CHICAGO--(BUSINESS WIRE)--RiverNorth Capital Management, LLC (“RiverNorth”), an investment management firm specializing in opportunistic strategies, announced the launch of the RiverNorth Managed Duration Municipal Income Fund II, Inc. (the “Fund”), a new municipal bond focused closed-end fund. RiverNorth acts as the investment adviser to the Fund and MacKay Municipal ManagersTM, the municipal bond team within MacKay Shields LLC ("MacKay Shields") acts as subadviser. This is the fifth fund co-managed by the investment firms. The Fund used the load waived pricing structure pioneered by RiverNorth. As a result, investors did not pay any upfront expenses, which allowed the Fund to be priced at $20.00 per share with an initial net asset value (NAV) of $20.00 per share. Trading on the New York Stock Exchange began on February 11, 2022 under the symbol "RMMZ.”
The Fund’s primary investment objective is current income exempt from regular U.S. 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 strategically allocates 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 Municipal ManagersTM. Additionally, the Fund has implemented a Managed Duration Strategy which targets a weighted average effective duration (excluding effects of leverage) within three years of the weighted average effective duration of the Bloomberg US Municipal Index**.
The Fund announced that its Board of Directors (the “Board”) approved a 6.25% level distribution policy effective March 1, 2022 and has declared a monthly distribution of $0.1042 per share of common stock, payable as noted below. In accordance with the level distribution policy, the rate has been set equal to 6.25% of the Fund’s initial public offering price of $20.00 per share.
The following dates apply to the distribution declared:
Ex Date |
Record Date |
Payable Date |
March 16, 2022 |
March 17, 2022 |
March 31, 2022 |
Holders of the Fund’s common stock will receive the distribution under one of two options:
1. Receive additional full and fractional shares of the Fund’s common stock
or,
2. Elect to receive cash for the distribution.
Investors should contact their broker-dealer where the shares are held to confirm their distribution reinvestment election.
About RiverNorth
RiverNorth Capital Management, LLC is an investment management firm founded in 2000. With approximately $5.8 billion in assets under management as of December 31, 2021, RiverNorth specializes in opportunistic investment strategies in niche markets where the potential to exploit inefficiencies is greatest. RiverNorth is the investment manager to multiple registered and private funds.
About MacKay Shields
MacKay Shields LLC is an indirect wholly-owned subsidiary of New York Life Insurance Company and a wholly-owned subsidiary of New York Life Investment Management Holdings LLC. MacKay Shields is a fixed-income and equity investment management firm with approximately $164 billion in assets under management as of December 31, 2021. MacKay Shields manages fixed-income and equity strategies for high-net worth individuals and institutional clients through separately managed accounts and collective investment vehicles including private funds, UCITS, ETFs, closed end funds and mutual funds. MacKay Shields maintains offices in New York City, Princeton, Los Angeles, London and Dublin.
Level Distribution Policy
As detailed in the prospectus, the Fund is implementing a level distribution policy. The Fund’s intention under the level distribution policy is to provide for monthly distributions to stockholders at a constant and fixed (but not guaranteed) rate. However, there can be no guarantee that the distribution policy will be successful in its goals. The Fund’s ability to maintain a stable level of distributions to stockholders will depend on a number of factors, including changes in the financial market, market interest rates, and performance of overall equity and fixed income markets. As portfolio and market conditions change, the ability of the Fund to continue to make distributions in accordance with the level distribution policy may be affected.
The Board expects that any declaration of distributions to stockholders, including final amounts and dates applicable to each, will be made and announced quarterly. Stockholders have the option of reinvesting these distributions in additional common stock through the Fund’s automatic dividend reinvestment plan, or electing to receive cash by contacting DST Systems, Inc. (the “Plan Administrator”). For further information, stockholders should carefully read the description of the dividend reinvestment plan in the prospectus.
The Fund may at times, in its discretion, pay out less than the entire amount of net investment income earned in any particular period and may at times pay out such accumulated undistributed income in addition to net investment income earned in other periods in order to permit the Fund to maintain a stable level of distributions. As a result, the distribution paid by the Fund to stockholders for any particular period may be more or less than the amount of net investment income earned by the Fund during such period.
