JEFF GUNDLACH BREAKS DOWN A MULTI ASSET PORTFOLIO
Jeff Gundlach of DoubleLine Capital provided some detail on one of their new funds – the Multi-Asset Growth Fund (DMLIX) in a conference call today. The presentation gave some insights into how he approaches the portfolio construction. What differentiates Mr. Gundlach is his talent as a master allocator and risk manager.
In many ways, this fund appears similar to a lazy portfolio or an Ivy Portfolio – a broadly diversified fund that seeks to benefit from the potential growth and correlations (often inverse) of differing assets. It removes stock picking (which I love), focuses on protecting the downside (by maintaining healthy cash levels) and utilizes a unique expertise in risk management and fixed income to generate high risk adjusted returns. Mr. Gundlach elaborated on some of the bigger themes that drive growth:
- When he doesn’t like markets he prefers to just get out (into cash).
- The equity portion is not based on stock picking. He sees stock picking as a waste of time and prefers to focus on sectors, industries & indices.
- Capital preservation is just as important as portfolio growth.
- You can see the composition below:
Update - DoubleLine contacted me to clarify that the cash position will not necessarily be maintained at 30% and will likely be deployed over time.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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6 Comments
I wonder if the high cash level is for opportunistic “buy the big dip” (i.e. Mar2009) … possibly he thinks returns will be very flat and volatile for the next decades, so the cash is really a cheap way to be long “big macro cycle” vol/mean reversion.
It is. I just received an email from them saying the cash position will be deployed as opportunities arise.
Considering Gundlach’s call for an S&P500 at 500 (not a typo), it could be some time before the stock allocation rises. Interesting that Gundlach frowns on stock picking when he has made a name for himself by doing some very low level bond picking (zipcodes, ltvs and credit scores).
This fund seems to be comparable to Rob Arnott’s Pimco All Asset, although Pimco will go (and is) short stocks.
He did clarify on that “call” today. He said SP 500 was contingent upon a severe deflationary downturn….he wasn’t making a prediction. He was just saying it was possible if deflation grips the economy again….
Gundlach, Klarman See Bull Market Undermined by U.S. Budget Gap
http://www.bloomberg.com/news/2011-03-15/gundlach-sees-bull-market-undercut-by-u-s-debt-in-view-shared-by-klarman.html
Cullen, Jeff actually said that this info is dated (as of 2/28), and that they are at 35% cash at the moment. also that 35% was about the max he’d ever have.
30.5% US RMBS is still the best bet out there, and the reason why his 2 previous funds were best in class since inception 1yr ago.