No. of Recommendations: 2

The following is from Morningstar.

Take DoubleLine Total Return Bond (DBLTX), for example. The fund has been on a tear for almost as long as it’s been around, ever since manager Jeffrey Gundlach founded his new firm and launched the portfolio in early 2010. It has gained nearly 9% in 2011 through Oct. 17, and has consistently generated the highest annualized yield relative to its closest competitors in the bond-fund universe since its launch. That figure clocked in at 8.4% on the last day of September.

The magnitude of that number should catch anyone's eye, though, despite the fund’s massive success. It comes courtesy of a mix of agency and nonagency mortgages that in July included roughly 20% in what one might refer to as exotic mortgage securities, with some of that overlapping a 28% stake in nonagency debt rated below BBB. Gundlach has generally done a masterful job assembling those kinds of risks at odds with each other so that they balance out when the market gets dicey, but his methods aren't foolproof. He himself has noted that a double-dip housing crisis, in particular, would likely take a toll on his strategy.

In other words, the fund invests in spec-grade mortgage debt, which is a tough asset-class for a small investor to access and to manage responsibly. So doing so through a fund not only makes sense, but also creates a very shrewd diversifier to whatever other assets might be held in one's portfolio. Predictably, the article's author, Jacobson, issues a boiler-plate warning about the risks of the fund and under what conditions it might fail. But compare the caution Gundlach evidences in his interviews with the "sky is falling" cries that Gross is now making and, especially, compare the returns the two are offering to their shareholders. In a fund with an equally-flexible charter, PTTRX, Gross isn't even offering a cash-equivalent return. So, of course, he is attempting to manage his shareholder's expectations, saying in his most recent letter that they should be content with 5% at best (and offering them a miserable 2.08% YTD).

Kudos on your choice of DBLTX. It was a shrewd, timely pick. If you are overweight the fund --as would be tempting to do-- just trail a stop and, meanwhile, clip your much-deserved coupons.

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