While the average U.S. stock mutual fund plunged nearly 38 percent last year, the Hussman Strategic Growth fund based in Ellicott City limited its annual loss to 9 percent.
The fund posted the lowest negative return among 157 Maryland-based stock mutual funds tracked by The Baltimore Sun, according to data provided by Bloomberg News.
The Hussman fund, whose holdings included consumer brands such as Nike, Coca-Cola and Best Buy, lost 12.9 percent in the fourth quarter.
That no Maryland equity fund was in the black in 2008 reflects a year with the worst stock market performance since the Great Depression. After September's financial sector meltdown, Wall Street continued its huge sell-off in the fourth quarter amid a prolonged recession and worsening economy.
"There was nowhere to hide except Treasuries," Morningstar Inc. analyst John Coumarianos said, referring to investors who sought a haven in government debt. "This was a year where diversification helped a little bit but not as much as it usually does."
Stock fund investors withdrew $215.7 billion through the end of November, the most recent data available, compared with $91 billion in new investment in the corresponding period of 2007, according to industry trade group Investment Company Institute.
Funds invested in market segments floundered with an average annual loss of 39.7 percent, according to mutual fund tracker Lipper Inc.
Global stock funds fared worse than their domestic counterparts, posting an annual negative return of 45.8 percent. Latin American funds fared exceptionally poorly, losing 57.3 percent.
Almost every type of U.S. diversified stock fund posted a double-digit loss.
A bright spot was funds that gamble on markets falling, with the Dedicated Short Bias Funds posting an annual 27.3 percent gain, according to Lipper.
The Greenspring Fund, which invests in a mix of stock, convertible and corporate bonds and cash, was showing a positive return until mid-September.
"We were hanging in pretty well against the overall market," said Michael J. Fusting, senior vice president and chief financial officer of Lutherville's Corbyn Investment Management, the Greenspring Fund's adviser. "The fourth quarter for everybody was probably one of the most painful quarters going forward."
The fund, whose investment strategy seeks to preserve capital during bear markets, lost 11.7 percent for the year and 8.8 percent in the quarter, which was the best quarterly return on a relative basis among Maryland stock funds.
"We found a lot of value in short-term bonds, and during the fourth quarter, the performance of the bonds helped buffer us against the volatility of the market," said Chip Carlson, who manages the fund. "I think a lot of the explanation of our good relative performance is due to the significant holdings in short-term, high-yielding bonds."
The fund's performance for the year was second only to the Hussman fund, whose fund manager, John P. Hussman, could not be reached for comment.
Overall, bond funds fared poorly, with an average negative return of 8.2 percent for the year, according to Morningstar. But bond funds focused on government debt squeezed out gains as panicked investors flocked to safety.
Of Maryland's 58 fixed-income funds, 30 funds posted gains for the year, including many with exposure to government debt, according to Bloomberg data.
Rockville-based Rydex Series Government Long Bond 1.2x Strategy A fund posted the best return, soaring 49.8 percent for the year and 41.4 percent in the quarter.
Dan Shackelford, portfolio manager for T. Rowe Price's New Income fund, said the fund avoided toxic subprime-related securities that troubled many investors. The fixed-income fund, which invests primarily in investment-grade bonds, eked out a 1.4 percent gain for the year.
"Going into 2008, we felt like we were in a bit of a strong position in terms of liquidity and in terms of having very high-quality assets ... that easily could be used to tack on some risks," he said. "In retrospect, we probably went into 2008 much more conservatively than many of our competitors, but I have to tell you that we even feel like we got too involved too quickly following the Bear Stearns [bailout] in March, that the air had been cleared."
With a topsy-turvy market, Baltimore money manager Douglas G. Ober points to a problem facing many investors in 2009.
"Where does the investor go?" said Ober, chairman and chief executive of closed-end mutual funds Adams Express Co. and Petroleum & Resources Corp. in Baltimore. "I think people who are long-term investors that can afford to have their money invested for a five-year period or more should look at the markets as being a tremendous opportunity at this point. Valuations out there right now are among the lowest we've seen in the last 15 years and likely to see in the next 15 years."