For all of the talk about individual stocks and ETFs, mutual funds are still the largest component of many individual retirement and savings portfolios. With thousands of open funds and upwards of $10 trillion in assets under management, this is obviously a market segment that deserves attention. To that end, then, it is worth exploring where mutual fund investors saw the best returns for 2011.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

This analysis includes only funds that are open to new investment, have minimum initial investment requirements below $10,000 and assets under management of at least $100 million.

A Bull Year in Bonds
I do not recall all that many pundits from December 2010 telling investors that U.S. government bonds were going to be the place to be for 2011. And yet, that's what has happened. With the Fed pulling every rabbit out of its hat to keep rates low and the economy slouching forward, U.S. government bond funds have been strong this year.

The Rydex Government Long Bond 1.2x Strategy (Nasdaq:RYGBX) fund (and its share class siblings) takes the top spot for 2011, up more than 41% on a year-to-date basis. This is not your regular fund, though. RYGBX looks to produce 1.2 times the price performance of long-dated Treasury bonds and does so with investments in futures, swaps and options. (For related reading, see An Introduction To Swaps.)

Wasatch-Hoisinton US Treasury (Nasdaq:WHOSX) is another winner, but perhaps a bit more conventional. With over $200 million in assets, this fund is up nearly 32% for the year, following a strategy of buying long-duration U.S. government bonds.

A host of municipal, long-term bond and inflation-protected bonds funds also ended the year with top-tier performances for 2011.

Strength in Sector Plays
Apart from funds invested in government bonds, there was also strength in dedicated sector plays. The FBR Gas Utility Index Fund (Nasdaq:GASFX) rode the strength in natural gas distribution companies like El Paso (NYSE:EP) and Williams (NYSE:WMB) to a nearly 20% return this year. On the opposite side of the risk spectrum, the Fidelity Select Biotechnology (Nasdaq:FBIOX) delivered better than 16% returns this year.

Discretionary Funds
Investors have to travel a long way down the list of performers before the more traditional actively-managed funds are found (at least those that don't invest in particular market or industry categories). The Federated Strategic Value Dividend (Nasdaq:SVAAX) fund has delivered better than 10% performance this year, while the well-known Sequoia (Nasdaq: SEQUX) is up more than 12%.

Outside the U.S., the BlackRock Global Dividend Income (Nasdaq:BABDX) fund is up about 5% for the year, while the Dreyfus Worldwide Growth (Nasdaq:PGROX) fund is about 2% for the year.

The Bottom Line
The absence of generalist funds at the high end of the performance lists is nothing new; top performance is increasingly dominated by risky sector/strategy-specific funds. It is also worth noting that the best actively-managed general equity funds were up only about 10% or so for the year - further proof that this was a difficult year to find profits in the markets. (You might be carrying more risk than you think if your fund invests in derivatives. For more, see Is Your Mutual Fund Safe?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Stephen Simpson did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  2. Mutual Funds & ETFs

    4 Mutual Funds Warren Buffet Would Buy

    Learn about four mutual funds Warren Buffett would invest and recommend to his trustee, and discover detailed analysis of these mutual funds.
  3. Mutual Funds & ETFs

    Passively Managed Vs. Actively Managed Mutual Funds: Which is Better?

    Learn about the differences between actively and passively managed mutual funds, and for which types of investors each management style is best suited.
  4. Professionals

    How to Navigate Taxable Mutual Fund Distributions

    It's almost time for year-end capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact.
  5. Mutual Funds & ETFs

    The 3 Biggest Mutual Fund Companies in the US

    Compare and contrast the rise of America's big three institutional asset managers: BlackRock Funds, The Vanguard Group and State Street Global Advisors.
  6. Mutual Funds & ETFs

    Top 4 Communications Mutual Funds

    Discover some of the best mutual funds in the communications sector, and learn how investors can position investments within these funds.
  7. Mutual Funds & ETFs

    Top 4 Transportation Mutual Funds

    Discover the top-rated mutual funds in the transportation industry, and understand how investors can position these funds in their asset allocation.
  8. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  9. Professionals

    5 Top-Rated Funds for Your Retirement Portfolio

    Mutual funds are a good choice for emotional investors. Here are five popular funds to consider.
  10. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  1. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  2. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  3. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
  4. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
  5. Do mutual funds pay dividends?

    Depending on the specific assets in its portfolio, a mutual fund may generate income for shareholders in the form of capital ... Read Full Answer >>
  6. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!