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If you are looking to invest in the municipal-bond market through a closed-end fund, Ratings models indicate BlackRock Advisors may be the fund family for you.

Each month Ratings updates its ratings on approximately 800 closed-end funds and exchange-traded funds, highlighting the Top 200. As of Oct. 31, BlackRock Advisors Inc. had 30 funds in the top 200 list, or 15% of the total. Most of these are municipal-bond funds and are classified as either single-state municipals or national municipals.

The following tables lay out where our models suggest investors should look. Among single-state municipals, the best performers are those that focus on California, New Jersey, New York and Florida.

In my opinion, the pick of the bunch is


BlackRock CA Municipal Income Trust II, which has generated very good returns for the past three-month, six-month, one-year and three-year periods and trades at a discount to its net asset value of less than 1%, as of Oct. 27.

As a general rule of thumb, closed-end funds that trade at a discount to their net asset value of between 0.50% to 10% can be considered attractively valued. With the exception of BlackRock CA Municipal Income Trust II, all of the funds in this group trade at a premium. So, using the criteria of the best discount available, highest overall risk- and tax-adjusted performance rating and competitive fee structure, BCL comes out on top.

Turning to funds that invest in municipal bonds across the nation, the two with the highest ratings and best performance, particularly over the past three months, are


BlackRock Investment Quality Municipal Trust and


BlackRock Strategic Municipal Trust.

However, they both trade at hefty premiums to their net asset values. It's worth noting that BSD is the better performing but modestly more volatile fund. Investors may instead want to take a look at


BlackRock MuniYield, which offers very comparable statistics, yet only trades at a premium of 5.5%, substantially lower than either BKN's or BSD.

BlackRock Single-State Muni Funds

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Source: Ratings

BlackRock Nationwide Muni Funds

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Source: Ratings

Not all of the BlackRock closed-end funds that made it into our Top 200 list were municipal-bond funds. Among income funds, the two to look for are


BlackRock Dividend Achievers Trust and


BlackRock Strategic Dividend Achievers, both of which trade at solid discounts and have performed very well over all time periods.

BlackRock Income Fund

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Source: Ratings

Other BlackRock funds making the cut fall into a number of different categories. There are some very good candidates, in particular


BlackRock Capital and Income Strategies,


BlackRock Global Opportunities Equity and


BlackRock S&P Quality Rankings Global Equity. If you are looking to go global, BQY may be the value play, as it's trading at a substantial discount and produces only slightly lower returns than BOE. The Growth and Income fund (CII) is also a very good performer and trades at an attractive discount. The only negative is its relatively high expense ratio of 3.49%.


BlackRock Global Energy and Resources also trades at a solid discount, but its exposure to the energy and natural-resource sector is not appealing given the current market conditions.

BlackRock Miscellaneous Funds

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Source: Ratings

Of course, investors should check with their tax advisor to see if they can benefit from the tax advantages of a specific municipal-bond fund, particularly one that focuses on a single state.

Knowing the discount or premium that a fund is trading at is also important because, over time, funds tend to revert back to their net asset value, a premium of zero. Investors should be wary of funds that perpetually trade at large discounts, as the discount may be warranted. Buying a fund at a discount does give an investor a small advantage but doesn't guarantee that the fund won't be trading at a larger discount at the time of sale. In the ideal scenario, a large discount would turn into a large premium while the NAV remained constant or, better yet, rose.

Sam Patel, CFA, is the manager of mutual fund Research for the Ratings.

In keeping with TSC's Investment Policy, employees of Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

While Patel cannot provide investment advice or recommendations, he appreciates your feedback;

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