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ReFlow expands in-kind redemption service

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ReFlow Management, a San Francisco-based provider of performance tools to US mutual funds and European Ucits, has introduced a new client interface to its in-kind redemption service.

ReFlow Management, a San Francisco-based provider of performance tools to US mutual funds and European Ucits, has introduced a new client interface to its in-kind redemption service.

Its expanded functionality allows portfolio managers to review their redemption obligations and schedule in-kind redemptions online.

Except for the selection and transmittal of securities, the entire process may now be executed electronically.

ReFlow’s in-kind redemption service tool enables fund managers to raise capital for meeting redemptions without selling securities.

It offers mutual funds a way to lower shareholder taxes while improving performance, and helps to level the competitive playing field between mutual funds, exchange-traded funds and separately managed accounts.

ReFlow provides funds with needed cash by becoming a shareholder in the fund, and earns a transaction fee.

Funds later redeem ReFlow’s holdings with cash or, if they choose the ‘in-kind’ redemption option, with securities of equivalent value.

Transaction costs and capital gains distributions are lowered in either case, since ReFlow lets funds avoid selling securities for cash. Funds also gain control over the timing of transactions.

Funds choosing the in-kind option can further increase tax efficiency by selecting the lowest-cost-basis lots of the securities on their sell lists for redemption of ReFlow’s position.

ReFlow says shareholder redemptions and taxes are especially hot topics in light of market trends.

October saw record-setting monthly net outflows of USD86bn from stock funds and USD44.3bn from bond funds, according to Lipper.

‘As a result, many shareholders will now be facing big tax bills on losing funds that had to liquidate securities in order to meet redemptions. That’s a tough double-whammy for any investor to take,’ says Paul Schaeffer, president of ReFlow.

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