RiverNorth Managed Duration Municipal Income Fund II

Fund II launched in 2019 with the same managed-duration strategy as the original fund, but as a separate closed-end vehicle with its own capital structure and shareholder base. The two funds are managed in parallel by the same investment team but maintain distinct portfolios, leverage profiles, and distribution policies. The creation of a second fund allowed RiverNorth to raise fresh permanent capital without diluting existing shareholders or altering the original fund's investment program.

Instead of maintaining a fixed duration target, the managers actively shorten or extend the portfolio's interest-rate sensitivity based on their outlook for rates, credit spreads, and municipal supply-and-demand dynamics. When the team expects rising rates, they reduce duration; when they see value in longer maturities or steeper yield curves, they extend. This is combined with a closed-end fund arbitrage sleeve that purchases other municipal CEFs at deep discounts to net asset value, capturing mean reversion as discounts narrow.

Brian Schmucker and Patrick Galley co-manage the portfolio. Schmucker serves as Chief Investment Officer and Galley as Chief Executive Officer of RiverNorth Capital Management, the Denver and Chicago-based investment adviser to the fund. Both have managed the RiverNorth municipal complex since the original fund launched, and their investment committee structure includes additional portfolio managers and credit analysts focused on the municipal market.

Yes. The fund has historically employed leverage through auction-rate preferred shares, a capital structure common across RiverNorth's closed-end fund offerings. This leverage is used to enhance income generation by magnifying the spread between the portfolio's yield and the cost of borrowing. The fund's shareholder reports disclose the amount of leverage and its impact on net investment income.

The fund pays monthly distributions at a managed rate, currently $0.0825 per share as of late 2023. These distributions are intended to be supported by net investment income, but in periods where income falls short, a portion may represent return of capital. The distributions are generally exempt from federal income tax, reflecting the underlying municipal bond portfolio's tax-exempt character. Shareholders receive a Form 1099 annually detailing the tax treatment.

The portfolio spans general obligation bonds, essential-service revenue bonds — including water, sewer, and electric utilities — as well as transportation revenue bonds backed by toll roads, airports, and mass-transit systems. The fund also holds bonds from states with chronic fiscal stress when spreads compensate for the risk, as well as high-grade paper from California and New York issuers. Sector weightings rotate based on relative value analysis by the investment team.

The fund is primarily an income vehicle, but the managed-duration mandate and closed-end fund arbitrage sleeve introduce a total-return component that can produce moderate NAV volatility. The leverage amplifies both gains and losses. Investors seeking pure capital preservation with minimal price fluctuation should look to short-duration or investment-grade municipal bond funds that do not employ the discount-trading strategy or leverage that defines this vehicle.