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Bond king Gundlach explains his principles for success and a 'destructive' characteristic of many firms

·Former Correspondent

Jeffrey Gundlach is a highly regarded bond investor, and a well-respected CEO and business leader in the investment management world.

In less than ten years, Los Angeles-based DoubleLine Capital has gone from zero to $150 billion in assets under management. What started with a team of 45 people has also expanded to more than 250 employees, while still maintaining the firm's original entrepreneurial culture of intellectual honesty and shared success.

"We have a shared success mentality, one that, 'If you do well, I'm happy for you,'“ he told Yahoo Finance recently. “So nobody here is fighting for shelf space. Everyone's pulling the oar in the same direction."

The 60-year-old executive added that one of the "most destructive" characteristics of many investment firms is they have siloed units that tend to compete with each other.

DoubleLine hosts monthly fixed-income asset allocation meetings where the team leads — and pretty much anyone who wants to attend, discuss opportunities to put capital to work.

And no one is compensated by the amount of assets their team accumulates. Instead, it’s based on the firm's performance, helping to foster a sense of intellectual honesty, the billionaire investor explained.

Gundlach, who is viewed internally as someone who empowers his employees, summed up his philosophy with a catchphrase: “No responsibility without authority, no authority without responsibility.”

It means that if something goes wrong, he takes the blame — and he professed that he doesn’t raise his voice to employees.

"[My] other thing is I never yell at anybody. I believe that if something goes right, I'm more than happy to share the credit with everybody,” he told Yahoo Finance.

“And if something goes wrong, I really think it's my fault. So that, I think people feel good that they're not being kind of kicked like a dog when things go wrong,” he added.

Rising from the ashes

Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital,  speaks during the Sohn Investment Conference in New York May 4, 2015. REUTERS/Brendan McDermid
Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital, speaks during the Sohn Investment Conference in New York May 4, 2015. REUTERS/Brendan McDermid

What's likely the fastest-growing investment management firm in history, DoubleLine boasts an impressive track record, with many of its mutual funds outperforming their benchmarks and peer averages since inception.

Fortunately, it's been smooth sailing at DoubleLine, which will celebrate its 10th anniversary this month. The story of DoubleLine is unusual, in a way that speaks to the culture and the team's loyalty.

It was on a Friday in early December 2009, when a shockwave rippled across the trading floor at Trust Company of the West (TCW): A firm-wide email hit inboxes that informed the staff of Gundlach's termination. The investment firm had accused its rock star bond investor of swiping firm secrets, and leveled a host of other lurid accusations.

What happened right afterward was even more surprising. The next day, fourteen TCW officers — including all of the portfolio managers and traders for mortgage-backed securities — gathered in Gundlach's Santa Monica home and emailed resignations. Over the coming weeks, another 30 would quit TCW, including folks from other groups and departments.

DoubleLine Group's president Ron Redell, who had been president of TCW's mutual funds and left to build mutual fund business, explained to Yahoo Finance why his decision was easy.

"When you see a bright star, like Jeffrey Gundlach, you want to follow someone like that because you just know he's going to be successful," he said.

Even the intern at TCW, Steven Wald, who was finishing his undergraduate degree, departed TCW to join DoubleLine that December amid the shakeup. He called the decision a "no brainer."

By December 23 of that same year, DoubleLine announced its registration with the Securities and Exchange Commission — and its plans to develop a suite of fixed income investment strategies, including core, mortgage-backed, investment-grade corporates, and emerging markets.

In four months, DoubleLine would launch its first two mutual funds, and another one in June, all while dealing with a contentious lawsuit filed by TCW in January 2010. After DoubleLine filed a countersuit shortly thereafter, the jury issued a mixed verdict in September 2011, and the two firms finalized confidential settlements that December.

Fast forward several years, and what began as an upstart firm with nothing now has $150 billion in assets under management. In fact, it only took about three years for DoubleLine hit the $50 billion milestone in assets under management.

Julia La Roche is a Correspondent at Yahoo Finance. Follow her on Twitter.

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