Mutual funds are in a never-ending war to beat their benchmarks. This was true even in the days before index-tracking stocks made buying the index easy. Fund managers prove their worth and earn their management fees by picking winning investments that return more than their competitors and the market as a whole.

Even though past results are never a guarantee of future returns, performance, for better or worse, is a significant part of what attracts new money to a fund. Returns in excess of benchmarks are especially prized, and funds with consistent track records of producing them attract billions of dollars from investors.

But this kind of growth presents special challenges. Managers must avoid buying so many shares of any one company that the fund ends up with a controlling interest. This limits their investment options to the biggest companies, even though small-cap stocks historically outperform large-caps.

Even with large-cap stocks, it can be difficult to build a position in a company without pushing the share price higher. Exiting a position can be just as tricky, since heavy selling can move the price lower. And the additional time it takes to establish and exit large positions can potentially lead to higher entry prices and lower exit prices, producing a drag on returns.

Peter Lynch, the former manager of

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Fidelity Magellan , described his experiences with similar restrictions in his classic book,

One Up On Wall Street

. Magellan, once the biggest U.S. mutual fund, now has just $46 billion in assets. While still huge, it didn't make our list.

Below are the 10 biggest open-end stock mutual funds benchmarked to U.S. stocks. These Goliaths tend to be benchmarked against the

S&P 500

, which holds the titans of each stock market industry group. However, we've included a selection of major market indices for benchmark comparison by annual total return over one-, three- and five-year periods ending Dec. 5, 2006.

Sometimes bigger really is better. Even with the difficulties inherent in managing multibillion dollar investment portfolios, the average return for the group outperformed their stated benchmark of the S&P 500. The group also did better than the Dow Jones Industrial Average over the three- and five-year periods, but trails this price-weighted average of 30 stocks in the last year.

Taking a much wider look, the fund Goliaths had higher returns in each period than the Dow Jones Wilshire 5000 Composite Index that aggregates all U.S. equities. As a group, these funds also outperformed the 3,151 stocks in the

Nasdaq Composite

, although they lagged the 2,017 components of the NYSE Composite.

However, for some of these funds, the outperformance has been accompanied by volatility, which our ratings model also takes into account.

Two funds that would have made the biggest 10 list had they not been benchmarked to the MSCI EAFE Index (which tracks European and other foreign stocks) are the B+ rated

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American Funds EuroPacific Growth and the A rated

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American Funds Capital World Growth & Income.

EuroPacific Growth has $87.9 billion in assets while Capital World Growth & Income has $71.1 billion. With one-year returns of 23.1% and 22.8%, respectively, neither kept pace with the super-hot benchmark that turned in 27.2%. Over the last five years, however, Capital World Growth & Income's performance of 16.1% outdid the 14.9% for its benchmark and all the Goliath-sized funds on the list above.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.