Arrow’s First ETF Is A Global Payout Fund
May 08, 2012
Arrow Investment Advisors, the Olney, Md.-based mutual fund manager behind the ArrowShares brand, today rolled out its first ETF, a broad-based global fund that canvasses several traditional and alternative asset classes in search of yield.
The Arrow Dow Jones Global Yield ETF (NYSEArca: GYLD), which tracks the Dow Jones Global Composite Yield Index, will go head-to-head against another newcomer: the iShares Morningstar Multi-Asset Income Index Fund (BATS: IYLD) launched last month, but GYLD costs 0.75 percent, while IYLD costs 0.60 percent.
Still, the fund is unique in that it diversifies exposure across five global segments—global equity, real estate, alternatives such as MLPs, corporate debt and sovereign debt—but it equally weights exposure to mitigate risk. Each of the segments represents 20 percent of the portfolio. The company said the fund was yielding 7.43 percent at the end of the first quarter.
GYLD is the latest in a quickly growing roster of income-promising ETFs that offer payouts at a time when developed markets are faced with ultra-low interest rates and choppy markets. Many fund providers such as iShares, Van Eck Global and Global X Funds have been racing to meet investor appetite for such strategies, although most funds are either debt- or equities-focused.
“The prevailing low interest rate environment has made it extremely challenging for income-oriented investors to generate substantial yield via traditional means,” Joseph Barrato, Arrow’s CEO, said in a press release.
“For investors seeking a higher-yielding core holding with similar historical risk to the S&P 500, we believe [GYLD] may be an appropriate substitution for high yield or moderately aggressive equity allocations,” he added. “GYLD is designed to tactically target yield, which may also make it suitable for investors seeking an adaptive element to their portfolio.”
Each of GYLD’s global yield segments comprises 30 holdings, which are also equally weighted. All in all, the portfolio consists of 150 securities in a mix that’s rebalanced quarterly. While Arrow will strive to fully replicate the index, it might also use representative sampling to do so.
Three of the five segments are equities based and reflect dividend distributions from securities like corporate stocks, real estate, energy-related preferred stocks and MLPs, according to data provided by the company. The fixed-income part of the portfolio derives yield from interest payments on the underlying bonds.
As noted, the mix has a composite yield of 7.43 percent based on the average yield of the five different underlying segments.
The bulk of the portfolio is allocated to North America, with the U.S. snagging 40 percent of the country exposure and Canada representing nearly 3 percent. In that vein, GYLD’s biggest currency allocation is to the U.S. dollar, which represents 56 percent of the fund’s currency exposure.
Some 28 percent of the fund is tied to financial-sector securities, followed by 16 percent allocated to communications and nearly 13 percent to energy, according to data provided by the company.
Arrow Investment Advisors is the investment advisor for the fund, but Omaha, Neb.-based Northern Lights is its distributor.
The fund was put into registration by the Northern Lights ETF Trust, which had obtained the “exemptive relief” from regulators that amounts to a general permission to market exchange-traded funds.