Mr. Gundlach is widely respected as one of the leading experts of mortgage-backed securities. We purchased his fund late last year with the thought that his fund would be the best way to invest in beaten-down mortgage securities, which we believed were offering a very attractive investment opportunity at the time. Indeed, as shown on the chart below, his fund is up over 20% this year, which is a tremendous return out of a bond fund. We were certainly disappointed to learn of his departure. When we also learned that his top assistants had also stepped down, we decided we needed to take action and sell the fund, since there was clearly a material change at the top involving those managing the fund.
Bombshells like these don’t occur very often, but when they do it requires an immediate review of that holding. In today’s environment the news comes fast, and markets never sleep. This is an example of the sort of risk management that Pinnacle provides for its clients.
