The fund, which will be managed by Gundlach himself “seeks current income by investing principally in debt securities of any kind.” It will have a dollar-weighted average duration of no less than 10 years. Duration refers to bond’s movements based on interest changes and the longer duration suggests that Gundlach is betting on interest rates remaining at today’s levels or rising marginally.
As recently as last week, Gundlach told reporters that he doesn’t see significant interest rate increases in the short-term and expects the 10-year Treasury note’s yield to range between 2.20 percent and 2.80 through the year.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
According to the filing, Gundlach and the fund will be free to invest in mortgage-backed securities of any maturity or type that is guaranteed by the United States government. That includes those secured or guaranteed by collateral from government agencies or sponsored corporations.
Consequently, expect the new fund to look at Collateralized Mortgage Obligations (“CMOs”), government pass-through securities as well as multi-class pass-through securities, private pass-through securities and stripped mortgage securities. Inverse floaters won’t be off the table either.
The filling also suggests that the newly created fund won’t shy away from: foreign securities (both corporate and government); emerging market securities (corporate and government), as well as asset based securities and inflation-indexed bonds; bank loans and assignments.
Gundlach’s other filing stipulations
Gundlach has proven his worth in the bond market and enjoys my father as a customer as he approaches his fixed-income years. The fund, in its filing, said that it would focus on rated high-quality investment grade instrument but reserves the right to allocate up to 20% of its total assets below and investment grade or even unrated instruments viewed by Gundlach as worthy junk bonds.
Lastly the filing allows for Gundlach to place up to 30% of all assets in securities in foreign funds and have unlimited purchasing poser in U.S. dollar-denominated securities of foreign issuers. Lastly, the filing suggests that up to 25% of its assets may be placed in governmental and private obligations in emerging market economies and their countries.