It's beaten the S&P 500 Index in seven of the past nine calendar years, sometimes by a wide margin, which is impressive for an enhanced index fund. But so far, the fund's layer of active management has worked well. Turnover is also a bit higher here, at 115%, since the managers look only 12 to 18 months ahead in making stock picks. Management is also betting heavily on the industrial materials sector, currently representing 25% of the portfolio. The fund's strategy makes it rather concentrated, with only 29 holdings at present. The fund's top holdings currently include Textron (NYSE:TXT), General Electric (NYSE:GE), and American International Group (NYSE:AIG). This team seeks out large-cap stocks with undervalued short-term growth catalysts, guided by top-down macroeconomic research. Senser's tenure goes back to December 2003, while Wenzel is a recent addition, coming on board this past May. Lyon is the longest-tenured manager, having been with the fund since its December 1997 inception. Mainstay ICAP Select Equity (ICSLX) The Select Equity Fund is run by co-managers Robert Lyon, Jerrold Senser, and Thomas Wenzel. The funds were merged into NYLIM's Mainstay fund line, but retained their management team and investment process. They were run by money manager Institutional Capital prior to June 2006, when ICAP sold its business to New York Life Investment Management. First up are two funds from Mainstay Investments. In this two-part series, we'll take a quick look at some of the best enhanced index funds, as ranked by Morningstar. If you buy into the concept of indexing, but want your manager to have that little extra bit of flexibility to juice returns, an enhanced index might be right for you. They aim to beat, rather than match, the index return. However, there's a third, less-explored option in this debate, combining the best of both worlds: enhanced indexing.Įnhanced indexes track a specific market benchmark but add an element of active management. Indexing fits some investors' temperament and strategic approach, while others favor active management. Proponents argue each side's superiority, but the issue's never quite resolved. The debate between active and passive investing rages on. Amanda Kish is the Fool's resident fund advisor for the Rule Your Retirement investment newsletter.