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RiverNorth Flexible Municipal Income Fund II, Inc. functions as a managed, closed-end investment vehicle. Its main investment aim is to generate current income free from standard U.S. federal income taxes, while its secondary goal is to achieve overall total return. Established on June 11, 2020, the company's headquarters are located in West Palm Beach, Florida.
RiverNorth Flexible Municipal Income Fund II remains the most attractively valued among its peers, trading at a deep 8.71% discount. RFMZ's hybrid strategy leverages both municipal bonds and muni CEFs, offering tactical opportunities but also heightened volatility and expense ratios. The fund's 7.42% distribution yield is appealing, but coverage remains low, with destructive return of capital likely to persist.
Investors are flipping back into buy mode, which has been a boon to the equity funds—especially on the tech side.
Municipal bond closed-end funds (CEFs) are seeing narrowing discounts, with NXP and MHF offering the most compelling value in the space at present. Leverage costs are easing as the Fed cuts rates, which should improve distribution coverage and make leveraged muni CEFs more attractive. Of course, there are always risks that include increased volatility from leverage and sensitivity to long-term Treasury rates, but we've seen long-term rate stabilization within a fairly narrow range.
RiverNorth Flexible Municipal Income II aims to exploit CEF discounts in the municipal bond space but delivers sub-market, unattractive income. RFMZ's 7.9% distribution is misleading; only 3.16% is true income, with the rest being return of capital—well below competing muni funds. The fund's strategy of capturing CEF discount-to-NAV reversion has not worked in practice, as evidenced by persistently low real yields.
RiverNorth Flexible Municipal Income II offers the best value of its lineup of sister funds currently, with the widest discount. RFMZ employs a strategy of investing in both individual municipal bonds and other muni CEFs, then using high levels of leverage. A significant portion of RFMZ's distribution is classified as return of capital, not tax-exempt income that some investors could be looking for.