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It hasn’t gotten a lot of notice from the mainstream financial press, but hybrid funds have become, by some measures, more popular than good old-fashioned equity mutual funds. These funds, which are allowed to invest in both stocks and bonds, have taken in a grand total of nearly $24 billion in new assets between the start of the year and May 9th. For the week ended May 9th, as the amount of assets in U.S. equity funds dropped by $2.41 billion, investors poured $617 million into hybrid funds.

True hybrid funds function as sort of mini hedge funds, giving the fund’s managers tremendous leeway to move assets among different classes. Hybrids tend to have fairly high expenses when compared to traditional equity funds, but they’re still far lower than hedge funds, which typically give 20 percent of all profits to management. One study examined the risk-adjusted returns of 12 hybrid funds between 1998 and 2003, and found that half outperformed the hedge fund indexes they most resemble.

The variety of asset classes under management also provides the opportunity for the funds to engage in some forms of market timing, for those who believe in such a thing. And there’s research to support the idea that hybrid funds may actually be effective in timing the market. A 2003 paper by a professor at Georgetown’s School of Business found “evidence of significant stock timing ability across the fund sample over the 1992-2000 time period.” The thesis was tested in both up and down markets and found to be valid in all types of economic conditions.

The top-performing hybrid funds over the past year (as of April 30) have been members of the Invesco Balanced-Risk Retirement group of funds, a set of target-date funds. The strongest of these, Invesco Balanced-Risk Retirement 2030, has returned 13.39 percent over the past 12 months. For the longer-term, the leader is the Villere Balanced Fund, which has returned nearly 24 percent over the past three years.

But maybe the most notable fund in this category is the Bruce Fund, run by a reclusive father-and-son team in Winnetka, Illinois. The Bruce Fund finishes a close second to Villere in three-year returns, bringing back 23.36 percent over that period. It leads all hybrids over the past ten years, returning 15.96 percent — far outpacing the second-place finisher, Permanent Portfolio at 10.93 percent.

That’s pretty impressive, considering the top-performing large-cap equity fund for the past ten years, Yacktman Focused, has returned just 11.13 percent over the same period. With expenses running extremely low — “It’s just the two of us here,” Jeffrey, the younger of the two Bruces, told Forbes magazine last year — the Bruce Fund has been described as “the best no-load mutual fund you’ve never heard of.”

These funds have been so hot lately that established funds have begun remaking themselves as hybrids. Morningstar recently touted one example of a fund that has been brought back from the dead by reinventing itself as a hybrid: Dividend Capital Reality Income Allocation Fund, a fund that was primarily invested in real estate securities, had a disastrous couple of years back in 2007 and 2008, as the housing bubble was exploding; it lost 41 percent and 66 percent of its NAV in those years, respectively.

The fund merged with DCW Total Return Fund, changed its name to Virtus Total Return, and began investing in a portfolio of 45 percent common stock and 25 percent corporate bonds, with the remaining portion divided among several asset classes. The new fund beat its Morningstar peer group’s average performance in both 2010 and 2011 and is well ahead of its peers over the two-year period, 19 percent to 8 percent.

The increased popularity of hybrids in a sense signals a return to the belief in the capability of fund managers. There’s a strong sense in the marketplace that index funds are the best way to expose yourself to the equity markets, and that fixed-income funds offer a boring stolidity. The nimbleness of hybrid funds puts the manager to the forefront, and provides a way for him or her to beat the market, as the Georgetown research shows. In an era when stocks have been crashing around us, investors may have decided they no longer trust the rising tide that lifts all boats, and are seeking out brilliant captains instead.

For more from Tom Nawrocki, see:

Bargain Stock Shopping

America’s 10 Biggest IPOs

Apple’s Ups and Downs