(FORTUNE Magazine) – Nine months ago Jeff Shames and John Ballen were in a tough spot. As co-heads of MFS Investment Management, they had just learned that their two hottest money managers, Chris Felipe and John Brennan, were jumping ship to start a hedge fund. Shames and Ballen toyed with the idea of starting an MFS hedge fund to entice the hotshots to stay, but in the end they let the managers go. They didn't want to give special treatment to a couple of highfliers and send the wrong signal to the rest of the crew at Boston's oldest--and possibly most egalitarian--mutual fund company.

It was a gutsy move. MFS is doing very nicely without its superstars, thank you-- it is flush with cash at a time when other fund companies are facing outflows. (Its parent, Sun Life of Canada, is headed for an IPO.) And the fund that Felipe deserted, Massachusetts Investors Growth, is blowing away the competition and pulling in billions in new money. In the first eight months of 1999 it netted $3.67 billion, nearly three times last year's intake, according to Financial Research Corp.

MFS's success is all the more striking because most fund companies go to great lengths to keep popular managers onboard. All too often when a big name leaves, investors follow because they're afraid the new managers won't deliver the same market-beating returns. Nevertheless, says Shames, MFS's 44-year-old chief executive, "we weren't willing to change our culture, even if it was a good business idea. We will pursue a hedge fund, but we'll do it in a team way."

Luckily for Shames, the new fund managers have given strong performances. Brennan's old fund, MFS Capital Opportunities, is up 13.49% in 1999 under Maura Shaughnessy, while the S&P 500 has risen only 5.46%. And Massachusetts Investors Growth under Felipe's replacement, Stephen Pesek, is up 6.29% year to date (and an amazing 34.21% over the past 12 months).

How did Pesek and Shaughnessy manage to get off to such strong starts? Because they were already doing it the MFS way. Shaughnessy, an eight-year veteran, was doing an impressive job at the lower-profile MFS Utilities. Similarly, Pesek had a proven record with large stocks at MFS Large-Cap Growth when he was chosen to take over from Felipe at Investors Growth.

Unlike John Brennan, the former Capital Opportunities manager, Shaughnessy isn't big on making huge bets on the market or on specific stocks. Right off the bat, she got rid of marketwide put options left over from Brennan and trimmed the fund's position in Tyco International from 12% to 5.1%. Good call--Tyco shares have taken a hit recently. Shaughnessy has recently taken small positions in tech stocks such as Motorola and Analog Devices.

You can't buy shares of MFS Investors Growth or Capital Opportunities directly, however. They're available only through Wall Street brokerages, financial advisers, and bank reps. That means a hefty 5.75% up-front sales load, though expenses are low. Is it worth it? Perhaps, but only if you stay put. Consider MFS Investors Growth. Had you put $10,000 in it a decade ago, you'd have $52,776 today, after expenses. That's an average annual return of 18.1%, compared with 16.82% for the S&P 500.

To hear Ballen and Shames describe what makes the company tick, MFS sounds more like a happy family than an impersonal money-management firm. "You won't do well here for just having good numbers and staying in your office," Shames warns. "MFS isn't a one-man shop or a two-man shop," adds Ballen. Hungry fund-manager wannabes are hired straight out of grad school as analysts. All promotion is from within. Bonuses are based on how well the recruits introduce fund managers to fresh ideas. And the name of the game is teamwork, not sink or swim--the motto at MFS's cross-town nemesis, Fidelity Investments.