The Woodward Bond Fund was the leading bank-run intermediate U.S. government mutual fund in the country last year.

But don't expect to get an earful of braggadocio from the bond fund's two 36-year-old managers, Douglas Swanson and Ricardo Cipicchio. Woodward's 15.62% return for the year ended Sept. 30 is nice, but it isn't what the pair consider their top achievement.

After all, the Woodward Bond Fund is only one of the three bond portfolios that Mr. Swanson and Mr. Cipicchio manage on behalf of NBD Bancorp's proprietary fund family, the Woodward Funds.

It's the solid gains from all three Woodward bond portfolios as well as some common trust accounts that have the two money managers patting themselves on the back.

We'll take it, Mr. Swanson says of $493 million-asset Woodward Bond Fund's top ranking in its asset class. But we run a lot of other accounts. It's important that they do well, too. Indeed, Mr. Swanson and Mr. Cipicchio didn't even realize that 15.62% annual posting on the Woodward Bond fund was a bank record, and they've been running the account since its inception in May 1991. The load portfolio which is distributed by First of Michigan Corp. has averaged a total return of 8.65% since day one. Mr. Swanson says that he and Mr. Cipicchio focus on trying to outperform the Lehman Brothers Aggregate Bond Index. With the Lehman index coming in at 14.1% for the past years, Woodward Bond Fund handily beat its benchmark.

Such success isn't the result of drastic changes in investment strategy from years past, say Mr. Swanson and Mr. Cipicchio.

We used the same philosophy we always have: We're looking for value, Mr. Cipicchio says. That's why we talk to a lot of different brokers on the street every day. You never know where the best deal is coming from next. The Woodward Bond Fund portfolio typically breaks the following way: 45% in mortgage-backed securities, 40% in Treasury securities, 8% in corporate securities, and the rest mostly in money markets.

Within each of those sectors, however, the composition of securities is in constant flux, Mr. Swanson acknowledges. Last year, for instance, Mr. Swanson and Mr. Cipicchio bulked up their collateralized mortgage obligations. These days, premium mortgages are the CMO of choice. The fund managers reason that families who have carried home loans in the 10% range for the past eight to 10 years aren't likely to prepay if they haven't already. In all, the average maturity of securities in the Woodward Bond Fund is about 6.4 years, on the shorter side for an intermediate bond fund. But the tighter time frame adds stability to the fund's net asset value per share, which hovered between $9 and $11. Heavily comprised of institutional investors, Woodward is marketed through Essex National Securities Inc.

Constant communication is one of the keys of Mr. Swanson and Mr. Cipicchio s success. Their desks are side by side in a trading-floor office environment at Detroit-based NBD Bancorp. And the two find themselves hanging around the office long after the markets close to discuss the next day s strategy. Avid golfers who say they are evenly matched, Mr. Swanson and Mr. Cipicchio often take their talk of bonds onto the links.

I guess we do put in a lot of hours, says Mr. Cipicchio. But I don t think of it that way. The tandem traders are sanguine about the numbers they hope to register in the next 12 months. But they aren t predicting that they will equal the success of the past year.

It s going to be tough to have absolute returns as high as this next year, says Mr. Swanson. But good five-year numbers are more important than good one-year numbers. Mr. Byrd is a freelance writer in Denver.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.