Challengers for Bond Fund Manager of the Year

Now that we've dispensed with the front-runners for the domestic-stock and international-stock Fund Manager of the Year Awards, we can finally address the most interesting group vying for this year's honors: bond fund managers. (Okay... so I am a bond-fund specialist.) 

Perhaps more so with fixed-income funds than with any other group, leaders and laggards can switch places with the flash of an interest-rate spike, particularly in a year such as this, when returns are bunched together even more so than usual. But it's important to recall that our award is meant to recognize managers who have turned in not only great recent performances, but also solid returns over the long haul. We're also looking for managers who have a demonstrated record pro-shareholder behavior.

This list, meanwhile, isn't meant to be exhaustive. There are other great managers and funds that may still get our attention as the year winds to a close. With that in mind, here our some of our early favorites.

Bill Gross and Team 
 Harbor Bond (HABDX) and  PIMCO Total Return (PTTRX)
If you just looked at our list of past winners you might be tempted to accuse us of favoritism. Why else would we keep nominating a manager we've been following for so long, and who has already won twice before? Well, it's not because we're stuck on Bill Gross. The simple fact is, Gross has somehow managed to turn in solid performances in just about every single calendar year over the history of his career. It's that consistency, even more so than his raw long-term record, that makes him such a fierce contender for the throne.

Ken Leech and Team
 Western Asset Core Bond  (WATFX)
Given how much Leech and the Western Asset organization seem to avoid the limelight, one can only imagine them cringing at seeing their names displayed prominently. Tough. They've been too good to ignore over the years, as most institutional investors who make up the bulk of their client list already know. Along with PIMCO and a couple of other behemoths such as BlackRock, Western is a stalwart at the top of the bond-management heap when one looks at size (the firm has more than $160 billion in bond assets under management) as well as skill.

Dan Vandivort and Sid Bakst
 WPG Core Bond  
This is another shop that we've known about for years but that has been flying under investors' radar. Despite this offering's small size and the modest size of advisor Weiss, Peck & Greer, which runs about $18 billion in assets, the fund has posted a great record due to solid management and a very modest price tag. The team uses quantitative models to arrive at its selections, but they're made with the same measured tools common to some of the other greats--including modest interest-rate bets and lots of sector and issue-specific plays.

Dan Fuss
 Loomis Sayles Bond  (LSBRX)
Here's another past winner. But again, you can't ignore success. Fuss generally takes on more risk than many rivals, but he also invests based on fundamentals, and his results speak for themselves. Time after time, he's strayed far from the pack and produced generous returns when others have fallen down. The fact that this fund's year-to-date return is ahead of its peers today despite being back in the scrum as of August, however, reinforces the notion that this offering is truly managed for long-term investors, with little regard for short-term noise. We'll obviously have to see how the year winds up for Dan Fuss, but whether he and this fund are in contention in December or not, this is one manager who has stood the test of time.

Clifford Gladson
 USAA Tax Exempt Intermediate-Term  (USATX)
The great thing about Cliff Gladson is that he's built strong records at the muni funds under his control while opting out of the common formula for most of his rivals--which is to stick almost entirely to high-quality bonds. It's hard to blame managers for taking that approach given that so much of the muni universe consists of high-quality and insured bonds, and so many investors are just looking for a plain-vanilla offering. But there's a lot of inefficiency in the muni market, and managers of Gladson's ilk can build their entire careers around exploiting it. The modest amount of credit risk he's taken on over the years has helped earn this fund great long-term returns.

Your Picks for Manager of the Year
Last week we asked you to pick your favorites for Domestic-Stock Fund Manager of the Year, and here's how you voted.

47.5% - Dodge & Cox team
24.5% - Will Danoff
8.26% - Chris Davis and Ken Feinberg
7.62% - Brian Rogers
5.58% - R. Michael Shanahan, Timothy Armour, Claudia Huntington, C. Ross Sappenfield
4.45% - Brian Berghuis 
2.18% - Rob Lyon