April/May 2009 Features Spotlight: Be Careful What You Fish For In the wrong hands, leverage can drag down returns in a hurry. 32 Where Leverage Lurks The use of leverage was widespread among bond funds in 2008, and shareholders had few ways of knowing. 36 Guide to Finding Hidden Risks 40 How Leveraged ETFs Compound the Misery For long-term holders of these instruments, it’s almost a mathematical certainty that they won’t perform as advertised. Morningstar Conversation 42 Get Rid of the Dead Weight Let failures occur, Bob Rodriguez and Jeffrey Gundlach say. Only then can a fundamentally transformed economy prosper. Undiscovered Managers 50 Grounded Manager Whether it’s working his farm or running a mutual fund, Jeff Auxier takes a cautious approach to risk. 54 Investors Should Mind Their Tails The market experiences more shocks than investors think. PIMCO’s Vineer Bhansali thinks he has a way to guard against these events. 3