Biggest gains to go the nimble, biggest losses to the costly.
The good news for investors is that some actively managed mutual funds were able to soundly beat the S&P 500 over the last decade. The bad news is that even the best weren’t able to avoid steep drops in value as markets cratered in late 2008 and early 2009. In our rankings of performances between 1999 and 2009 domestic mutual funds with ending assets of $25 million or greater, only three of the top 10 performers so far have regained all the ground they lost since hitting record highs prior to 2008.
The top spot goes to CGM Focus Fund; its manager, G. Kenneth Heebner, is known for bold moves into sectors he believes are undervalued. Heebner’s heavy overweighting of oil stocks sent the fund’s net asset value soaring in 2007 and late 2008, but a subsequent drop in oil prices then caused it to plummet.
The Boston-based fund has recovered nicely this year, and boasts an 18.8% annualized return over the past decade, even as the S&P 500 lost about 1% per year. Heebner is these days bullish on financials, like Goldman Sachs Group Inc. ( GS - news - people ) and JPMorgan Chase ( JPM - news - people ), and on mining outfits Freeport-McMoRan Copper & Gold ( FCX - news - people ) and Southern Copper ( PCU - news - people ).
Other top performers of the decade are a pair of funds run by the Yacktman Group. Guided by father Donald and son Stephen, both the Yacktman Fund and Yacktman Focused Fund (large-caps only) took their late-2008 drops in stride and have posted gains of 59% and 63%, respectively, in 2009. The S&P has posted a 26% gain for the year through Dec. 21.
These days the Yacktmans are partial to consumer mainstays Coca-Cola ( KO - news - people ), PepsiCo ( PEP - news - people ), Procter & Gamble ( PG - news - people ) and Johnson & Johnson ( JNJ - news - people ). They are also sticking by an old favorite, auto loan giant AmeriCredit ( ACF - news - people ), based on the notion that Americans put a high value on hanging onto their cars. Both have posted 12.3% annualized returns the past decade, ranking them eighth and ninth on our list.
Two other firms had pairs of funds in the top 10. Robeco’s Long/Short Equity and Small Cap Value II funds were Nos. 3 and 5 in our rankings. Long/Short Equity bested its pre-2008 highs with esoteric picks like Alpha Pro Tech Ltd. ( APT - news - people ), which makes protective apparel for the food and health care industries; its share price has tripled in 2009. Mind the fees on the Robeco funds, though: at 2.75% and 1.55%, respectively, their long-short and small-cap funds are the most and second-most expensive on our top-10 list.
Fidelity Investments pointed investors in the right direction with two of its health care sector funds. Fidelity Select-Medical Delivery and Fidelity Select-Medical Equipment and Systems took our No. 6 and No. 10 spots with annualized returns of 12.8% and 12% over the last 10 years.
The most common theme among the 10 worst performing funds in our rankings was high fees. The biggest loser, First American Mid-Cap Select-A, had an annualized return of negative 12.7% since 1999. Investors incurred a front sales charge of 5.5% and a 1.41% expense ratio. Five of the other 10 worst imposed front-end sales charges of 5.25% or more.
Readers should note that the worst performers on our list first began underperforming the S&P 500 after the dot-com bubble burst in 2000, and generally have been unable to do more than match the index’s performance in the years since. A lesson for the future: Beware mutual funds that fail to bounce back quickly in the event that the current recession is in fact winding down.
by Asher Hawkins forbes.com