For good reason, savvy fund investors everywhere have long considered Vanguard the 800-pound gorilla of passive investment management. The shop features an impressive line-up of index mutual and exchange-traded funds (ETFs), offerings that run the gamut from tried-and-true staples -- stalwarts such as Vanguard 500 (FUND:VFINX) and Total Stock Market (FUND:VTSMX) -- to the relatively more exotic "Vipers," which have caused quite a stir in the wonderful world of ETFs.

But the Pennsylvania-based mutual fund complex has other feathers in its cap, too. For starters, it was founded by index-investing luminary Jack Bogle, and when it comes to rock-bottom expense ratios, Vanguard is virtually impossible to beat. Indeed, even in the relatively low-budget arena of indexing, these guys are Crazy Eddies: Their prices are so low, they're insane!

For all these reasons, it's no coincidence that Vanguard picks turn up quite often in "Indexing for Fools," a regular feature in Champion Funds. The shop and its funds are just that good.

But despite Vanguard's well-earned reputation as the king of the indexing hill, it also boasts an impressive line-up of actively managed picks. That's right: The house that Bogle built hires (and fires) real live stock pickers to manage a goodly number of funds whose fortunes rise and fall with their managers' acumen, not merely with their underlying benchmarks. Indeed, one of them made the grade as a Fund of the Month back in the July issue of ChampionFunds, and I cherry-pick another actively managed Vanguard champ in the issue that hits the streets next week. As you'd expect, those two funds are my favorite Vanguard picks, but the shop has other contenders as well. Below, I highlight three that are among the best of the rest.

Vanguard Health Care
By and large, I'm not a sector fund kind of guy. That way, generally speaking, lies volatility and heartache, not to mention luxury-item price tags. But Vanguard Health Care is different. For starters, it specializes in an area of the market that's broad enough to allow manager Ed Owens to assemble a well-diversified portfolio of holdings. For instance, the fund recently held shares of big pharma concern Merck (NYSE:MRK), medical-goods distributor Cardinal Health (NYSE:CAH), and drugstore chain CVS (NYSE:CVS).

Two other points are worth noting here. First, Owens has been large and in charge at this fund since its inception way back in 1984. Moreover, during his tenure, the fund has positively shellacked the S&P 500, delivering an annualized gain of -- are you sitting down for this? -- 19.6% on his watch.

A pretty healthy return, no? (Sorry. I couldn't resist.)

Vanguard Asset Allocation
This hybrid fund (i.e., it invests in both stocks and bonds) has been managed since its 1988 inception by Bill Fouse and Tom Loeb, both of whom hail from Mellon Capital, the well-regarded money management firm that Vanguard has tapped to run this fund's nearly $10 billion in assets. The duo has wide latitude when it comes to deciding how much to allocate to stocks and bonds, and just now the portfolio is heavily tilted toward equities, particularly industry behemoths such as General Electric (NYSE:GE) and ExxonMobil (NYSE:XOM).

Owing in large measure to its fixed-income allocation, this fund has been a bit less volatile than your typical S&P 500 tracker, while still holding its own against that particular flavor of mutual fund. Indeed, for the trailing 15 years ended June 2004, the fund has returned an annualized 10.8%, a mark that comes within a hair's breadth of the all-equity S&P's gain of 11.3% over that time frame.

For investors looking to hedge their equity exposure with a portfolio of fixed-income picks, I think this fund makes a strong case for itself -- provided you're comfortable with the manager's flexible asset-allocation mandate.

Vanguard Equity Income
Here's a fund that will intrigue your inner value hound. Its management team hews to a strict valuation discipline while assembling the portfolio, which currently includes such low P/E picks as Bank of America (NYSE:BAC) and General Motors (NYSE:GM). John Levin is the fund's longest-tenured manager, and on his watch, the fund has navigated the market's choppy waters with aplomb, sailing past the S&P's returns over all trailing periods by meaningful margins.

As you'd expect of a value-leaning pick, volatility here has been relatively modest, and, what's more, the fund's price tag should have all of you penny pinchers out there (yes, I'm talking to you) positively salivating: The thing goes for a paltry 0.45%.

Drooling yet?

Champion Funds chief analyst Shannon Zimmerman used to drool when he napped, but now that he has a three-month-old, naps are just sticky kids' stuff. Shannon owns shares of Vanguard Total Stock Market, andyou can try his newsletter for free. The Motley Fool is investors writingfor investors.