MANAGE VOLATILE OUTFLOWS AND INFLOWS
WHO CAN BENEFIT
Any fund concerned with volatility of flows, especially those in relatively illiquid and/or high-transaction-cost asset classes.
PROBLEM
Shareholder flows are becoming more volatile for several reasons:
- Market conditions are leading many investors to shift strategies or move to the sidelines.
- Patterns of fund ownership are changing, with wealth management platforms accounting for a rising share of assets. As a result, flows are becoming more concentrated.
- As growing numbers of Baby Boomers reach retirement, cash withdrawals from retirement plans are on the rise.
While shareholder flow has always sapped fund assets and performance, it is becoming an increasingly significant performance drain
SOLUTION
With both Redemption Service and NAVswap in place, funds can control their market exposure and maintain a targeted cash position without transacting securities.
In this scenario, ReFlow’s solution is triggered by either a net inflow or a net outflow exceeding predetermined thresholds.
- Funds may use NAVswap to either build up a cash cushion or keep net inflows on hand as they consider and pursue investment opportunities. In either case, they can accumulate cash without performance penalties; in fact, they can turn cash into a source of return matching NAV appreciation.
- Redemption Service swings into play when funds need to augment their cash—either because they need to meet redemptions or want more cash on hand in readiness for future redemptions or investment opportunities.
With this two-pronged solution, funds may equitize up to 15% of NAV in excess cash, or receive up to 3% of NAV in liquidity.
BENEFITS
ReFlow’s combined toolkit enables funds to:
- Smooth out the peaks and valleys of fund flows, reducing or eliminating the associated cost and tax impacts.
- Precisely manage cash position and market exposure within a range covering 18% of NAV.
- Maintain the integrity of their investment strategies.
