PRESENTING: The Amazing Life Of Jeff Gundlach, The World's Greatest Bond Investor

gundlach rock

Photo: Bev Eyre

If F. Scott Fitzgerald had lived to meet Jeffrey Gundlach, the author might have sang a different tune.The king of bonds and founder of DoubleLine Capital Management has not only experienced a second act, but a third.

After a legal battle with his former firm TCW, where he’d spent more than two decades, Gundlach barely missed a beat.

That’s not surprising, since his very first act was keeping rhythm in a band during the heyday of LA’s rock and punk scene.

We’ve profiled many people on this site over the years, but we doubt you’ve seen a story like this. 

Jeff grew up lower-middle class in Buffalo.

His father was a chemist for a bowling alley. 'When our drying machine broke, it didn't get fixed,

But in no way did that hold him back.

He told Farzad he was always at the top of his class and got a near-perfect SAT maths score.

Source: BusinessWeek

He was accepted to Dartmouth on financial aid.

He graduated summa cum laude in maths and philosophy in 1981 and entered Yale's applied mathematics Ph.D. program.

Source: BusinessWeek

Here's when things get interesting.

Two years into his Yale program, he dropped out and drove to California to join L.A.'s burgeoning rock scene.

Source: BusinessWeek

The band had relatively prosaic origins.

Beverley Eyre, the band's cofounder, said Gundlach had been playing in another band at Dartmouth, and after hearing him play was intent on recruiting him to his group. Gundlach agreed. The pair put in an ad for a bassist, and settled on Nancy Draper, who became Gundlach's wife. The band, initially called 'The Greens,' (Eyre said he simply liked the colour) was born.

Source: Bev Eyre

Gundlach stayed on the scene until 1988.

When they got to L.A., they changed the name of the band to Radical Flat because, Eyre said, he and Gundlach 'are both maths people.'

Source: Bev Eyre

Gundlach was the star attraction.

'He was an incredible drummer,' Eyre said. 'He could have made a career ... He's fast. He tends to go faster than when the song was being rehearsed. He was excited; he never missed beat, like a machine gun. He could play so many cool rhythms, switch tempos, doing something real fast, then a little slower.'

Source: Bev Eyre

The band recorded numerous songs, but never quite made it.

'We spent years trying to get songs on the radio, on TV, but never quite went that next level,' Eyre said.

But it wasn't for lack of trying.

'Jeff was just so driven,' he said. Eyre recalled one night when the group was out having a late-night meal and discussing the band's future. 'Jeff just said, 'OK, let's go right now, we're gonna practice until we get five songs perfect. Let's go do it,' It was after midnight, but we all just sat up. It was pure Jeff pushing us on. We were there all night practicing. He was driven; he wanted to succeed. In a sense, he was one of the drivers of the momentum, the power player side. He wanted to push us on.'

Source: Reuters

But ever the hedger, Gundlach maintained a day job.

After a stint at Transamerica, he got a job as an investment manager for TCW Inc.

According to Reuters, he said he was inspired to work in financial services in the 1980s by an episode of the TV show 'Lifestyles of the Rich and Famous' hosted by Robin Leach and featuring the 10 top-paying careers.

'I think, great! I'll just listen to that and figure out what I am going to do,' he told the wire. The No. 1 highest-paying profession at the time was investment banker. 'The show said you need to have worked very hard --not like I don't do that already--and the show said you need to have an analytical mind--and I said, I've got an 11 on a scale of 10--and I said that's what I am going to do.'

Source: BusinessWeek, Reuters

In 1990 he took home his first million-dollar paycheck.

And continued to make millions thereafter.

Source: BusinessWeek

Other things we learned about Jeff during his tenure at TCW...

After a successful client meeting, he would jokingly refer to himself as 'The Godfather.' Source: Reuters

He drove a Porsche.

By 2009, he was making $40 million a year. His team was managing most of TCW's assets. Morningstar had nominated him Fixed Income Manager of the Decade.

Source: BusinessWeek

At this point, we enter the third, and current, phase of Gundlach's life.

If this were a Behind The Music episode, here's when the music turns to a minor key.

The afternoon of Friday, Dec. 4, 2009 Gundlach walked back from lunch into his office and was fired.

TCW legal counsel 'alleged gross misconduct, including an attempt to steal staff and confidential client and trade information to launch his own rival firm,' Farzad writes. 'His 24 years with TCW were over, effective immediately. His BlackBerry was already disabled.'

Source: BusinessWeek

Which as the NYT's Kevin Roose noted at the time, is 'a world where the bar for captivation is relatively low.' However, many lay-people would find some of the details entertaining. Dealbook and CNBC, for example, reported that when Gundlach and his cohorts were clearing out, a secretary apparently hid a thumb drive in her bra.

Source: New York Times

TCW would later claim Gundlach kept in his office a stash of porn, sexual devices, and pot-smoking accessories.

'In a letter to DoubleLine clients, Gundlach called those items 'vestiges of closed chapters' of his life,' Farzad writes.

Source: BusinessWeek

Luckily, Gundlach had a loyal team.

All 15 of his senior staff ended up resigning from TCW, including Philip Barach, co-manager of the TCW Total Return Fund. 'Surrounded by a circle of mutineers, Gundlach, who says he got misty-eyed, persuaded Barach to join them,' Farzad writes. 'The two men shook hands and hugged, and the reunited team applauded Barach as he thumbed out his own resignation on his BlackBerry.'

Source: BusinessWeek

The group founded DoubleLine almost immediately.

Five days after Gundlach was fired, DoubleLine put out its first press release, Farzad writes. Eventually, the number of former TCW employees who joined the new firm grew to 45.

Source: BusinessWeek

But DoubleLine was hamstrung by lawsuits with TCW.

Gundlach realised he had to recharter as a mutual fund to survive. But the gambit worked: a Merrill Lynch brokerage office immediately wired $65 million.

Source: BusinessWeek

Gundlach is still considered 'the king of bonds.'

That's what Barron's called him in a profile last year. Over the course of his investing career, his success almost exclusively in mortgage-backed securities--even during a decade when 'the mortgage-backed market underwent tectonic shifts, destroying many less able investors.'

Source: Barron's, BusinessWeek

Gundlach doesn't necessarily shrug off such epithets.

'Look, I have a gift, or some would say a curse, of being able to have stunning insight into the reality of markets and the economy,' he told Barron's. 'I don't often know where my ideas come from. Maybe it's the fact that I'm obsessively regimented in my analysis, borderline autistic. But whether it's bond selection or asset allocation, we can do it better than just about anybody around.'

Source: Barron's

Then again, it's not exactly unwarranted.

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