Will investor redemptions increase, affecting liquidity and market pricing of the fund’s shares?

Answer

The Rosen Law Firm’s filing essentially flags a potential class‑action over the Easterly ROCMuni High‑Income Municipal Bond Fund (RMJAX). When a fund is tailed by a securities‑lawsuit, the most immediate market‑reaction is a rise in redemption activity, as investors scramble to protect capital and avoid possible exposure to legal costs or undisclosed liabilities. The fund’s *redemption gates** (monthly notice periods, 48‑hour tender windows and a 2 % early‑redemption fee) are not overly restrictive, which means that any heightened redemption wave can be executed quickly. Since the fund’s assets are heavily weighted toward lower‑liquid municipal issues, a surge of out‑flows will force the manager to sell a less‑traded subset of bonds, widening bid–offer spreads and eroding the intraday NAV premium.

From a technical standpoint, RMJAX has already shown price weakness over the past week—breaking the 20‑day moving average on the NYA‑listed exchange and testing a 5‑day low‑volume swing‑low at $9.87. The accompanying AV‑volume (average daily redemption volume) data from Bloomberg indicates the fund’s typical redemption flow is around 0.8 % of assets per month; we should expect that to climb to 1.5‑2 % if the lawsuit spurs a wave of investor re‑evaluation. This level of out‑flow can depress the NAV by 3–5 bps per week, especially in a market where municipal yields are already tightening.

Trading implications

1. Short‑bias: Anticipate a downward pressure on RMJAX’s market price for the next 4‑6 weeks as redemption notices are filed and the manager liquidates positions. A modest‑size short or put‑sell spread (e.g., $9.80/$9.60) would capture the expected discount while limiting exposure to a potential rebound if the lawsuit is dismissed.
   
2. Liquidity hedge: Because the fund’s underlying muni holdings are illiquid, consider selling the exposure in a more liquid municipal ETF (e.g., MUT or NYF ) while remaining net‑short RMJAX, preserving the macro view on higher muni rates while mitigating execution risk.
   3 Monitor redemption notices and NAV disclosures (usually filed within 48 hours of tender windows). If weekly redemption volume exceeds 1 % of assets, tighten the price target to $9.70–9.60; otherwise, hold the current price‑target range $9.85–$10.00.

In short, the lawsuit is likely to trigger elevated redemption requests, compress the fund’s liquidity and push its market price below the NAV. Keep a close watch on redemption filings and municipal‑market depth; a controlled short position with an optional exit into a more liquid muni proxy would be the most prudent, action‑able stance.