Investors often overlook multi-sector bond funds, which are usually difficult to pigeonhole into a specific allocation need. But their but their go-anywhere style can round out your bond holdings. Here’s one small-shop offering that’s one of the better options out there.

An avowed value shop, Century Management was founded in 1974 by Arnold Van Den Berg who elevates Grahamian investment principals almost to the point of religion. Ben Graham, the original value investor, espoused buying securities on the cheap, doing your homework and taking advantage of other investors’ mistakes. And that’s exactly what Thomas Siderewicz, manager of CM Advisers Fixed Income (CMFIX), does.

“We have people on the Street showing our fixed-income guys bonds every day, but we do our own proprietary research and don’t take the credit agencies’ word for anything,” he says. “The Street will sell off a bond that’s been downgraded and cause the spread to widen to a crazy level. Then we’ll look at it and make our own determination that the downgrade wasn’t warranted and step in and pick up the bond.”

That critical eye is applied across the entire fixed-income universe, and Siderewicz leverages the expertise of both his own group and the firm’s equity analysts.

That explains the small position in Toll Brothers Financial Corp 5.15% due 2015, which the company issued for general financial purposes. Siderewicz was turned on to the bond after a CM equity analyst made the determination that, while troubled, the homebuilder was financially sound. “Toll Brothers [NYSE: TOL] is a small position of ours, but it is going to be a survivor in the industry and if you want to be in the homebuilding space, it’s a great name to own,” says Siderewicz.

That philosophy created a portfolio with an average rating of BBB (low investment-grade quality), largely because the fund picked up some top-rated bonds–for example, issues from

The Coca-Cola Company (NYSE: KO) and Johnson & Johnson (NYSE: JNJ)–at attractive valuations at the height of the crisis when many holders were liquidating to meet margin calls.

Management’s go-anywhere spirit has generated impressive results since CM Advisors Fixed Income launched in 2006. The fund ranked in the top 1 percent of its category in 2007 and the top 2 percent in 2008. In a somewhat ironic twist, last year’s results were lackluster–largely due to the slightly better credit quality of its holdings. Nevertheless, the fund still ranks in the top 3 percent of its category.

At first blush, CM Capital Advisers Fixed Income sports an expense ratio that will take your breath away. Data providers such as Google Finance and Morningstar report the fund’s expense ratio as 1.5 percent, which would rank it among costliest multi-sector bond funds available. But the fund’s actual expense ratio is just 0.98 percent, well below the category average of 1.15 percent.

The discrepancy occurs because the fund discloses that it carries a 0.45 percent 12b-1 fee. But the fund has never charged shareholders this fee; it doesn’t pursue an aggressive marketing program or carry a wide network of distributors. And according to management it doesn’t plan to levy the fee in the near future.

With a turnover ratio of just 17 percent, the fund is extraordinary tax efficient–a function of management’s proclivity to hang onto its bonds until they reach what, in its judgment, is fair value or something fundamentally changes.

The only potential drawback to the fund is the large cash stake–about 25 percent of assets–Siderewicz holds. Over the long term that can weigh on returns, but it’s also indicative of Siderewicz’s patience and willingness to wait for attractive opportunities to emerge–a strategy that’s preferable to buying marginal ideas just to remain fully invested.

Managed with an eye towards total returns, CM Focus Fixed Income should prosper over the long term–and a relatively low expense ratio further bolsters returns. Although the fund likely will lag in bull markets, it offers significant downside protection when conditions sour.