In a manner of speaking, the Matterhorn Growth fund lives up to its name. Over the last 10 years, the Yardley, Pa.-based mutual fund, which invests in the stocks of large companies, generated returns of about 2 percent each year.

	Online Graphic See a chart returns on a number of mutual funds

That's growth, but not much compared with the 8 percent annual returns the average large-cap fund generated over the same period. Matterhorn looks like a mole hill compared with Vanguard's Prime Money Market Fund, whose annualized returns of 4 percent came from investing in short-term corporate and government debt.

Despite the subpar performance, investors still have about $5 million in Matterhorn. That begs two questions: Why do chronic underachievers hang around so long, and why do investors remain so loyal to them?

Investors who aren't willing to admit defeat -- if they even take the time to look at their quarterly statements and recognize it -- have a lot to do with it. So do their brokers and advisers, who don't want to call attention to the bad advice they dispensed. Some of the funds are in retirement and pension plans, one way of keeping laggards on life support. Mutual fund directors, who have come under increasing scrutiny from the Securities and Exchange Commission, also are to blame.

"One of the hardest things for people to do is sell," says Tom Roseen, senior research analyst with Lipper, a financial research firm. "We fall in love with our investments, and we don't want to admit we're wrong."

Using data provided by Lipper, the Post-Gazette identified the three worst funds in six mutual fund categories, based on their performance for the 10-year period ended Aug. 31. It would be hard to fall in love with the 18 funds. On average, they failed to break even over the 10 years. Still, investors have trusted the fund managers with $2.6 billion.

"There is just an inertia in some fund investors," says Russ Kinnel, director of fund research for Morningstar.

One fund, the Frontier Equity Fund, of Brecksville, Ohio, accounts for most of the damage. At a time when stocks of small companies have outperformed the market by a wide margin and the average small cap fund was earning 11 percent annually, Frontier was pounding out annualized losses of 30 percent.

"It's the worst fund ever in the history of the universe," says Adam Bold, chief investment officer of the Mutual Fund Store, an Overland Park, Kan., investment firm.

"I swear to God my eighth-grade daughter could do a better job of picking stocks," Bold says. Investors who paid a sales charge, or load, to get into a poorly performing fund, or will have to pay one to get out, often make the mistake of staying put, Bold says. In the case of no-load funds, apathy frequently takes over.

"They'll buy a fund and forget about it. Mutual funds are not buy-and-forget-about-it investments," he says.

Hanging on can hurt in other ways. Selling losers can offset gains from other investments, reducing an investor's tax bill.

Some investors manage to walk away. Only four of the 18 severely underperforming funds have more money in them today than they did five years ago, according to Lipper. With fewer assets, the costs of hiring stock pickers and administering the fund is spread over fewer shareholders "and it becomes enormously expensive for these shareholders," says Paul Brahim, managing director of Equity Capital Management, a Downtown investment firm.

The expense ratio -- the charges for managing and administering a fund -- for the Ameritor Security Trust, a small-cap fund that is closed to new investors, is 14.8 percent. That's nearly nine times larger than the 1.7 percent that the average small-cap fund charges, according to Morningstar. Frontier Equity, another sluggish small-cap fund, sports an expense ratio of 10.5 percent.

Kinnel says even legendary investor Warren Buffett couldn't provide decent returns with those kinds of costs, "and these guys aren't Warren Buffett."

"It's ridiculous that they're allowed to exist," Kinnel says. "I'm really surprised the SEC hasn't stepped in."

Bold believes fees are irrelevant with these funds.

"If managers paid investors 1 percent to put money in these funds, it's a bad deal," he says.

A number of the ailing funds are included in pension and 401(k) plans, Brahim says. One is AIM Mid Cap Core Equity, which has assets of $3.9 billion despite having the fifth-worst performance among its peers over the last 10 years. Poorly performing funds offered as part of a retirement plan can give workers enough choices to build a diversified retirement portfolio. Financial advisers recommend spreading investments out among a variety of stock and bonds funds because loading up in one type of fund can ruin a portfolio, as the recent bull market demonstrated.

However, employers and fund directors can't ignore the quality of the fund choices they offer, Brahim says.

"I think it's a bad practice of the industry to stuff bad funds in a retirement plan," he says. "The mutual fund industry has a very long way to go in terms of reestablishing its own fiduciary responsibility to shareholders."

Most of the sluggish funds get bad marks from Fiduciary360, a Sewickley firm that grades funds on how well they meet their obligations to shareholders.

"If these funds are being used in a fiduciary account ... one could make a very sound argument that the fiduciaries responsible for investment decisions were breaching their duties," says Chief Executive Officer Donald B. Trone.

Trone also blames investors who don't take the time to understand and monitor their investments.

"If investors spent as much time comparing investment performance as golfers spend updating their handicaps, you wouldn't see funds like these remain on the shelf very long," he says.

Some of the funds have done better in recent years. The FPA Paramount Fund, the second worst-performing mid-cap fund over 10 years, finished in the top 3 percent over the last five years, Brahim says. The improvement coincided with the fund's decision to hire new stock pickers, he said.

The turnaround has attracted new money. According to Lipper, the fund's assets increased from $76 million as of July 31, 2000, to $327 million five years later.

"FPA Paramount is actually one of our favorites. We really like the managers who took over," Kinnel says.

The mid-cap fund is the exception: 14 of the 18 funds have fewer assets than they did five years ago. The biggest bleeder was Ivy International. With assets of $9 million, it's 98 percent smaller than it was five years ago.

Still, Ivy and the other sluggish funds keep creeping along, a sign there's something in it for somebody. Fund companies typically only pull the plug "when they are no longer making money," Brahim says.

"As long as they are making money, they keep it open."