For many investors,

Janus Twenty

(JAVLX)

epitomized the 1990s bull market. During the five-year period that ended in 1999, Janus returned 45.22% annually, according to Morningstar. The media uniformly applauded the results, publishing glowing portraits of the fund's managers. Enthusiastic investors sent billions of dollars to Janus.

So how is Janus Twenty performing these days? For the five years ended in July, the fund returned 17.13% annually. That track record is compelling by historical standards, but the news media's response has been muted. A recent article in

The Wall Street Journal

struck a cautionary note about the dangers of investing in Janus funds, which have scored high returns by emphasizing energy stocks.

The reaction to Janus Twenty is symptomatic of larger changes in attitudes. During the 1990s, the media and investors elevated portfolio managers to unrealistic heights. Investors came to believe that star managers were geniuses who could churn out profits every year. Now that the bear market has hurt most stocks, the pendulum has swung too far in the other direction. The press is running pessimistic articles. Grumbling that their portfolio managers are incompetent, shareholders are pulling billions of dollars out of funds with strong long-term records.

Some of the greatest discontent has been directed at value managers, who have suffered big losses because of trouble in financial shares. One-time stars who now get little respect include Bill Nygren of

Oakmark Select

(OAKLX) - Get Report

, Ron Muhlenkamp of

Muhlenkamp Fund

(MUHLX) - Get Report

and Wally Weitz of

Weitz Value

(WVALX) - Get Report

.

To appreciate how irrational investors have become, consider Weitz Value. During the past 15 years, the fund has returned 10.6% annually, outdoing 90% of large value funds and surpassing the S&P 500 by more than a percentage point annually. In seven of the last ten years, Weitz outdid the S&P.

Based on that record, Wally Weitz ranks as one of the best fund managers around. But plenty of investors have fled the fund. Assets under management have declined to $1.7 billion now from $4.5 billion in 2004.

The withdrawals have been triggered by the fund's double-digit losses. While the red ink is painful, it should hardly be surprising. A contrarian investor, Weitz buys stocks selling at deep discounts. Then he waits for years as undervalued shares rebound.

Because he can't call bottoms perfectly, Weitz is often out of step with the markets and sometimes trails competitors. That has happened lately. During the first seven months of 2008, the fund lost 18.8%, about 4 percentage points worse than the average large value fund. In the past, Weitz has always rebounded from such low points, and there is every reason to expect that he will again bounce back hard within a year or two.

Many of the investors who dumped Weitz and the other troubled funds were repeating the old pattern of buying high and selling low. The current cycle began in 2000 when growth stocks crashed and the S&P 500 lost 9.1%. While growth funds tanked, many value funds rallied, as investors sold technology names and bought financial shares. For the year, Oakmark Select and Muhlenkamp each gained more than 25%, while Weitz Value returned 19.6%.

Seeing the results, investors began pouring into the star value funds. Assets of Muhlenkamp rose to $3.0 billion in 2005 from $266 million in 2000. During the same time, Oakmark Select climbed to $6.0 billion from $2.1 billion in assets. Many of the new investors arrived shortly before value stocks began sinking in 2007.

As value funds moved out of favor, some angry investors lost faith in the star managers and shifted their assets to exchange-traded funds and other index funds. The disgruntled shareholders figured that the passive portfolios could deliver better results than the managers had been achieving.

While indexing can be a sound strategy, it is a mistake to panic and dump proven managers. To avoid making hasty decisions, investors should always have a clear idea of how closely their funds are likely to track competitors and benchmarks. If a fund has hit extreme highs and lows in the past, then shareholders should be prepared for the behavior to continue.

To get a picture of how a manager might perform, check an indicator called R-squared, a measure of how closely a fund tracks a benchmark. For a large blend fund, an R-squared of 100 indicates that the portfolio precisely correlates with moves of the S&P 500 and should never underperform or outperform by much. A score of 85 or lower indicates that the fund has not always matched the benchmark closely. Cautious investors may well prefer funds with R-squareds of 95 or higher.

Weitz Value has an R-squared of 67, a score indicating that the manager follows an unusual approach. Investors should recognize that Wally Weitz can sometimes strike out, underperforming the benchmark by a wide margin. But Weitz Value can achieve big scores for investors who are willing to wait patiently.

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