Jeffrey Gundlach: From Broke Drummer to Bond Billionaire

Key Speakers At The Bloomberg Markets 50 Summit
Jin Lee/Bloomberg/Getty Images Jeffrey Gundlach founded DoubleLine Capital in 2009.

When Bill Gross left Pimco — the investment firm he co-founded, which manages $1.94 trillion in assets — the shock was felt throughout the global financial community. For more than 30 years he was considered the most prominent bond investor in the world. So when he drove from his home in California’s Newport Beach an hour north to meet with Jeffrey Gundlach at his Santa Monica estate to discuss a possible partnership, the symbolism was not lost on observers.

The king is dead. Long live the king.

That’s how Gundlach was referred to –- the king of bonds -– in a 2011 Barron’s cover story that highlighted the success of his own firm, DoubleLine Capital. But his route to financial royalty was unusual, and if not for one impulsive action, his life may have taken a much more obscure path.

Math, Philosophy and Music

Gundlach grew up in Buffalo, New York, and by his own admission, his family struggled to get by. However, a strong work ethic and a head for numbers helped him excel in school, where he got straight A’s and a near-perfect score on his SATs. With the help of financial aid, he attended Dartmouth and graduated summa cum laude with a double major in theoretical mathematics and philosophy. Then in 1981, he entered Yale’s theoretical mathematics doctoral program.

Two years later, a dispute with his graduate advisor over the topic of his Ph.D. thesis –- Gundlach wanted it to be “The Probabilistic Implications of the Non-existence of Infinity” –- caused him to drop out of Yale and head to out to California to join the Los Angeles music scene. With friend Bev Eyre, he formed the band Radical Flat.

In a 2012 interview with Business Insider, Eyre described Gundlach’s musical style. “He was an incredible drummer. He could have made a career out it. He’s was fast. He was excited; he never missed a beat, like a machine gun. He could play so many cool rhythms.”

Opportunity from the Yellow Pages

But rock ‘n’ roll stardom was not in the cards, and by 1985 he found himself broke. “I had basically cardboard boxes for tables, and I sat on the floor. I had a black and white TV with a coat hanger for an antenna, and I needed a pair of pliers to turn the dial,” he told Bloomberg on a recent podcast. But soon after, that tiny TV gave him an idea that changed his life.

“Lifestyles of the Rich and Famous” was counting down the top 10 highest-paying jobs in the business world. No. 1 was investment banker, which host Robin Leach said required “a hard work ethic and an analytical mind.” Feeling that he possessed both, Gundlach pulled out the Yellow Pages and set about contacting investment banking firms for a job.

Investment banking firms don’t generally advertise in the phone book, but there were listings for investment managers, and the naive Gundlach figured they were the same thing. So he sent his résumé to all 23 firms with boldfaced listings, emphasizing his background in math. He got one response, from TCW, which incorrectly assumed he was responding to an ad it had placed with a local college.

Despite his lack of financial experience, his interviewers felt he might be a good fit and asked if he was interested in fixed-income or equities. “I don’t know what those are,” Gundlach replied. Though taken aback, they explained that fixed-income were “bonds” and equities were “stocks.” Having never heard of bonds, Gundlach chose “stocks.” Fortunately for him, they recognized that his math skills would be more applicable to bonds, so he was hired, given a book on bonds to read, and told to be ready to start in two weeks.

A Quick Study, a Quick Rise

During that time, Gundlach devoured the book and derived from scratch all the formulas it presented, so that by the first day of work he knew more about bonds than anyone else in the firm. And within six months, he was managing a portfolio of a few hundred million dollars.

Gundlach stayed with TCW for 24 years until 2009, when he was fired for reasons that are still disputed by both sides today. Less than three months after departing, he had formed DoubleLine Capital with a dozen or so former TCW employees and already had over $1 billion under management. By 2014, that number had grown to over $50 billion. Factoring in Gundlach’s compensation and equity in the firm, his net worth is estimated at just north of $1 billion.

Though he has largely abandoned his musical past, Gundlach retains one special connection from Radical Flat: bass player Nancy Draper, now his wife.

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