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TCW says fund redemptions slow; jilted Gundlach holds a call with investors

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The latest in the ongoing saga of the bitter split between L.A. money manager TCW Group and its chief investment officer, Jeffrey Gundlach, who was fired by TCW on Friday amid a power struggle:

--- Investor redemptions from TCW’s flagship mutual fund, TCW Total Return Bond, continued Tuesday but slowed to less than half of Monday’s pace of $1.2 billion, said Tad Rivelle, who replaced Gundlach as chief investment officer on Friday. The fund, which under Gundlach had outperformed nearly all other similar bond funds over the last five years, held $12 billion in assets at its peak last week.

Rivelle, who came aboard Friday after TCW agreed to buy his firm, Metropolitan West Asset Management, said the fund on Tuesday easily sold government-backed mortgage bonds as well as $450 million of nongovernment-backed mortgage debt to meet redemptions.

The sales didn’t hurt investors who’ve stayed: The per-share net asset value of the fund rose 3 cents to $10.25 for the day, which indicates TCW was able to sell bonds for as much or more than the value at which they were carried on the fund’s books.

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--- TCW confirmed that the U.S. Treasury had suspended the $1-billion fund TCW had recently raised to buy toxic assets from banks under the so-called Public-Private Investment Program. With Gundlach’s departure, the government has the right to put the fund on hold while it requests information about who at TCW now will be managing the portfolio.

“We are in regular communication with Treasury and are working to ensure we meet their contractual due-diligence requirements,” a TCW spokeswoman said.

--- Gundlach, who has made clear that he intends to get back into the money management business, held a conference call with former and prospective investors. Along with more than a dozen peers who quit TCW over the weekend to join him, the 50-year-old Gundlach said he expected to be managing portfolios again within “30 to 45 days,” either via a start-up firm or in partnership with another asset manager. He said a bond mutual fund that would be available to individual investors was “absolutely” in his plans.

For the time being, Gundlach said, investors shouldn’t feel as if they have to sell out of the funds he managed at TCW, including the Total Return Bond fund. He said he left the portfolios in “perfect” shape for the economic and market landscape he foresees in the short term.

TCW has said it believes Rivelle and his Met West team can match Gundlach ‘skill for skill’ in managing the mortgage securities that are Gundlach’s specialty.

-- Tom Petruno


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