Some mutual funds belong to an exclusive club these days call them the crisis survivors. They have a variety of investment styles, and they ve been at it for a long time, some dating back to the Great Depression. But they share a crucial trait. When times get bad, they protect shareholders money or at least they don t lose as much as other funds. Investors hardly need to be reminded what happens when fund managers take on too much risk. The average stock mutual fund was down 41 percent in 2008, according to fund researcher Morningstar. Those unlucky enough to have put their money in the bottom quarter of stock funds have seen average declines of more than 50 percent.

But hidden in this crowd of poor performers are a few that manage to stand out. More likely than not, they re the same ones that have managed to thrive out of each crisis, whether it s a tech bubble, foreign currency meltdown or the latest recession. None of these will shoot the lights out on the upside, but they aren t likely to be hit as hard on the downside, says Adam Bold, chief investment officer at the Mutual Fund Store. In short, they re just what a lot of nervous investors are looking for these days.

To find these time-tested treasures, we searched for actively managed funds with the best returns since the Standard & Poor s 500 bottomed in 1987. To weed out funds that might have had a spectacular year or two and then fizzled, we made sure the funds had decent records against others in their investment category in recent years even 2008. Because we focused on longevity, the list left out newer funds with impressive track records (see page 66). In the end, we combed through more than 5,000 funds, identifying 100 whose strategies allowed them to thrive over the long term. Here are five that did particularly well in navigating the downturns.

Vanguard Wellington (VWELX)

Born in 1929, the Wellington fund has seen it all: wars, recessions, asset bubbles and busts. And if not for a hard-nosed approach to valuing stocks early on, it probably wouldn t have lasted a year. Sensing that the markets were getting frothy in the summer of 1929, the managers cut the stock allocation of the portfolio from 75 percent to 40 percent just before the October crash. We re very price-sensitive, says comanager Edward Bousa, explaining the fund s long-standing aversion to high-flying stocks.

These days, bonds account for a third of the portfolio, with stocks and cash rounding out the rest. And while the mix caps the fund s upside potential, it limits losses when stocks go into free fall. The fund may still lose money, of course. It was down 23 percent in 2008, but that beats 83 percent of other balanced funds. Over the past decade, Wellington s annual returns averaged 4.5 percent, beating 95 percent of its peers.

Bousa also likes stocks with supply-and-demand cycles on their side (think energy firms) and what he calls broken growth stories. He bought PepsiCo in early 2007, for instance, after it had fallen out of favor with investors who thought it couldn t maintain cola prices in a slowing economy. Since then the stock has handily outperformed the S&P 500.

With $38 billion in assets, Wellington isn t the nimblest of large-cap funds, and Bousa takes his time building and paring positions. That can hurt in fast-moving markets. Two top-10 holdings, General Electric and Bank of America, were slammed in 2008, and Bousa has stuck with energy stocks such as Chevron, despite their recent declines. For his part, Bousa acknowledges that he didn t think the market s plunge would be quite so dramatic.
The fund s bond holdings have buffered those losses, but they haven t been entirely spared. Compared with other balanced funds, Wellington is heavily invested in corporate bonds many of which were down in 2008. Bonds of utilities and financial firms have been especially hard-hit, but comanager John Keogh isn t about to change course. Financial markets will recover sooner than the economy, he says. And Morningstar analyst Dan Culloton still gives the fund high marks: They ve made more right moves than wrong moves.

RS Large Cap Alpha (GPAFX)

Mani Govil is the first to admit he s made his share of blunders. Over the past few years, his RS Large Cap Alpha fund has held big losers such as AMR, eBay and Freddie Mac. But while the mea culpas may be flying these days, Govil has less to apologize for than his peers. Before he took over in late 2005, the fund had floundered a variety of managers had come and gone since 1998, and the fund had rarely outperformed the S&P 500. That seven-year stretch tarnished an otherwise stellar 20-year run, when the fund was up more than sixfold. Under Govil s reign, it went back to beating the market, returning 17 percent in 2006 and 15 percent in 2007, putting Govil in the top 11 percent of all large-cap fund managers. And the fund beat 96 percent of its peers in 2008 (albeit with a loss of 28 percent).

Today, about half the $685 million fund s 53 holdings are companies Govil selected for their competitive advantage or toll keeper business model firms such as MasterCard, which has a 28 percent share of global card transactions and bright prospects in India and China. Others looked like tomorrow s big winners. He added Nintendo in early 2008, after the manager of a nursing home told him that the Wii game console was a hit with residents.

To Govil, 39, that was clear evidence that Nintendo was expanding the video game market and the Wii wasn t a fad. The stock is down more than 50 percent since he started buying, but Govil is convinced it will rebound sharply once consumer spending revives.

Because RS Large Cap Alpha is a concentrated fund, investors could be in for a volatile ride if there are any big shocks to Govil s top 10 holdings. Still, he doesn t take risks lightly, especially since he has more than $1 million of his own money in the fund. Early on he scrapped stocks whose financials he felt were too risky or opaque selling Countrywide Financial and Lehman Brothers in 2006, before they ran into trouble. And he won t touch a stock unless he estimates that the potential gain is at least twice the potential loss. Predicting rain doesn t count, says Govil, who started on Wall Street in the early 90s amid a wave of bank failures. Carrying an umbrella is what counts.

