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Usually we focus on respectable, hard-working, virtuous mutual funds. But for a change of pace, today we focus on the losers.

These bottom-of-the barrel funds have posted consistently lame returns over the past 10 years. They deserve some attention, since in several cases the skull-and-crossbones, so to speak, are posted right on the bottle. Besides poor performance, several of the funds, like those from


, have screamingly high expenses; others are hugely overweighted in a handful of oddball stocks (like


American Heritage, which is betting the farm on a barbaric-sounding treatment for erectile dysfunction).

Still others got hurt because they were pantywaists in a period favoring growth. (That's especially true for the handful that have clung to gold stocks, though some had to because of their investment mandate). Still, underscoring the long-term power of the stock market, all but one of the worst domestic funds we examined have made money over the past decade. They weren't down for the whole period, but the singe-digit gains they eked out paled in comparison to their peers and to the returns of the broader market. The


claims annualized returns of 17.71% over the same period.

But enough of the qualifications. Some of these funds are inexcusably bad. To begin, let's consider the worst of the bunch:


Ameritor Industry, the only fund on the domestic list to have succeeded in losing money over an entire decade. This one-eyed, peg-legged, unshaven degenerate of a fund saw annualized 10-year losses of 12.28% a year.

But here's the kicker: Not only is it the worst equity fund around, excluding two gold funds, but it charges profanely high operating expenses of 29.92%. And yes, you read that decimal point right. (

Thank you, sir, may I have another?

) By the way, sibling fund


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Ameritor Investment, the third worst domestic fund, charges expenses of 11.97%. Is this even legal? Yes. According to the

Securities and Exchange Commission

, there is no cap on operating expenses.

Since Ameritor did not return phone calls for comment, perhaps it's best to defer here to the voice of the people. I quote from a letter in


fund conversation: "The maggots are having a field day on this bottom feeder," observes one commentator. "Hopefully, in the not too distant future, the fund's expenses will consume it like the wretched corpse that it is."

Another price gouger among nondomestic funds is American Heritage, with operating expenses of 8.73%. As of the end of the third quarter, it had entrusted more than three quarters of its assets to a miniscule British biotech outfit named


, which Morningstar gave an "F" grade for financial health. Lately Senetek's busied itself touting one of its flagship products: self-administered "intracavernous" injections via a "fine-gauge needle" to treat erectile dysfunction.

You be the judge.

Some of the other loser funds have suffered more from long-term cowardice than from any wacky stock-picking strategies. Take


Gabelli Mathers. Wary of overpriced stocks, its managers have become accustomed to socking away a huge percentage of assets (75.6% as of the third quarter) in cash. On rare occasions this works: A Morningstar analysis notes that the fund managed to post a 27% return in 1987, the last time the market truly got walloped. But for all its caution this year it still only eked out a 2.5% return through November, well shy of the performance of most money-market funds.


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Permanent Portfolio acknowledges it's had anemic returns -- 5.18% over the past 10 years -- but makes no apologies. For the past 18 years, its portfolio has remain utterly unchanged: 20% gold, 5% silver, 10% Swiss francs, 15% real estate and natural resources, 35% U.S. Treasury bills and long-term bonds and a mere 15% aggressive growth.

Might it be time to rethink that composition? "We would be doing our shareholders a disservice, in our opinion, to change the investment asset allocation and mix of investments," responds John Chandler, a partner in the fund's investment adviser,

World Money Managers

. Permanent Portfolio has always been "misjudged and mischaracterized," he complains. It's "not designed to be judged on the basis of performance. It's designed to preserve and enhance assets in any foreseeable economic situation -- runaway inflation, big depression or anything in between."

"There's not any other fund like it," he adds.

Incidentally, the manager of Permanent Portfolio, who can claim 18 years of experience managing the fund, looks wet behind the ears compared with a couple of other managers on the list:


Gabelli Mathers has a manager who's been around since 1974, the same year the manager of


Rainbow started out.

Usually it's considered a selling point to have veteran managers at a fund, since presumably they're more experienced at responding to all kinds of market environments. But in practice, long-term tenure seems to have encouraged a certain strategical rigidity at these funds.



Valley Forge fund manager Bernard Klawans (who answers the fund's 800 number, "Hello, shareholder services" or sometimes just "Hello"). Klawans has headed the fund since '71. And this year, he saw the light.

"I finally realized that the market tenor has changed, and value stocks aren't worth what they used to be. I'm tired of this 1, 2% a year. I don't want gold anymore." He explains that gold has never been more than 25% of the fund -- a massive stake by today's standards, since virtually no funds own gold at all.

Today, he elaborates, he's not buying gold anymore. But selling may be a little more complicated, since nobody else wants it, either. As he does slowly sell it off, he says he plans to put the money into more aggressive stocks.

To its credit, one other fund on the list is also taking a new tack, in more dramatic fashion.


Lindner Large Cap, a large-cap blend fund, recently overhauled its strategy, bringing in two new managers last month and reorienting itself towards better-known, liquid large-caps like


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. Under the new regime, managers won't try to ferret out bargains, looking instead for good values in a relative sense.

And in fairness, another fund may not deserve to be smeared with the rest. Though

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Alpine International Real Estate claims to have bested the Dutch-based index for its extremely narrow sector, it ended up on the laggards list because international real estate's had such measly returns over the past decade. Manager Sam Lieber readily admits, "International investing in real estate's been terrible." But that may say as much about macroeconomic circumstances as about Alpine's offering.

In any case, most bottom-dwellers can't claim excuses. For the most part, these laggards haven't seen much in the way of beneficial shake-ups. They seem to put the lie to that investing qualifier: in these cases, past (crummy) performance seems to have guaranteed future (crummy) results.