Morningstar's picks: Mutual fund managers of the year

You know it’s an ugly market when the U.S. Stock Fund Manager of the Year loses "only" 19.5%.

Investment research firm Morningstar Inc. on Tuesday announced its annual best-of-breed awards for the mutual fund industry. Here they are:

-- Domestic Stock Fund Manager of the Year: Charlie Dreifus of New York-based Royce Special Equity, which focuses on small-capitalization "value" stocks. Although Dreifus' fund lost 19.5% for the year, that was far better than the 32.3% plunge of the average fund in its category. "The fund's small-value stomping grounds were full of dangerous value traps, such as mortgage lenders, real estate plays, and a slew of cyclical stocks that were highly dependent on financing. Dreifus avoided all that quite nicely, and he even had a handful of winners," Morningstar’s director of fund research, Russ Kinnel, wrote on the firm’s website.

-- International Stock Fund Managers of the Year: David Samra and Dan O'Keefe of San Francisco-based Artisan International Value. The portfolio slumped 30.1% in 2008, compared with the 47% loss posted by the average foreign small/mid-cap value fund, its peer group. "They look for companies with clean balance sheets trading at big discounts to their estimates. That investment discipline kept them largely away from the financials that got pummeled," Kinnel said. He also praises the fund’s longer-term record: Since its 2002 inception, a $10,000 investment has grown to $22,561, compared with $14,297 for MSCI EAFE foreign stock index.

--- Bond Fund Managers of the Year: Bob Rodriguez and Thomas H. Atteberry of L.A.-based FPA New Income fund. The outspoken Rodriguez was sounding the alarm about the insanity of the mortgage market long before it was cool. As Kinnel notes, "As someone who places capital preservation above all else, Rodriguez works furiously to squeeze all forms of risk out of his portfolio. So, even before 2007, he steered clear of default risk, interest-rate risk, and any other kind of risk out there. True, it meant passing up the chance for big returns and, as has been the case before, he did miss out on some rallies. But when everything hit the fan in 2007 and 2008, the fund was on safe ground: It gained 4.3% in 2008," compared with a 4.8% loss for the average intermediate-term investment-grade bond fund.

-- Tom Petruno