Jeffrey Gundlach, manager of the top-performing DoubleLine Total Return Bond Fund, is planning a new fund that will seek to beat an index that focuses on the cyclically adjusted price-to-earnings ratio for stocks.
DoubleLine Shiller Enhanced CAPE Fund will use derivatives, perhaps in combination with direct investments, to track the performance of the Shiller Barclays CAPE U.S. Sector Total Return USD Index, and invest in bonds to try to generate long-term total returns that beat the index, according to a filing today with the U.S. Securities and Exchange Commission. The fund will be run by Gundlach and Jeffrey Sherman, who co-manages the DoubleLine Multi-Asset Growth Fund.
The Shiller Index, named for economist Robert Shiller, the co-creator of the S&P/Case-Shiller home-price index, allocates an equally weighted notional long exposure to the top four U.S. sectors that are undervalued based on cyclically adjusted price- to-earnings ratio and exhibit relatively strong price momentum over the past year. The index returned 20 percent this year through yesterday, compared with a decline of 2.7 percent for the Barclays U.S. Aggregate Index, the most commonly used benchmark for fixed-income managers, and a gain of 20 percent for the Standard & Poor’s 500 Index.
This year, Gundlach’s firm opened a floating-rate mutual fund, an equities small-cap growth fund and an income-oriented closed-end fund to diversify Los Angeles-based DoubleLine Capital LP after a three-decade-long bond bull market.
Gundlach’s flagship DoubleLine Total Return Bond Fund advanced at an annual average of 7.5 percent in the past three years, ahead of 97 percent of peers, and fell 0.7 percent this year through yesterday, beating 87 percent of similarly managed funds, according to data compiled by Bloomberg.