NEW YORK, Thu Sep 20, 2012 – The Federal Reserve’s move to stimulate the economy by buying mortgage securities is proving to be manna from heaven for three of the biggest players in the bond fund business: Pacific Investment Management Company, DoubleLine Capital and TCW.
The three investment firms all manage mutual funds that loaded up on mortgage-backed securities well before the Fed announced last Thursday that it would start buying $40 billion in government-backed mortgage debt each month until there’s a sharp improvement in the job market.
With U.S. Treasury yields at extraordinary low levels, bond investors like TCW, PIMCO and DoubleLine have migrated toward mortgage-backed securities as those securities not only provide higher yields but they perform well when interest rates are stable.
It is TCW’s flagship fund that is outperforming the ones managed by PIMCO co-founder Bill Gross and DoubleLine founder Jeffrey Gundlach – the two money managers seen as the reigning kings of the bond investing world.
The $7.4 billion TCW Total Return Bond Fund, which has more than 80 percent of its assets invested in mortgage-backed securities, is up 10.68 percent for the year.
The TCW fund is besting the 8.61 percent year-to-date return for the $272.5 billion PIMCO Total Return Fund – the world’s biggest bond fund – and the 7.89 percent return posted by the $32 billion DoubleLine Total Return Bond Fund.