Good water flow allows the algae to efficiently release wastes as well as take in nutrients and carbon dioxide. It's very high surface area (the result of its thin, wiry form) helps with this. However, if water movement through the mass is weak, the plants can choke out, starve and eventually begin to die. So, if water does not appear to be briskly and evenly moving through the mat, it might be necessary to add supplemental flow to the refugium. Air pumps are great for this purpose; unlike water pumps, there is no water intake for the algae to get stuck in.
Salinity is an often-overlooked factor when cultivating macroalgae. By many accounts, rapid shifts in salinity can be detrimental to chaeto. This type of stress can occur following massive water changes where new water is poured in too quickly (especially if it is poured directly into the refugium). If using an automatic top-off system, be sure that the freshwater outlet is placed somewhere just downstream from the algae. Also, maintain a natural salinity level. Some aquarists maintain salinities as low as 1.020 s.g. either in the hope that they will ward off parasites (they don't) or save money on salt (come on!). A small handful of estuarine-adapted types such as Ulva can handle this; Chaetomorpha, certainly, cannot.
You may be "lucky" and your chaeto grows like mad. You've got powerful lighting, vigorous flow... But then, after doing so well for so long and filling the entire grow space, it crashes. This might have been because of overgrowth. When packed in this way, the inner and bottom parts of the algal mat do not receive adequate light or flow, no matter how strong your lights/pumps maybe! Chaeto must be harvested regularly—before it begins to crowd itself out. Most aquarists will remove something like 20% of the mass per harvest. This not only keeps the growth rate (i.e. nutrient removal rate) high but also prevents crowding.
Taking a little care to ensure the health of your chaeto can go a long way. While not bullet-proof, it is extremely hardy and adaptable and will, if provided with adequate growing conditions, never "go bad" on you.