Bond Fund Managers of the Year: Ken Leech and His Supporting Cast

Ken Leech and Western Asset Management might not be household names, but maybe they should be.

For the second-straight year, bond funds are beating stock funds and for the first time in recent memory they're topping the sales charts, too. The top seller, far and away, is the (PTTAX Quote - Cramer on PTTAX - Stock Picks)Pimco Total Return fund, run by bond guru Bill Gross.

With more than $220 billion in his funds, he's the king of bond investing; he's the only fund manager to win Morningstar's manager of the year award twice. But Western Asset Management, where Leech is chief investment officer, overseeing a team of managers, has quietly built an equally solid track record with its $630 million (WATFX Quote - Cramer on WATFX - Stock Picks)Western Asset Core fund over the past decade. They're our bond-fund managers of the year.

Leech and his team are up 9.2% this year, beating 95% of the fund's peers in the intermediate-term bond fund category, according to Morningstar. In fact, the no-load fund beats at least that 95% of its competitors over the past one, three, five and 10 years. They're also beating Gross' Total Return fund over the past five years.

Those returns are the result of measured bets vs. the fund's benchmark, the Lehman Brothers Aggregate Bond Index, rather than a white-knuckle approach. The fund's management team focuses only on investment-grade bonds and typically builds a portfolio with an average duration within a year of its benchmark's. The team's portfolio adjustments and savvy sector allocation might not be drastic, but their prescience is illustrated by the fund's consistent outperformance.

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Below-average expenses are an added benefit to -- or another reason for -- the management team's success. The fund's carries a 0.50% annual expense ratio, compared with 1% for its average peer, according to Morningstar.

Given its performance and low price tag, why isn't the fund more well known? It's typically offered to institutional investors with a $1 million minimum investment, but it's also offered to retail investors through fund supermarkets like Charles Schwab's with just a $2,500 minimum.

Once you look at its track record and price tag, it's hard to overlook this fund, which has been obscured by Bill Gross' long shadow. That said, Gross deserves at least an honorable mention. His Total Return fund and the cheaper (FBDFX Quote - Cramer on FBDFX - Stock Picks)Fremont Bond fund, which he runs, have routinely trounced their competitors without taking outsize risks. A doff of the cap is also due Sandy Rufenacht, manager of the (JAHYX Quote - Cramer on JAHYX - Stock Picks)Janus High Yield fund, who has beaten his average peer each year since taking the reins in 1996.