How the Chou Income Fund Got Its Mojo

Francis Chou was a 25-year-old telephone repairman in Canada when he pooled 51,000 Canadian dollars from himself and six co-workers to start an investment club.

Thirty-one years later, Mr. Chou manages more than US$650 million for investors at his firm, Chou Associates Management Inc., and runs the best-performing bond fund in North America.

"It wasn't a big sum," Mr. Chou says of his stock-investment club. "But it did quite well."

Indeed. The Bell Canada co-workers—and some of their parents and friends who also invested early on with Mr. Chou—now are each worth more than $2 million.

Mr. Chou's trajectory to the top of the bond-fund world shows how investors are tweaking tried-and-true strategies to boost returns and overcome chronically low interest rates. When he was starting out, Mr. Chou largely stuck to stocks and the classic value-investing methods made famous by Benjamin Graham and Warren Buffett.

"The key idea was to find bargains, and if you could find bargains, you could do quite well," Mr. Chou says in an interview at his unadorned suburban office, far from the bustle of Toronto's Bay Street financial hub.