Bond fund managers may not mind being recognized as “bond fund manager of the year,” but the biggest prize is the bond fund manager of the decade. Why? Because one year of performance history is not a meaningful or accurate reflection of asset management skill.
More importantly, the 10-year period captures a full market cycle, which is typically five to seven years. Therefore, unless you are looking for short-term bond funds, the last selection criterion you consider is short-term performance. Instead, it is prudent to look at five and 10-year returns.
Also, when faced with increasingly uncertain and fragile economic and market conditions, it makes perfect sense to put your money in the hands of asset managers who have seen it all before and have succeeded or even thrived in it. And bond funds are certainly no exception to this prudent rule.
With that said, my selection criteria for the best bond fund managers of the past decade began with a simple 3-point screen:
- 10-year returns greater than the broad market benchmark, the Barclays Capital Aggregate Bond Index.
- Manager tenure of at least 10 years for respective bond funds managed during the period.
- Performance ranks in the top quarter for three-year, five-year and 10-year returns.
And now, here are our three finalists for the best bond fund managers of the past decade:
Best Bond Fund Managers of the Decade: Dan Fuss
Daniel J. (Dan) Fuss may be best known as the lead bond fund manager for Loomis Sayles Bond Fund (LSBRX). According to his bio profile at Loomis Sayles Dan Fuss has 56 years of experience in the investment industry and has been with Loomis, Sayles & Company since 1976.
Mr. Fuss won the 2009 Morningstar Fund Manager of the Year award in the fixed income category. He also won both the Institutional Investor Money Management Lifetime Achievement Award and the Lipper Excellence in Investing Award in 2012 and was named to the Fixed Income Analysts Society’s Hall of Fame in 2000.
Wisely, Dan Fuss does not work alone. He has put together a team of fixed income managers, namely Matthew Eagan and Elaine Stokes, to help him with the research, analysis, and security selection processes.
Other funds managed or co-managed by Dan Fuss include Loomis Sayles Investment Grade Bond (LIGRX) and AMG Managers Bond (MGFIX). Both of these funds, in addition to Loomis Sayles Bond, have 10-year annualized returns that outrank at least 90% of respective category peers.
Best Bond Fund Managers of the Decade: Dodge & Cox Fixed Income Team
As with Dan Fuss, great managers surround themselves with skilled and experienced co-managers and Dodge & Cox is a prime example of the strength of team management.
Headed by Dana M. Emery, Co-President and Director of Fixed Income, the Dodge & Cox team manages one of the best low-cost bond funds in the universe, Dodge & Cox Income (DODIX). Ms Emery has been lead manager since the fund’s inception in 1989 and like the other team members, she is a Dodge & Cox shareholder, which is a strong sign of good stewardship and a skin-in-the-game perspective that can be reassuring for investors.
The 10-year performance rank for Dodge & Cox Income places it ahead of 84% of category peers. On top of performance, DODIX primarily consists of above-investment grade bonds and has a cheap expense ratio of 0.43%.
The Dodge & Cox fixed income team also manages the fixed income portion of one of the best balanced funds on the market, Dodge & Cox Balanced (DODBX), which beats 83% of category peers for 10-year returns.
Best Fond Fund Managers of the Decade: Daniel J. Ivascyn / Alfred T. Murata
With very little doubt, the fixed income story of the decade is the rise and fall of bond king, Bill Gross. Therefore I had to allow a slight exception to my selection criteria and include a management team with a less-than-10-year performance record.
While Bill Gross stole the spotlight at Pimco for the past decade and beyond, and then proceeded to dim that light in recent months, the team of Daniel J. Ivascyn and Alfred T. Murata quietly put together an outstanding fixed income portfolio that deserves attention here.
Also befitting of my best bond fund manager of the decade list, their bond fund, Pimco Income A (PONAX), has existed for more than seven years, which captures a full market cycle and is therefore a more-than-justifiable exception to my 10-year rule. Performance for year-to-date, 1-year, 3-year and 5-year returns easily places Pimco Income ahead of 90% of their multi-sector bond category in each time frame.
For reflection on the outstanding performance since the March 30, 2007 inception date, an initial investment of $10,000 in PIMCO Income would have grown to more than $20,000 to date whereas the average multi-sector bond fund would be approximately $14,700 in the same time period.
Capping off performance, PONAX offers a high yield of 3.47% and reasonable expense ratio of 0.85%.
As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.