Jury Awards Gundlach $66.7 Million in Bitter Fight With TCW

(September 16, 2011) — Bond guru Jeffrey Gundlach has been awarded $66.7 million by a jury over unpaid wages following his split from money management firm Trust Company of the West.

A Los Angeles jury awarded TCW, a unit of French bank Societe Generale, no punitive damages. However, it found that Gundlach and his co-defendants breached their fiduciary duty to the firm by taking trade secrets. The bond star was also found liable for interfering with TCW client contracts.

The jury awarded Gundlach the millions of dollars in unpaid wages to be split among Gundlach and three other former TCW executives. In December 2009, Gundlach and the three executives — who joined Gundlach’s new firm, DoubleLine Capital — were fired from TCW. DoubleLine has attracted about $14 billion from investors in 20 months.

In response to the verdict, TCW stated:

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“We are gratified by the jury’s verdict, which speaks directly to the principles at the heart of this case — integrity, honesty and trust. The jury found that each of the defendants violated these principles — that each one of them breached their fiduciary duties and stole trade secrets and that Jeffrey Gundlach wrongfully and intentionally interfered with TCW’s business…Trade secret damages to TCW will be determined in a separate proceeding. The jury has made it clear that the principles of integrity, honesty and trust count.”

Last month, 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.

While TCW claimed Gundlach stole its trade secrets, including client portfolio data, to start DoubleLine, Gundlach had countersued TCW and its parent firm. 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 start 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

(September 16, 2011) — Preqin’s latest research has found that private equity fund managers looking to raise their first funds have reason to be optimistic.

According to the research, more than 50% of investors have stated that they will at least consider investing in a first-time or spin-off fund, while performance data suggests that these funds have generated good returns for investors in the past.

“The private equity fundraising environment is extremely competitive, but there is evidence that despite the difficulties, emerging managers are successfully raising funds,” Preqin’s Helen Kenyon stated in a release. “While investors place a lot of importance on a fund manager’s past performance, they are keen to take advantage of highly attractive opportunities. With 36% of first-time fund managers going on to manage top quartile funds, it is perhaps not surprising that more than half of investors in private equity funds will consider backing a first-time or spin-off fund.”

In addition, the study showed that despite tough fundraising conditions, since the start of 2011, a number of first-time funds have reached a final close within a year of setting out. The conclusion, according to the research firm, is that investors are eager to take advantage of attractive opportunities regardless of manager experience. The research noted that the average time spent fundraising for first-time funds closed in 2011 to date is 20.2 months.

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A report earlier this month by SEI and Greenwich Associates shows private equity is in demand as institutional investors, fund managers, and consultants plan to increase their allocations of the asset class or recommend increases to their clients over the next year, but they are urging greater transparency in the asset class.

The survey from SEI and Greenwich Associates, titled “The Logic of Fund Flows,” found that 26% of investors plan to increase their private equity mandates in the next year. However, investors and consultants differed on their investment objectives regarding private equity. Approximately two-thirds of investors (68%) pointed to return potential as their primary objective as opposed to 10% of consultants. Fifty percent of consultants, meanwhile, said diversification was their primary investment objective as opposed to only 18% of investors.

“As investors are looking to achieve higher returns in an increasingly challenging return environment, private equity is coming back, but standards are higher across the board,” said Greenwich Associates Managing Director Rodger Smith.

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