Berkowitz’s Fairholme Fund Bounces Back

That was then, this is now, and Berkowitz and Fairholme appear on the mend. Although it has yet to fully recover from 2011 losses, it was among the top-performing U.S.-stock mutual funds in the first half of this year, with a 24.7% gain, according to The Wall Street Journal.

"This year, some of the fund's biggest losers, including AIG and Bank of America, have rebounded. The fund is 15 percentage points ahead of the S&P 500′s return through June," The Journal reports. "Financial advisors say Fairholme's swings underscore the risks of investing in a concentrated fund (AIG represented 32% of fund assets as of February) and the importance of understanding a fund manager's investment philosophy."

Berkowitz "tends to own things that have a lot of negativity associated with them," the paper quotes Nick Smith, portfolio manager at Steele Capital Management, as saying. As a result, Fairholme "can be more volatile in the short term."