Another Gundlach in the news (bond king Jeffrey Gundlach)

Barrons had this interview with former Trust Company of the West (TCW) bond guru Jeffrey Gundlach, and the pot and porn story.

Gundlach had turned the TCW bond mutual fund business into something humming, doubling or tripling it. A French company decided to come in and buy TCW. They either didn’t take good care of Gundlach, or decided that he, as a success, was too much of a “threat” (possible risk of flight?) So they gave him his walking papers.

This isn’t quite the disaster it could be, since Gundlach had made something like $40 million dollars a year for his efforts. He rightly called the whole mortgage meltdown, and so in many circles is looked at in the league of a Bill Gross.

Gundlach decided to set up his own money management operation, and a number of his associates left TCW to work with him. That got the lawyers out in force, who sued Gundlach on one of those “theft of business information” grounds. These are very hard to prove in the asset management industry, because usually the Rolodex is rather thin, and most high-net-worth people or institutional investors personally know who is managing the money. A firm I had worked for in Princeton, New Jersey in the ’90’s and 2000’s had this happen–a group of guys headed by the “dean” of the place picked up and moved next door. The clientele naturally followed, because they all knew the dean, a multi-millionaire who was, conincidentally, Princeton money, and a very popular man with a warm personality.

I forget in the article where the TCW suit is at, but they didn’t have very much with it. That’s probably why they additionally ransacked what Gundlach thought was a private office, and found porn, sex toys, and the residue of marijuana or maybe a joint or two of the stuff. Oh my!

So what Gundlach had expected to be about $20 billion coming to his company by reputation value of his name started out as “only” $1.5 billion, (now $7.5 billion). The money management world—especially the bond world—is rather conservative, although you’d never know it from the Frinancial Crisis. So maybe the Mary Jane and the porn were meant to smear Gundlach and make the investment stodgies less desiring of his services.

The talk now, though, is that he is a “cool” money manager, and that success has a tendency to take what might be painted as scandal or sometimes “craziness” and make it into a celebrated eccentricity. When you return 15% annualized on a bond fund focusing on mortgages, then the people really don’t care if you smoke a joint or watch Miko Lee on the side.