DoubleLine Deputy CIO Jeffrey Sherman hosts the firm’s annual Closed End Funds webcast, opening with a macroeconomic and rates overview before diving into positioning and performance for DoubleLine’s three closed-end funds – Opportunistic Credit Fund (DBL), Yield Opportunities Fund (DLY) and Income Solutions Fund (DSL). On rates, Mr. Sherman walks through a historic shift in the bond market’s psyche, noting this is the first time since the end of the last hiking cycle that markets are pricing policy tighter a year out, with fed fund futures now implying two to three hikes over the next 12 months. He attributes the recent front-end U.S. Treasury rally primarily to crude oil relief following hopes of a Strait of Hormuz opening, but he cautions the picture remains uncertain and core inflation continues to be a problem. On spreads, Mr. Sherman is candid: They are at cycle tights, and to get anything north of 6% without taking on meaningful idiosyncratic risk, investors are essentially forced into CCC or near-CCC territory. The team’s strategy is patience, ample dry powder and a focus on diversified income across securitized credit and emerging markets local currency debt. Mr. Sherman sees the latter as one of the more compelling opportunities in a world where the U.S. dollar remains structurally rich.
On the funds themselves, all three have delivered 350 bps to 450 bps of excess return per annum versus the Bloomberg US Aggregate Bond Index since inception. Leverage across all three is near the lowest levels in the funds’ histories – a deliberate choice reflecting tight spreads and the rising cost of borrowing. Mr. Sherman closes with a pointed warning on private credit semi-liquid structures, expecting headline risk to persist for at least the next year as redemption cycles and gating issues work their way through the market.
Past performance does not guarantee future results. Investing involves risk including the risk of principal loss. For Important Information about the funds, go to: https://doubleline.com/closed-end-funds/
DBL Prospectus
DSL Prospectus
DLY Prospectus
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Jeffrey Sherman, DoubleLine’s Deputy Chief Investment Officer, is a thought leader, portfolio manager and public speaker in the industry. Mr. Sherman is a member of DoubleLine’s Fixed Income and Global Asset Allocation committees, and he serves as lead portfolio manager for the firm’s multi-sector and derivative-based strategies. In his role, Mr. Sherman guides the investment teams in developing top-down macro views and collaborative asset allocation processes throughout a market cycle. Additionally, he is a member of DoubleLine’s Executive Management Committee. In 2018, Money Management Executive named Mr. Sherman as one of “10 Fund Managers to Watch” in its yearly special report. Prior to joining DoubleLine in 2009, Mr. Sherman was a Senior Vice President at TCW, where he worked as a portfolio manager and quantitative analyst focused on fixed income and real-asset portfolios. Prior to that, he was a statistics and mathematics instructor at the University of the Pacific and Florida State University. Mr. Sherman taught Quantitative Methods for Level I candidates in the USC/CFALA CFA® Review Program for many years. He holds a B.S. in Applied Mathematics from the University of the Pacific and an M.S. in Financial Engineering from Claremont Graduate University. Mr. Sherman is a CFA® charterholder.
