TCW Group Inc, one of the largest money managers in the world, fired its chief investment officer, Jeffrey Gundlach, and removed him from its board of directors after buying a smaller rival last week.

Los Angeles-based TCW said Gundlach was relieved of his duties and replaced as head of TCW's high-grade fixed income group by Tad Rivelle. Rivelle is the co-founder of Metropolitan West Asset Management LLC, a firm overseeing $30 billion in assets that TCW recently acquired.

In a letter obtained by Reuters on Sunday, TCW said Gundlach threatened to take certain actions that could have jeopardized the firm's ability to manage clients' fixed income assets.

TCW, which oversees about $110 billion in assets, said it deeply regrets the need to take this action in the letter dated December 4 and signed by TCW's chief executive officer, Marc Stern.

Gundlach, who was recently named a finalist for fund manager of the decade by mutual-fund tracker Morningstar and has worked for TCW since 1985, held conversations earlier this year with major fixed-income rivals about a role at those firms, according to people familiar with the talks.

Calls and emails to Gundlach were not returned.

Last week, TCW announced it would buy MetWest and said the transaction was expected to close in the first quarter of 2010. Financial terms were not disclosed in the release sent Friday.

MetWest's Rivelle, another widely regarded fixed-income manager and long-time competitor of Gundlach's, told Reuters on Sunday that the move by TCW made sense.

It is, not to sound cold-blooded, a business combination, and as such on one level it is an expression of great confidence TCW has in MetWest's abilities, Rivelle said. We're flattered and recognize there are integration issues that will be dealt with in the days and weeks in front of us.

Of the two companies, he said, We both complement one another, with TCW overseeing $60 billion-plus in high-grade securities mostly in mortgage-backed securities and MetWest having $30 billion in total return assets drawn from the mortgage, asset-backed, corporate, and Treasury sectors.

MetWest has 115 employees and was founded in 1996; TCW has more than 630 employees and was founded in 1971.

Rivelle said there are no plans to contemplate reductions at this point, although it is possible that some investment professionals may not elect to remain with the combined entity.

TCW spokeswoman Erin Freeman declined to comment further.

(Additional reporting by Deepa Seetharaman, editing by Maureen Bavdek and Leslie Adler)

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