RiverNorth Managed Hybrid Municipal Bond Fund: A Comprehensive Overview

The RiverNorth Managed Municipal Income Fund (RMMZ) is a hybrid municipal bond fund that invests in a diversified portfolio of municipal bonds with an active management approach. It aims to generate stable returns and provide tax advantages for investors. The fund is managed by RiverNorth Capital Management, a seasoned muni bond manager with a proven track record. RMMZ offers investors a unique opportunity to tap into the municipal bond market with a flexible investment strategy.

The RiverNorth Managed Municipal Income Fund (RMMZ) is a hybrid municipal bond fund that offers investors a diversified portfolio with an active management approach. Managed by RiverNorth Capital Management, a seasoned muni bond manager with a proven track record, RMMZ aims to generate stable returns and provide tax advantages. This fund is particularly appealing to investors seeking exposure to the municipal bond market with a flexible investment strategy.

Fund Overview
RMMZ is structured as a term fund with an anticipated liquidation date of February 16, 2037. The fund's investment objective is to provide current income exempt from regular U.S. federal income taxes, with a secondary objective of total return. It allocates managed assets between two principal strategies: the Tactical Municipal Closed-End Fund Strategy (managed by RiverNorth) and the Municipal Bond Income Strategy (managed by MacKay Shields).

Portfolio Allocation and Strategies
The fund's portfolio is constructed based on the current environment for closed-end funds (CEFs). The RiverNorth team decides whether to adopt a "defensive," "neutral," or "aggressive" CEF environment. Currently, the fund is positioned with a tilt toward a more defensive CEF environment, given the higher weighting toward the individual muni bond strategy of MacKay.

Performance and Risk
RMMZ's 1-year Z-score is 2.21, indicating moderate risk compared to other funds. The fund's expense ratio is 2.38%, and it is highly leveraged with a leverage ratio of 41.2%. This leverage can make the fund more volatile compared to investing in individual municipal bonds. The fund's borrowing costs are relatively cheap compared to other CEFs, but the underlying muni bonds typically pay between 3%-4%, which can be a challenge when rates rise.

Distribution and Yield
RMMZ offers a distribution yield of 7.80% and a managed distribution of 6.75%. The fund's NAV distribution rate is 7.43% YTD, which has not fully supported its distribution policy. The fund's distribution policy resets annually, and further rate cuts could benefit the fund by easing borrowing costs.

Portfolio Holdings
Some of the largest holdings in RMMZ include Western Asset Managed Municipals Fund (MMU), BlackRock Muniyield Fund (MYD), and Nuveen Quality Muni Income Fund (NAD). These holdings are known for their high distribution rates but varying levels of distribution coverage. The fund's underlying CEF portfolio has an average weighted discount of -6.8%, which is wider than the current overall muni CEF space discount.

Conclusion
RMMZ is an interesting muni bond fund that relies on active management to drive performance. The fund's hybrid approach provides significant diversification but comes with higher expenses and increased volatility due to leverage. With recent rate cuts and further expected cuts, the fund's borrowing costs could decrease, potentially benefiting its performance. However, investors should be cautious about the fund's high leverage and the risk of overdistribution.

References
[1] https://seekingalpha.com/article/4818661-rmmz-actively-managed-hybrid-municipal-bond-fund