How Did Jeffrey Gundlach Make His Money?

Jeffrey Gundlach is known throughout Wall Street as the Bond King. He’s one of the best bond traders and successfully grew funds for a major Los Angeles asset management firm before starting his own firm DoubleLine Capital LP.

His background is no mystery but how did Jeffrey Gundlach make his money?

The Yale dropout is a savant when it comes to intermediate-term bonds and became a philanthropist in 2016 after donating $42.5 million to a Buffalo, New York art gallery. His market strategies are often brought up in investment circles, because he’s a billionaire whose firm manages over $150 billion in assets.

In fact, DoubleLine is one of the fastest-growing investment management firms of all time. It’s no small feat, especially considering he was fired from his long-serving position at Trust Company of the West (TCW) before starting his company.

When the pandemic crashed the stock market in 2020, Gundlach covered all his firm’s short positions, making a healthy profit while the market reeled. But looking back how did he get into those positions in the first place?

How Jeffrey Gundlach Got Started

Gundlach is one of hundreds of billionaires who made their money through investments. He started out in a lower-middle-class family in Buffalo, New York. Growing up in a low income bracket, he learned to be resourceful with a limited budget.

He’s also a mathematical genius and graduated summa cum laude from Dartmouth before attending Yale’s Ph.D. program. He used financial aid to attend and left the Ivy League to pursue a music career in Los Angeles.

That’s where he used his credentials to get hired to manage TCW’s $9.3 billion Total Return Bond Fund. He shined at the job and continued growing the company’s portfolio as one of the top 2 percent of bond traders in the market.

He even correctly called the subprime mortgage crisis in 2007, protecting his clients from the housing market crash.

Despite his success, Gundlach was fired from TCW in 2009 as a mass email was sent. It happened during the firm’s acquisition of Metropolitan West Asset Management (MetWest). It’s unclear what caused the termination, but the company indicated he was involved in marijuana and sexual misconduct, as well as stealing confidential trade secrets.

What’s clear is he soon pulled a move that would make Jerry Maguire proud.

He started a new company and brought 14 TCW officers with him. The roster included the company’s top mortgage-backed securities traders who quit en masse to work from Gundlach’s Santa Monica home using their work BlackBerry’s.

The company they started was DoubleLine Capital.

How Did Jeffrey Gundlach Make His Money?

Just as important as how he amassed his multi-billion-dollar fortune is why. Gundlach loved watching Robin Leach host “Lifestyles of the Rich and Famous” on TV as a kid. This inspired him to become wealthy, and he did it through his investment firm in the aftermath of the foreclosure crisis.

Of course, before that he earned his first million-dollar paycheck while working as an investment banker in 1990.

He continued growing his annual salary until he was making $40 million per year in 2009. His old firm wasn’t happy to lose him, so TCW filed a lawsuit in early January 2010. Less than four months later, the company launched two open-end mutual funds, with Gundlach taking the helm of the DoubleLine Total Return Bond Fund (MUTF:DBLTX).

The fund hit $1 billion in assets by June 25 of that year. By 2011, Barron’s christened him the king of bonds, dethroning Bill Gross in the process.

By 2012, the firm managed $50 billion in assets and they celebrated in the restaurant in the lobby of the TCW building with a banner celebrating the accomplishment.

In doing so, Gundlach turned his millions into billions.

What Is Jeffrey Gundlach’s Net Worth?

Jeffrey Gundlach is worth approximately $2.2 billion at the end of 2020, after growing his firm’s assets under management to nearly $150 billion. This makes him one of 630 billionaires in the United States who held over $3.4 trillion in wealth fueled by the pandemic.

It’s a massive growth for a short ten-year period.

And just like he predicted the subprime mortgage crisis featured in The Big Short, Gundlach sees the decline of the FAANG index coming in the 2020s.

The economy was artificially held up by government stimulus funds through the end of 2020, and a new stimulus bill will continue this trend well into 2021. COVID-19 accentuated an already-growing income gap, and economic upheaval is almost inevitable over the first half of the decade.

Home sales, however, are booming and expected to continue as this generation embraces virtual work in Zoom towns. At 61, Gundlach proved his worth as and investment savvy and could outperform even Warren Buffett by the end of his life.

The market in 2021 is different than anything we ever faced, but one thing that remains clear is bonds have generated profits for bondholders.

Are Bonds a Better Investment Than Stocks?

Gundlach made his fortune by navigating the bonds market instead of stocks. Although stocks give you ownership of a company, bonds are interest-bearing loans. These fixed-income investments are units of securitized corporate debt.

Bond prices are inversely correlated with interest rates, so bond prices go up when interest rates go down.

When the pandemic hit, a lot of scared investors fled stocks while investing in bonds, which are more secure. But lower interest rates mean you receive lower payments from these newly issued bonds.

So, if you held bonds in 2020, you had a front-row seat to watch the pandemic hit the market. It also made for a great time to sell high-yield pre-pandemic bonds. The payments are typically locked in through maturity.

Whether held or sold, bonds (typically government bonds, although not always) can make a lot of money if you understand the math and patterns. Just ask Jeffrey Gundlach.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.