Gundlach has a history of making contrarian and brash pronouncements. After a conference in April 2012, he said he thought the Federal Reserve should be abolished, and that same month that investors should short Apple Inc., after it had risen more than sevenfold from January 2009.
Most of DoubleLine’s assets are in the $31 billion Total Return Bond Fund, which as of last year had 31 percent, the highest allocation, in residential mortgage-backed securities not backed by the U.S. government. Subprime bonds accounted for 2 percent of the fund’s holdings.
Gundlach has traditionally favored higher quality non- agency debt in the fund rather than subprime. He balances those securities with bonds that are backed by the government and adjusts the mix to help the fund weather different scenarios in the housing market and changes in interest rates.
Gundlach’s fund returned 6.3 percent over the past three years, ahead of 93 percent of peers, according to data compiled by Bloomberg. Last year was the fund’s worst absolute and relative returns since opening in April 2010, with it gaining just 0.02 percent and beating 80 percent of peers. Investors pulled $6 billion, according to estimates from Morningstar Inc., its first year of net withdrawals.
During a webcast this month Gundlach said that he’s “re sculpted” DoubleLine Total Return Bond Fund, decreasing its holdings of agency mortgages and adding holdings of non-agency and commercial mortgage debt. This year through Jan. 22, the fund returned 1.5 percent, moving it ahead of 99 percent of similarly managed funds, Bloomberg data show.