Natural Gas
Gundlach made his recommendation on natural gas stocks after they fell 59 percent from January 2009 to April 2012. The prices plunged as producers extracted gas trapped in shale and created a supply glut. Gundlach says investing in natural gas now is similar to buying gold in 1997, when prices hit an 18- year low before a surge in the precious metal’s value.
The Standard & Poor’s GSCI Natural Gas Index increased more than 77 percent from April through Nov. 28, partly on demand from electrical utilities switching to gas from coal.
Even with timely calls like these, Gundlach has to overcome skepticism from investors that a bond guy can succeed in equities and other investments. DoubleLine, which had $39.8 billion in assets in its four bond funds as of mid-November, had gathered only $190 million for its Multi-Asset Growth Fund.
Lagging Returns
Started in December 2010, the fund includes natural gas exchange-traded funds, gold futures and currency and agriculture options as well as U.S. and international stocks. The fund returned only 4.3 percent in 2012 through Nov. 28, trailing the 14.4 percent gain in the Standard & Poor’s 500 Index.
“We have confidence that when the opportunities arise within fixed income, DoubleLine will be able to take advantage of that,” says Jeremy DeGroot, who helps oversee $8 billion in assets as chief investment officer of Orinda, California-based Litman Gregory Asset Management LLC. “When you go outside of fixed income into broader multiasset allocation, we don’t have that conviction. We haven’t done the work to give us confidence that they can successfully do it.”
Self-assured as ever, Gundlach says he’s indifferent to his reputation as someone without a track record outside of bond funds. “I couldn’t possibly care less; I don’t have anything to prove,” he says.
Morningstar Fight
Gundlach does care enough about what Morningstar opines that he’s now fighting with the mutual-fund industry’s preeminent rankings and research firm. In meetings, e-mails and phone calls, he has repeatedly complained to Chicago-based Morningstar’s executives that their analysts are biased against DoubleLine.