3 undiscovered mutual funds

By Brad Nelson, contributor


(Fortune) -- The 25 investors featured our retirement guide make up a team of established all-stars. But in the wide world of mutual funds, sometimes even great performers can escape the critics' notice. That's why we decided to go in search of talent that has thrived long-term without the attention and the assets that typically follow. Herewith, three tiny (less than $300 million in assets) funds that deserve more acclaim:

Most funds that invest in both stocks and bonds stick to a fixed ratio. The Bruce Fund (BRUFX) isn't afraid to alter the mix depending on the market. At times it has had close to 60% in equities; today it has 58% in bonds. "The Bruce Fund is eclectic in how they allocate assets," says David Webb of Wade Financial, an independent adviser that recommends the fund to clients. "What I love about them is they're unafraid to hold cash." The biggest thing to love: its track record. Father and son manager duo Robert and Jeff Bruce -- who have run the fund since its inception in 1983 -- have racked up an 18.5% annualized return over the past decade, putting it in the top percentile among funds in its category.

Robeco Long/Short Equity Fund (BPLSX) bets not only that some stocks will rise ("long") but that others will fall ("short"), employing sophisticated strategies once open only to institutional investors. Robert Jones, who has managed the fund since 2004, relies on rigorous fundamental analysis (and these days maintains an 80/20 long/short ratio.) The results have been smashing: an annualized 11.5% return since inception, with a whopping 81% gain in 2009.

First Pacific Advisors and its CEO, Robert Rodriguez, have certainly drawn their share of accolades. But the tiny FPA Paramount Fund (FPRAX) proves the company's bench runs deep. Managed by Eric Ende and Steven Geist since 2000, it holds a concentrated portfolio -- no more than 30 stocks -- of undervalued small- and mid-size companies that are leaders in their industries and that produce high returns. The strategy helped Paramount gain 8.2% a year over the past decade, even as the S&P slipped. It currently has nearly a quarter of its assets in consumer services names, including a sizable position in auto retailer CarMax (KMX, Fortune 500). To top of page

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