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Fund Spy

The Nine Best New Funds of 2010

Some promising ideas for your 2011 watchlist.

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Most new funds are trendy or poorly managed. To make matters worse, many start with a big price tag that suggests one should pay a premium for less-proven investments. Yet every class has a few keepers. Searching through this year's new funds, I found nine promising ones. While the funds are new, the managers are experienced investors with strong track records at other funds. Thus, you aren't gambling on an unknown. On the downside, because they are new, some of these funds have less-than-great expense ratios, so you'd be buying in hopes that asset growth would drive costs down.

We haven't made any of them Analyst Picks, but certainly some make good investments today. Others have more to prove but are worth watching. I'll run through the nine with those that seem most ready for investment from the start.

 DoubleLine Total Return Bond DBLTX
Expense Ratio: 0.49%
Manager: Jeffrey Gundlach
In 2009, Jeffrey Gundlach produced great performance at  TCW Total Return Bond (TGLMX), but he was fired in December. Gundlach launched his own firm and resumed his strategy at this fund in April, and he has continued his remarkable stretch of uncanny returns. In between, he sparred with TCW in a painful divorce that must have scared away potential investors from both firms. There's no doubting Gundlach's skill, but if TCW's charges are true, you'd be taking a risk that he has a flawed management style that one day might harm performance. That risk is tough to define, though, and performance remains stellar. Recently, DoubleLine revealed that, as part of an investigation into the Public-Private Investment Program for Legacy Assets, the U.S. attorney has also asked for information relating to TCW's allegations that Gundlach and other former employees stole proprietary secrets. On the plus side, it might well never be a problem for shareholders.

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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