Garitt Kono is pulling back the reins on Dreyfus A Bonds Plus, a corporate bond fund he manages for Mellon Bank Corp. Since taking over the fund 18 months ago, Mr. Kono has been moving the fund in a more conservative direction. He has eliminated the portfolio's Latin American exposure, and he's shortened maturities to make the fund less vulnerable to rises in interest rates. You're not going to have a cowboy running this thing, Mr. Kono said. His conservative style hasn't taken away from the fund's stellar performance, which includes a heady annualized return of 10.95% for the five year period ended Sept. 30, according to Lipper Analytical Services, Summit, N.J. For that period, the fund, which holds $589 million in assets, emerged as the No. 1 performer among all bank-managed A-rated corporate debt funds. The portfolio which by charter must emphasize high-quality corporate debt is distributed by a unit of Boston Institutional Group. That a Dreyfus fund should come out on top in the bank-managed universe is of little surprise. Long before being acquired in August of 1994 by Pittsburgh-based Mellon, Dreyfus had established a reputation as a fixed- income specialist. Mr. Kono described his style right now as taking chips off the table, an approach more conservative than his well-known predecessor, Barbara Kenworthy. Ms. Kenworthy left two summers ago to take a similar position at Prudential Securities. In managing the Dreyfus A Bonds Plus portfolio, Mr. Kono, 55, has developed a cautious approach, which he attributes to his days as an institutional salesman at CS First Boston suffering through bear markets of the 1970s and soaring interest rates of the 1980s. The portfolio manager, who holds a bachelor's degree in finance from the University of Notre Dame, says he inherited his innate conservatism from his grandfather. The elder Kono changed the family name from Konopinski after immigrating to the U.S. from Poland in the late 1800s. In October, Mr. Kono spurned the portfolio's 15% stake in the bonds of foreign governments, most notably Mexico, Argentina and Colombia. In light of the dramatic devaluation of the Mexican peso that took place in December, he realized he made the right move. Last October I was looking at interest rates around the world and I was really confused with what was going on in Mexico, he said. It was not a place for me to have shareholders. Reducing the duration of the bonds he has invested in has helped him reduce the fund's risk, too. Previously, the fund invested in securities that were called in six or seven years, but he has reduced most of the portfolio to 5.75 years. Interest rates don't go down forever, he said, noting that the value of his portfolio is now less vulnerable if interest rates kick up. His favorite single holding currently is Time Warner Inc. because telephone company giant AT&T Corp. has reportedly expressed an interest in investing up to $4 billion in the media conglomerate's cable-television unit. Cable is where the money is going to be made, he said. Mr. Kono also has a 12.8% stake in debt issued by banks and 14.7% in finance companies such as General Motors Acceptance Corp. and Ford Motor Credit. When he's not juggling the portfolio at Dreyfus A Bonds Plus, Mr. Kono is managing three other funds that invest in Ginnie Maes.

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