By Rob Silverblatt

Zeke Ashton knows a thing or two about playing defense. In 2008, for instance, his Tilson Dividend Fund beat the market by 18 percent. Meanwhile, for the trailing three years, the fund's returns land it in the top 1 percent of Morningstar's mid-cap blend category.

By any measure, it would seem that Tilson Dividend has a lot to brag about. But it chooses not to. "We don't have an affiliated broker dealer," says Ashton. "We are very small, and we rely entirely on referrals for new investors. And we don't have a marketing budget, so we haven't spent any money marketing." As a result, despite its superior performance, Tilson Dividend has just $10.7 million under management. In the $11 trillion mutual fund industry, that doesn't even qualify as a blip on the radar.

In many ways, Tilson Dividend is the prototype for the small but successful fund struggling to differentiate itself in what has turned into an incredibly crowded field. According to Morningstar, there are currently 6,735 distinct mutual funds (excluding money market funds).

Given the sheer size of the fund universe, it's impossible for any one investor--or even one firm--to be familiar with every fund. From a practical standpoint, that means that in the fight to catch the attention of registered investment advisers or to nab one of a limited number of spots on brokerage platforms, products from big-name fund shops have a distinct advantage. Meanwhile, smaller funds often go unnoticed.

"If you go back and look at the '90s, [back then] you could go directly to shareholders and talk to them about your products and your style," says Jay Sekelsky, a comanager of the Madison Mosaic Disciplined Equity fund. "These days there's always an intermediary. ... And so trying to get shelf space, or trying to get people to notice you, is often difficult."

Put another way, it's a Catch-22: In order to get noticed, a fund has to be big. But in order to be big, it has to get noticed.

With that in mind, here are 10 great funds you've probably never heard of.

All of them are small funds (only one has more than $100 million under management) that receive at least an 8 out of 10 using U.S. News's recently unveiled Mutual Fund Score.

Tilson Dividend Mutual Fund (TILDX)

This isn't your typical equity income fund. Unlike most of its peers, which focus exclusively on dividend-paying stocks, the fund frequently uses covered calls to supplement its goal of providing investors with current income. A covered call works like this: The fund enters into a contract with a buyer in which the fund agrees to sell a security if that security reaches a certain price. In exchange for the right to purchase the security at an agreed-upon price, the buyer pays an upfront fee, and this provides investors with current income in much the same way that dividends do. That's not to say dividends aren't important to this fund. But since they're not its sole focus, Tilson Dividend has the flexibility to be more selective in its stock picking. Meanwhile, the fund currently has around 20 percent of its assets in cash. "With the market having performed so strongly, we've been doing more selling than buying, and we've been very patient about redeploying that capital," says Ashton, who comanages the fund.

Madison Mosaic Disciplined Equity Mutual Fund (MADEX)

For Disciplined Equity's management team, investing is all about stock picking. To neutralize sector dynamics, the fund keeps its sector weightings almost identical to the S&P 500's. That means all of the fund's relative outperformance stems from superior stock selection. "In general, we're looking for companies that are growing faster than the market but yet have higher-quality balance sheets, strong management teams, sustainable competitive advantages, and ... reasonable valuations," says Sekelsky. The fund generally owns between 50 and 60 stocks and tends to hold on to them for the long haul. Sekelsky and his team prefer conservative blue chips that have proved their potential over the years. "You're more likely to see a Johnson & Johnson in the portfolio than a biotech company, for instance," Sekelsky says.

Lou Holland Growth Mutual Fund (LHGFX)

Over the past decade, Lou Holland Growth has, from a relative standpoint, had its best years in rough markets. Still, management does know how to step on the gas in a bull market, as evidenced by the fund's 39 percent return last year. (The average large-growth fund returned 35 percent last year, according to Morningstar.) Although it's technically a growth fund, its managers are just as likely to consider a stock's value as they are to look at its growth potential. "We focus on companies with earnings-per-share growth rates that are faster than the general market. We like to buy those at reasonable valuations," says comanager Monica Walker. Management also prefers to own companies with strong balance sheets. "Obviously, we understand that some businesses require debt," says Walker. "But we do like companies that have good balance sheets and good cash flows."

Dreman Contrarian Small Cap Value Mutual Fund (DRSVX)

Mark Roach, a comanager of Dreman Contrarian Small Cap Value, likes to describe the companies the fund owns as "straw hats in the winter." These businesses, which he also refers to as "fallen angels," have solid models but are temporarily out of favor. "We're contrarian investors. We look for those stocks that have been overreacted to by Wall Street and by other investors," he says. The fund invests in companies with market capitalizations of between $300 million and $2.5 billion, which means that in addition to the small-cap stocks that anchor the portfolio, management will also own some mid-cap names. At any given time, it will own 100 stocks. Management looks to maintain equal weightings, so each company will represent roughly 1 percent of the fund's overall invested position. The fund's most senior manager is David Dreman, a well-known value investor who has been with the fund since its 2003 inception.

