Managers of the best performing mortgage-backed securities funds are taking a cautious approach amid the refinancing wave and hoping that mature loans will see them through the deluge.

"The main reason for good performance over the last year was our reliance on seasoned (adjustable-rate mortgage) securities, which have been somewhat insulated from vast prepayments that the market has seen," said T. Anthony Coffey, portfolio manager for the Franklin Templeton Group, San Mateo, Calif.

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