Oct. 13--With tolerance growing for riskier investments, investors continued to put money into the stock market in the third quarter as nearly all Maryland-based mutual funds finished in the black.

Despite the slumping housing market, mutual funds that invest in companies owning office buildings, apartment complexes and shopping malls turned in stellar performances. Nationally, real estate funds rose 32.5 percent on average from July through September and ranked as the best performers among those investing in specific industries, according to mutual fund tracker Lipper Inc.

In Maryland, Baltimore's PNC Diversified Real Estate Fund gained nearly 38 percent, followed by the T. Rowe Price Real Estate Fund with a 33.7 percent return.

"People were going after beaten-down stocks," said Tom Roseen, a research manager at Lipper. "How could real estate be doing well after all the negative news? That's part of the beaten-down concept."

Of the 165 Maryland-based stock funds tracked by The Baltimore Sun, only one posted a loss for the quarter, according to a Sun analysis of data provided by Bloomberg News. Ellicott City-based Hussman Strategic Growth fund lost 0.15 percent in the three months ending Sept. 30. So far this year, though, the fund has gained 6.05 percent.

Nationwide, the average diversified stock gained 15.8 percent in the quarter and 23.7 percent for the nine months of the year, according to Lipper.

As in the second quarter, almost every stock fund category made money on average during the latest quarter. Returns ranged from 2.56 percent for "equity market neutral funds," which employ complex hedging strategies, to 32.44 percent for funds that use borrowed money to boost returns. The exception was funds that bet on falling stocks.

Legg Mason Capital Management Opportunity Trust surged to the top spot in Maryland among diversified stock funds with a 36.5 percent gain for the quarter. The positive return continued fund manager Bill Miller's comeback after a dismal 2008.

Closely behind was Legg Mason Capital Management Special Investment Trust, which invests in mid-sized U.S. companies that are seen as undervalued. The fund was up more than 31 percent for the quarter and 70 percent so far this year.

Special Investment Trust manager Sam Peters said the past 12 months presented a "historic valuation opportunity." To that end, he focused on identifying stocks that were not only priced for a depression but could survive one.

"It was a valuation strategy that was right up our alley, and it was a huge opportunity," Peters said.