Three Hybrid Funds Scored October Gains

"Hybrid" mutual funds, with a blend of equity and fixed-income holdings, might have sounded like safe vehicles for riding out the October stock-market slaughter.

Yet, excluding specialized funds such as those exclusively in currencies and commodities as well as "inverse" offerings, only the three hybrid funds in the accompanying table managed to gain ground last month.

Active portfolio management was responsible for the remarkable achievement. But expertise comes with a price: The expense ratios of the three funds stand well above the 1.5% typical of actively managed open-end mutual funds.

One of them didn't just manage to hold its own. The Comstock Capital Value Fund(DRCVX) vaulted 25.9% during October, leaving the Gabelli-managed fund 52.5% higher for the year.

DRCVX may invest up to half of its total assets in short sales of securities and write covered call and put option contracts. It seems to climb aboard whatever investment vehicle its manager thinks will generate a profit, including currencies and precious metals. The manager blends them with more conventional investments such as Well Fargo(WFC), Nokia ADR(NOK), Lam Research(LRCX) and NVR(NVR).

If DRCVX seems to share genetic traits with aggressive hedge funds, so does the Managers AMG FQ Alternatives Fund(MGACX).

"The fund invests in long and short positions in the global equity, bond and currency markets," according to MGACX documents. "It may use derivative instruments -- including futures, options, swaps and forward contracts -- and direct investments to allocate exposure among asset classes, countries and currencies. The fund typically maintains exposure among at least 10 different countries."