The investment arm of Great Western Bank is adding an insured California municipal bond fund to the Sierra Trust Funds, its 14-member proprietary mutual fund family.

The Sierra California Insured Intermediate Municipal Fund is exempt from federal and state income tax, a boon for residents of the high-tax Golden state.

Insured bond funds have gained in popularity because they provide extra protection for investors. In the event the issuer of an insured bond held by the portfolio defaults, payment is guaranteed by an insurer.

The product was created for conservative, long-term investors who want tax-free income and a chance at higher yield, said F. Brian Cerini, chief executive of Sierra Trust Funds, Los Angeles.

Sierra Trust also offers an uninsured California Municipal Fund as part of its product line.

Van Kampen Merritt Management Inc., Oakbrook Terrace, Ill., will serve as the fund's portfolio manager. Great Western's fund family, launched in 1989, now has $3 billion of assets.

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