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)
Talk of inflation has been swirling for some time amid all the stimulus that's been pouring into the market and the soaring debt levels in the U.S. The Federal Reserve has said that any inflation that does occur will be temporary, but one hedge fund macro trader says there are plenty of reasons not to Read More
- 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
- Leverage: 18-19%
- Duration: 8.1 years
- 51% Agency MBS, 49% non-guaranteed mortgage assets
DoubleLine Income Solutions Fund (DSL)
- 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.
- 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
- 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
- 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.
- Jeffrey Gundlach remains long gold with a $1400 target
- 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.