Bond Funds: Behind Dan Fuss' Stellar Record

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In addition, Fuss is a big fan of bonds with BBB credit ratings which straddle the weird terrain of investment-grade debt and junk.

There are no screaming buys for bond investors, though. "The market is fairly valued," he says. Yield spreads, the difference between the yields of corporate debt and risk-free Treasuries, are about the same as they were 18 months ago, before the credit crisis hit, he notes. And while inflation isn't a worry yet, Fuss does expect inflationary pressures to reemerge … eventually. The problem is that he doesn't know when it will happen. As a result, he has pared the average maturity of debt issues held in the fund from nearly 14 years to 11 years to shorten its exposure to interest-rate risk.

Wrapping Up a Strong Decade

As for the New Normal—the idea that the economy is resetting to a long period of slow growth—Fuss says: "I don't know what normal is anymore."

What is normal for investors is stellar long-term performance of the Loomis Sayles Bond Fund—it's gained an annualized 8.5% in the past decade, making it one of the best-performing multisector bond funds, according to fund tracker Morningstar (MORN). So far in 2009, it's up 32.63%. "Loomis Sayles Total Return takes an equity-like approach and, lately, has generated better than equity-like returns," says Russ Kinnel, director of research at Morningstar. Fuss "is an outstanding, wide-ranging investor," Kinnel says. In fact, Morningstar likes the Loomis Sayles Bond Fund so much that the firm added it as an option to their employee retirement plan about a month ago.

Aside from the fund's rocky period, the biggest bummer for Fuss is the fact that his beloved Boston Red Sox failed to make it through the American League playoffs. "It's too late to worry about the Red Sox now. It's already happened," he says. Still, his team should be a contender for years to come. Like Fuss, they appear to have found the key ingredient for long-term success. Maybe it's spinach.

Young is a Personal Business editor for BusinessWeek .

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