To the extent that sufficient investment income is not available on a monthly basis, the Fund’s distributions may consist of return of capital in order to maintain the distribution amount. A return of capital occurs when some or all of the money that stockholders invested in the Fund is paid back to them. A return of capital does not necessarily reflect the Fund’s investment performance and should not be confused with ‘yield’ or ‘income.’ Any such returns of capital will decrease the Fund’s total assets and, therefore, could have the effect of increasing the Fund’s expense ratio. In addition, the level distribution policy may require the Fund to sell its portfolio securities at a less than opportune time to meet the distribution amount.
Monthly distributions from the Fund are expected to be generally exempt from regular U.S. federal income taxes, however, a portion of the Fund’s distributions may (i) be subject to U.S. federal income tax, (ii) be includable in taxable income for purposes of the federal alternative minimum tax, or (iii) constitute a return of capital. Such distributions will also generally be subject to state and local taxes. RiverNorth does not provide tax advice; consult a professional tax advisor regarding your specific tax situation.
Investors should not make any conclusions about the Fund’s investment performance from the amount of the Fund’s distributions or the Fund’s level distribution policy. With each distribution that does not consist solely of net investment income, the Fund will issue a notice to stockholders that will provide detailed information regarding the amount and composition of the distribution and other related information. The amounts and sources of distributions reported in the notice to stockholders are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the distributions for tax reporting purposes will depend upon the Fund’s investment experience during its full fiscal year and may be subject to changes based on tax regulations. The Fund will send individual stockholders a Form 1099-DIV for the calendar year that will tell them how to report these distributions for federal income tax purposes. In addition, the source of the monthly distributions will be available on www.rivernorth.com.
The Fund is a closed-end fund and does not continuously issue stock for sale as open-end mutual funds do. The Fund now trades in the secondary market. Investors wishing to buy or sell stock need to place orders through an intermediary or broker. The share price of a closed-end fund is based on the market value.
Shares of closed-end investment companies frequently trade at a discount to their net asset value and initial offering price. The risk of loss due to this discount may be greater for initial investors expecting to sell their shares in a relatively short period after completion of the initial public offering.
The Fund is new and has limited performance history. An investment in the Fund is not appropriate for all investors and is not intended to be a complete investment program. The Fund is designed as a long-term investment and not as a trading vehicle.
Risk is inherent in all investing. Investing in any investment company security involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your investment. Therefore, before investing in the Fund’s common stock, you should consider the risks as well as the other information in the prospectus.
Fund Risks: Credit Risk - a borrower may be unable to make interest or principal payments when they are due. Funds that invest in Municipal Bonds rely on the ability of the issuer to service its debt. This subjects the Fund to credit risk in that the municipal issuer may be fiscally unstable or exposed to large liabilities that could impair its ability to honor its obligations. Municipal issuers with significant debt service requirements, in the near-to mid-term, unrated issuers and those with less capital and liquidity to absorb additional expenses may be most at risk. To the extent the Fund invests in lower quality or high yield Municipal Bonds, it may be more sensitive to the adverse credit events in the municipal market. The treatment of municipalities in bankruptcy is more uncertain, and potentially more adverse to debt holders, than for corporate issues. Interest Rate Risk - the value of Municipal Bonds, similar to other fixed income securities, will likely drop as interest rates rise in the general market. Conversely, when rates decline, bond prices generally rise.
Weighted average effective duration is a mathematical calculation of the sensitivity of the price of a bond to changes in interest rates, measuring a bond’s expected life on a present value basis, taking into account the bond’s yield, interest payments, final maturity and, in the case of a bond with an embedded option (e.g., the right of the issuer to call the bond prior to maturity, or a sinking fund schedule), the probability that the option will be exercised.
Please consult your personal tax advisor regarding the tax implications of owning this Fund.
Member Firm ALPS Distributors Inc. RiverNorth is not affiliated with ALPS or MacKay Shields.
Investors should read the Fund’s prospectus and consider the Fund's investment objectives, risks, charges and expenses carefully before investing. For more information, please read the prospectus, call your financial professional or call 844.569.4750.
*MacKay Municipal Managers™ is a trademark owned by MacKay Shields LLC.
** The Bloomberg US Municipal Index is considered representative of the broad market for investment grade, tax-exempt bonds with a maturity of at least one year. The index cannot be invested in directly and does not reflect fees and expenses.
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