Loomis Sayles & Co.’s Dan Fuss left rival bond-fund managers including Bill Gross behind in his eighth decade, by using a style generally associated with bargain-hunting stockpickers.
Fuss, who turns 80 tomorrow, managed the two best large U.S. bond funds over the past 10 years. His $15.1 billion Natixis Loomis Sayles Strategic Income Fund and the $21.7 billion Loomis Sayles Bond Fund both returned more than 125 percent over the period, ranking first and second among 65 bond funds with more than $5 billion in assets that have been in existence for at least 10 years, according to data compiled by Bloomberg. The flagship Loomis Sayles Bond Fund, started in 1991, was also the top fixed-income fund over the past 20 years.
Fuss won with skills used by value-oriented stock investors, finding bargains such as beaten-down U.S. bank bonds in 2008 and Irish government debt in 2010 and profiting as the securities recovered along with the global economy. Fuss analyzes individual issuers and scouts for cheap securities among sovereign, investment-grade and high-yield bonds. He also invests in foreign currencies and stocks.
“A lot of bond guys are absorbed with spreads and nuances of the yield curve,” said Kenneth Heebner, a Boston-based stock picker who has known Fuss since the 1970s. “Dan approaches things the way a stock investor would. He is looking for opportunity,” said Heebner, whose $1.5 billion CGM Focus Fund has beaten 99 percent of rivals over the past year.
Eclectic Blend
The eclectic blend of Fuss’s picks is a legacy of his early days in the investment business, when his job was to analyze companies and buy their whole range of securities for several Midwestern banks, including First Wisconsin Bank in Milwaukee.
“Back then there was no such thing as an index to compare yourself to,” Fuss, whose career began in 1958 at Wauwatosa State Bank in Wauwatosa, Wisconsin, said in an interview in his Boston office. “The idea was to make money by finding the cheapest things out there.”
Bloomberg’s ranking looked at fixed-income funds that invest in a wide range of securities, although excluded those that invest exclusively in high-yield bonds. Some fixed-income funds are allowed to invest in stocks and bonds that can be converted into equity stakes.
The funds’ holdings of stocks, convertibles and high-yield bonds helped Fuss beat more than 96 percent of rivals this year. His view that U.S. interest rates are heading higher, an opinion he has held for several years, insulated him from the slump in Treasuries that hurt most bond investors over the past few months.
Pacific Investment Management Co.’s Gross, who manages the world’s biggest bond fund, has seen his flagship Pimco Total Return Fund decline 2.1 percent this year, compared with a 3.6 percent increase at Fuss’s Loomis Sayles Bond Fund.