Are there any anticipated changes in the fund’s portfolio composition or credit quality as a result of the lawsuit outcomes?

Answer

The Easterly ROCMuni High‑Income Municipal Bond Fund (RMJAX/RMHV K/RMHIX) is now facing a class‑action deadline (Sept 22) that forces all investors who bought the fund between May 1 2024 and Aug 10 2025 to contact Wolf Haldenstein. In practice, the “lead‑plaintiff” deadline signals that the fund’s legal exposure is moving from a latent risk to an imminent, potentially material liability. When a municipal‑bond fund is sued over alleged mis‑representations of its credit‑quality or income‑generating profile, the most common outcomes are (i) a settlement that includes a cash‑outlay to claimants and (ii) a forced restructuring of the portfolio to reduce future litigation risk.

Portfolio composition: A settlement would likely be funded by liquidating a portion of the higher‑yield, lower‑rated munis that triggered the suit. Expect a near‑term shift toward a more conservative mix—i.e., a higher share of AA/AAA municipal bonds, a reduction in high‑yield “junk” muni exposure, and a modest increase in cash or short‑duration Treasury positions. The fund’s net‑asset value (NAV) could be trimmed by 1‑2 % in the next 4‑6 weeks as managers unwind the most vulnerable holdings.

Credit quality: Because the fund will be shedding its riskiest assets, the average credit‑rating of the remaining portfolio should improve modestly (roughly 0.5‑1 rating‑notch). However, the cash‑outlay required to satisfy claimants will also compress the fund’s yield, potentially prompting existing investors to redeem shares. Anticipated outflows could pressure the fund’s liquidity and force a further “quality‑first” rebalancing, which may keep the credit‑quality trajectory upward but at the cost of lower current‑income.

Trading implications: In the short term the market will price in the expected NAV drag and the credit‑quality uplift. The fund’s share price (RMJAX) has already shown a 4‑5 % discount to its 30‑day moving average, and the technical picture remains bearish (downward‑sloping trend line, bearish MACD crossover). For risk‑averse traders, a short‑position or a put‑spread on RMJAX could capture the downside as the fund likely trades at a discount while the restructuring process unfolds. Conversely, investors seeking a higher‑quality municipal exposure may consider re‑allocating into a comparable AAA/AA muni fund (e.g., iShares High‑Yield Municipal Bond ETF) to preserve yield with less litigation risk.

In short, the lawsuit outcome will push Easterly ROCMuni toward a more conservative, higher‑credit‑quality portfolio, but the associated cash‑outlay and potential redemptions will compress yields and create near‑term downside pressure on the fund’s price. Position accordingly—short the fund or rotate out into a higher‑rated municipal vehicle.