With a total return of 0.36% in 2008, the Colorado Bond Shares Tax-Exempt Fund ( HICOX) deserves 12 cheers.

While the fund's fractional gain might not seem impressive at first glance, it was higher than the 2008 inflation rate of 0.1% the government announced Friday. By besting the CPI, HICOX was able to produce a positive "real" annual return for its holders. Its return in 2007 also surpassed the gain in the consumer price index, as it did in the previous year, and the year before that, and again and again and again.

In fact, the double-tax-exempt HICOX turns out to be the only fixed-income fund in TheStreet.com Ratings' database to have achieved 12 consecutive annual returns, besting the corresponding gains in the CPI. Its singular achievement is summarized in the table below.

An investor in search of a bond fund consistently producing gains exceeding the annual inflation rate will find that the quest is anything but a slam dunk. It turns out that even with supposedly steady fixed-income funds, lengthy annual strings of positive "real" returns are surprisingly elusive.

FIXED-INCOME 'REAL RETURN' CHAMP: 12 STRAIGHT YEARS OF BEATING THE CPI
NAME
Colorado Bond Shares
Tax-Exempt A
CONSUMER PRICE
INDEX
TICKER
HICOX
-
INVESTMENT OBJECTIVE
Municipal - Single State
-
TheStreet.com RATINGS GRADE
C+
-
TOTAL NET ASSETS ($MIL)
741.2
-
TOTAL EXPENSE RATIO (%)
0.61
-
MIN. INITIAL INVESTM'T ($)
500
-
MAX. INIT. SALES CHG. (%)
4.75
-
YIELD (%)
5.096
-
CALENDAR YEAR TOTAL RETURNS (%)
2008
0.36
0.1
2007
5.29
4.1
2006
5.50
2.5
2005
5.85
3.4
2004
5.33
3.3
2003
6.56
1.9
2002
6.03
2.4
2001
7.26
1.6
2000
7.68
3.4
1999
3.20
2.7
1998
6.35
1.6
1997
9.49
1.7
Source: TheStreet.com Ratings (Data as of 12/31/2008)"
For an explanation of our ratings, click here."

While the remarkable HICOX has outpaced inflation over each of the past dozen years, a parsing of the thousands of bond funds in TheStreet.com Ratings' database could not find one other that has performed the same trick for even the past 10 years. But that could change by the end of this year, as the five funds in the second accompanying table have now strung up nine straight years of gains exceeding inflation's annual erosion of purchasing power.

Including the steady HICOX, TheStreet.com Ratings "CPI Busters" presents an interesting mix of bond funds.

SHORT-TERM TREASURY NOTES: American Century Target Maturity - 2010 ( BTTNX) invests only in zero-coupon U.S. Treasury securities and U.S. Treasury bills, notes and bonds that will mature in 2010. The fund adjusts to maintain the duration of its holdings so that it falls within the year 2010 and may take advantage of disparities in prices and yields. The fund will be liquidated at the end of 2010.

BTTNX achieved double-digit percentage gains in 2000, 2001, 2002 and 2008.

GLOBAL BONDS: Dreyfus Standish Mellon Global Fixed-Income ( SDGIX) normally invests at least 80% net assets in U.S. dollar and non-U.S. dollar denominated fixed-income securities of governments and companies located in various countries, including emerging markets. It generally invests in eight or more countries, but always invests in at least three countries, one of which may be the U.S. At times, the fund may invest a substantial part of its assets in any one country.

INTERNATIONAL BONDS: Dreyfus Standish Mellon International Fixed-Income ( SDIFX), unlike SDGIX, above, targets the world outside the U.S. rather than the world including its home country. It normally invests at least 80% of net assets in fixed income securities. It also normally invests at least 65% of net assets in non-U.S. dollar denominated fixed income securities of foreign governments and companies located in various countries, including emerging markets. The fund always invests in at least five countries other than the U.S. At times, It may invest a substantial part of its assets in any one country.

SHORT & INTERMEDIATE GOVERNMENT BONDS: The ISI North American Government Bonf Fund ( NOAMX) normally invests at least 80% of its assets in a portfolio of investment grade bonds issued or guaranteed by the governments of the U.S., Canada and Mexico. Thus, it offers a degree of international diversification while staying with government bonds that are of higher risk than U.S. Treasuries but generally more secure than corporate bonds.

LONG-TERM INVESTMENT GRADE BONDS: Vanguard Long-Term Bond Index ( VBLTX) tracks the performance of the Barclays Capital U.S. Long Government/Credit Bond Index, a market-weighted bond index that includes investment-grade bonds with a dollar-weighted average maturity of 15 to 30 years.

Those who doubt the efficacy of index funds should take note that the VBLTX has been the only long-term general bond fund to consistently produce inflation-beating returns so far this century.

And those subject to trivializing the attritional impact of mutual fund expense ratios should note that at 0.18%, VBLTX sports the lowest annual total expense ratio of any fund on the list.

SINGLE-STATE MUNICIPAL BONDS: Colorado Bond Shares Tax-Exempt shields its holders from federal as well as Colorado income taxes on its dividends. Because of their tax-exemption benefits, muni funds normally produce subdued performances relative to other forms of fixed-income funds. That makes the 12-year CPI-thumping record of HICOX all the more impressive.

'CPI BUSTERS' - FIXED-INCOME FUNDS WITH 9-YEAR STREAKS OF BEATING CONSUMER INFLATION*
NAME
Vanguard Long-Term Bond Index Fd
Dreyfus SM Glb Fixed Income Fd
Dreyfus SM Intl Fixed Income Fd
ISI North American Government Bd A
American Century Tgt Mat.-2010 Inv
TICKER
VBLTX
SDGIX
SDIFX
NOAMX
BTTNX
INVESTMENT OBJECTIVE
General Bd - Long
Global Income
Global Income
US Government - Short & Interm
US Treasury
TheStreet.com RATINGS GRADE
C+
B
B
C+
B+
TOTAL NET ASSETS ($MIL.)
2,518.1
41.7
58.7
156.2
271.1
MIN. INITITIAL INVESTM'T ($)
3,000
100,000
100,000
5,000
2,500
TOTAL EXPENSE RATIO (%)
0.18
0.70
0.70
1.11
0.57
MAX. INITIAL SALES CHG. (%)
0.0
0.0
0.0
3.0
0.0
YIELD (%)
5.17
8.46
5.77
4.45
3.36
CALENDAR YEAR TOTAL RET'NS (%)
2008 (CPI=0.1%)
8.73
7.51
8.08
8.13
11.95
2007 (CPI= 4.1%)
6.59
4.30
4.34
8.56
8.39
2006 (CPI= 2.5%)
2.67
5.15
4.27
3.21
2.86
2005 (CPI= 3.4%)
5.32
3.58
4.72
6.23
6.30
2004 (CPI= 3.3%)
8.40
4.98
4.88
4.11
4.08
2003 (CPI= 1.9%)
5.50
6.38
4.89
3.41
2.15
2002 (CPI= 2.4%)
14.35
6.94
6.44
8.87
24.17
2001 (CPI= 1.6%)
8.17
4.51
4.07
7.67
10.93
2000 (CPI= 3.4%)
16.64
9.79
9.63
13.24
22.29
* Does not include Colorado Bond Shares Tax Exempt Fund (HICOX), which has beaten the CPI 12 consecutuve years & is summarized in a separate table.
Source: TheStreet.com Ratings (Data as of 12/31/2008)
For an explanation of our ratings, click here."
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.