The quarterly results of Ratings' model runs, which rate more than 9,000 stock mutual funds, reveal some surprising names in the upgrades for the third quarter.

Nations Mortgage & Asset Backed Portfolio ( NMTGX) made the top of the list, with an upgrade from C+ to A+. The surprise is that the fund's in the real estate sector.

NMTGX invests predominantly in mortgage-related securities; however, this fund has amazingly bucked the trend by focusing on investment-grade short to intermediate-term mortgage securities -- mortgages with a duration of one to five years.

The only other notable feature of the fund that may explain its surprise performance is its concentration of holdings, with close to 50% of its assets deployed in its top 10 holdings -- so the managers are taking position in a few investment grade mortgage securities.

Year to date, the fund is down only 4.27% and over the past month ended Oct. 22 it is actually up 1.17% for the three-month period.

The other standout fund in our list is the Gabelli Comstock Capital Value Fund ( DRCVX), which can essentially invest in any asset class it chooses. It is this flexibility that has allowed the fund to sidestep the equity market turmoil and invest predominantly in government securities (80%) and cash (15%) with just 5% in equities.

The quarterly return of the fund as of Oct. 22 -- 41.28% -- is outstanding. It has a longer-term track record of 54.42% for the year-to-date return, and its one-year return is a very respectable 57.31%.

Large Third-Quarter Fund Upgrades by Ratings
Fund Name Ticker Current Grade Previous Grade 3-Month Return Category
Nations Mort & Asset Backed Port NMTGX A+ C+ 1.17 Sector - Real Estate
James Advantage Market Neutral A JAMNX A+ C+ -1.42 Growth - Domestic
ING GET U.S.Core Portfolio -Ser 8 IGUJX A+ C+ -1.52 Equity Income
Gabelli Comstck Partners Cap Val A DRCVX A D 41.28 Aggressive Growth
ProFunds-Short Small Cap Inv SHPIX B+ D- -2.45 Small Cap
Source: Ratings
Sam Patel, CFA, is the manager of mutual fund research for the Ratings.

In keeping with TSC's Investment Policy, employees of Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

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