TCW Links With MetWest, Boots Gundlach

December 5, 2009 ( – The bond investing world was shaken on Friday, as TCW Group Inc. announced that Jeffrey E. Gundlach had been "relieved of duties" as chief investment officer.

The firm announced that it had named Tad Rivelle, Stephen Kane and Laird R. Landmann as Co-Portfolio Managers of the TCW Strategic Income Fund, Inc., a change that it said followed the announcement that TCW had reached a definitive purchase agreement to acquire Metropolitan West Asset Management LLC (MetWest).  Rivelle, as it turns out, is currently chief investment officer at MetWest, a “nationally recognized fixed income investment management firm with close to $30 billion in assets under management”.   

The new portfolio management team will begin managing operations for the fund on Monday, December 7, 2009, according to TCW.  “We do not anticipate any change in TSI’s investment strategy, discipline or style as a result of this change,” said Ron Redell, President of the TCW Strategic Income Fund, in a press release 

Gundlach, 50, who also was removed from TCW’s board of directors, had been with the downtown L.A. firm for 24 years, according to the LA Times. He is well-regarded in the investment industry, especially for his management of portfolios that hold mortgage-backed securities, according to the report. 

TCW, parent of Trust Co. of the West, manages about $110 billion in assets, primarily for institutional clients such as pension funds but also for small investors via retail mutual funds.

Other changes are clearly coming.  TCW noted that “key MetWest investment professionals will immediately assume portfolio management responsibilities for all of TCW's high-grade fixed income client accounts”.  As for current MetWest clients, it was announced that MetWest will maintain investment control over its existing fixed income portfolios and strategies and “expects no change in its investment process or discipline”.   

According to the announcement, upon completion of the transaction, MetWest Partner and CEO, David Lippman, will become Group Managing Director and Head of TCW's high-grade fixed income business and a member of The TCW Group, Inc. Board of Directors. The transaction, which is subject to receipt of all required regulatory approvals, is expected to close during the first quarter of 2010. The financial terms of the agreement were not disclosed. 

The firms said that the acquisition will provide TCW clients access to “a broader suite of fixed income products and enhances TCW's ability to collaborate with its clients in addressing their investment needs”.  As for MetWest, the transaction would serve to provide the firm with “a larger balance sheet, international resources and a broader platform that will strengthen its existing product offerings,” according to the firms. 

The LA Times reports that TCW's long-term fate has been clouded by uncertainty this year, after its French parent company, banking giant Societe Generale, indicated it expected to sell or spin off the Los Angeles firm in the next five years.  Rumors also have circulated on Wall Street that Gundlach was considering jumping to a rival money manager.  As for removing Gundlach, in the announcement TCW said the firm "deeply regrets the need to take this action". 

TCW's acquisition of Metropolitan West is expected to be completed in the first three months of 2010.