RiverNorth Capital Management (RiverNorth), an investment management firm specialising in opportunistic strategies, has launched the RiverNorth Flexible Municipal Income Fund, a new municipal focused closed-end fund. RiverNorth will act as the investment adviser to the Fund and MacKay Shields will act as sub-adviser.
This is the third fund co-managed by the investment firms. The Fund will use the load waived pricing structure pioneered by RiverNorth. As a result, investors will not pay any upfront expenses, which allows the Fund to be priced at USD20.00 per share with an initial net asset value (NAV) of USD20.00 per share. Trading on the New York Stock Exchange began on 27 March, 2020 under the symbol RFM.
“In this time of an unprecedented health crisis combined with the resulting economic and capital market uncertainty, we are thrilled with investor response to the Fund and very proud to announce its successful launch,” says Patrick Galley, RiverNorth’s Chief Executive Officer and Chief Investment Officer. “Raising a fresh portfolio of cash in a closed-end fund structure to be deployed in a period of dislocated markets is very timely in our opinion. Elements of the Fund’s design that may be of particular interest to investors include its flexible ability to opportunistically allocate up to 65% of managed assets to the tactical municipal closed-end fund strategy. We believe this increased flexibility may serve to enhance potential additional excess return from closed-end fund discount trading opportunities, especially in light of the recent market volatility.”
The Fund’s primary investment objective is current income exempt from regular US federal income taxes (but which may be includable in taxable income for purposes of the Federal alternative minimum tax). The Fund’s secondary investment objective is total return. As the investment adviser, RiverNorth will strategically allocate the Fund’s assets between two principal investment strategies: the Tactical Municipal Closed-End Fund Strategy, managed by RiverNorth, and the Municipal Bond Income Strategy, managed by MacKay Shields.
“We are delighted to be partnering for a third time with the municipal closed-end fund team at RiverNorth,” says Robert DiMella, Executive Managing Director and Portfolio Manager of MacKay Shields. “The municipal bond market has been prone to periods of volatility. As active relative-value municipal bond managers with an intense focus on mis-priced securities, we view this volatility and resulting inefficiencies as potential investment opportunities.”
The Fund raised USD110 million in its initial public offering of shares of common stock. Should the underwriters exercise the over-allotment option in full, which may or may not occur, the Fund will raise approximately USD127 million.
The lead managers of the underwriting syndicate were UBS Investment Bank, Wells Fargo Securities, RBC Capital Markets and Stifel.