Bond-Fund Star Gundlach: 'There Was Nothing Special About TCW Data'

Jeffrey Gundlach has told a jury that he had no use for data from TCW Group Inc., his former employer, to start a rival firm because there was nothing special about it.

(August 16, 2011) — Fund manager star Jeffrey Gundlach, currently engaged in a lawsuit for allegedly stealing trade secrets from his former employer, has testified that he did not need the company’s data to start his rival firm.

Gundlach, formerly the fixed-income guru at asset-management company Trust Company of the West (TCW), has been accused by TCW of stealing the firm’s system for evaluating bonds to set up a rival money-management business, DoubleLine Capital. However, under questioning by his own attorneys, he asserted that the TCW system for evaluating complex bonds used “the same data everyone else looked at,” the Los Angeles Times reported. Furthermore, he asserted that DoubleLine was built from scratch, with the computer software and data systems purchased from a third-party vendor.

In December 2009, TCW fired Gundlach as its chief investment officer. He formed DoubleLine just 10 days after that, with most of his bond-team members leaving TCW to join him. DoubleLine has attracted about $14 billion from investors in 20 months.

Gundlach told a Los Angeles jury that during a meeting with TCW Chief Executive Officer Marc Stern when he believed he was about to get fired, he offered roughly $350 million for 51% of the firm. “If you fire me, you’re going to blow up the firm,” Gundlach told Stern during the meeting, according to Bloomberg.

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While TCW — which seeks $375 million in damages — claims Gundlach stole its trade secrets, including client portfolio data, to start DoubleLine, Gundlach has countersued TCW and its parent firm, French bank Societe Generale. Seeking about $500 million, he accused the firm of firing him to avoid paying him a hefty chunk of promised income, and said that concerns over being fired drove him to develop a backup plan to stat his own money management firm.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

European and US legislation has encouraged significant changes within private equity divisions of banks worldwide, according to data provider Preqin.

(August 16, 2011) — Legislation in Europe and the United States is fueling a number of major changes within the Private Equity divisions of banks worldwide, Preqin has found.

According to the research group, the private equity arms of many global banks are being restructured, or spun out, as they aim to comply with the Volcker Rule in the US and European legislation Basel III.

“The financial crisis and recent changes to legislation have had a lasting impact on banks’ activity in the private equity asset class, with the amount of capital committed to the asset class falling over the past few years,” said Preqin spokeswoman Helen Kenyon in a release. “We have seen a number of approaches taken by banks to their captive private equity operations and it is clear that there are further changes to come,” she said, noting that it is likely that banks will continue to remain a significant and important part of the private equity investment universe. However, strengthening capital requirements and the restrictions on private equity investments will force more banks to alter their investment strategies, while compelling private equity firms to seek capital elsewhere, she asserted.

Preqin’s research revealed that banks have always been major players in the private equity investing space — currently, private equity arms of banks hold $49.7 billion of un-invested capital, or 5.4% of aggregate global dry powder. Furthermore, Preqin’s research demonstrated that banks accounted for 9% of all capital invested in private equity as of 2010, equating to an aggregate $105 billion — a number that was slightly less than the $115 billion invested as of 2008.

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Last month, Preqin ‘s private equity research found that management fees are still causing significant unrest amongst investors. “In the difficult fundraising market, negotiating favorable fund terms and conditions is of the upmost importance to investors. That such a large proportion of limited partners will not consider investing in a fund that does not conform to the ILPA Principles is clear evidence of this,” stated Preqin’s Kenyon.

Preqin’s survey found that 50% of limited partners feel that there is a misalignment of interests between themselves and fund managers when it comes to management fees.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742