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Mairs & Power Growth (MPGFX)

William Frels, 69, is the Maytag repairman of mutual fund managers. While others furiously buy and sell stocks in their portfolio, Frels buys and holds. And holds, and holds, and holds. The average stock in the $1.6 billion Mairs & Power Growth portfolio has been there 20 years, an eternity in an industry where managers seem to think they get paid to constantly tinker with their holdings. The difference is huge: Other funds, on average, have an annual turnover rate of 96 percent, meaning that nearly the entire portfolio changes every year. At Mairs & Power Growth, the annual turnover rate is a minuscule 4 percent.

He does what he s going to do whether the market is in the midst of the biggest bull run or a replay of the Great Depression, says Morningstar s Culloton. Over time that kind of patience pays off: The fund is up nearly 13-fold since late 1987. It was down 28 percent in 2008 but still beat 96 percent of similar funds.

Mairs & Power Growth does seem to take a limited view of the world: About half its 45 holdings are a short drive from the Twin Cities area. While that regional approach to investing can close off opportunities, it allows the fund s managers to tap local contacts to see if their instincts are on target. Last summer, when investors were dumping bank stocks over worries about their mortgage business, Wells Fargo management put out the word that the big bank, which has significant operations in Minnesota, would be fine. Just to be sure, Mark Henneman, a comanager of the fund, checked with Wells Fargo employees he knows around town. It helped build conviction when it felt like the world was falling apart, Henneman says. The result: While others were dumping shares of Wells Fargo last summer, Mairs & Power Growth was buying.

Instead of stashing cash like other investors, Frels is fully invested, recently buying companies like industrial toolmaker Fastenal, which he previously thought was too pricey. While he admits that today s problems don t lend themselves to quick fixes, he s happy to wait for his investments to show their stuff even if it takes years.

FPA Capital (FPPTX)

No fund manager likes to lose money, but Bob Rodriguez takes it personally. His family lost much of its wealth before immigrating to the U.S. from Mexico, teaching him lessons that stick with him today. I grew up knowing what it was like to lose everything, he says. So it made sense that after warning about a credit bubble back in 2003, Rodriguez shunned stocks and built up the cash position of FPA Capital.

The fund s safety-first strategy has paid off. A $10,000 investment in FPA Capital at the stock market s bottom in 1987 is worth more than $130,000 now, putting the fund, which invests primarily in small- and midcap stocks, second on our list for total return. In 2008, the fund, which is closed to new investors, was down 32 percent. That s not great, but it s better than 76 percent of FPA Capital s investing category. With oil prices down even more than the stock market, the fund has been hurt by declines in energy holdings such as oil driller Ensco International. Still, Rodriguez believes that demand for energy will outstrip supply over the long run. If we are correct in our analysis, the problems we have in our performance are only temporary, he says.

After the Treasury Department s decision to infuse capital into banks last fall, Rodriguez began hunting for companies with strong balance sheets that were also cheap based on measures like their book value and how much cash they generate. The buying, however, was short-lived as Rodriguez grew disenchanted with the bailout efforts. The government is on the wrong road, he says. The Fed is exploding its balance sheet. Seeing higher inflation, higher taxes and meager economic growth on the horizon, Rodriguez is avoiding long-term bonds and was holding a hefty 38 percent of FPA Capital s assets in cash as of early November.

When he s not stewing about the government from his office near Lake Tahoe, Rodriguez, 60, takes off on what he calls his religious retreats racing cars. His racing trailer is outfitted with a Bloomberg data terminal and a satellite hookup, but once he s in the car, nothing in the world exists other than that moment. It may seem like an odd hobby for a cautious manager, but Rodriguez sees plenty of parallels to investing. Go in too fast and turn too soon, you may hit a cement wall, he says. Take it too late or too slowly and you lose speed. You have to balance the risk with the return.

First Eagle Global (SGENX)

First Eagle built its reputation by spotting bargains and avoiding speculative markets. Two decades ago the fund s aversion to pricey stocks led Jean-Marie Eveillard to sell its Japanese holdings. Although some shareholders complained when the Japanese market reached new highs, First Eagle escaped the carnage when it crashed 18 months later. More recently, Eveillard and his team built a safety net of cash as they grew uneasy with lofty stock prices and looming credit problems before the worldwide stock market crash of 2008. The crash of 2008 was still painful: First Eagle was down 20 percent. But it still beat about 85 percent of competing global funds. They did as much as they could have, says Bridget Hughes, associate director of fund research at Morningstar.

The fund did tripped up in the summer by moving back into the market too soon. Favored stocks like American Express have taken big tumbles, even though the fund s managers still see it as a strong long-term holding. The mistake, Eveillard says, was failing to factor in what now looks like two to three years of very difficult times for economies around the world.

Despite the quick trigger in getting back in, First Eagle remains comfortably ahead of competing funds. Still, the losses are hard for a team used to making money in all kinds of markets. That s especially true for Eveillard, who retires this spring, leaving the fund in the hands of Matthew McLennan, who until last fall managed money at Goldman Sachs. It s long-distance running, Eveillard says of First Eagle s investment philosophy. We are slowing down, but we re still on our feet.

Lately, the team has been eyeing high-yield bonds in the U.S. and stocks in Hong Kong like Wharf Holdings, an operator of malls, office buildings and ports. They have also started bargain-hunting in India and China, countries they used to consider too expensive. And in Japan two decades after the 1998 crash they see some of the best buys around. It s a value investor s paradise, says Deshpande.