White-hot bond fund going dark to new investors

APR 24, 2012
The clock is ticking for clients and financial advisers interested in investing in the RiverNorth/DoubleLine Strategic Income Fund (RNSIX). RiverNorth Capital Management LLC plans to close the $900 million fund to new investors at the end of next month. The fund, which was launched a little more than a year ago, has drawn substantial interest thanks to the low-interest-rate environment and its partnership with Jeffrey Gundlach's DoubleLine. DoubleLine Capital LP manages about 75% of the fund's assets. The other 25% is invested in a tactical closed-end-fund strategy managed by RiverNorth. The tag team management has worked out well for investors so far. The RiverNorth/DoubleLine Strategic Income Fund has topped all multisector-bond funds in performance over the past 12 months, according to Morningstar Inc. Patrick Galley, chief investment officer at RiverNorth, isn't focused on the fund's relative returns, though. “When you're in the top percentile, there's really only one way to go. We're more focused on having the best risk-adjusted returns,” Mr. Galley said. Closing the fund to new investors as it approaches $1 billion in assets will allow the fund to continue operating without having to alter its investment strategy, he said.

BOOSTING INCOME

Andrew Feldman, president of A.J. Feldman Financial, uses the fund to boost the income of his client's fixed-income portfolios. “It's a great complement to a vanilla fixed-income portfolio,” he said. Mr. Feldman is pleased that the fund is closing to new investors so that the managers don't feel forced to chase less-than-ideal opportunities with new money coming in. The fund's closed-end sleeve would be most susceptible to such a situation, Mr. Galley said. “Discounts and premiums in closed-end funds are driven by supply and demand,” he said. With about $1 billion in assets, $250 million of which is invested in closed-end funds, the fund still can take advantage of buying closed-end funds at a discount without diluting the discount through its purchase, Mr. Galley said. The RiverNorth/DoubleLine Strategic Income Fund is RiverNorth's second mutual fund and its second to close to new investors. The RiverNorth Core Opportunity Fund (RNCOX) was closed to new investors last year. With both its mutual funds sealed up, RiverNorth has three or four strategies in its mutual fund pipeline that may be launched this year, Mr. Galley said. He declined to comment about the possible new funds or whether DoubleLine would be involved. [email protected]

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