Strong performance and a conservative approach has enabled American Century Investments to outperform some of its competitors, despite market conditions that cost it 31.4% of its assets under management last year.

Enrique Chang, the Kansas City, Mo., mutual fund company's chief investment officer, said its international equity, bond, and asset allocation funds were strong performers last year. American Century had $70.1 billion of assets under management as of Dec. 31. Mr. Chang said the company remains relatively successful, despite the outflows, because it has remained committed to fundamental analysis.

"We were having conversations in 2006 about leverage and risk being taken by firms that we invested in," he said. "So we began to get very conservative because of that."

That approach enabled American Century to deliver stronger performance than other fund companies. According to Morningstar Inc., through the end of last year, 66% of American Century's funds were in the top half of their respective peer groups in terms of one-year performance, 77% were in the top half in three-year performance, and 69% were in the top half in five-year performance.

The company's best performing areas last year were in the asset allocation/target date funds, fixed income and value, Morningstar said; growth funds, both international and domestic, struggled as a result of a lack of momentum in the market.

Sean Cunniff, a research director for TowerGroup, an independent research firm owned by MasterCard Inc., said having so many funds performing well within their peer groups has enabled American Century to compete with large fund companies, including Fidelity Investments, Vanguard Group, and BlackRock Inc.

"If American Century has strong performance, they can go head to head with the heavyweights," he said.

American Century, which launched its first fund in 1995, originally sold its products directly to consumers, but a few years ago it began distributing through advisers. Mr. Cunniff said the most important issue for fund firms, after performance, is distribution.

American Century has increased its focus on distribution through the financial channel. Last year its assets under management for bank clients fell 31.6%, to $10.6 billion as of Dec. 31. Its five largest banking relationships are with JPMorgan Chase & Co., Wachovia Corp., Citigroup Inc., Wells Fargo & Co., and Bank of America Corp.

Mr. Chang said bankers often think asset management is good business until economic conditions become difficult. He said bankers need to understand and tell their customers that things are not as bad as they seem now and probably were not as good as they thought a few years ago.

Geoffrey Bobroff, an analyst with Bobroff Consulting in East Greenwich, R.I., said American Century, like everyone else, will face the challenge of trying to bring investors back to the equity markets during the next 24 months.

The company is working hard to make adjustments to its family of funds to attract customers, including adding more actively managed funds, he said. "They have been doing a good job in managing domestic equity assets, although they have a couple of weak sisters in their product offerings. They have experienced turnover over the past several years, so long-term numbers may not be reflective of their future ability."

American Century is primarily a domestic equity shop with a bias toward growth equities, Mr. Bobroff said. "They shifted gears a few years ago from being a direct-marketed fund group to a dealer-sold fund group, which presents some challenges, since they have had to establish themselves in that marketplace against firms like American Funds, Franklin, BlackRock, and Oppenheimer."

Mr. Chang said American Century has made some manager changes to improve fund performance, but in November, Morningstar ranked his company No. 10 in terms of manager retention, putting it in the top half of fund firms.

This month American Century announced it had hired a pair of veteran money managers, John Lovito and Federico Garcia Zamora, who worked for Lehman Brothers Asset Management as co-portfolio managers for the $1.7 billion American Century International Bond Fund.

Mr. Chang said he thinks his company has been able to compete with larger ones because of a superior business model, because the company is private, and because its focus is on investment management. "We don't have to worry about who will buy us or about having enough capital," he said. "Our portfolio managers can focus on what they should be doing."

American Century's focus on risk management allowed it to sidestep most of the traps that were out there last year, Mr. Chang said. Concerns about the length and depth of the current recession has consumers saving, he said, and there is a big risk of deflation.

This year the company will stick to its knitting and look to develop additional assets through all its distribution channel and maintain steady performance, he said.

"There is so much noise out there now, but we have a good chance of keeping the momentum," he said. "We understand that there are things that go bump in the night out there, but when the markets pick up, we'll be there."

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