Preserve Your Assets With Muni Funds

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The right-side brains of capitalists may be horrified by even a partial nationalization of the global banking system. Meanwhile, amid the current selloff, the left-side brains of these same investors love the idea and only fear that it won't come soon enough.

For those investors who do not believe the panic last Friday marked the bottom, TheStreet.com Ratings team has compiled the 10 best-rated open-end bond mutual funds based on risk-adjusted performance though Sept. 30.

None of these funds earned a rating of A+ within our universe of open-end fixed income fund rankings because they were crowded out by the steady returns of 215 different money market funds.

The best-rated bond fund as of the end of the third quarter is the Alpine Ultra Short Tax Optimized Income Fund ( ATOIX), which has a rating of A, or buy. Aside from 2.7% in corporate debt, the remainder of the fund's portfolio is invested in municipal obligations such as the Volusia County, Fla., Multi-Family Housing Authority and a Scottsdale, Ariz., hospital.

Also with a rating of A, the Wells Fargo Advantage Ultra Short-Term Municipal Income Fund ( SMUAX) targets federal tax-exempt income with very short-term maturities. This second best-rated open-end bond fund, offered by Wells Fargo ( WFC), has its largest security holdings in the tobacco settlements of California and New Jersey along with the DeKalb County, Ga., Multi-Family Housing Authority.

The third-place Vanguard Short-Term Tax Exempt Fund ( VWSTX) added 3.39% over the last year on municipal securities, with an average target maturity under five years. Three of its larger federal-tax-exempt holdings are revenue bonds of the Pennsylvania Turnpike and the Florida Hurricane Catastrophe Fund and general obligation debt of the Las Vegas Water District.

If you prefer a short-duration U.S. Treasury fund, check out the Ridgeworth Institutional U.S. Government Securities Ultra Short Bond Fund ( SIGVX). It holds 11.3% Treasuries and 84.7% mortgage pool securities of Fannie Mae ( FNM) and Freddie Mac ( FRE). This fund's steady performance helped earn it an A rating.

10 Best-Rated Bond Funds
Fund (Ticker), Rating Total 3-Year Return Total 1-Year Return Objective
Alpine Ultra Sht Tax Optim Inc Inv (ATOIX), A 3.76% 3.78% Municipal - High Yield
Wells Fargo Avtg Ult-Sh Muni Inv (SMUAX), A 3.43% 3.47% Municipal - Insured
Vanguard Short-Term Tax-Exempt Inv (VWSTX), A 3.39% 3.62% Municipal - National
RidgeWorth U.S. Gvt Sec U/S I (SIGVX), A 4.67% 4.30% U.S. Government - Short & Interm
SEI Tax-Exempt Tr-Shrt Dur Muni A (SUMAX), A 3.02% 3.38% Municipal - National
Dreyfus Premier Sh-Intmd Muni Bd D (DSIBX), A 2.95% 3.29% Municipal - Insured
SEI Daily Inc Tr-Sh Dur Gov Bd A (TCSGX), A 4.65% 5.38% U.S. Government - Short & Interm
Sanford Bernstein Sh-Dur Dvrs Muni (SDDMX), A- 2.96% 3.35% Municipal - National
BNY Mellon ST U.S. Gov Sec M (MPSUX), A- 4.84% 5.82% U.S. Government - Short & Interm
Federated USG Sec:1-3yrs Inst (FSGVX), A- 5.08% 5.98% U.S. Government - Short & Interm
Source: TheStreet.com Ratings

For more information, check out an explanation of our ratings.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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