Star fund manager’s ouster has cost TCW about $25 billion
TCW Group Inc.’s ouster of its star bond fund manager in December cost the Los Angeles investment firm more than one-fifth of the assets it managed before the firing, the company disclosed Wednesday.
Institutional and individual investors pulled a total of about $25 billion from TCW after the company terminated Jeffrey Gundlach as chief investment officer Dec. 4, according to TCW data.
The company managed $115 billion as of Jan. 31, up from $110 billion Dec. 4. But about $31 billion of the $115 billion was brought in by Metropolitan West Asset Management, which TCW agreed to buy to replace Gundlach and the TCW staffers whom the firm correctly expected to leave with him.
Excluding the Metropolitan West money, TCW’s assets declined to about $84 billion on Jan. 31. Any drop in assets means a money manager has less income than it would otherwise, because management fees are charged as a percentage of assets.
Of the $25 billion in cash that left TCW, more than $6 billion came out of the TCW Total Return Bond fund, the company’s flagship mutual fund.
TCW, which had said it expected to lose some assets after Gundlach’s dismissal, disclosed the Jan. 31 figures in a statement announcing that it had completed its merger with Metropolitan West.
The bulk of TCW’s assets has long been in high-quality bonds, which Gundlach oversaw.
Some investors who had had their fixed-income assets managed by Gundlach -- a 24-year veteran of TCW who built a strong track record, especially investing in mortgage-backed bonds -- quickly yanked their money after he left.
TCW has suffered further client defections since Jan. 31. Investors holding about $1.3 billion in specialized mortgage funds at the firm decided last week to pull their money, although TCW was able to retain about $1.7 billion in those funds.
Most of the cash that left TCW hasn’t gone to Gundlach’s new firm, DoubleLine Capital, which he says is managing about $3 billion, mostly from insurance companies and wealthy individuals.
Gundlach is seeking Securities and Exchange Commission approval to launch mutual funds, hoping to pick up some of the investors who have left the TCW Total Return Bond fund.
TCW and Gundlach are embroiled in a bitter legal battle. TCW last month sued Gundlach and several other ex-TCW employees, alleging that they set up DoubleLine using proprietary information stolen from TCW.
Gundlach has since countersued, accusing TCW of firing him to avoid honoring an agreement to share as much as $1.25 billion in potential fee income.
