Since Benjamin Shepherd profiled Loomis Sayles Bond (LSBRX) in our June 2010 issue, the fund has returned 15.9 percent and outperformed 86 percent of its peers in Morningstar’s Multisector Bond category. Despite missteps by manager Daniel Fuss and his team in 2008—they were almost the only investors who were bullish on corporate bonds that year—the fund has rebounded as corporate bonds returned to vogue.

But that doesn’t mean the fund’s portfolio is risk free. Fuss initiated a stake in Irish bonds even as the European debt crisis deepened, betting 2 percent of the fund’s investable assets on a turnaround in Irish bond prices.

It’s a gusty move that’s part and parcel of Fuss’s strategy to seize on potential turnaround stories and reduce the fund’s sensitivity to US interest rates. As a result, 21.4 percent of the fund’s investable assets are held in non-dollar denominated bonds issues primarily by countries with healthy balance sheets and strong currencies.

As concerns mounted over the direction of the US dollar, Fuss raised his stakes in debt denominated in Canadian and New Zealand dollars, as well as the Indonesian rupiah and Norwegian krone. The fund’s position in high-yield issues, a sector that historically performs well when the Fed tightens monetary policy, has also risen to a quarter of assets. This marks a shift in focus from the investment-grade credits that Fuss picked up on the cheap early last year.

Loomis Sayles Bond’s cash position has increased and now accounts for 7.5 percent of assets. The management team believes rising interest rates will inevitably create volatility and dislocations in the market; they want a store of dry powder to take advantage of those opportunities.