Morningstar says DoubleLine bond fund 'not ratable'; DoubleLine fires back

Reuters

By Sam Forgione

NEW YORK, July 17 (Reuters) - Morningstar Inc. has listed DoubleLine Capital's flagship Total Return Bond Fund as "not ratable," saying it changed its rating from "neutral" after DoubleLine Capital declined to discuss the portfolio.

Morningstar analyst Sarah Bush told Reuters on Thursday that the change in the analyst rating, which Morningstar announced in a research note on Wednesday, was made after DoubleLine Capital LP declined to answer Morningstar's latest inquiry on the fund's portfolio management in late June.

DoubleLine Capital said it had stopped communicating with writers of fund reports on Morningstar's website because of what it said was biased treatment of DoubleLine and its co-founder, top bond fund manager Jeffrey Gundlach, related to Gundlach's firing in late 2009 from Trust Company of the West Group Inc.

The $34 billion Total Return Bond Fund is ranked as a top performer by Morningstar. The fund had an annualized return of 9.3 percent from its inception in April 2010 through June 2014, beating all other U.S. intermediate-term bond mutual funds over that period, according to Morningstar.

Chicago-based Morningstar said it could not rate the Total Return Bond Fund on two of the five components used to determine its overall fund ratings, given DoubleLine's decision not to discuss the fund. Those two components were "process" and "people"; the other components used for the overall ratings are "performance," "parent" and "price."

Morningstar maintained its ratings of the fund's "performance" and "price" at "positive," with the "parent" component maintained at "neutral."

Morningstar's Bush said DoubleLine had not answered Morningstar's questions on the fund since 2012.

Los Angeles-based DoubleLine Capital has roughly $49 billion in assets. Gundlach, the chief executive and chief investment officer, co-founded the firm in December 2009 after a publicized split from TCW. While at TCW, Gundlach was named Morningstar Fixed-Income Fund Manager of the Year in 2006.

Loren Fleckenstein, an analyst at DoubleLine, said the firm stopped communicating with the writers of fund reports on Morningstar's website in 2012.

"From the day Jeffrey Gundlach was fired, fund writers at Morningstar.com sided with TCW in their dispute with the team at DoubleLine," Fleckenstein said. "They made false statements about our fund and our team, and they mischaracterized our performance and our portfolios."

Morningstar spokeswoman Nadine Youssef denied the claim. "If we've taken sides, it's with the investor. We have systematically presented the strengths and weaknesses of the fund in a candid and fair light," she said.

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Leslie Adler)

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