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ReFlow Redemption Service (RS) provides mutual funds with a unique source of just-in-time capital to manage daily shareholder redemption and subscription activity --- providing control and improving performance. RS delivers savings at a fraction of trading costs, while allowing managers to focus on investment decisions. |
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Who should use Redemption Service? |
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Managers who experience volatile investor flows. |
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Managers who invest in asset classes that have expensive transaction costs (including market impact). |
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Managers who would like to reduce their cash reserve held in order to protect against redemptions. |
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Managers who seek an innovative liquidity solution to meet cash requirements without the corresponding flow-driven trading. |
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How it works |
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RS provides a pool of equity capital that mutual funds access when they experience net redemptions. ReFlow exits its position when the fund subsequently experiences net subscriptions. During the holding period, ReFlow is a shareholder paying operating expenses and experiencing market risk. |
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Value Proposition |
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ReFlow can reduce trading in response to shareholder activity. |
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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. |
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ReFlow can incrementally improve after-tax fund performance. |
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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 with RS and leveraging ReFlow’s Redemption In-Kind (RIK) service to improve tax management, ReFlow can provide portfolio managers with the tools to better control transactions and realized capital gains. |
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Improve control of market exposure. |
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Allowing shareholders to impact the fund’s cash position provides the shareholder with control of market exposure. Studies have shown that these cash movements cause the fund to hold cash at the wrong time, typically costing 20-40 bps per year in performance. |
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