DoubleLine Finally Gets A Five Star Rating (From LB Ratings)

LB Ratings has announced that it is initiating coverage of the DoubleLine Total Return Bond Fund with a five star rating.  A five star rating means, “We love the fund and would consider investing ourselves.”  The main player in the mutual fund and ETF rating industry, Morningstar, has yet to give DoubleLine a star based rating.

LB Bond Mutual Fund and ETF Ratings is a new free service from Learn Bonds, a financial education and commentary site focused on bond investing.  The service aims to be different from Morningstar and Lipper in several ways.  Most importantly, the site aims to provide investors a small group of quality funds to consider for investment, rather than the thousands of funds rated by Morningstar and Lipper.

Why doesn’t Morningstar Rate DoubleLine?

This is a good question, especially considering the DoubleLine Total Return Bond Fund is one of the largest mutual funds in world, with $33 billion under management.  Even if its size alone did not warrant coverage, its performance certainly does.  Since inception, the fund has gained over 13% a year for its investors.

Morningstar’s star rating system is based on a fund’s past performance. To give a fund a rating, Morningstar needs at least a 3 year track record.  The DoubleLine Total Return Fund has only been around for two and a half years.

Why does LB ratings give the fund 5 stars?

While the DoubleLine Total Return Fund has only been around for 2 and a half years, its performance since inception has been stellar.  In addition, the same management team that started DoubleLine, formerly managed another top performing bond fund called the TCW Total Return fund.  In 2006 while DoubleLine’s Co-Founder Jeffrey Gundlach was overseeing the TCW fund, he was named Fixed Income Manager of the Year by Morningstar.  He was also nominated by Morningstar for their prestigious Fixed Income Manager of the Decade award in 2010.

Finally, the fund is largely insulated from losing value if interest rates rise. As the LB Ratings: Doubleline Total Return Bond Fund Rating states:

“What makes this fund unique is the average duration of its portfolio, which is just a tad above one.  This means if interest rates rise, the fund will not lose much value.  This is especially true when  compared to other core bond funds.”

The full report discusses the fund’s performance, risk, and management.

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