Municipal Funds Bounce, Energy Funds Fizzle

TheStreet.com Ratings' review of the five most-improved and five most-deteriorated closed-end fund ratings changes for the month reveals a bounce in municipal bond funds while some energy funds deflated.

All five of the most improved closed-end funds hold investment-grade municipal securities. Up five notches to a rating of A from C+ in the prior month, Nuveen Insured California Premium Income Municipal Fund 2(NCL) ducks federal and California income taxes with its single-state focus.

Floridians investing in the other five-notch mover, BlackRock Insured Municipal Income Investment Trust(BAF), which buys mostly Florida muni bonds, do not have to worry about a state income tax because there isn't one.

Two of the five funds plunging the most this month are plays on energy and natural resources. Tortoise Capital Resources Corp.(TTO) hit the bottom of the barrel with a rating of E-, down seven steps from a middle-of-the-pack rating of C. This fund invests in privately held and micro-cap energy infrastructure limited partnerships.

Making the same-sized move from a rating of C down to E- is Kayne Anderson Energy Development Fund(KED). The global economy aside, some of these energy trust investments with Gulf of Mexico facilities have not recovered from damage sustained by Hurricane Ike.

Down four notches to a rating of D, or sell, long-term investors in the JF China Region Fund(JFC) are seeing red and the fund continues to suffer post-Olympic blues. Major holdings include economically sensitive companies like China Mobile(CHL), Taiwan Semiconductor(TSM) and the Chinese national oil company, CNOOC(CEO).

A month ago, I wrote about the Boulder Total Return Fund(BTF) as one way to buy Berkshire Hathaway(BRK.A) at a discount. The fund has fallen to a C+, or hold rating, from A-, or buy. The discount below net asset value has increased to 18.8%.