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If the punishing 2000-02 bear market wasn't enough, the 2008 implosion certainly made it difficult to imagine any equity mutual fund could have survived the past 10 years without a at least one negative annual return.

So it was with minimal expectations that TheStreet.com Ratings team combed its database of open-end equity and hybrid mutual funds to search for such a performer. Astoundingly, we uncovered a single fund that has not suffered an annual loss over the most recent 10 years.

The

GMO Alpha Only Fund III

(GGHEX) - Get GMO Alpha Only III Report

fulfilled its purpose of hedging against losses while successfully investing on the "long" side of the market to become the only equity or hybrid fund to pass the 10-calendar-years-with-no-annual-losses test for the decade ended Dec. 31, 2008.

But before anyone prone to a "pain-resistant" approach to equity investing writes a check to get into GGHEX, be aware that any investor looking to get in will need a bank balance well into the eight digits.

The fund invests primarily in the underlying funds of GMO (Grantham Mayo Van Ottlerloo & Co.) domestic equity international equity funds, or directly in equity securities of the type invested by these funds. It may also invest in the firm's emerging-country debt portfolio or in debt securities of the type invested in by the fund.

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It states that is will implement its the strategy with a combination of U.S. and international equities and typically invest in a U.S. equity strategy that will be hedged using exchange traded

S&P 500

futures contracts.

Unlike most "market neutral" hedge fund lookalikes that have opted to travel the open-end mutual fund route, its short-side positions have been selected and proportioned in such a way as to produce annual gains for each of the past 10 calendar years.

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Skillful use of derivatives has helped the fund on its steady upward course.

As might be expected from a long-short fund, GGHEX's gains during the 2003-06 bull years were relatively modest. But they followed double-digit annual advances during the painful 2000-02 bear market. As can be seen in the accompanying table, the fund's hedging bordered on brilliance in the year just ended, rewarding holders with a positive return of 12.09% for calendar 2008.

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.