Peter Saperstone, the portfolio manager of Boston-based Fidelity Investment's Advisor Midcap fund, a blend fund that Chicago-based Morningstar Inc. pegs as having a growth bias, turned in the survey's fifth highest gain of 23.4%. Mr. Saperstone said he seeks out companies "where the world is wrong on what they can earn" two or three years down the road, he said. Among stocks that have delivered this year are Houston-based oil production equipment maker National Oilwell Varco Inc. and Pleasanton, Calif., supermarket operator Safeway Inc., with gains of 100% and 33% respectively.
On the fixed-income side, Fidelity took the survey's top three spots for the year ended Sept. 30. Fidelity New Markets Income, an emerging markets debt fund, retained the top spot with a 16% gain, followed by Fidelity Advisor High Income Advisor fund, with a 14.2% advance, and Fidelity Capital & Income, with an 11.1% gain.
Mark Notkin, portfolio manager of the Capital & Income fund, said securities selection, together with the flexibility to invest "across the capital structure, from bank debt to common stock," contributed to his fund's performance.
The fund's bank debt portion has risen to roughly 5%. As interest rates rise, with default rates likely to follow suit, bank debt — the most senior part of the capital structure — is "the place to be," Mr. Notkin said.
The fund's equity holdings — which have risen from around 10% of the portfolio in March to roughly 15% by late September — have contributed as well, surging 41%, or more than three times the gain by the S&P 500, the portfolio managers said.
For the latest quarter, the fund's high yield bond holdings — included overweight positions in sectors such as energy, mining and telecoms and underweight positions in autos — contributed to returns, he said.
Portfolio manager Kathleen Gaffney, whose Boston-based Loomis Sayles & Co.'s multisector Bond Fund took fourth place with a 9.4% gain, said her fund 's overseas holdings, including the 17% of her portfolio in Canadian issues and 3.5% each in Brazil and Mexico, have helped performance this year. Currencies are likely to be where excess return comes from going forward as well, she said.
With the Federal Reserve intent on squashing any potential inflationary pickup resulting from Hurricane Katrina, further tightening is likely, which could delay the eventual payback from her fund's growing bet that Asian currencies are undervalued, Ms. Gaffney said. The fund has just added a 2% position in Korean issues and a 1% position in Malaysia, following purchases last year in Singapore and Thailand.
For now, "we're probably the most defensive that we've ever been," with the portfolio's average duration about half a year below the Lehman government credit benchmark's 5-year average, she said. Ms. Gaffney said she remains fairly optimistic about the economic outlook, although for the year to come a 5% to 6% return will probably be enough to be a top performer.
Arthur Steinmetz, the portfolio manager of New York-based OppenheimerFunds' Strategic Income fund, said his team's penchant for looking "a little bit out of the mainstream," for more exotic or illiquid investments has buoyed his fund's recent performance. The fund returned 9.2% for the year ended Sept. 30, for fifth place.
"You don't get many fat pitches in this game," but markets such as Brazil and Turkey, where investors have been slow to appreciate just how serious governments and central banks have become about controlling inflation, have been exceptions to that rule, Mr. Steinmetz said.