DoubleLine Capital LP, the $53 billion firm run by star bond investor Jeffrey Gundlach, said on Wednesday it is now managing stock portfolios in a new division called DoubleLine Equity LP.
The firm, which surpassed $50 billion in bond assets last year after launching in 2009, said in a news release that it has tapped former TCW Group Inc portfolio managers Brendt Stallings and Husam Nazer to expand its stock division.
In an interview on Wednesday, Gundlach, DoubleLine's chief executive officer and chief investment officer, said stock mutual fund strategies suffer from a lack of new ideas.
"We think the equity business is ripe for creative thinking," he said.
Gundlach said he plans to start with one or two mutual funds that offer a strategy focusing on U.S. stocks, and quickly follow with a hedge fund whose strategy would focus on "best ideas" in international stock investing.
"We're really not prepared to do a lot of individual stock selection outside of the United States," he said.
Gundlach had hinted at the firm's move into stocks in a webcast on September 11, citing the broad disinterest in equities and their potential as a hedge against inflation.
He said on Wednesday that some of the stock funds he plans to offer will have a strategy that focuses on specific sectors among small and mid-cap stocks, while others will have a broader strategy that could vary widely in its stock selection.
Gundlach said DoubleLine's business plan had been to build the firm's bond management side to between $50 billion and $60 billion in assets before diversifying into areas such as stocks, a goal it has achieved.
"This is our first move to diversify. There's very likely to be one if not two more over the course of 2013," Gundlach said. He said he is seeking to reach a maximum of about $10 billion in assets within DoubleLine's equity division.
Gundlach has made pointed calls on stocks in the past, including one at the Ira Sohn investing conference in May to buy natural gas while betting on a decline in the shares of Apple Inc, the world's most valuable technology company.
On Wednesday, Gundlach recommended trading the volatility in Apple's stock price.
"Apple's flopping around like a fish in a boat. When it has a big rally, you should probably sell it. When it goes down a lot, you should probably buy it," he said, and reiterated a call he on CNBC in November that its stock price may drop to $425 a share. Apple's stock was up 3.2 percent to $549.03 at the close of trading on Wednesday.
DoubleLine Total Return Bond Fund, the firm's flagship, earned a return of 9.2 percent in 2012, beating 97 percent of other U.S. mortgage-focused funds, according to Lipper. The fund, which oversees $37.1 billion, took in $19.7 billion last year, making it the most popular mutual fund by asset growth.
Pacific Investment Management Co, the world's largest bond fund manager with $1.92 trillion in assets as of September 30, 2012, began moving into equities when it launched its first actively managed stock mutual fund in 2010.
Gundlach told Reuters that his foray into stock investing could also come with a downturn in the stock market, which he said he could overcome through active management.
"There's a really good argument that you could have a major correction in the S&P 500 in 2013," he said. He cited the heavy influence of U.S. policymakers on markets.
Stallings and Nazer were previously group managing directors at TCW, the highest title for managers at the firm, where they oversaw $5 billion in assets in stock portfolios.
Gundlach founded DoubleLine after a nasty split with TCW, where he was fired as chief investment officer in December 2009. The two sued one another in 2010, but settled in December of that year without disclosing terms.
Private equity firm Carlyle Group struck a deal in August to buy a 60 percent stake in TCW from French bank Societe Generale. TCW management and employees will own the remaining 40 percent stake in the Los Angeles-based investment firm, which has $135 billion in assets.
DoubleLine, which is also based in Los Angeles, employs more than 80 people. Stallings and Nazer plan to hire at least five investment professionals this year, the news release said.
Nazer said in an interview on Wednesday that dividend-paying stocks in general and consumer staple stocks are particular bright spots.
(Reporting by Sam Forgione; Editing by Kenneth Barry and Mohammad Zargham)
By Sam Forgione