Actively managed mutual fund managers, who often don’t stray too far from the sector, stock or country weightings of their benchmark indexes, face the difficult task of outperforming enough to justify their management fees. Studies show that most of them fail to do so, especially over longer periods.

But the $1 billion Thornburg Global Opportunities Fund is one actively managed mutual fund that has managed to break that mold. Over the three years ended December 31, 2014, its annualized return (without sales charges) was 22.7%, while the return on the MSCI All Country World Index was 14.10%. Since its inception in July 2006, the fund’s annualized return of 11.29% trounced the 5.13% return for the index. And last year, a particularly difficult one for global fund managers struggling to navigate slower economic growth in Europe and Asia, the fund rose 18.4%, beating the index by 14 percentage points.

The ability to step outside of traditional indexes and style boxes, rather than fine-tune them as most actively managed funds do, has been a key ingredient to success according to co-manager W. Vinson Walden. “We recognize that because markets are extremely competitive it’s not easy to find opportunities and inefficiencies,” he says. “That said, a style box focus is like having one arm tied behind your back and a constraint to adding value.”

Instead of investing in 150 or more stocks typical of actively managed global equity mutual funds, this portfolio concentrates on 30 to 40 of the firm’s “best ideas.” It also spreads its bets more evenly across the market-cap spectrum. According to the firm’s latest fact sheet, about one-quarter of its assets are in small-cap companies with less than $2.5 billion in public value, an area that comparable market-cap-weighted indexes ignore. Another 12% is in mid-caps with market capitalizations of $2.5 billion to $12 billion, and the rest is in large-cap stocks.

Although the strategy focuses more on the characteristics of individual stocks and companies rather than macroeconomic forecasts, Walden also takes into consideration political, regulatory and economic trends that could have a direct impact on businesses. The “Anglosphere” nations consisting of the United States, Canada and the United Kingdom have been the developed-world bright spots on the world economic front, and he expects that to continue, at least through this year. In these countries, corporate balance sheets are strong, employment continues to improve, and lower energy prices will put money back into consumers’ pockets. But much of the world is expected to muddle along with little or no economic growth.

While the U.S. has a jump on economic growth over other parts of the world, an advantage that has helped buoy its stock market, the valuations on many stocks here are bloated. For that reason, the Thornburg fund has shifted some capital away from more expensively valued markets, such as the United States, into cheaper markets in Europe and other areas that provide more fertile ground for bargain hunting.

According to the fund’s latest fact sheet, the U.S. accounts for some 36% of the fund’s equity assets, which is about 15 percentage points lower than the MSCI ACWI weighting. Countries such as Canada, the United Kingdom, China, France and the Netherlands also have a much stronger presence here than they do in the index. Japan, however, the index’s second-largest country weighting, is absent.

Integrated into this flexible approach are risk safeguards that include a mandate for the fund to maintain exposure to at least 10 countries. There are also position and industry limits. The managers will let cash build if they’re not finding attractive investment opportunities, but they rarely let that part of the portfolio exceed 10% of assets.

The fund has a value orientation, so it doesn’t chase hot stocks. Instead, it focuses on well-run companies whose stocks have often been hurt by temporary difficulties or market misperceptions but will likely be helped by some catalyst for change. It might emphasize cyclical stocks some years or higher-quality growth stocks in others, depending on market conditions and where the managers see the best values.

In 2008, for example, Walden and co-manager Brian McMahon picked up beaten-down cyclical stocks in financial and industrial sectors. When the prices of those stocks rebounded and they were no longer bargains, the fund migrated to growth-oriented stories that are more insulated from the overall business cycle.

Today, this relative value approach yields a diverse portfolio that ranges from value stocks such as Citigroup to growthier stories such as Google. “We certainly have higher-quality businesses than we did three or four years ago,” says Walden. “They are stronger franchises with fewer competitors and longer earnings horizons. Therefore, they deserve higher multiples.” Over the last year, the fund has increased exposure to the information technology, health-care and consumer discretionary sectors and moved money out of more cyclical energy and financial stocks.

Walden observes that most of the time performance is driven by individual security selection rather than country or sector allocation, and last year was no exception.

Numericable, which was added to the fund in late 2013, was a standout performer in 2014. An integrated media company in France that owns and operates the largest cable TV network in that country, Numericable is also the market leader in high-speed broadband Internet. In late 2014 the company, whose stock accounted for nearly 9% of fund assets at the end of the year, broadened and strengthened its product line with its acquisition of SFR, the second-largest wireless telecom company in France. With the easing of regulations that once put the kibosh on corporate consolidations in France and other European countries, Walden believes Numericable and other companies in the region could get a tailwind from more M&A activity.

Longtime holding Brazil Foods, one of the largest food producers in the world, also did well last year. The Thornburg fund first picked up the stock in 2010 following a selloff prompted by investor concerns over the potential impact on profit margins of some large company acquisitions. Walden believed these purchases would come off as planned, and the resulting synergies would drive significantly higher profits. As with many businesses tied to global commodity prices, the pressure on margins was likely to by cyclical.

Since then, the stock has had a number of ups and downs, including a 2013 selloff of almost 30%. Walden has traded around the position by taking advantage of the upturns to sell and the downturns to buy. “It’s been a gift that keeps giving, and one of our strongest investments since 2010,” he says.

Some companies have been a drag on performance in the last year, though, including Australian mining services provider Mineral Resources and Canadian energy company Banker’s Petroleum. These and other holdings have been hamstrung by moderating growth in China. The slowdown has pinched off demand for industrial commodities over the year. Another laggard, Telecity, is a London-based operator of data centers for cloud and Internet computing. Even though the business performed below analyst expectations last year and management turnover has been high, the company’s business is fundamentally sound and the stock is selling at a discount to similar businesses in the U.S. and Europe.

The fund did close out several other positions last year either because they appeared fully valued or had simply run out of steam. That happened with several technology holdings, including Microsoft. “It was a longtime holding for the fund and an OK investment overall,” noted Walden in a letter to shareholders. “But this year we decided to prioritize some other technology investments.”

Walden is also keeping an eye trained on oil prices to see how they could affect fund holdings. “Overall, countries and companies that sell oil are losers relative to those that buy it,” he says. “This transfer of value from producers to consumers… could stimulate spending.” The economies of several major oil-producing countries such as Russia and Venezuela are likely to see more stress in the year ahead.

Airlines, including fund holding American Airlines Group, are a direct beneficiary of lower oil prices, and with the consolidation of airlines over the last decade, including the merger of US Airways with legacy American Airlines, the remaining players are well positioned to grow profits. “We think the price of jet fuel will continue to fall over the next few quarters, and that at current prices the stock looks inexpensive for a growing business,” says Walden, who added the stock to the fund in 2014.

Another top holding, Colorado-based EchoStar Communication, was spun out of Dish Network at the beginning of 2008 and operates satellite broadband services, a wholesale satellite services business that leases satellite capacity, and a set-top box business. Although cable TV growth has been sluggish in the U.S., Walden believes that the planned launch of four new satellites in 2016 will improve and expand the company’s Internet services. One of those satellites will open up a new market in Brazil, where cable television penetration is still very low.