ReFlow, a spin-off of Forward Funds, is all about liquidity. The big idea behind ReFlow is to provide a line of equity to funds, in order to reduce transactions and make funds more tax efficient. The service also gives funds ETF-like efficiency and works to make cash look like the rest of the portfolio.
"ReFlow now offers three services to aid funds in achieving these goals. "Alan Seigerman
, the Chief Operating Officer at ReFlow, told the MFWire
. "Each service is tailored to a solve a a particular liquidity problem a fund may be having", he added.
The first of the three services is the Redemption Service (RS). This service allows funds access to a source of just-in-time capital to manage daily shareholder activity.
The service works by providing a pool of equity capital to funds when they have net redemption and then ReFlow exits the position when the has net subscriptions.
Beneficiaries of this service would be managers who experience volatile flows, invest in asset classes with expensive trading costs, would like to reduce cash reserve, and those hunting for an innovative liquidity solution to meet cash requirements without the corresponding flow-driven trading.
The second service provided by Reflow is Redemption in kind (RIK). It is designed to level the playing field between mutual funds and ETF. RIK gives fund managers control and improves performance by reducing transactions and taxable distributions.
"RIK allows fund mangers to be true to their investment beliefs", Seigerman says.
Some examples of situations RIK would be advantageous in are -- managers who would like to reduce a position in a security without the transaction costs or the realization of capital gains; the need to sell positions and remain anonymous; and tax-managed funds hoping to reduce fund transactions and capital gains associated with those.
The third and newest of the three services is Client Tailored Equitization (CTE).
"It (CTE) allows funds time to seek the best execution of their strategies by creating a runway to the market," Seigerman explains.
ReFlow achieves this end by taking a payment from the mutual fund of the return on cash (Libor + Fee) and then paying the fund the change in it's NAV, adjusted for management fees.
Potential uses of CTE are -- for mangers the use futures to mitigate the tracking error caused by carrying cash in their portfolios, manager who like to carry a larger cash balance, but are concerned about the tracking error, and mangers who would like to gain or reduce market exposure without the transaction and portfolio re-balancing overhead.
The main idea behind all these services, says Seigerman, is, "to take away the obstacles and let fund managers focus on doing their jobs."
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