For the mutual fund, besides being the leader in its category each year, one key performance measure is to beat the bench market index. For instance, if a fund is invested in emerging markets, one key bench mark is MSCI emerging market index (EFM, an ETF tracks this index). For reference, the index is up 33.44% from Dec 21 2006 to Dec 20 2007.
But, beating the index is very hard. Consider Bill Miller, the legendary fund manager of Legg Mason Value Trust, and he is going to underperform the market second year in a row after beating S&P continously for 15 years. Here is a link to the fund details. From the portfolio, Bill hit a home run with Amazon, but he also had dogs like Sprint, Yahoo and to a lesser extent, eBay. The following is Performance of Monthly and Average Annual Total Returns (as of 11/30/07, source: Legg Mason site).