Just as regularly spaced notches don't necessarily represent constant distances when an elastic measuring stick is used, positive returns don't always translate into enhanced purchasing power when the erosive impact of inflation is taken into account.

While there are hundreds of fixed-income funds that have produced positive annual returns over the past decade on a

nominal

basis, only a handful have been able to remain positive on a

real

basis, when adjusted for the purchasing power attrition caused by inflation.

Bond fund managers can empathize with Alice in Lewis Carroll's

Through the Looking-Glass

, who ran but remained in the same place.

It seems that the book's Red Queen could have been describing the pursuit of positive inflation-adjusted fixed-income returns when she said to Alice, "Now here, you see, it takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

I parsed TheStreet.com Ratings' database of open-end bond funds for those that have produced positive returns vis-à-vis the consumer price index for each of the past 10 calendar years. (Because the Commerce Department has yet to release CPI data for December, I compared bond funds' 2007 returns with the index's performance for the 12 months ending Nov. 30.)

Just four made the cut.

Not surprisingly, the quartet of inflation-beating bond funds includes a low-expense institutional fund that requires an ante of $3 million in order to get into the game. The

TheStreet Recommends

(LSFIX) - Get Loomis Sayles Fixed Income Fund Report

Loomis Sayles Fixed-Income Fund (LSFIX) has an expense ratio of just 0.6% and carries no sales commission.

Although LSFIX achieved the highest 2007 total return of the four funds in the table, it's also more volatile than comparable fixed-income funds. Consequently, it is rated a "C+" by TheStreet.com Ratings, which equates with a "hold" recommendation.

More amazingly, a fund from the normally low-yielding municipal bond grouping has been able to produce consistently positive constant-dollar returns. Municipal bonds are exempt from federal, and in some cases, state and local, taxes. That means they can get away with paying less interest than comparable taxable bonds.

As its name suggests,

(HICOX) - Get Colorado Bond Shrs Tax-Exmt A Report

The Colorado Bond Shares Tax Exempt A fund (HICOX) is geared toward investors who reside in the Centennial State. It carries TheStreet.com Ratings' highest possible rating of A-plus.

High fees tend to eat into returns, but the list of inflation beaters includes two funds with relatively pricey expense ratios for bond funds. The

(CFICX) - Get Calvert Income Fund A Report

Calvert Income Fund A (CFIXC), carries an expense ratio of 1.2%, while the

(LBFAX) - Get Loomis Sayles Bond Fund Adm Report

Loomis Sayles Bond Admin (LBFAX) charges 1.02% of assets.

Foreign bond funds -- especially those that focus on emerging markets -- have enjoyed considerable notoriety because of the combined allure of rapidly growing economies and currencies that have generally been steadily appreciating relative to the U.S. dollar. But the quartet of "Red Queen" funds is essentially home-grown. Only the two Loomis Sayles bond funds have any appreciable foreign holdings, and they amount to no more than 20% of assets.

Richard Widows is a financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.