When mutual funds step off the beaten path, there's no telling what will happen. In the past, for example, oddball funds have fought the war on terror (the Ancora Homeland Security Fund), tried to prop up the sky (the Chicken Little Growth Fund) and fantasized about swinging a presidential election (the Blue Fund).
And although those three particular funds failed -- all have been liquidated -- others have stepped in to carry the torch and preserve a long and proud tradition of eccentric investing styles. Here are the 10 quirkiest funds we could find:
1. Congressional Effect Fund
This fund exists to answer the question posed in enormous letters at the top of its Web site: "How much investment wealth does Congress destroy?"As the question suggests, the Congressional Effect Fund (CEFFX) has a rather cynical view of the country's political leaders. In fact, its manager sees politicians' disruptive influences as so far-reaching that when Congress is in session, he pulls completely out of the stock market and moves the entire portfolio into Treasurys, cash and money market funds.
"Over the very long haul, it's almost always bad for the market," manager Eric Singer says of congressional action.
Unfortunately, those pesky politicians on Capitol Hill seem to think Congress needs to be in session every now and then, so the fund has largely missed out on this year's furious rally in stock prices and has landed in the bottom percentile this year in Morningstar's moderate-allocation category.
Still, Singer says he has compelling research to back up his strategy. According to the fund's numbers for the period between Jan. 1, 1965, and Dec. 31, 2008, the Standard & Poor's 500 Index ($INX) registered a paltry 0.31% annualized gain when Congress was in session, compared with a 16.15% annualized increase when Congress was on vacation.
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2. StockCar Stocks Index Fund
At first glance, the StockCar Stocks Index Fund (SCARX), which tracks companies that support NASCAR's Sprint Cup Series, is a dream come true for racing fans. But a more careful look reveals a different story: Most of its holdings are only tangentially related to NASCAR. Investors might be surprised to see that, aside from car-related names, the fund's top holdings include Walt Disney (DIS, news, msgs), Target (TGT, news, msgs), Coca-Cola (KO, news, msgs) and Sony (SNE, news, msgs).There are "two or three legitimate NASCAR plays, and then you have to go into all sorts of whacky stuff like Target and Coca-Cola because they sponsor someone's car," says Russel Kinnel, Morningstar's director of mutual fund research. Over the years, the fund's performance has been a touch erratic, but its returns this year are enough to land it in the top quartile of Morningstar's large-value category.
3. The Blue Chip Winery Fund
Jokingly called the best "liquid" investments on the market, wine funds once enjoyed some popularity. But unlike good wines, these funds have usually not gotten better with age, and most of the ones that were around several years ago have since crashed and burned.Nevertheless, the Blue Chip Winery Fund (.pdf file), which was launched in October and is based in the Bahamas, takes a bit of a nontraditional approach to wine investing: Instead of buying wine, it invests exclusively in real-estate holdings such as wineries and storage facilities. In particular, the fund's management is looking to take advantage of the low property prices created by the recession.
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"Given the current economic environment," there are many opportunities, co-manager Bruce Ramsey says.
Aside from the chance for capital appreciation, investors can look forward to the perks that this quirky fund offers, including discounts on food, hotel rooms and spa treatments at select wineries. According to the fund's Web site, shareholders also get first dibs on the wine produced at the properties and the chance to "help pick grapes, prune vines and taste-test the wines as they progress from juice to bottled wine."
4. Herzfeld Caribbean Basin Fund
Though most managers talk about investing with long time horizons, few are willing to stake large chunks of their fortunes on an event that might never happen in the lifetime of their funds. But for the past 15 years, Herzfeld Caribbean Basin Fund (CUBA) manager Thomas Herzfeld has been doing just that as he patiently waits for the Cuba embargo to come crashing down. Along the way, Herzfeld has chosen stocks for this closed-end fund based largely on companies' prospects for success should the embargo be lifted.While he also holds significant positions in Mexico, Herzfeld is particularly keen on investing in U.S. companies that could explode in value if the United States and Cuba begin trading. In addition, the fund looks for companies that can also hold their weight in the current political environment. Its top holding, for example, is Freeport-McMoRan Copper & Gold (FCX, news, msgs), whose share price has more than tripled this year.
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