When Peter Staas profiled FPA Crescent in the July 2010 issue, the fund held 44 percent of its investable assets in cash. Today, Romick remains worried about the US government’s heavy debt burden and the inflationary impact of the Federal Reserve’s second round of quantitative easing. But the fund’s cash stake has declined to about 28 percent, and that money has been deployed in some unexpected places.

In keeping with his contrarian bona fides, Romick recently acquired a $130 million participation interest in a senior construction loan originated by Canyon Capital Realty Advisers. The loan will fund the completion of a 615,000 square foot, 40-story office building in the Southeast US.

This may be a risky bet in the current market, but Romick’s due diligence revealed that the borrower has more than ample debt coverage and should be able to repay the loan with ease. Additionally, Romick calculates that the fund should make a tidy 12 percent return on the investment.

Romick has also gone east for investment ideas. He and his team visited Japan early this year and established small positions in several local companies. Although the devastating earthquake and nuclear crisis in March led many investors to flee from the Japanese market, Romick added to his positions, which now account for 1.5 percent of the fund’s investable assets.

FPA Crescent has returned almost 11 percent since we profiled the fund last year, underperforming the S&P 500 by almost 5 percentage points. But these returns have come with far less volatility than those of its peers. FPA Crescent isn’t exactly an offering for the fainthearted, yet it remains a solid option for most investors with a moderate tolerance for risk.