> account login > careers > contact us
 
quoate-cancelmo
quote-imperiale
square1 square2
  Redemption In-Kind (RIK)
   
ReFlow’s Redemption In-Kind is a new service that levels the playing field between mutual funds and ETFs. The service reduces transactions and taxable distributions to fund shareholders --- providing control and improving performance. Delivering in-kind shares to ReFlow enables a mutual fund to dispense with shares the fund manager plans to sell without the transaction; ReFlow takes the shares. In-kind transactions enable the fund to transfer the shares to ReFlow based on the current NAV value (check with your tax advisor about tax treatment).
   
   
  Who should use Redemption In-Kind?
  RIK offers a significant value proposition to portfolio managers --- improved after-tax performance. If you find yourself in any of the following situations, you could benefit using RIK:
   
 
Managers who would like to opportunistically reduce positions in certain securities without incurring the transaction costs or realizing capital gains.
Managers who have positions to sell and want to remain anonymous.
Tax-managed funds that seek to reduce fund transactions and the associated realized capital gains.
Managers seeking an innovative liquidity solution to meet cash requirements without the corresponding flow-driven trading.
   
   
  How it works
  RIK works effectively in tandem with ReFlow’s Redemption Service (RS). Example: ReFlow’s Redemption Service (RS) purchases positions in the fund for a fee (e.g. 15 bps of the purchase amount) on days when the fund incurs redemptions. Within two weeks of the purchase, the fund may request ReFlow to redeem some or all of its holdings in the fund. Subsequently, ReFlow redeems its position and may request in-kind shares rather than cash for its redemption. The fund selects and delivers in-kind shares to ReFlow of equivalent value to its redemption.*
   
  redemption in kind
   
   
  Value Proposition
  The following outlines the value proposition for a sample fund normally carrying 6% cash balances with a target return of 15% and standard deviation of 9%. The fund has a 70% correlation to its closest futures contract.
   
  ReFlow reduces trading in response to shareholder activity.
  Shareholder buying and selling creates cash and trading burden on mutual funds. In recent years, daily net shareholder buying and selling has averaged $3.4 trillion annually.
   
  ReFlow can improve after-tax fund performance.
  In 2005, mutual fund shareholders paid over $15 billion in taxes; $8 billion of those taxes were due to the distribution of capital gains.** By reducing transactions and improving tax management with RIK, ReFlow can provide portfolio managers with the tools to better control transactions and realized capital gains --- and improve performance.
   
   
   
 

* In-kind securities must be liquid securities traded in the U.S. equity markets. ReFlow must be notified one hour before market close of the securities and
shares to be delivered. The value of the securities is based on market close and any difference between the shares delivered to ReFlow and the mutual
fund shares redeemed is corrected with a cash wire the following morning.

** Source: Lipper, “Taxes in The Mutual Fund Industry,” 2006.
   
   
 
 
 
 
 
 
home
Copyright © 2008 ReFlow Management Co., LLC