As the subprime mortgage crisis unfolded in the latter part of 2007 and took its toll on the municipal market — specifically the bond insurance industry — one sector of tax-exempt mutual funds was quietly outperforming all other categories.

In the fourth quarter, in all of 2007, and even in two-year trailing returns, insured municipal debt funds performed better than all other categories, according to Lipper Inc. These funds are also benefitting from better inflows when compared to other muni fund categories, according to AMG Data Services.

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