January 28, 2010
Advisors to the CRA Qualified Investment Fund Adopt ReFlow Liquidity Service
Will use ReFlow’s Redemption Service (RS) to manage impacts of shareholder flow while improving performance
(San Francisco, CA) ReFlow Management Co., LLC, a global provider of mutual fund liquidity and performance tools, today announced that Community Capital Management has signed up to use ReFlow’s Redemption Service for its actively managed fixed-income fund.
The Redemption Service gives mutual funds access to a pool of liquidity they can tap on demand to meet shareholder redemptions. ReFlow thus insulates funds and shareholders from the damaging repercussions of shareholder flows. Without a source of backstop liquidity, funds experiencing a wave of redemptions may find themselves forced to liquidate securities, incurring transaction costs and increasing fund expenses in the process.
The CRA Qualified Investment Fund CRA Shares (CRAIX) invests in high-credit-quality, undervalued government-related sectors of the bond market, such as municipal bonds and asset- or mortgage-backed securities. The CRA Qualified Investment Fund has invested more than $2.5 billion in community and economic development bonds since 1999.
“Reflow provides an additional source of liquidity which has proven to be a great value to our shareholders” said Michelle Rogers, portfolio manager for the CRA Qualified Investment Fund.
To date, ReFlow’s Redemption Service has provided more than $2.8 billion in liquidity to the firm’s clients. The service utilizes the mechanisms mutual funds already have in place, making it easy to use. In essence, ReFlow provides cash in exchange for a position in the fund, becoming a shareholder like any other. Funds then redeem ReFlow’s shares within 28 days as new inflows are received.
Paul Schaeffer, President of ReFlow, observed that mutual fund shareholder flows are becoming increasingly volatile, due to growing intermediation of investment, greater use of retirement funds, and other fundamental shifts in fund ownership and distribution. “Based on these long-term trends, fund managers can expect flow volatility to persist and worsen even as the market improves, making it that much harder and more costly to execute fund strategies,” he said.
ReFlow is unique among alternative liquidity sources in that it enables funds to meet redemptions while lowering expenses and improving performance. “We believe this kind of approach will increasingly be identified as a best practice for funds both in the U.S. and abroad,” said Schaeffer.
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 advanced performance-enhancing solutions have been approved by the boards of 23 mutual fund families, representing some $387 billion in assets, for use by 468 funds. For more information about ReFlow, please visit www.reflow.com; for more information on Community Capital Management, please visit www.ccmfixedincome.com.