Bloomberg had a good profile of Jeff Gundlach on Friday that highlighted some of the positioning from the new bond guru. It’s interesting to note how many of these fixed income managers are being forced into other asset classes due to the limited options in the fixed income space as a result of the collapse of the yield curve (thanks to the Fed and the credit bubble). We’re all becoming macro thinkers now….
“He recommends buying hard assets: Gemstones, art and commercial real estate are high on his list. And DoubleLine has been buying the stocks of Chinese companies, U.S. natural gas producers and gold-mining firms because it considers them to be bargains.
Gundlach himself has amassed a contemporary art collection of about 100 pieces, with works by Jasper Johns and Franz Kline. The money manager drew on abstract painter Piet Mondrian’s double-line style for the name of his firm and its geometrical, crosshatched logo.
Of course, this positioning doesn’t mean he’s veering too far away from his primary area of expertise. Gundlach is still holding huge fixed income positions primarily in MBS:
Most of DoubleLine’s assets are in the Total Return Bond Fund (TGLMX), which has 78 percent of its holdings in residential mortgage-backed securities — both those guaranteed by the U.S. government and those that are not and have discounted prices.
The mix should help the fund weather either inflation or deflation because the securities should move in opposite directions if interest rates go up or down. Because higher rates could mean the economy is improving and housing prices are recovering, there would be fewer defaults on the riskier nonguaranteed bonds, and prices would rise, says Philip Barach, DoubleLine’s co-founder and president.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.