Following Bill Gross’ unexpected departure from PIMCO, Wall Street appointed Jeffrey Gundlach as the new Bond King.
But apparently not everyone agrees.
The superstar bond manager Gundlach and the mutual-fund rating service, Morningstar, are feuding, according to a Barron’s report.
Back in July, Morningstar classified Gundlach’s $ 35 billion bond fund, DoubleLine Total Return, as “not ratable.”
Which is a strange decision, considering the fact that DoubleLine outperformed every other bond fund in its category since its debut in April 2010.
Morningstar’s Sarah Bush said the the fund was reclassified because Gundlach severed all communication with the rating firm’s analysts back in the summer of 2012.
Additionally, Morningstar expressed concern “that the fund’s periodic resort to what Morningstar termed variously as esoteric or exotic mortgage securities, such as inverse floaters and interest-only strips, gave Total Return a high risk hue,” according to Barron’s.
DoubleLine responded “heatedly” by saying that it cut off communication with Morningstar’s analysts because the rating firm made “falsehoods and mischaracterizations” about it.
These “falsehoods and mischaracterizations” go back all the way to 2009.
Back then, when Gundlach was fired at the TCW,
‘Morningstar’s Eric Jacobson “came out with a lengthy report gushing over TCW’s ‘savvy move’ in agreeing at the same time to buy the LA bond manager Metropolitan West Asset Management to take over Gundlach’s duties.”
That same year after Gundlach was already voted Morningstar’s Bond Manager of the Year, the rating firm engineered a re-vote — crowning Daniel Fuss of Loomis Sayles instead.
The Gundlach-Morningstar feud doesn’t seem to be ending any time soon, but that hasn’t stopped DoubleLine or Gundlach.
After all, bad ratings can only go so far when the firm is continuously posting great numbers. After legendary bond investor Bill Gross left his firm, PIMCO, last week, $ 400 to $ 500 million poured into DoubleLine. Quite a vote of confidence.
Read the full blow by blow over at Barron’s>