Funds to Watch
By Megan Johnston

(MONEY Magazine) – Looking Beyond the REIT

Commercial rents are rising. Home prices are soaring. Must be tough to manage a mutual fund with "Value" and "Real Estate" in its name. But Michael Winer, who has managed Third Avenue Real Estate Value (TAREX) since its 1998 inception, is finding buys. How? Most of his peers invest heavily in real estate investment trusts (REITs), which have had a great run. Winer has more than 40% of assets in builders and developers like top holding St. Joe. They don't pay out the high dividends REITs do, Winer explains, but they've got more ability and freedom to grow because they can reinvest more of their cash and don't depend on outside capital to finance their purchases. Winer also owns retailers that control a lot of real estate, including top 10 holding K Mart. He recently bought into a Canadian hotelier and hopes to start investing in Europe and Asia. --MEGAN JOHNSTON

Avoid This Top Bond Fund--for Now

Worried about inflation and credit risks, Robert Rodriguez of FPA New Income (FPNIX) has cut his long-term and junk bond holdings to the bone. Rodriguez has a great record, but his actions suggest now's not the time to buy. Why pay a 3.5% load for what he likens, right now, to a "glorified money-market fund"? -- T.K.