The mutual fund behemoth is most famous for its indexing approach, but the company also offers a stable of actively managed funds. By Bob Frick, Senior Editor August 8, 2011 Last year, Vanguard Group became the nation's largest provider of mutual funds, overtaking Fidelity Investments. Benefiting from its focus on index funds, its super-low fees, and growing investor disenchantment with funds that shine for a time and then blow up, the company has seen its assets surge over the past decade. SEE ALSO: A Guide to Our Favorite No-Load Mutual Funds How Vanguard became a juggernaut -- it now sucks up $100 billion in new assets every year -- says a lot about today’s investment landscape. Vanguard’s success speaks to a growing distaste for funds that charge exorbitant fees and a loss of trust in companies that lure us into funds that chase the hot investment theme du jour. Vanguard’s index funds are cheap and anything but faddish. Yet, in what might be called the Vanguard paradox, the firm also peddles a large stable of actively managed funds. For the most part, those funds have delivered decent returns. Here are our picks of Vanguard's actively managed funds (each fund requires a minimum initial investment of $3,000): Vanguard Convertible Securities (symbol VCVSX) invests mostly in hybrids that are part debt and part stock. Run since 1996 by Oaktree Capital Management, the fund has outpaced the U.S. stock market over the past 15 years. But it has done so with below-market risk. In 2008, for example, it lost 29.8%, while the S&P 500 plunged 37.0% and the average convertible fund sank 35.7%. Vanguard recently amended Convertible’s charter to allow the fund to hold up to 30% of assets in overseas securities. The fund charges 0.68% in annual expenses. Advertisement Vanguard Dividend Growth (VDIGX) buys stocks of big companies with steady profit growth and executives who demonstrate they’re committed to sharing the wealth through higher dividends. Wellington Management, Vanguard’s favorite hired gun, has run the fund since its launch in 1992. The fund, a member of the Kiplinger 25, yields only 2.3%, so don’t expect a lot of cash—just below-average volatility and solid returns.Its annual expense ratio is 0.34%. Vanguard GNMA (VFIIX) is a classic Vanguard income fund. It charges low fees, holds down volatility and sticks closely to its mission, which is to own Ginnie Maes, mortgage securities backed by the full faith and credit of the U.S. government. Wellington has been at the helm since the fund began in 1980. Current yield: 3.3%. Annual expenses are 0.23%. Vanguard Health Care (VGHCX) has been perking up. It delivered strong gains in the first half of 2011, as many investors rotated into the perceived safe haven of health care stocks. Its long-term record—an annualized return of 13.0% over the past 15 years—is also impressive. The lead manager is as experienced as they come; Wellington’s Edward Owens has run the fund since its inception in 1984. The fund's annual expense ratio is 0.35%. Vanguard Selected Value (VASVX) is run by two firms, both of which focus on bargain-priced midsize companies. Barrow, Hanley, Mewhinney & Strauss, which looks for beaten-down stocks with high dividend yields, controls three-fourths of the assets. The rest is run by Donald Smith & Co., which looks for stocks that are cheap relative to book value (a company’s assets minus its liabilities). The fund has outgained the typical midcap value fund but with less volatility. The fund charges annual expenses of 0.47%. Advertisement Vanguard Short-Term Investment Grade (VFSTX) doesn’t yield much these days (1.6%), but if you want to make the most money possible in a conservative, short-term bond fund, it’s your best bet. One reason, of course, is expenses. The fund, run by Vanguard’s own bond experts, charges just 0.22% per year, one-fourth of the average for short-term bond funds. Its annual expense ratio is 0.22%. Vanguard Wellington (VWELX) is a classic balanced fund, with about two-thirds of its assets in the stocks of large dividend-paying companies and the rest in high-quality, medium-maturity bonds and cash. It’s designed to be a one-stop investment, and it has met that challenge admirably since its creation in 1929. Over the past 15 years, the fund returned 8.5% annualized, easily beating the stock market but with only half the market’s volatility. As you’d expect, Wellington Management is in charge. The fund charges 0.30% in annual expenses.