Westcore Select Mutual Fund (WTSLX)

This fund, which is managed by William Chester of Denver Investment Advisors, generally owns between 20 and 25 stocks. In picking stocks for the fund, Chester draws exclusively from companies owned by other managers at his firm. In that sense, Westcore Select is a "best-ideas" fund that buys only Denver's highest-conviction picks. The Select fund follows a "smid-cap" strategy, meaning that it purchases both small- and mid-cap stocks. Chester likes companies that have "emerging growth characteristics and attractive valuations." The fund's main focus is exploiting "the differences between expectations and reality," he says.

Marsico Flexible Capital Mutual Fund (MFCFX)

Managed by Doug Rao, this is a classic "go anywhere" fund. Currently, Rao has around 80 percent of the portfolio invested in the United States, but at times, up to 30 percent has been in China. Meanwhile, the fund can invest in common or preferred stocks of companies of any market capitalization, as well as in bonds and even warrants. Occasionally, Rao will also keep a sizeable chunk of the portfolio in cash. As a result of his opportunistic strategy, Rao generally does a lot of trading. The fund's turnover ratio, for example, is 259 percent. By comparison, a fund that replenishes its entire portfolio once a year would have a turnover ratio of 100 percent. In picking stocks, Rao seeks out companies with long-term advantages. These advantages can come from a company's technological prowess, cost structure, or brand appeal. "What we look for are what we would define as very high-quality companies that have long-term, sustainable moats around their businesses," he says.

Needham Small Cap Growth Mutual Fund (NESGX)

This fund has shown a great deal of talent in navigating the volatile small-cap market. Part of Needham's premium comes from an extensive research process, which is particularly valuable given the fact that smaller companies are often the most difficult to get an accurate read on. Within the small-cap universe, manager Christopher Retzler pursues a fairly diverse strategy. Notably, he employs a long-short approach, in part as a hedge against volatility. Shorting is a tactic that allows an investor to profit when a company's stock price goes down. Retzler says he likes to short companies where the management teams are "notorious for shareholder destruction." Meanwhile, the fund's long positions are often in post-IPOs that offer strong growth potential at a reasonable price. In 2008, the fund landed in the top 1 percent of Morningstar's small growth category.

Diamond Hill Select Mutual Fund (DHTAX)

This fund's managers pick their favorite stocks from the portfolios of three other Diamond Hill funds: Diamond Hill Small Cap, Diamond Hill Large Cap, and Diamond Hill Small-Mid Cap. If a stock isn't in at least one of those three portfolios, the Select fund can't buy it. In that sense, the fund's holdings are a bit like Diamond Hill's all-star list. Another restriction is that the fund can't own more than 40 stocks at a time. "Because it's intended to be a best-ideas fund, we don't want to have [too many] names in there," says comanager William Dierker. Lately, the fund has liked the healthcare sector. "With the concerns over what was going to come out of healthcare reform, a lot of these healthcare stocks were--and I think to a certain extent still are--not getting the credit they deserve," says Dierker. For the past several years, the fund has also maintained healthy positions in energy stocks.

Boston Trust Equity Mutual Fund (BTEFX)

While this fund certainly has some retail clients, it was designed for institutional investors. Notably, to gain access to the fund, investors need to pony up at least $100,000. For high-net-worth retail investors, though, there are certainly some potential advantages to a fund like this: Its annual expenses, for example, are capped at 1 percent. "I don't think anyone should pay more than 1 percent to have their money managed; that's enough," says manager Domenic Colasacco. In terms of style, the fund doesn't emphasize either growth or value investing. Its goal is to find companies with high-quality balance sheets and a competitive edge. It also likes to avoid business models that require a lot of leverage. The fund did a good job playing defense in 2008, but it lagged behind the competition during the rally last year, largely because its high-quality holdings were left behind as riskier fare shot up in value.

Earnest Partners Fixed Income Trust Mutual Fund (EPFTX)

A lot of funds looking to have the full faith and credit of the U.S. government behind them will look to treasury bonds. Earnest Partners Fixed Income, on the other hand, prefers some slightly more obscure options, such as bonds backed by lesser-known U.S. agencies. These agencies include the Small Business Administration and the Maritime Administration. "These are [investments] that have irrevocable, ironclad guarantees," says comanager Douglas Folk. The fund has most of its portfolio in AAA-rated bonds, but it does take on some credit risk, mostly through BBB (the lowest rating that is still considered to be investment grade) holdings.

Investing - 10 Mutual Funds Which You May Have Never Heard Of

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