On May 12, 2015, Jeffrey Gundlach Chief Executive Officer and Chief Investment Officer DoubleLine Capital held an Audio webcast discussing the Closed-End Funds Opportunistic Credit Fund (DBL) and Income Solutions Fund (DSL). Below is a summary via DoubleLine.
Jeffrey Gundlach: DoubleLine Closed End Fund Webcast – Recap
DoubleLine Opportunistic Credit Fund (DBL)
- Portfolio restrictions
- Must own at least 25% non-Agency mortgage-backed securities (MBS)
- Must own at least 50% mortgage-backed securities (MBS)
- Can only hold a have up to 50% of its total assets in below investment grade securities
- Characteristics
- Leverage: 18-19%
- Duration: 8.1 years
- 51% Agency MBS, 49% non-guaranteed mortgage assets
DoubleLine Income Solutions Fund (DSL)
- Characteristics
- Leverage: 45%
- Duration: 6.2 years
- 43% of assets invested in U.S. Dollar (USD) denominated Emerging Market debt
- Puerto Rico
- The fund owns a 1% position in Puerto Rico General Obligation (GO) bonds; Mr. Gundlach would consider adding on weakness and believe they will either be paid back at par or restructured at a price much higher than where they are trading today.
- The Fund does NOT own the Puerto Rico Pension Obligation (PO) bonds; Mr. Gundlach likes the PO bonds, currently trading around 37.0, but finds them too hard to source for a portfolio of this size.
- Portfolio
- 43% Emerging Market corporate debt
- EM corporate debt up over 13% in the last 3 months; most securities rated BB-B
- 20% High-yield (HY) bonds
- Jeffrey Gundlach increased the allocation last fall when high-yield bonds cheapened. Mr. Gundlach does NOT expect a disaster in the HY bond market but continues to eye the large maturity wall coming due in 2018-2020
- 10% Bank Loans
- Up over 13% since inception based on total return
- 10% Commercial mortgage-backed securities (CMBS)
- Best performing sector in the fund up 30% since inception based on total return
- 10% non-Agency MBS
- Up 19% since inception based on total return
Question/Answer
- U. S. Interest rates
- Jeffrey Gundlach does not believe the Fed will raise short term interest rates in the next 6 months
- If you are worried about rates, you should to be worried about the mortgage REITS which can be 6-8x levered
- Jeffrey Gundlach believes the yield curve could continue to steepen particularly as the Fed becomes less likely to raise rates
- Global interest rates
- Jeffrey Gundlach believes the German 10-year Bund could trade up to 1.00%-1.25% over the next few months
- Interest rates have tended to rise during QE and fall after QE is taken away
- Energy
- Jeffrey Gundlach is cautious about oil related debt and will continue to look for debt that can withstand $60 oil for 2 years. Profits should be taken on further price strength.
- Gold
- Jeffrey Gundlach remains long gold with a $1400 target
- Liquidity
- The lack of bond market liquidity is more of an opportunity for closed-end funds because the capital is permanent. In addition, DoubleLine does not run any high frequency trading strategies
See full PDF below.
