Best Equity Funds Have Less Equity

The most recent top-rated equity funds graded by TheStreet.com Ratings are dotted with entrants that wouldn't qualify as "stock" funds in a traditional sense.

As appropriate for these uncertain investment times, half of the 10 highest-rated open-end equity funds in the accompanying table either focus on "hard assets" or have portfolios constructed in such a way as to be largely net unexposed to the stock market.

The two highest rated funds, the Permanent Portfolio Fund(PRPFX Quote - Cramer on PRPFX - Stock Picks) and the Merk Hard Currency Fund Investor(MERKX Quote - Cramer on MERKX - Stock Picks), along with the Prudent Bear Fund(BEARX Quote - Cramer on BEARX - Stock Picks), have investments in "hard" (tangible) assets such as precious metals and other minerals.

Two other funds, the TFS Market Neutral Fund(TFSMX Quote - Cramer on TFSMX - Stock Picks) and the Aberdeen U.S. Growth Leaders Long/Short Fund(MLSAX Quote - Cramer on MLSAX - Stock Picks), combine long and short investment positions that can cancel each other out to near-neutral net exposure to the broad equity markets. Such funds, when successful, achieve competitive total investment performances with far less volatility of returns than traditional "long-only" stock funds.

MLSAX's top portfolio holdings include Goldman Sachs Group(GS Quote - Cramer on GS - Stock Picks), Colgate-Palmolive(CO Quote - Cramer on CO - Stock Picks) and Wal-Mart Stores.(WMT Quote - Cramer on WMT - Stock Picks).

With annualized growth of 16.29% over the past three years and a return of 9.93% over the last 12 months, TFSMX has been particularly successful at picking appropriate long and short investments.

Ironically, with hard-asset and long-short funds dominating the spotlight, a quartet of funds that would be considered as highly conservative ended up on the list.

Two utility funds, the AIM Utilities Fund(IAUTX Quote - Cramer on IAUTX - Stock Picks) and the Alliance Bernstein Utility Income Fund(AUIAX Quote - Cramer on AUIAX - Stock Picks), have each grown at compound rates of more than 15% annually over the past three years. Both count Exelon(EXC Quote - Cramer on EXC - Stock Picks) among their top portfolio holdings, with IAUTX also favoring AT&T(T Quote - Cramer on T - Stock Picks).

The John Hancock Balanced Fund(SVBAX Quote - Cramer on SVBAX - Stock Picks) has combined its cautious strategy of investing in equities and fixed income instruments correctly enough to enrich its holdings at an annual rate of 14.73% over the last three years and 11.32% over the most recent 12 months. Its top holdings include the diverse investments of Archer Daniels Midland(ADM Quote - Cramer on ADM - Stock Picks), Alcoa(AA Quote - Cramer on AA - Stock Picks) and Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks).

The fourth fund on the top-rated list with a relatively conservative approach to investments is the Oakmark Equity and Income Fund II (OARBX Quote - Cramer on OARBX - Stock Picks).

While SVBAX and OARBX tend to maintain relatively constant proportions of equities and fixed income holdings in their portfolios, the Blackrock Global Allocation Investment Fund (MDLOX Quote - Cramer on MDLOX - Stock Picks) has a strategic mandate that allows more extreme mixing of stocks and bonds as well as domestic and international investments. Its largest U.S. investments include General Electric(GE Quote - Cramer on GE - Stock Picks), Microsoft, Union Pacific(UNP Quote - Cramer on UNP - Stock Picks) and American International Group(AIG Quote - Cramer on AIG - Stock Picks).

TOP-RATED OPEN-END EQUITY MUTUAL FUNDS
NAME, TICKER & TheStreet.com RATINGS GRADE	3-MO. TOTAL RET'N (%)	12-MO. TOTAL RET'N (%)	3-YR. ANN'L RET'N (%)	MAX. INIT. SALES CHG. (%)	MIN. INITIAL INVEST. AMT. ($)
Aberdeen U.S. Gr Leaders L/S A (MLSAX) A+	3.34	5.87	8.72	5.75	2,000
AIM Utilities Fund A (IAUTX) A+	6.76	3.13	15.52	5.50	1,000
AllianceBern Utility Income A (AUIAX) A+	6.01	6.46	15.20	4.25	2,500
BlackRock Glb Allocation Inv A (MDLOX) A+	-0.26	6.00	13.04	5.25	1,000
J Hancock Balanced A (SVBAX) A+	3.11	11.32	14.73	5.00	1,000
Merk Hard Currency Fund Investor (MERKX) A+	0.41	17.85	11.93	0.00	2,500
Oakmark Equity and Income II (OARBX) A+	1.37	6.41	10.19	0.00	1,000
Permanent Portfolio Fund (PRPFX) A+	1.63	13.99	12.78	0.00	1,000
Prudent Bear Fd (BEARX) A+	2.27	20.59	11.66	0.00	2,000
TFS Market Neutral Fund (TFSMX) A+	9.25	9.93	16.29	0.00	5,000
S&P 500 Composite Total Return	-2.73	-11.91	-13.12
Source: TheStreet.com Ratings - Data as of 6.30/2008. For an explanation of our ratings, click here.