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BOSTON (TheStreet) -- Health-care mutual funds are up an average of 15% this year, the most of any industry, as investors piled into so-called defensive and value stocks as the global economy grinds along at a slower pace.

Of the 40 mutual funds with the highest returns this year, 27 are health- or biotechnology-focused, including the top 11 performers, according to


. Real-estate funds are a distant second, with a gain of 9.6%.

"It doesn't matter what the fund company is, because so many of the health-care sector funds are doing so well," said Todd Rosenbluth, a mutual fund industry analyst at Standard & Poor's in discussing comparative fund performances with



The reason for their strong returns is that, excluding dividends, health-care stocks have gained 12.8% this year through May 25, more than double the return of the S&P 500 Index, and that comes after a pedestrian 3.2% return for the sector for all of 2010.

Health care is considered a defensive play in the face of market uncertainties, but it underperformed last year as concerns grew over how government-proposed health-care reforms would affect companies' earnings. But many of those issues have been resolved this year as many firms have said they find most of the proposals manageable.

The best performer this year is the

Fidelity Select Medical Delivery Fund


, with a 20.4% increase, followed by the

ProFunds UltraSector Health Care Fund


, at 20.3%.

But some investors are cashing out, apparently in the belief that the funds may have topped. U.S. health-care funds have seen outflows of about 7% of assets in the first four-and-a-half months of this year, Rosenbluth said.

Fund flows tracker EPFR Global said "profit-taking appears to have been the driver" as the funds have gained over 14% since mid-March. It said institutional investors' redemptions in health-care and biotechnology funds hit their highest weekly total in over a decade in the week ending May 25.

There also appears to be a shift by investors to more defensive stocks over the past month, as the returns of funds in the consumer staples, utilities and telecommunications sectors are picking up steam, Rosenbluth noted.

It's a turnaround from earlier this year when energy stocks and, by proxy, energy funds, ruled. Energy stocks are down 6.3% on average this month, while another strong performer in the first quarter, the materials sector, is down 5.1%.

The benchmark S&P 500 Index, including reinvested dividends, is up 6.2% this year and 26.6% over the past 12 months.

Here are three mutual funds that are among the top performers this year and

their best portfolio picks


T. Rowe Price Health Sciences Fund


, a $3 billion fund with a portfolio of 158 stocks, is up 19% this year and 43.5% over the past 12 months. The diverse fund has only 27% of its assets in its top 10 holdings and the annual portfolio turnover is a slim 36%. The fund favors small- and mid-cap stocks.

Kris Jenner has been the manager since 2000.

Alexion Pharmaceuticals


, the top holding at 6.4% of the fund, is up 15% this year. The company focuses on the development and marketing of drugs for life-threatening medical conditions. Mutual funds own 59% of its shares.

Valeant Pharmaceuticals International


, up 75% this year, makes up 3.6% of the fund. The Canadian company, composed of the former pharmaceutical firms Valeant Pharmaceuticals and Biovail International, licenses and develops specialty drugs in the neurology and dermatology category. It sells more than 100 branded products.

Gilead Sciences


, 3% of the portfolio, is up 12.9% this year. The company develops and markets therapies to treat life-threatening infectious diseases.

The $1.2 billion

Fidelity Select Biotechnology Fund


has a return of 18.6% this year and 37% over the past 12 months. The 95-stock fund has been managed by Rajiv Kaul since October 2005. The annual portfolio turnover is relatively high, at 119%, and 57% of its assets are concentrated in the top 10 positions.

Its top holding is the biotechnology giant



, which at 18.4% of the fund, is more than double the allocation of the next largest stock. Amgen has risen 9% this year. The company is a leader in biotechnology-based human therapeutics, with expertise in renal disease and cancer-care products.

Alexion Pharmaceutical


is the second-largest holding, at 6.7% of fund's assets.

Vertex Pharmaceutical


, 6.5% of the fund, is up 58.6% this year. It is a developer of small-molecule drugs for the treatment of life-threatening diseases. It is close to commercializing telaprevir, a hepatitis-C treatment in late-stage development with the potential to achieve blockbuster status, according to Morningstar analysts.

The fourth-largest position is

Biomarin Pharmaceutical


, at 4.5% of the fund. The company, which is building a portfolio of genetic disease therapeutics, many used in the treatment or rare diseases, is up 2% this year.


BlackRock Healthcare Institutional Fund

( MAHCX), with $349 million in assets, is up 18% this year and 33% over the past 12 months. The fund holds 60 stocks and has 96% annual turnover. It has 25% of its assets in the top 10 holdings.

Robert Hodgson has managed the fund since 1998.

WebMD Health


, 6% of the fund and its largest holding, is down 6.4% this year. It runs one of the most popular online destinations for health-related content. Its primary businesses are specialized Web sites that provide health information to consumers and health-care professionals, and it develops and runs private Web sites for health-care providers. They generate 85% of its revenue through ads and sponsorships.

Warner Chilcott


is the fund's second-largest position at 6%. It sports a return of 6.5% this year. The company markets women's health and gastroenterology products, including hormonal oral contraceptives.

Vertex Pharmaceuticals


, at 5.9%, is the third-biggest fund holding. It is up 58.6% this year.



is 4.3% of the fund and has returned 36.6% this year. It is the largest U.S. health insurer by medical membership, serving 34 million people. The company holds the exclusive license to the Blue Cross/Blue Shield names in 14 states.

>>To see these stocks in action, visit the

3 Top Funds' Best Stock Picks

portfolio on Stockpickr.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.