For years, (PVOYX) Voyager fund and (PGRWX) Fund for Growth & Income have ruled the roost at Putnam Investments. No more.

In the mutual fund business, money follows performance, and the hot hand these days at Putnam belongs to lead manager Beth Cotner and her $6.4 billion

(PINVX)

Investors fund. The hot money is taking note.

Investors fund was the runaway bestseller at Putnam last year, attracting $2.6 billion in net new sales, nearly 500% more than a year earlier and $1 billion more than any other Putnam fund, according to

Financial Research

, the Boston consulting firm. In the fourth quarter alone, it outsold any other Putnam fund more than 2.5 to 1.

The reason is performance. The five-star Investors fund was up 35.5% last year, blowing away the

S&P 500

index, which was up 28.6%. It was the second year in a row Investors fund had topped the S&P. Over five years through Feb. 11, the fund ranks in the top 10% of all growth funds tracked by

Lipper

, up 196.8% vs. 139.9% for the average growth fund.

The fund has done it by being in the right place at the right time. That place, of course, has been big-capitalization stocks.

Investors fund's list of top holdings is littered with names like

Microsoft

(MSFT) - Get Report

,

Wal-Mart

(WMT) - Get Report

,

Lucent

(LU)

,

Time Warner

(TWX)

,

IBM

(IBM) - Get Report

,

General Electric

(GE) - Get Report

and

MCI WorldCom

(WCOM)

. The median market cap of investors fund is $43 billion, or about triple that of old standby Voyager.

This used to be a more eclectic fund, but in 1994, in the face of subpar returns and investors pulling money out, Putnam repositioned the fund to a more systematic approach that uses a series of quantitative screens. The fund's ambitious goal has been to beat with S&P with lower levels of risk, something it hasn't always been able to do.

The fund looks at companies with market caps of more than $2 billion and ranks them on such factors as valuation, earnings and cash-flow growth, potential earnings surprises and financial strength. Cotner and her two co-managers then research the companies that their model spits out.

Cotner has the fund overweighted in technology, cable and entertainment and retailing stocks. She is light on such sectors as food, tobacco and energy. Among her current favorite stocks are telecommunications equipment makers like Lucent and

Tellabs

(TLAB)

and retailers

Costco

(COST) - Get Report

,

Safeway

(SWY)

and

Kroger

(KR) - Get Report

, which she sees as consolidation plays.

After several years of moving up the capitalization food chain, Cotner is broadening her holdings (now at 77) and her median market cap is heading down. But she is anything but pessimistic, even at these valuations.

"The economy is much stronger than people think," says Cotner, who has run Investors fund since 1995. She thinks too much is made of the overall slowing of corporate earnings: "Individual companies are doing very well."

Investors is the most successful example of Putnam's efforts to reinvigorate an aging product line. Putnam's cross-town rival,

Fidelity Investments

, has been pursuing much the same strategy, with the top-selling, top-performing

(FDGFX) - Get Report

Dividend Growth fund being the most obvious example.

Among Putnam's other newer offerings are

(POGAX) - Get Report

Growth Opportunities,

(PNRAX) - Get Report

Research and

(PNVAX) - Get Report

International Voyager funds.

The $1.2 billion Growth Opportunities did even better than Investors fund last year, up a remarkable 47.4%. The secret was Growth Opportunities' even larger-cap stocks and a giant $60 billion median valuation.

Peter Di Teresa, editorial analyst for

Morningstar FundInvestor

, likes Investor fund, saying Cotner & Co. have done a particularly good job at playing the big-cap boom. But he'll pass on Growth Opportunities, even with its impressive '98 returns.

Simply too risky, he says.

Steven Syre & Steve Bailey write for the Boston Globe. This column is exclusive to TheStreet.com. Under no circumstances does the information in this column represent a recommendation to buy stocks or funds.