Commerzbank harnesses fund flow data for asset allocation indices

Oct 29th, 2015 | By | Category: Alternatives / Multi-Asset

Commerzbank, the German bank behind the ComStage range of exchange-traded funds, has announced the launch of a family of investable indices based on fund flow data from EPFR, a leading fund flow and asset allocation provider.

Commerzbank indices harness fund flow data in asset allocation

Commerzbank’s new index series utilises fund flow data in determining asset allocations.

Covering multiple asset classes including equities, commodities, fixed income and multi-asset, the indices track systematic strategies that utilise the predictive power of fund flow data to make asset allocation decisions. Their systematic nature means they can also be used as the basis for index-linked products such as exchange-traded funds.

Fund flows represent cash flowing into and out of mutual and exchange traded funds worldwide and exist due to the obligation of asset management companies and ETF providers, across the world, to report the amount of assets they manage within regulated funds.

Dr. Bernd Meyer, Head of Cross Asset Research at Commerzbank and who has researched fund flow data, commented: “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 both traditional and alternative funds domiciled globally with $24tn 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.

Jaime Uribe, Financial Institutions Marketing at Commerzbank, added: “As investor interest has steadily grown, there have been a number of smart beta product launches in recent months and years. 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.”

According to back-tested data, the indices have generated more than 10% annualised returns and are also available in volatility-control variants for more risk-conscious investors.

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