Looking for a great mutual fund? A little extra digging might spare you a lot of trouble.

I recently ran across Embarcadero Funds, a group I'd never encountered before. According to its website, its funds work with "superior investment managers" with above-average medium-term and long-term performance, a clear and disciplined investment process, intellectual honesty, and a passion for stock picking, among other traits.

That sure sounds good -- but it's more than a bit vague. What kind of investment processes do the managers use? Are they studying companies' fundamental characteristics, or just chasing last month's hot equities?

With a little more research, I discovered that Embarcadero is the new name for the Van Wagoner funds, which didn't have the most impressive performance history. Check out the long-term track record these newly named Embarcadero funds built in their Van Wagoner days:

Fund

5-year avg. annual return

10-year avg. annual return

Some recent top holdings

All-Cap Growth (EMALX)

(24.06%)

(13.46%)

AutoZone (NYSE:AZO), Target (NYSE:TGT), Goldman Sachs (NYSE:GS), U.S. Steel (NYSE:X)

Small-Cap Growth (EMSMX)

(26.28%)

(21.52%)

KB Home (NYSE:KBH), US Airways (NYSE:LCC), Contango Oil & Gas (AMEX:MCF)

Alternative Strategies (EMASX)

(4.90%)

(16.55%)

Money market fund

Source: Embarcadero Funds, Morningstar. Returns as of March 31, 2009. Most recent holdings as of Dec. 31, 2008.

Just to be clear, those numbers in parentheses are annual losses. So according to the fund's own figures for the Small-Cap Growth fund, an original $10,000 investment in April 2004 would've been worth less than $2,200 by March 2009. April 1999 investors would've seen their $10,000 shrink to less than $900. Yikes!

It gets worse
Even if you're willing to forget the past and look forward to the future, you may still balk at Embarcadero's astronomical fees. As I learned from David Snowball at FundAlarm, the three funds recently filed materials with the SEC saying that they'd have expense ratios ranging from 9% to 17% per year! (The average mutual fund's expense ratio runs slightly north of 1%.)

On average, the stock market has returned around 10% annually over many decades. In order to stay in the black, then, these funds would have to rack up impressive returns just to offset the lowest of those proposed fees. With that peak 17% expense ratio, even astounding performance might still leave you in the hole.

Don't believe everything you read
Pick your funds carefully, taking promising promotional language with a grain of salt. Look closely at past performance, and learn about the managers' philosophies. Seek out low fees and relatively low turnover. A turnover ratio of 100% or more reflects a lot of buying and selling in the fund, which generates commission fees and taxes, and displays impatience or a lack of confidence on the managers' part. The two Embarcadero stock funds above each have turnover ratios greater than 500%, according to Morningstar, which means they change out their entire holdings more than five times each year.

If a fund family's name is new to you, a deeper look into its history might be a smart move. While a "new" fund might seem exciting, there are thousands of other funds to choose from. Well-established names may end up serving you better.

By any other name, this would still be further Foolishness:

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Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. The Motley Fool's disclosure policy is happy with the name it's got.