Jason Kephart, a Morningstar Inc. analyst who focuses on alternative strategies but doesn’t cover the DoubleLine fund, said the advantages of such stock-bond combos can become a drawback if both the stock and bond portions underperform simultaneously, as happened to some funds in 2008.
“Do you want the extra risk of a bond strategy that can detract potentially from the performance of the equities?” said Kephart, speaking about such funds in general. “The funds will say this is kind of the alpha on top of the index. But that’s not guaranteed.”
DoubleLine’s fixed-income record, along with Gundlach’s performance at his prior employer, TCW Group, through the 2008 financial crisis, should give investors confidence in the team’s ability to navigate market cycles, Sherman said.
Investors added a net $693 million in inflows to DoubleLine’s mutual funds in June, the firm reported Friday.
DoubleLine Shiller’s fixed-income portfolio tends to reduce losses during market declines, while adding 1 to 2 percentage points to annualized returns above its benchmark index after fees and expenses, according to Sherman.
“In a low-return world, that’s big,” he said.