NEW YORK ( TheStreet) -- Some states and towns are struggling financially, but their problems aren't so catastrophic that they will cause a wave of bond defaults, says John Boritzke, manager of the Marshall Intermediate Tax-Free Bond Fund ( MITFX).

The $416 million mutual fund, which gets a full five stars from research firm Morningstar ( MORN), has returned 1.7% over the past year, better than 89% of its peers. Over the past five years, the fund has returned an average of 4.5% annually, outperforming 99% of its Morningstar rivals.

Welcome to's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.

Do you believe there's a muni crisis brewing in the U.S.?

Boritzke: Investors are selling their muni funds thinking there is a crisis coming, but we don't believe there is going to be a crisis in the truest sense of the word. If you can raise taxes or cut expenditures, then states and municipalities can deal with whatever fiscal problems they have.

Are the problems in the states similar to what we are seeing in peripheral Europe, the so-called PIIGS countries? Is California like Greece?

Boritzke: From the standpoint that they have a few fiscal issues to deal with, the answer is yes. But not to the same extent. The states and municipalities can fund themselves. They may have to pay more, but there is always a clearing rate in the market. And right now we are finding that clearing rate is a little higher in terms of yield than it was a few months back.

Is it a smart move to buy municipal bonds from resource-rich states? A lot of people are doing that with sovereign bonds, going to countries like Canada and Australia. Does it make sense to do that with the states as well?

Boritzke: You can. In fact, that's not a bad way to go. A resource-rich state would have the ability to promote its economy in order to get those resources out of the ground. It takes plants, equipment and people, which would be good for tax receipts. So that's not a bad way to play it.

What is the state of supply out there? Are states afraid to go to the market because of all the worries over state finances?

Boritzke: Supply is a little diminished right now simply because rates are higher and those issuers that want to take advantage of a stronger market are waiting a little bit. In general, there is a certain schedule of bonds that needs to get funded and will. It's just that rates are higher now. But we will get to a point where new supply represents a buying opportunity to the extent that we can identify what the clearing yield levels are for the market and that will give people some sense of confidence.

What about demand? Last year we kept hearing people say that investors need to buy municipal bonds because taxes would soon be rising. Is that story still intact?

Boritzke: In the end, taxes didn't rise. And while that was one reason people may have bought bonds last year, it's going to be a different reason this year. Simply, yield levels that are attainable in munis are attractive no matter your tax bracket.

-- Reported by Gregg Greenberg in New York.

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