Still, Gundlach eked out a gain of less than 0.1 percent for the year at his main fund, beating 87 percent of competitors. The fund benefited from having less exposure to rising rates than its benchmark and from Gundlach’s holdings of mortgages not guaranteed by the federal government, which provided income to reduce losses elsewhere in the portfolio.
‘Both Worlds’
“We have lower risk and higher income,” Gundlach said in the interview. “The best of both worlds.”
Morningstar has challenged the notion that the fund has always maintained strong risk controls.
As the fund surged 16 percent in 2010, Gundlach had about 25 percent of its assets in “esoteric” mortgage-backed securities that “can be highly volatile and suffer from bouts of illiquidity,” analyst Sarah Bush wrote in a July 2014 note. The allocation had dropped to 4 percent to 5 percent last year, Bush wrote.
Based strictly on risk-adjusted returns, DoubleLine Total Return has earned Morningstar’s top score of five stars. The Chicago-based research firm, however, deems the fund “not ratable” by its analysts, saying DoubleLine has failed to answer its questions on portfolio construction and risk management.
Gundlach dismissed the criticism.
Pork Bellies
“You would think I had gone crazy and was buying pork bellies,” he said. “At some point, if you are going to say the fund is risky you have to produce some numbers to back it up. In fact, the numbers show the opposite.”
The fund’s below-average volatility in the past three years has led to it losing less than half as much as similar funds in periods of falling bond prices, Morningstar data show.