Stock Analysis & Valuation RiverNorth Flexible Municipal Income Fund II, Inc. (RFMZ)

• Previous Close: $13.09
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	31.70	142
Intrinsic value (DCF)		n/a
Graham-Dodd Method		n/a
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

RiverNorth Flexible Municipal Income Fund II, Inc. (NYSE: RFMZ) is a closed-end management investment fund specializing in tax-exempt municipal securities. Headquartered in West Palm Beach, Florida, the fund was established in 2020 with a primary objective of generating current income exempt from regular U.S. federal income taxes and a secondary goal of achieving total return. RFMZ operates in the asset management sector, catering to income-focused investors seeking tax-efficient municipal bond exposure. With a market capitalization of approximately $309 million, the fund provides access to a diversified portfolio of municipal debt instruments, leveraging RiverNorth Capital Management's expertise in flexible income strategies. The fund's structure as a closed-end vehicle allows for stable capital deployment while offering liquidity through NYSE trading. RFMZ's focus on municipal securities positions it as a strategic holding for tax-sensitive portfolios, particularly in higher tax brackets, with its $1.0352 annual dividend per share reflecting its income-oriented mandate.

Investment Summary

RFMZ presents an attractive option for tax-advantaged income seekers, evidenced by its 100% net income coverage of dividends and $31.8 million net income for the period. The fund's 0.76 beta suggests lower volatility than the broader market, appealing to risk-averse fixed income investors. However, the $239 million debt load (77% of market cap) introduces leverage risk, and the zero cash position limits financial flexibility. The fund's niche focus on flexible municipal strategies differentiates it from conventional muni funds, but interest rate sensitivity remains a key risk. Current investors benefit from RiverNorth's active management approach in a sector where 85% of municipal bonds are held by individual investors, creating persistent demand for tax-exempt income vehicles.

Competitive Analysis

RFMZ competes in the specialized segment of actively managed municipal closed-end funds (CEFs), differentiating itself through RiverNorth's flexible mandate that allows tactical allocation across the muni curve and credit spectrum. Unlike traditional municipal CEFs that maintain static portfolios, RFMZ can adjust duration and credit exposure, providing potential downside protection during rate hikes. The fund's competitive edge lies in its ability to invest up to 20% in taxable fixed income for enhanced yield, a feature absent in pure municipal ETFs. However, its 1.32% expense ratio is higher than passive municipal ETFs (average 0.20%), creating a performance hurdle. RFMZ's small size ($309M AUM) limits economies of scale compared to mega municipal CEFs like NUV ($2.9B AUM), but enables more nimble trading in less liquid muni issues. The fund's 5.9% discount to NAV (as of latest data) is narrower than the 7.2% sector average, suggesting relatively stronger market confidence in its strategy versus peers.

Major Competitors

• Nuveen Municipal Value Fund (NUV): Nuveen's $2.9B AUM fund dominates the national municipal CEF space with scale advantages and 0.50% lower expense ratio than RFMZ. However, NUV follows a more conservative investment mandate without RFMZ's flexibility to adjust duration or blend taxable securities. NUV's distribution rate of 3.9% trails RFMZ's 5.2%, but its larger size provides better liquidity for institutional investors.
• Nuveen AMT-Free Municipal Credit Income Fund (NVG): NVG's $2.1B portfolio focuses on investment-grade munis, contrasting with RFMZ's ability to dip into high-yield municipals. NVG's 4.8% yield is comparable but less flexible in credit allocation. Both funds employ leverage, but NVG's 35% leverage ratio is more conservative than RFMZ's estimated 45%. NVG benefits from Nuveen's distribution network but lacks RiverNorth's tactical approach.
• iShares National Muni Bond ETF (MUB): This $45B passive ETF competes for tax-aware investors with a 0.07% expense ratio advantage over RFMZ. MUB provides pure-play AAA/AA exposure without RFMZ's credit flexibility, resulting in lower yield (2.9%). While MUB offers superior liquidity, it cannot actively manage duration or incorporate taxable bonds like RFMZ during unfavorable muni markets.
• PIMCO Municipal Income Fund II (PML): PML's $650M AUM and 5.8% yield make it a closer peer to RFMZ in size and strategy. Both employ active management, but PML's PIMCO affiliation brings global fixed income expertise whereas RFMZ specializes in domestic munis. PML's 1.45% expense ratio is higher than RFMZ's, but its longer track record (1998 inception) may appeal to conservative investors.