The arrival of new strategies within the closed-end fund (CEF) universe is always an interesting event. There are much fewer new CEFs released on an annual basis than the exchange-traded fund world, which makes this experience more noteworthy.
This is primarily due to the fact that investment banks and fund managers must raise a large amount of capital prior to instituting an initial public offering. As such, the strategy or manager must have a definable edge and significant influence to debut a fresh opportunity relative to the existing market.
My ears perked up this month when I noticed the release of the RiverNorth/DoubleLine Strategic Opportunity Fund (OPP). This fund marks another joint venture between RiverNorth (a prominent closed-end fund strategist) and DoubleLine Capital (a renown fixed-income manager). Previously, these two firms have successfully teamed up on open-ended mutual funds such as the RiverNorth DoubleLine Strategic Income Fund (RNSIX), which has $2 billion in total assets.
OPP debuted as a $210 million closed-end fund with two distinct portfolio sleeves that can be adjusted in size to capitalize on unique opportunities or manage specific risks. The tactical CEF income sleeve, managed by RiverNorth, has exposure limits of 10%-35% of total fund assets. This strategy will invest in a diverse pool of other closed-end funds to provide a high level of current income and capital appreciation potential. The tactical CEF sleeve will be similar in overall composition to the same opportunistic portion of the RNSIX portfolio.
The DoubeLine portion of the OPP portfolio can be shifted between 65%-90% of overall fund assets. As the more dominant strategy, this primarily fixed-income allocation will have a greater impact on the positioning and direction of the fund’s net asset value.
DoubleLine will invest heavily in mortgage-backed securities, asset-backed securities, and other commercial mortgage-backed securities. It’s my understanding after talking with a representative from RiverNorth that this bond sleeve will be similar in composition to the DoubleLine Opportunistic Credit Fund (DBL).
