Mutual Funds That Hedge Top Ratings List

"Desperate times call for temperate measures" might be a (corrupted) saying that describes a prudent approach to the maelstrom of the stock market.

Mass redemptions resulting from turmoil in the hedge fund industry are a major factor in the market's outsized swings in recent weeks. So it might seem ironic that three of the highest-rated mutual funds, as measured by TheStreet.com Ratings, are essentially hedge funds for Everyman.

But unlike most of the "two-and-twenty" funds that investors are abandoning in droves, three of the funds in the accompanying table place great weight on the "protect against risk" portion of the "hedge" concept of investing.

Two others in the table are equity funds whose managers decided at a propitious point in time that cash seemed like a better investment than stocks.

Together, the quintet of stock funds presents a rare sight in late 2008: a performance table devoid of double-digit negative returns. In fact, one with more positive than negative numbers.

Of the so-called arb funds on the list, the JPMorgan Market Neutral Fund(JMNAX Quote) and the aptly named James Advantage Market Neutral Fund(JAMNX Quote) follow the classic hedge fund strategy of going long on stocks with favorable prospects and shorting issues that are expected to fare poorly.

Adhering to the basics of hedging kept JMNAX and JAMNX in positive territory during the most recent three calamitous months, despite the distinct probability of confusion in distinguishing their ticker symbols.

JMNAX's investment portfolio includes Johnson & Johnson(JNJ Quote), Abbott Laboratories(ABT Quote), Intel(INTC Quote), Walt Disney(DIS Quote) and Verizon Communications(VZ Quote).