Ratings initiated coverage of 16 open-end mutual funds and one closed-end fund that accrued a sufficient track record of risk and performance data by the end of January.

Only two of the open-end funds launched in January 2006 received our top-rating level of "excellent." Both of those funds took a fund-of-funds approach to investing.

First, with an initial rating of A, the Direxion Evolution Total Return Fund ( PETRX) appears to have wisely sidestepped much of the recent stock-market collapse. The sub-adviser, Flexible Plan Investments, used its wide latitude of strategy options to shift upwards of 79% of assets into a Goldman Sachs money market fund and other lower-risk choices such as the SPDR Barclays Capital 1-3 Month T-Bill ETF ( BIL). The Direxion Funds confirmed that the name of this fund is being changed to the Direxion Evolution Alternative Investment Fund.

Second, the Flex-Funds Defensive Balanced Fund ( FLDFX) scored a brand-new rating of A-minus. The fund has avoided larger losses by limiting equity exposure to about 33% of assets. The holdings that target equities include defensive sector funds of Health Care Select Sector SPDR Fund ( XLV), Consumer Staples Select Sector SPDR Fund ( XLP) and Utilities Select Sector SPDR Fund ( XLU).

Lastly, one closed-end fund, Pimco Income Opportunity Fund ( PKO), which began trading on Nov. 30, 2007, earned a first-time rating of D on a below-average risk-and-return performance compared with the universe of closed-end and exchange-traded funds we rate. The fund's government and corporate debt portfolio lost 18.8% for the 12 months ending Jan. 31.

Research Methodology Ratings condenses the available fund performance and risk data into a single composite opinion of each fund's risk-adjusted performance. This allows the unbiased identification of those funds that have historically done well and those that have underperformed the market. While there is no guarantee of future performance, these investment ratings provide a solid framework for making informed, timely investment decisions.

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