NEW YORK (TheStreet) -Many financial advisors steer away from brand new funds.

Before investing, the advisors insist on seeing three-year track records. That's a reasonable approach. But a new group of fledgling funds may be worth considering. These young portfolios are run by managers with long records for delivering compelling returns. Because of their unusual strategies, the new funds could be intriguing vehicles for diversifying portfolios.

Among the most notable of the newcomers is

Fairholme Allocation

(FAAFX) - Get Report

, which is run by Bruce Berkowitz, portfolio manager of

Fairholme

(FAIRFX)

. During the past decade, the flagship fund returned 11.4% annually, outdoing the

S&P 500

by 9 percentage points and topping 99% of large value competitors, according to Morningstar.

Berkowitz achieved his record by making a series of bold contrarian calls, often holding big stakes in bonds or a handful of stocks. In recent years, he bought

American International Group

(AIG) - Get Report

, the much-hated insurer that was bailed out by Washington. The stock soared after the company began getting back on its feet and repaying government agencies.

With investors pouring cash into the Fairholme flagship fund, assets have climbed past $19 billion. Now some shareholders have worried whether Berkowitz can continue to perform magic with a giant portfolio. The concerns are justified because Fairholme's success has depended on nimble trading -- and that can be hard to accomplish with a big pool of assets.

But with only $167 million in assets, Fairholme Allocation can maneuver easily. That should provide a crucial edge. The new fund will make the same kind of contrarian plays as the flagship, but Berkowitz says that he will taking advantage of the limited size. "We can buy positions that are too small to push the needle at a big fund," he says.

Another star manager with a new fund is Jeffrey Gundlach. Until 2009, he ran

TCW Total Return Bond

(TGLMX) - Get Report

, which surpassed 99% of intermediate-term peers over long periods. After becoming embroiled in a dispute with his bosses, Gundlach set up his own shop and started

DoubleLine Total Return Bond

(DBLTX) - Get Report

last April. So far the fund has been crushing competitors.

Recently Gundlach introduced

DoubleLine Multi-Asset Growth

(DMLIX) - Get Report

. The new fund will keep about two-thirds of assets in bonds and the rest in stocks and real assets, such as commodities and real estate.

In the past Gundlach scored big gains by focusing on unloved mortgages. Continuing that approach, DoubleLine Multi-Asset currently has a sizable stake in private-label mortgages, which are considered relatively risky because they are not backed by government agencies. To compensate investors for the risk of defaults, many of the securities yield 8% or more. That is a rich payout at a time when 10-year Treasuries yield 3.4%.

With foreclosures still mounting, some of the fund's holdings deserve to sell at depressed levels, concedes Sam Garza, a DoubleLine portfolio manager. But he argues that the mortgage securities still represent bargains. "We have been able to buy these bonds at big discounts to their ultimate recovery value," he says.

For conservative investors,

Osterweis

(OSTFX) - Get Report

has long ranked as a compelling choice. During the past 15 years, the fund has returned 11.8% annually, outdoing the S&P 500 by a wide margin while taking much less risk.

Portfolio manager John Osterweis has sometimes limited losses by putting as much as 50% of assets in cash. Now the veteran manager has introduced

Osterweis Strategic Investment

(OSTVX) - Get Report

, which could appeal to investors who want to protect assets in downturns.

The fund has the flexibility to shift its allocation. During times when stocks look cheap, the portfolio can hold up to 75% in equities. When the manager wants to play defense, he can lower the equity allocation to 25%.

Osterweis Strategic Investment currently has 65% of assets in stocks. "Valuations still look reasonable," says Osterweis. "There are a lot of strong large-cap names trading for less than 12 times earnings."

An unloved giant in the portfolio is

Citigroup

(C) - Get Report

. The bank is still struggling with troubled loans, but Osterweis says that the stock will recover as the restructuring continues. He also likes

Microsoft

(MSFT) - Get Report

. Osterweis says that the company generates lots of cash, and eventually management will restructure or take other steps to boost the shares.

Worried about the outlook for bonds, Osterweis has much of his fixed-income holdings in high-yield bonds with maturities of two years. When interest rates rise, most bond prices fall. But the short-term holdings in the Osterweis fund should prove relatively resilient. "We are concerned about the bond markets," he says. "Interest rates have nowhere to go but up."

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Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.