Since the beginning of this decade, the fund has posted gains every year and suffered negative returns in only three quarters. Not surprisingly the fund has consistently outperformed at least 85 percent of its peers.

That sterling record earned manager Daniel Fuss a deserved reputation as one of the most successful fixed-income experts outside of Pimco.

But 2008 was a brutal year for all asset classes aside from Treasuries, and corporate bonds–Fuss’s stomping ground–suffered the brunt of the pummeling. And with less than half of its portfolio in investment-grade issues and almost 20 percent in high yield issues, the damage was especially painful. The fund also held a sizable portion of the portfolio in non-dollar denominated assets last year just as investors began flocking to the security of the greenback.

Although the fund held strong in the nascent stages of the current recession, generating an 8.3 percent return in 2007, the fund nosedived more than 22 percent in 2008, slipping to almost the bottom of its category. The irony is that in 2007 Fuss and his co-managers added positions in Treasury bonds–an uncharacteristic move for the fund–only to unwind them just before the Treasuries boom took hold.

Those missteps have prompted some to question whether, at age 75, Fuss might be beginning to lose his touch.

Such speculation is inevitable given the current environment, but the fund is well positioned to ride out the reminder of the storm. Although Fuss still hasn’t embraced Treasury bonds–and likely never will–the fund has loaded up on an unusual number of investment-grade corporates, which account for more than two-thirds of the portfolio. In the past the fund’s managers took full advantage of their mandate to invest up to 35 percent of assets in debt rated below investment grade.

Fuss has also eschewed mortgage-related debt currently in vogue among other fund managers, particularly that issued by Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) which have effectively been nationalized. He’s also built a cash position that constitutes over six percent of investable assets.

And with Fuss’s half-century of fixed-income experience and strong team backing him up, now’s the wrong time to abandon the fund. Fuss has a track record of coming back strong after tough years, with 2003 being an excellent example.

The fund should also catch a bit of a tailwind in coming months because, as we pointed out in the lead article, we expect the dollar to weaken thanks in part to the massive expansion of the Federal Reserve’s balance sheet and the exploding federal debt. Dollar weakness will be particularly pronounced if the economy doesn’t grow as rapidly as expected. Just over 9 percent of the fund’s assets are loonie denominated, a currency that will likely strengthen as oil prices recover.

On the corporate debt side, Fuss has always favored strong companies that are growing market share and enjoy low capital costs. At the same time, he hasn’t been afraid to bet on companies that appear troubled but which he believes will ultimately recover. His acumen in those areas of the market is almost uncanny and should ultimately pay off for investors.

Nevertheless, interested investors should carefully consider their risk tolerance before buying into the fund. Despite Fuss’s ability, some of his bets do move against him, as they did in 2000.

That year the fund was heavily invested in high-yield debt, which took a pounding when defaults spiked and investors shied away from riskier investments. And although the fund still managed to pull out a positive year, it was a rollercoaster ride from start to finish.

Fuss has also been dipping into debt issued by the financial sector, including names like Lehman Brothers. Needless to say, if you aren’t comfortable with a contrarian maverick at the helm, this isn’t the fund for you. Such holdings boost the fund’s yield, but also expose the fund to additional risk.

That makes the fund most appropriate for younger investors, who have a longer investment horizon and can afford to take on a bit more risk. That said, any prospective investor should remember that though the fund’s bets could pay off handsomely, such an investment should be balanced with more conservative fare.