Monday, December 7, 2009
Ousted Gundlach Angled for TCW's Top Job
Investment Firm Deals With Fallout After Exit of Star Bond-Fund Manager By ELEANOR LAISE A power struggle at one of the nation's biggest investment firms left its star manager, who oversaw more than $60 billion, out in the cold. TCW Group ousted its chief investment officer, Jeffrey Gundlach, and announced a deal to buy a rival money manager after what the firm describes as threats by Mr. Gundlach to leave and take some key staffers with him. Mr. Gundlach, who is widely regarded as a savvy bond manager, successfully navigated the financial crisis and has posted big returns this year on a timely bet on battered mortgages. Now TCW is scrambling to reassure clients, many of whom invested with the Los Angeles-based firm to get Mr. Gundlach's expertise. Several other members of TCW's fixed-income group resigned on Saturday. A mutual fund managed by Mr. Gundlach took in $6.7 billion in new money in the first nine months of this year. TCW's move, announced late Friday, included the acquisition of Metropolitan West Asset Management LLC, a firm known for its fixed-income expertise. Its managers will begin to run Mr. Gundlach's assets on Monday. "TCW was left no choice but to ensure continuity and stability in managing clients' fixed-income assets," says Erin Freeman, a TCW spokeswoman. "The MetWest acquisition ensures that continuity and stability." Mr. Gundlach calls his firing "highly inappropriate" and says he only raised the prospect of walking out with his team when he discovered a plan was in the works to push him out. The removal of Mr. Gundlach, who had worked at TCW since 1985, came after a year of uncertainty about TCW's future. In January, TCW parent company Société Générale said that it planned to list TCW on a stock exchange within the next few years. SocGen and TCW later in the year hired Citigroup Inc.'s investment-banking unit to look at strategic alternatives for TCW. With SocGen appearing to back away from the business, there was debate at TCW over what to do next. Mr. Gundlach, who managed roughly 60% of TCW's total $110 billion in assets, felt that he should be calling the shots, people familiar with the firm say. "He definitely wanted to be the decision maker, and he wanted to feel as though nothing around that place was going to happen without his OK," says Eric Jacobson, director of fixed-income research at investment-research firm Morningstar Inc. According to a person familiar with the matter, Mr. Gundlach hoped to lead a management buyout and become chief executive of TCW, but others at the firm felt that CEO wasn't the right role for him. Mr. Gundlach says he made a bid for TCW in September but never received a response. As for leading the firm, he says, "if I was going to buy the firm, I was going to be the CEO." Amid rumors Mr. Gundlach was interviewing at other firms, concern grew at TCW that the money manager would walk out the door and take key talent with him. He received much acclaim in recent years for his skill in investing in mortgage-backed securities and prescient warnings about trouble brewing in the subprime-mortgage market. TCW's flagship Total Return Bond Fund, managed by Mr. Gundlach, was a top performer this year in part because of his timely move into nonagency mortgages.