Even the Bond Kings are Rotating
- Joshua M Brown
- January 24th, 2013
My friend Jennifer Ablan has an important story at Reuters right now about how Dan Fuss (Loomis), Bill Gross (PIMCO) and Jeff Gundlach (DoubleLine) - collectively known as the Bond Kings - are overseeing their respective shops' landgrab into the equity management business.
This makes perfect sense given what the respective opportunities could be coming off of a 32 year bond bull market with rates having nowhere to go but up (someday). In the meantime, the existing equity actively managed mutual fund complex is in disarray - outflows from virtually every category not to mention the onslaught of ETFs and the profit margin destruction they bring with them.
Some of the biggest U.S. bond firms are making aggressive pushes into the $5.17 trillion equity market business, spurred by fears the bull market in fixed income could end and anticipation of growing retail investor interest in stock funds.
After five years of monstrous cash inflows into fixed income markets, bond giants DoubleLine Capital LP, Loomis Sayles & Co and PIMCO are strategically targeting a bigger share of equities - an area that many investors have shunned in recent years.
Jeff Gundlach's quote sums up neatly what many in the financial community already believe - that the world of existing managers in the equity space are way too preoccupied with their benchmarks (job security, who can blame them!)...
Gundlach criticized the "closet indexation" strategy that he said many influential equity portfolio managers use, which is to pick stocks to achieve returns similar to a benchmark index without replicating the index exactly. He called that passive investment management "masquerading" as active management.
"I like to think that at DoubleLine we've had some impact on shaping the fixed-income management business in terms of getting away from closet indexation; in terms of thinking creatively, managing actively," Gundlach told Reuters.
Last week, the firm registered the DoubleLine Equities Small Cap Growth Fund, the DoubleLine Equities Growth Fund and the DoubleLine Equities Global Technology Fund.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.