Risk has been anathema to investors for a while now, but signs are emerging that many–if not most–are beginning to spread their wings once again. But prudence should remain the watchword if you’re considering wading back into the high-beta corners of the market.

Kinetics Paradigm (WWNPX) is almost the definition of a risky fund. A former highflyer and a once long-tenured denizen of the Rukeyser 100, the fund hasn’t made an appearance on our list since September 2008.

An all-cap global fund, Kinetics Paradigm focuses on mid- and large-cap stocks. Its largest exposure is to diversified financial-services stocks, which currently make up more than half of the portfolio, about average for the fund.

Although that’s an immediate red flag, particularly because Kinetics’ holdings include the likes of Ambac Financial Group (NYSE: ABK) and MBIA (NYSE: MBI), the fund’s exposure to truly troubled names accounts for just a fraction of total assets. The bulk of the financial sector bets consists of largely untroubled titans in the exchange business, such as NYSE Euronext (NYSE: NYX) and NASDAQ OMX Group (NSDQ: NDAQ). The fund also holds a position in the granddaddy of financial services, Berkshire Hathaway (NYSE: BRK.A, BRK.B).

That penchant for financials, despite the bent towards quality, led to a horrendous performance in 2008, when the fund lost more than half its value and fell to the bottom of its category.

Despite ranking in or near the top 10 percent of its peer group for most of the past decade, a disastrous 2008 has pushed it out of the top quintile for five-year performance. But recent returns have propelled it back into the top third of its category, and we expect that improvement to continue in the coming months.

The Paradigm fund has been around in good times and bad and has always managed to come back because of its relentless pursuit of value investments. The fund managers invest at least two-thirds of the portfolio in common stocks or securities that act like common stocks, and may invest occasionally in convertibles. This mandate leaves the managers with some leeway, but in reality this is a regular stock fund.

The managers seek stocks that they believe are undervalued but focus on those companies with high returns on equity and barriers to entry in their businesses. The key point is that they regard the shares they buy as fractional ownership of the underlying assets, echoing Warren Buffet’s philosophy–an appropriate touchstone, given the fund’s almost 6 percent stake in Berkshire Hathaway (2.86 percent in A shares and 2.59 percent in B shares).

There’s also a 4 percent stake in electric utilities and a 10 percent stake in oil and gas plays. The latter group should rally into the end of the year.

The portfolio has a distinctly North American bent, though it takes advantage of its global mandate; 45 percent is invested in the US and 14 percent in Canada, while positions in mainland China and Hong Kong account for 20 percent of investable assets.

Among the best-performing funds are those that focus on emerging markets, particularly in Asia, so it’s refreshing to see a diversified fund deliver top-notch returns without huge emerging market exposure.

The fund’s portfolio has returned 0.3 percent, negative 4.3 percent and 5.9 percent per year in the past one, three and five years, respectively, which puts it near the bottom of its category in the short-term and in the top third of its category over the long-term. But the fund’s value bent has helped it rally by more than 36 percent year-to-date, as its positions in the financial sector have rallied substantially.

Kinetics Paradigm does tend to be more volatile than its peers, but this is the price you pay to get the better returns it consistently delivers, particularly in a risky sector. And that higher volatility is almost entirely due to its sector concentrations. But given the fund’s consistent long-term record, it’s worth it for younger investors who can take more risk.