"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) - Get Report

and the aptly named

James Advantage Market Neutral Fund

(JAMNX)

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) - Get Report

,

Abbott Laboratories

(ABT) - Get Report

,

Intel

(INTC) - Get Report

,

Walt Disney

(DIS) - Get Report

and

Verizon Communications

(VZ) - Get Report

.

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Major positions of JAMNX include

McDonald's

(MCD) - Get Report

,

International Business Machines

(IBM) - Get Report

and

CSX

(CSX) - Get Report

.

The Arbitrage Fund

(ARBFX) - Get Report

engages in the classic hedging strategy of capitalizing during a corporate merger on the spread between an acquired company's stock price and the proposed acquisition price. A merger-wise manager can profit by deftly shorting the stock of the acquiring company and using the proceeds to buy shares in the target firm.

The head of a mutual fund once quipped that he wasn't getting an equity manager's pay for rolling over a portfolio of Treasury bills. And in keeping with that approach, equity funds generally maintain modest percentages of cash reserves. Even balanced and asset-allocation funds tend not to lean heavily on cash.

But, then, knowledgeable investors have learned not to expect the ordinary from an investment associated with the Gabelli organization.

"The investment seeks long-term capital appreciation," says Gabelli's

GAMCO Mathers Fund

(MATRX)

, in an understatement prefacing its more ambitious intentions. "The fund usually invests a substantial portion of assets in common stocks; it may, however, invest all or any portion of assets in fixed-income securities," clarifies the fund. "Securities of unseasoned companies, foreign issuers, and special situations may provide suitable opportunities for investment. Investments may also include corporate debentures or notes of any credit quality, preferred stocks, and convertible securities."

MATRX was, most recently, 99.76% in the unexciting area of cash and equivalents. But that subdued investment selection was providing a modest return to investors during a period when stock prices were crumbling before investors' eyes. Its cash hoard provides the fund with ample ammunition to participate in an eventual stock market recovery.

For juicing up its returns, when it feels the time right, MATRX allows that it "may also engage in short selling and various hedging techniques."

Similarly, the stated objective of the

Reynolds Blue Chip Growth Fund

(RBCGX) - Get Report

states, innocently enough, that it "seeks long-term capital appreciation; current income is secondary."

But like MATRX, RBCGX has recently been observing the stock market carnage from the sidelines. With a recent cash position of more than 99%, it is positioned to fully participate in a market recovery, assuming its management knows when to get back in.

The fund invests in common stocks of U.S. "growth" companies. It may invest in companies that have the potential to become "blue chip" companies.

RCBCX can't be criticized for knowing when to be out of the market, so investors have some reason to hope the fund can be equally fortuitous with its reentry into stocks.

Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.