The indices track systematic strategies that leverage the predictive power of fund flow data to make asset allocation decisions.
Fund flows represent cash flowing into and out of mutual and exchange traded funds worldwide. The existence of fund flow data arises from the obligation of asset management companies and ETF providers across the world to report the amount of assets they manage within regulated funds.
The Commerzbank/EPFR family of fund flow indices contains both equity and cross-asset indices. The indices have reportedly generated more than 10% annualised returns in the back-tested history and are also available in volatility-control variants for more risk conscious investors.
The indices can be wrapped as an over-the-counter transaction, a certificate, a warrant, or even a mutual fund; and are designed for use by a diverse client base.
“In our experience, fund flows have the ability to prove particularly beneficial for allocation decisions within asset classes. They do indeed contain information beyond that contained in price momentum."
Bernd Meyer, head of cross asset research at Commerzbank, stated: “When deciding on tactical asset allocation, investors often support their decision-making process by using a scoring system that ranks the assets according to various momentum, valuation, or risk criteria.
“In our experience, fund flows have the ability to prove particularly beneficial for allocation decisions within asset classes. They do indeed contain information beyond that contained in price momentum.”
EPFR tracks over 72,000 traditional and alternative funds domiciled globally with $24 trn (£15.6trn, €21.8trn) in total assets. Strategists, traders, investors, and even supra-national authorities use EPFR flow and allocation data to gain the most current, global view of changing investor demand and manager positioning.
“As the investor interest has steadily grown, there has been a number of smart beta product launches in recent months and years,” explains Jaime Uribe, head of financial institutions marketing at Commerzbank.
“But a vast majority of these smart beta indices provide exposure to the already identified risk factors like quality, value and momentum. With the launch of our fund flow index family, we hope to bring investor attention to this new, alternative risk factor which can provide additional portfolio diversification benefits,” he added.
