The best-performing fund category for 2007 was large-cap growth funds, which returned 14.9% compared to large-cap value, which rose 2.7%, the Associated Press reports, citing data from Lipper.

And should the market fall into recession or lose steam, growth stocks are likely to continue to deliver impressive returns.

“We saw growth starting to pull away from value in late 2006,” said Lipper analyst Jeff Tjornehoj. “People had expected growth to assume the mantle during 2006, and to some degree, it did, but this year that difference was strongly pronounced.

“Even though people are often told not to buy into the hot market or hot sector, the transition from value to growth has taken long enough that when they look back on the performance of their funds, people are going to notice that, yes, indeed, value is suffering right now.”

Meanwhile, U.S. diversified equity funds declined 2.6% in the fourth quarter, although they ended the year up 6.9%.

“There were definitely bright spots out there, and if you were a diversified investor, you did take part in that success,” Tjornehoj said.

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