A mutual fund portfolio of just 20 stocks might seem too risky. It's certainly not a strategy that's followed by many funds. Of the 2,679 U.S. equity products listed in Informa Financial's PSN investment manager database at the end of the third quarter, only 150 - fewer than 6% - maintained a portfolio of 20 or fewer holdings. A scan of large-cap growth funds in the database shows just 2.5% of these funds hold 20 or fewer stocks. Not a very popular strategy. But it can work.

According to David Rolfe, chief investment officer of Wedgewood Partners in St. Louis, Wedgewood's focused and small portfolio SMAs have outperformed the S&P 500 fourteen out of roughly 20 years, in both up and down markets. Wedgewood's strategy is now available in the $75 million RiverPark/Wedgewood Institutional Fund (RWGIX), launched in September 2010. The firm has $1.2 billion in assets under management.

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