Returning from the bond market backwaters, municipal bond funds now populate eight positions in the TheStreet.com Ratings current list of the 10 highest rated fixed-income funds.
The short maturity side of the bond market received a nod, as nine of the funds on the accompanying table specifically target that end of the fixed-income maturities timeline. In fact, the
Wells Fargo Advantage Ultra-Short Muni Fund
RidgeWorth U.S. Government Securities Ultra-Short Bond Fund
Federated Adjustable Rate Securities Fund
hug the ultra-short end of the maturities spectrum.
An upward thrust in long-term interest rates has dampened prices of fixed income securities at that end of the maturity array, thus enhancing the attractiveness of instruments with short maturities. Recent news bulletins with disheartening news about bulging wholesale and consumer prices are likely to perpetuate the unpopularity of longer-term fixed-income investments.
The only fund on the list not specifically targeting short-term or ultra-short maturity fixed income investments is the
Colorado Bond Shares Tax-Exempt Fund
. With a 4.75% maximum initial sales charge, HICOX is the only front-end load fund on the list. The fund's three-year annualized return of 4.89% is best of the 10 funds on the list over that time span.
Amplifying the theme of conservative fixed income investing, the list lacks any exposure to corporate bond investing, even of the highest-quality issuers. The two non-muni funds on the list target U.S. government instruments. But even with holdings of ultra-short government holdings, the RidgeWorth fund returned 4.98% over the past year and 4.56% annually over the past three years.
Federated Adjustable Rate
fund, which is 65% invested in U.S. government instruments, enriched its holders by 5.28% over the past 12 months. Bucking the bad rep of anything touching the mortgage sector, the fund is 93% invested in GNMA and other mortgage-backed securities. Yet, its 2.38% gain over the first half of 2008 tops the year-to-date performance of the funds on the list.
Richard Widows is a senior 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.