DoubleLine Investment Philosophy
DoubleLine was founded to offer investment services under a cardinal mandate: striving to deliver better risk-adjusted returns. This mandate includes the avoidance of risk-taking that historically has led to catastrophic principal losses. DoubleLine emphasizes the importance of security selection, trade execution, portfolio construction, sector allocation, resourcing of the firm's personnel and systems, and ultimately ownership structure of DoubleLine itself. Employee-ownership reinforces the stability of the investment teams and its accountability: no outside decision makers stand between the teams and our valued clients. In fact, the name "DoubleLine" voices our cardinal mandate: like a careful motorist on a winding mountain road, the manager must not cross the double line into the oncoming lane of risk.
DoubleLine Investment Process
DoubleLine portfolio management teams maintain a consistent philosophy and process. While investment processes vary in adaptation to the particulars of asset class and strategy, the following general principles are embedded across investment groups:
- DoubleLine believes that all investments need to start with risk analysis, not the traditionally taught benchmark comparisons. In our view it is not how investments compare to benchmarks, but how their risks relate to each other across a portfolio. Risk integration techniques enable DoubleLine to build what we believe are more successful portfolio foundations.
- Investment ideas must offer an asymmetric, positively skewed risk-reward profile. In other words, selected securities and, in Core-type portfolios, sector overweights must appear, through careful analysis, to offer greater potential payoff than potential loss.
- Portfolios must be constructed with an aim to outperform under a range of future scenarios. In other words, DoubleLine shuns risk-taking based on unidirectional forecasts regarding interest rates, default rates or other variables that drive return.
- No one can consistently predict changes in the level, direction or term structure of interest rates. DoubleLine does not manage portfolios based on attempts to anticipate changes in rates.
- Fixed Income securities are to be selected for the potential to build par value. Never chase incremental income at the expense of the potential to build par value.
- Fixed Income portfolio managers actively head trading operations. By definition, portfolio managers are the most seasoned traders. Their experience is irreplaceable in the stoppage of trading leakages as well as rapid vetting of time-sensitive market opportunities.