Jeff Gundlach’s Fight With Morningstar

Jeff Gundlach’s Fight With Morningstar
Jeff Gundlach with permission from Double-line Capital

Fund ratings firm Morningstar released its latest analysis on Wednesday, July 17th, and noted it it was changing the rating of Jeffrey Gundlach’s Doubleline Total Return Bond Fund from Neutral to Non-ratable. Gundlach and Morningstar have been squabbling for some years over Doubleline refusing to provide more detailed information regarding the investments made by the firm.

Morningstar fund ratings are commonly considered by investors in deciding where to put their money. The firm rates past fund performance on a five-star system. However, Morningstar still currently assigns five stars to the Double Total Return Fund, its highest designation.

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Of note, the DoubleLine Total Return Fund has produced annualized returns of 9.29% in its institutional share class since its founding in 2009, relative to a 4.49% annualized return on the benchmark Barclays Aggregate bond index.

Reason for “Non-ratable” rating

Morningstar analyst Sarah Bush explains the change in rating from Neutral to Non-ratable: “DoubleLine has declined to answer Morningstar’s due diligence questions. Without more detail on portfolio construction and attribution, risk controls, and the team backing Gundlach, Morningstar has determined that this fund is Not Ratable.”

A Morningstar spokesperson commented: “We’re always looking out for investors’ best interests, and we stand by our analysis.”

Longstanding feud between Morningstar and Gundlach

The lack of communication between Doubleline and Morningstar relate to the formation of DoubleLine in 2010. DoubleLine says Morningstar has been been biased ever since Gundlach was fired as a portfolio manager at investment house TCW in late 2009.

Loren Fleckenstein, analyst at DoubleLine Capital, said: “The day TCW fired Jeffrey Gundlach, we believe fund writers at began taking sides with TCW in its dispute with DoubleLine. We tried very patiently to communicate with those fund-writers, but they continued for two years to make false statements and mischaracterize our fund and DoubleLine. In 2012, we decided that further communication with the fund-writers at was pointless.”

Statement from Doubleline

Fleckenstein also said said in a recent telephone interview: “Honestly, I don’t know the difference between their former neutral rating and this new non-ratable designation. Either way, they don’t understand our fund.”

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