SoCal's new bond king, Jeff Gundlach, is missing one of the these: a 2010 Porsche Carrera 4S. Along with $10 million in art and a few bottles of wine.
There are three big names in bonds these days, and they're all in Southern California. Together, Bill Gross and Mohamed El-Erian run Newport Beach-based PIMCO, the world's largest bond fund, overseeing a jaw-dropping $1.8 trillion in assets. Meanwhile, former '80s rocker Jeff Gundlach has been coming on strong in the past year.
His L.A. firm, DoubleLine Captial, has grown significantly, with now more than $40 billion under management. Gundlach's old firm, TCW (which he left in a cloud of controversy in 2009), is also in the news: It's being bought by the Carlyle Group, one of the world's biggest private equity firms.
PIMCO is in the midst of much speculation about whether El-Erian will be able to run the find as effectively as Gross once Gross decides to call it quits. This has created plenty of opportunity for Gundlach, who was already well known for his ability to make piles of money, to position DoubleLine as a better, faster PIMCO and a smarter, punkier TCW. Back in May, Businessweek's Roben Farzad captured the meteoric ascent of DoubleLine, which has gone from zero to $40-ish billion since 2010, and Gundlach, the new "bond king."
TCW was just bought by the Carlyle Group, a huge private-equity firm. The sale could helo TCW and former parent, struggling French banking giant Société General.
The Carlyle Group, one of the world's biggest private-equity firms, is buying TCW, an institutional investment management firm based in L.A., with roughly $130 billion on the books and a good reputation for fixed-income. In fact, the bond side of what TCW does is such a big part of the business (about 60 percent) that David Lippman, who ran fixed income for TCW, will become CEO of the new, Carlyle-owned enterprise.
The last thing that popped TCW onto the radar was a meltdown in 2009 that involved its star bond trader, Jeff Gundlach. But there's a meltdown behind the Carlyle deal, as well. And it's all about how TCW former parent, French back Société Générale, is suffering from the ongoing eurozone crisis and from the aftermath of the financial crisis.
Banks around the world are now required to basically keep more money in the vault (so to speak). It's called the "Basel Accord," and it's now up to its third iteration, Basel III. SoGen, France's number two bank, is in the process of bolstering its balance sheet and cutting lines of business in order to comply with Basel III. It's been a rough time for the bank, which is suffering from its exposure to Greek debt — it wrote off three-quarters of its investment last year.
Jeff Gross/Getty Images
Bill Gross, CIO of PIMCO, hits a shot during the AT&T Pebble Beach National Pro-Am at the Spyglass Hill Golf in 2012. Let's just hope co-CIO Mohamed El-Erian wasn't watching.
Two of the most generously compensated money managers in the world labor just down the road from Los Angeles, at Newport Beach bond colossus PIMCO, which oversees a staggering $1.8 trillion in assets. Co-Chief Investment Officers Bill Gross and Mohamed El-Erian make, respectively, $200 million and $100 million a year.
At least according to Geraldine Fabrikant's recent profile of (mostly) El-Erian in the New York Times. As Felix Salmon notes in a post that has now provoked some debate, Reuters reported last year that Gross and El-Erian were only making $33 million each. Then, as now (Felix checked), PIMCO disputes these figures. But Felix doesn't think they're totally out of whack, at least where Gross is concerned:
Certainly that kind of payday is within the realms of possibility, given that his firm manages $1.8 trillion, and his Total Return Fund has $263 billion under management: $200 million is just 0.01% of the former, or 0.08% of the latter. On the long-only buy side, the way you get paid for performance is that your performance attracts new money, and the new money pays management fees. And so long as Pimco’s assets under management are going up rather than down, I can see how Gross’s pay might do likewise. But still.
Greek default, French banks, and…Newport Beach? PIMCO's Mohamed El-Erian is more than a little concerned: “The light should be flashing yellow, if not red, in Washington, D.C., and hopefully the IMF meeting can be the catalyst for getting to a common analysis and setting the stage for the G-20,” El-Erian said from Pimco’s Newport Beach, California-based headquarters. (Booomberg)
The Federal Reserve of Dallas wonders why the housing boom boomed so big in the 2000s: "The most recent house price and construction run-up exceeded levels recorded during the 1990s economic expansion, when unemployment rates fell even lower and income grew faster. Why is this? Standard econometric models accounting for these factors simply cannot explain the surging house prices and building seen in the mid-2000s." (Dallas Fed)