ReFlow Launches Index Tracking Volatility of Fund Flows

 The monthly FLIX Index measures gross flows of long-term mutual funds as a percentage of average assets under management, expressed in basis points. A related FLIX Flow Barometer charts the ratio of inflows to outflows as an indicator of investor sentiment regarding mutual funds.   

Based on an analysis of data published by the Investment Company Institute (ICI) in its regular publication, Monthly Trends in Mutual Fund Investing, the FLIX Index covers all open-end, long-term mutual funds excluding money market funds and ETFs, according to a press release.   

“The FLIX Index aims to fill a gap in regularly published industry flow data, which historically has focused on net asset flows,” said Paul Schaeffer, president of ReFlow, in the announcement.  “While net flow data are important from an asset-gathering standpoint, an understanding of gross flows is necessary for funds that want to manage the disruptive effects of large redemptions or subscriptions on portfolio strategies, cash positions, and fund expenses.”   

Monthly FLIX data is published on www.reflow.com/flix. 

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May a Volatile Month for Fund Flows  

The newly launched ReFlow Fund Flow Volatility Index (FLIX Index), designed to help mutual fund managers better understand fluctuating asset flows and their impacts on fund performance, for May 2010 rose to 616, the highest level since March 2009 and a 15.4% increase over April 2010.   

The increase in volatility reflected a surge of redemptions during the month, reversing the pattern of sales-driven flows that prevailed over the past year, according to a press release. The FLIX Flow Barometer fell to -4.7%, registering the largest month-to-month drop in the past five years and the first negative value in 14 months.    

Taxable bond funds saw an especially sharp increase in flow volatility driven by the combination of record sales and an upswing in redemptions. The FLIX Index for bond funds rose to 878 in May, a 23.7% increase from the previous month’s value of 710. Simultaneously strong sales and redemptions pushed gross flows among taxable bond funds to $169 billion in May, the highest level on record, eclipsing even the $151 million in gross flows reported in October 2008 at the height of the financial crisis.    

While net flows remained positive, higher redemptions pushed the Bond Fund Flow Barometer down to 15.3%, substantially lower than the 50%-plus levels seen over most of the past year.   

The FLIX Index for equity funds climbed to 552 in May, up from 476 the previous month.  A wave of redemptions pushed the Flow Barometer for equity funds into negative territory, with outflows exceeding inflows by 16.3%.