Municipal-bond funds are not only the best performers, but another group of municipal-bond funds were also the most highly rated closed-end funds in February.

Instead of focusing on the short term, TheStreet.com Ratings identified 10 muni closed-end funds with superior risk-adjusted returns over multiple time periods. All funds listed in this article scored A-plus ratings last month.

The best-rated closed-end fund, Morgan Stanley Insured California Municipal Securites ( ICS), collects current income exempt from federal income tax. Some, but not all, of the securities held also are exempt from California income taxes. The fund will invest at least 80% of its net assets in a portfolio of municipal obligations covered by insurance guarantees on the timely payment of interest and principal.

As this is a closed-end fund, it can trade above or below the value of its underlying assets based on supply and demand for the shares. Currently, the fund is being offered at a 12.4% discount to its net asset value (NAV), a wider discount than the 7% average discount over the past year.

Of the best-rated closed-end funds, Morgan Stanley New York Quality Municipal Securities ( IQN) is trading at the largest discount to its net assets, at 21% below NAV. The one-year average discount of 15.2% shows room for improvement.

The Morgan Stanley New York Quality Municipal Securities is a closed-end, non-diversified management investment company providing current income from high-quality municipal securities exempt from federal, New York state and New York city income taxes.

Nuveen California Select Tax-Free Income Portfolio ( NXC) has an investment objective of providing stable dividends exempt from both regular federal income tax and California personal income tax, consistent with preservation of capital. The current discount to NAV of 8.8% appears attractive considering the one-year average discount of 2.4%.

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