December 11, 2008
RiverNorth Adopts ReFlow Service To Improve Fund Performance by Managing Large Inflows
Also signs up for ReFlow’s Redemption Service.
(San Francisco, CA) ReFlow Services LLC, a global provider of tools that help mutual funds improve performance by managing the impacts of shareholder flows, today announced that RiverNorth Funds has signed up to use ReFlow’s set of liquidity- and cash-balancing services for its Core Opportunity Fund.
While many mutual funds have been experiencing net outflows this year, RiverNorth, which specializes in closed-end funds and ETFs, had been seeking a way to better manage inflows. “If we get a large allocation in this less liquid market environment, we don’t want to be forced to deploy that capital right away,” said Patrick W. Galley, portfolio manager for the fund. “With ReFlow, we can take our time and implement our strategy more efficiently, getting the exposure we want at the right discount level.”
Without a way to manage inflows, funds are often forced either to hold excess cash, thereby increasing tracking error, or to compromise the execution of their investment strategy. ReFlow’s inflow solution enables fund managers to maintain a precisely targeted cash balance and invest inflows on their own time schedule, thus staying true to their investment strategies.
In essence, ReFlow guarantees funds a return on their cash matching the appreciation in their Net Asset Value (NAV). This improves funds’ performance by eliminating “cash drag” on their portfolios and putting more assets to work. It also provides a cash reserve that funds can draw upon to cover redemptions as needed.
RiverNorth has also adopted ReFlow’s Redemption Service for coverage of future redemptions. ReFlow offers mutual funds liquidity as needed to cover redemptions in exchange for shares in the fund, which are redeemed at any point within 28 days. In the interim, ReFlow operates as a shareholder.
Both ReFlow’s net inflow and outflow services may be turned on or off on a daily basis. In both cases, clients pay a transaction-based fee only when they use ReFlow’s services.
“Mutual fund managers are constantly faced with daily liquidity requirements that create conflicts with their long-term investment strategies. The current market environment only highlights what is a perennial problem for the industry,” said Paul Schaeffer, President of ReFlow. “We believe our approach to improving fund performance by managing the impacts of shareholder flow will increasingly be viewed as a best practice for funds both in the U.S. and abroad.”
About ReFlow Services LLC
Founded in 2002, ReFlow serves U.S. mutual funds and European investment funds (UCITS). The firm is headquartered in San Francisco with an office in Luxembourg. Its performance-enhancing toolkit has been approved by the boards of 18 mutual fund families, representing nearly $275.5 billion in assets, for use by 199 funds. Since January 2008, ReFlow has provided more than $880 million in liquidity to its mutual fund clients. For more information about ReFlow, please visit www.reflow.com; for more information on the RiverNorth Core Opportunity Fund, please visit www.rivernorthfunds.com.