TCW Cuts Fees to Appease Investors
February 4, 2010
The TCW Group has elected to cut fees on two of its institutional distressed debt funds following conversations the Société Générale subsidiary recently had with limited partners and clients.
According to a source familiar with the situation, the amendments to TCW’s Special Mortgage Credit Funds I and II came as a result of the “departure” of former TCW CIO Jeffrey Gundlach. The bond pro and new DoubleLine Capital CEO was terminated Dec. 4 by the firm.
On both contracts, Gundlach was listed as a “key person” for the funds’ management, the source said.
Roughly three days following the Gundlach firing last year, a similar “key man” event occurred where the U.S. Treasury decided to freeze TCW’s Public-Private Investment Program (PPIP) funds, worth nearly $500 million in assets, as a result of company’s staff restructuring.
And on Jan. 4, the Los Angeles-based firm voluntarily withdrew from the federal program.
In a conversation today, TCW spokesperson Erin Freeman said the proposed amendments would give investors significant flexibility, Additionally, she said that the firm is asking its clients to make the “transition” with them. In total, both investment options are worth $3 billion in assets.
Freeman said the funds, which were established as a vehicle to take advantage of the distressed debt prices in the mortgage market over the past three years, would include reductions of management fees from 2% to 1%, and decreases in carried interest rates from 20% to 5%.
TCW’s clients were notified of the changes last week. Freeman said that investors “can choose to liquidate, go with this option or [select] a combination [of both].”
Ultimately, clients will have until Feb. 19 to make their decision, she added.
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