Quarterly Funds Review: Big Funds, They Don't Cry-Yi-Yi

Any weekend sailor will tell you a tanker has a better shot of staying afloat during a monsoon than a dinghy. The same idea was borne out in the mutual fund world during the third quarter.

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Quarterly Funds Review: Big Funds, They Don't Cry-Yi-Yi

It would be an understatement to say stock-fund managers are hurting. The average U.S. stock fund fell about 17% in the third quarter alone and trails both bond funds and three-month certificates of deposit over the past one and three years, according to Chicago fund-tracker Morningstar. Over the past 12 months, stock funds are down some 27%. That's worse than any calendar-year loss dating back to 1970.

The silver lining: The biggest funds, in which millions of investors have stashed billions of dollars, have taken on water -- but they haven't sunk. The situation underscores the value of all-weather money managers like American Funds and flies in the face of the idea that all big funds have the sleekness and appeal of a 280-pound plumber climbing a flight of stairs.

Over the past 90 days, only four of the nation's 15 largest mutual funds have fallen further than their average peer. And over the past three mercurial years, all 15 of these mammoth funds, home to more than $600 billion, topped their average competitor.

Let's check these hulks out.

Large and in Charge The biggest funds are beating their peers over the past three years
Fund	Q3 Return	Rank vs. Peers(1=Best, 100=Worst)	3-Year Return	Rank vs. Peers(1=Best, 100=Worst)
(FMAGX Quote)Fidelity Magellan*	-17.7%	64%	2.3%	22%
(VFINX Quote)Vanguard 500 Index	-16.7	39	0.2	45
(AIVSX Quote)Investment Company of America	-12.3	25	6.1	21
(AWSHX Quote)Washington Mutual	-9.8	9	4.3	32
(AGTHX Quote)Growth Fund of America	-20	38	12.3	1
(PTTRX Quote)PIMCO Total Return	4.2	1	7	3
(FCNTX Quote)Fidelity Contrafund	-12.3	3	3.4	17
(ANWPX Quote)New Perspectives	-16.8	33	7.4	19
(AEPGX Quote)EuroPacific Growth	-16.2	15	6	11
(JANSX Quote)Janus*	-26.5	87	0	40
(TWCUX Quote)American Century Ultra	-19.1	29	-0.2	42
(VWNFX Quote)Vanguard Windsor II	-12.4	26	3.5	38
(JAWWX Quote)Janus Worldwide*	-23.2	88	2.5	41
(VWELX Quote)Vanguard Wellington	-7.7	33	5.3	20
(FDGRX Quote)Fidelity Growth Company	-24.4	76	6	9
Avg. U.S. Stock Fund	-7.1	N/A	3.3	N/A
S&P 500	-16.7	N/A	0.2	N/A
Source: Morningstar. Returns through Sept. 25. *Currently closed to new investors.

Given the inclement weather on Wall Street, it's not surprising that this lineup's best third-quarter performer is its only bond offering, the $47 billion (PTTAX Quote)Pimco Total Return fund. With guru Bill Gross at the helm, the only fund manager to win Morningstar's Manager of the Year award twice, it's not surprising that the fund is in the black, topping more than 95% of its peers in the third quarter and over the past three years.

Given that precious few stock funds are even close to the black over the past year, it's also no surprise that this is the nation's top-selling fund this year, with more than $6 billion in net inflows through the end of last month.

As you might imagine, the stock funds on our list focus on big-caps with a range of styles.

Large-cap blend funds are designed to be core stock holdings focusing on the stocks of big companies, with a mix of cheap value stocks and pricier growth fare. Its representatives are the country's two biggest funds: the $78.8 billion (FMAGX Quote)Fidelity Magellan fund, run by Bob Stansky since 1996, and the $77.6 billion (VFINX Quote)Vanguard 500 Index, which tracks the S&P 500. Each has stayed ahead of its average peer over the past three years, but Stansky posted an 18% fall in the third quarter that trailed most of his competitors.

Who's Winning

When we turn our attention to big-cap growth and value funds, we see that American Funds' reputation as a solid manager of core large-cap funds is well-deserved. ...