Gregory Zuckerman in the Wall Street Journal highlights the rise of the ‘hybrid’ mutual fund. These funds use hedge-fund like strategies within the confines of an open-end mutual fund. Given the relatively tepid performance of the equity markets it is not surprising that managers and investors alike are looking for new types of opportunities.

With hedge funds all the rage, scooping up assets even as some mutual funds struggle to attract investors, more mutual-fund firms are shifting gears and adopting hedge-fund-like strategies. Some are rolling out new mutual funds with an array of strategies that, like most hedge funds, strive for impressive absolute returns in all types of markets rather than simply aiming for top-notch returns relative to a particular benchmark. Others are working on ways to more closely tie the performance of their mutual funds to the fees they levy investors, much as hedge funds do.

For investors, the newfangled funds seem to have a lot going for them. They promise top performance with a variation of strategies that often do a better job protecting investors from the ups and downs of the overall market than traditional mutual funds. These funds generally charge lower fees and face more regulatory scrutiny than most hedge funds, potentially providing a higher level of oversight. And these mutual funds allow investors to withdraw or add money on a daily basis, unlike most hedge funds, which demand that investors lock up their money for months or longer. Hedge funds are lightly regulated private partnerships that have flexibility to pursue almost any investment, but provide access to only large institutions and wealthy individuals.

The article is a good introduction to the topic, if not entirely earth shattering. While hybrid funds may be all the rage, there still are some insights to be learned from traditional money managers.

Karen Damato in the Wall Street Journal profiles Ken Gregory, president of Littman/Gregory Asset Management LLC, which is the manager of the Masters’ Select funds. These funds are concentrated, multi-manager mutual funds. Their performance has generally been been good. The interview provides some insight into portfolio management.

WSJ: Tell us about other factors besides past performance that you use in selecting managers.

Mr. Gregory: It all starts with a well-defined process that is executed with a high degree of discipline. There are an awful lot of smart people in the investment business, but not very many of them are consistently successful. We think the reason is that not many of them have a truly well-defined process and are truly disciplined in executing it. The stock pickers that we like really want to win and they work very hard and very creatively at maintaining an investment edge. Another thing is focus. If a stock picker is spending a lot of time running multiple portfolios and doing a lot of marketing and has responsibility for running some of the business, that is a lot. We like to see a high degree of focus, without too much on the plate of the stock picker other than the stock picking itself. Many great investors also are independent thinkers.

A trick for do-it-yourself investors is to examine the managers Gregory has already selected as an initial screen. They have already done a great deal of due diligence and each of these managers has an open-end mutual fund of their own. There are of course, no guarantees, but the fact that the Masters’ Select family of funds has large cap, small cap, value and international funds you may find something of interest.