Bloomberg News

Prudential Picks Gundlach to Manage $450 Million in Mortgage Bet

September 23, 2013

DoubleLine Chief Executive Officer Jeffrey Gundlach

Jeffrey Gundlach’s $35.4 billion DoubleLine Total Return Bond Fund lost 0.2 percent this year through Sept. 20 to beat 89 percent of similarly managed funds and advanced 6.9 percent in the past three years to outperform 97 percent of peers, according to data compiled by Bloomberg. Photographer: Jin Lee/Bloomberg

Prudential (PRU) Plc, the U.K.’s biggest insurer by market value, selected Jeffrey Gundlach to manage $450 million as the company works to win U.S. business from clients seeking to bet on mortgages.

Gundlach will model the variable annuity offering for Prudential’s Jackson National Life Insurance on his top-performing DoubleLine Total Return Bond Fund, according to a statement yesterday from Los Angeles-based DoubleLine Capital LP. The fund, to be run by DoubleLine Chief Executive Officer Gundlach and President Philip Barach, can also bet on junk bonds, bank loans and credit-default swaps.

“We didn’t have a mortgage-focused portfolio on the platform, so that’s something we wanted to offer,” said Ryan Strauser, vice president of investment management for Jackson’s distribution unit, in a phone interview. “That diversification tool is really what we were looking for.”

The unit of London-based Prudential was the largest seller of individual U.S. variable annuities in the first half of this year, according to data from industry group Limra. Newark, New Jersey-based rival Prudential Financial Inc. (PRU:US), the top seller in the first half of 2012, fell to No. 3 this year as the company reduced some guarantees on the products to help profit margins.

Variable annuities let savers invest in stocks, bonds and other assets while deferring tax payments. Manager options within Lansing, Michigan-based Jackson National’s platform include BlackRock Inc. (BLK:US), Pacific Investment Management Co. and Invesco Ltd. (IVZ:US), according to a filing earlier this month.

‘Institutional Interest’

The push into variable annuities helps diversify DoubleLine’s client base amid speculation that the three-decade-long bond bull market may have ended. Gundlach has also expanded offerings by opening a floating-rate mutual fund, an equities small-cap growth fund and an income-oriented closed-end fund. DoubleLine subadvises mutual funds for firms including RiverNorth Capital Management LLC and Alma Capital Investment Management.

“This mandate marks the continuing institutional interest in DoubleLine’s investment services and our channel diversification into the variable-annuity space,” Ron Redell, president of DoubleLine Funds Trust, said in the statement.

Gundlach’s $35.4 billion DoubleLine Total Return Bond Fund lost 0.2 percent this year through Sept. 20 to beat 89 percent of similarly managed funds and advanced 6.9 percent in the past three years to outperform 97 percent of peers, according to data compiled by Bloomberg. The fund had its third straight month of net withdrawals in August, as clients fleeing bonds pulled $1.1 billion, according to Morningstar Inc. (MORN:US) estimates.

To contact the reporters on this story: Alexis Leondis in New York at aleondis@bloomberg.net; Zachary Tracer in New York at ztracer1@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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Companies Mentioned

  • PRU
    (Prudential Financial Inc)
    • $90.83 USD
    • 1.11
    • 1.22%
  • BLK
    (BlackRock Inc)
    • $322.32 USD
    • 4.51
    • 1.4%
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