RiverNorth, DoubleLine Reopen $1 Billion Strategic Income Fund

RiverNorth and DoubleLine announced Thursday that the RiverNorth/DoubleLine Strategic Income Fund (RNSIX) has reopened to new investors.

RiverNorth CIO Patrick Galley said in a webcast that performance of the fund, launched at the end of 2010, had been very strong until the early part of this year, “until ‘fear and loathing’ came to dominate fixed income,” particularly among the 300 fixed income closed-end funds in its universe. That sector constitutes one of the three sleeves in RNSIX, along with DoubleLine Capital’s core fixed income sleeve and that firm’s opportunistic fixed income picks.

Galley (left) said that this summer, “when interest rates sold off,” RiverNorth descried the increased discount to the value of the underlying assets in closed-end funds “go from boring to a very strong opportunity.” That opportunity is so strong, in fact, that the fund now has 33% of its holdings in each of the three sleeves. At inception, 50% of the fund’s holdings were in DoubleLine’s core fixed income sleeve. “We soft closed as opportunity shrunk; now we’ve shifted, finding new opportunity,” especially since “discount volatility is what we like at RiverNorth.”

 During the webcast, DoubleLine Capital CEO Jeffrey Gundlach (right) noted that the announcement came on the same day that Federal Reserve Chairman Ben Bernanke announced that the Fed would continue its monthly bond purchases at the same level, rather than start tapering those purchases. Saying the FOMC move made it likely that “zero interest rates are here to stay for a long time,” Gundlach said that in the “beginning of a cyclical change, closed-end funds might be more attractive than open-end funds; they’re already cheap, and may become cheaper than open-end funds or bonds themselves.”

In addition to commenting on the possible reasons for the Fed’s decision, Gundlach said of the Strategic Income Fund that “I’m an investor in the fund and I’ve been happy with its performance.”

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Check out Gross, Gundlach Cheer as Fed Holds Off on ‘Death Swim’ on ThinkAdvisor.