5 mutual fund all-stars

Most fund managers struggled with the volatile markets in 2011. We found 5 who won big. Here's how they did it and what they like now.

One thing in common
One thing in common
The year started with so much promise. As optimism grew about a strong economic recovery in 2011, January turned into a record-setting month for the fund industry. Investors poured $16 billion into U.S. stock funds -- the biggest monthly haul since the heady days of 2006. They added another $11 billion to taxable bond funds. But by summer the recovery talk had been replaced by fears of a eurozone collapse. Pretty soon the specter of another economic downturn was causing turbulence. None of this was good news for most mutual fund managers or their investors. The average diversified U.S. stock fund fell 2% through October, according to Lipper, compared with a 1.3% rise in the S&P 500. And the average fixed-income fund trailed the Barclays Capital U.S. Aggregate Bond Index by four percentage points.

Against that backdrop, funds which did manage to produce stellar results stand out all the more. Which is why we decided to recognize top performers by naming them to Fortune's 2011 Mutual Fund All-Star Team. What we didn't want to do was mistake a hot streak for real investing skill. So after we screened for the year's top funds through early November, we again screened to make sure each fund's past returns ranked among the top 20% of peers over a five-year period, according to Morningstar. In the end, we selected five funds from different Morningstar categories. (Most charge average fees, but two, the Wells Fargo and Epoch funds, also carry a load.) The group has a wide range of approaches but one thing in common: Its members proved in 2011 that the best fund managers can earn gains for investors even in a punishing market.

Note: All returns as of 11/4/11
By Scott Cendrowski, writer-reporter @FortuneMagazine - Last updated December 15 2011: 5:59 AM ET
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