Exclusive: Gundlach's DoubleLine eyes RS Investments to grow equity business - sources

DoubleLine and Cleveland-based Victory Capital are among a handful of bidders for RS Investments, in a deal that could be valued up to $275 million, said the sources, both of whom wished to remain anonymous because the sales process is confidential.

Guardian Life Insurance Company of America, the parent of RS Investments, tapped Morgan Stanley in June to find a buyer for the business, which has $20 billion in assets under management. Second round bids for RS Investments were due Friday.

Gundlach and a spokesperson at Victory were not immediately available for comment. Guardian Life declined to comment.

If DoubleLine wins the business, it would be the firm's first acquisition in its five-year history.

Also, it would position DoubleLine, which is known for its fixed-income expertise, to win over investors that are looking to get back into equities once the Federal Reserve begins raising rates, which many expect it to do next month, said Todd Rosenbluth, a senior director at S&P Capital IQ.

"I think DoubleLine is well positioned for rising rates because they tend to have a low duration approach," Rosenbluth said. "But equities tend to do better than fixed income in a rising rate environment."

DoubleLine, whose co-founder Gundlach is widely followed for his investment calls including correctly predicting that U.S. Treasury yields would fall last year, reported its 18th consecutive month of new money inflows in July.

RS Investments has 25 mutual funds and a total of $19.8 billion in assets under management, according to the firm's Web site.

Two of its top-performing funds, the $86 million RS Small

Cap Equity Fund and the $2.5 billion RS Small Cap

Growth Fund have been in the top 5.0 percent of their categories for the past one, three and five years, according to

Morningstar.

In fact, investors poured in $1.2 billion into the RS Small Cap Growth Fund in the first seven months of the year, making it the top fund in inflows in the category year to date, according to Lipper.

(Reporting By Jessica Toonkel and Jennifer Ablan)