Arrow Investment Advisors, the Maryland-based advisor to Arrow Funds known for its offerings of open-ended tactical and alternative mutual funds, expanded its exchange-traded funds lineup with the launch of the Arrow DWA Tactical ETF (DWAT).
The go-anywhere actively managed fund seeks long-term capital appreciation while preserving capital and aims to achieve its investment objective based on the proprietary Dorsey Wright Relative Strength Global Macro model.
Hedge Funds across the globe implement the Global Macro model extensively and DWAT gives retail investors an opportunity to seek exposure in a strategy that shifts holdings in response to global macroeconomic trends.
The DWA RS methodology identifies relative strength across various asset classes and market segments and has the ability to shift its portfolio entirely into equities or fixed income depending upon market conditions.
Portfolio rotations involve buying securities or asset classes with high Relative Strength rankings while selling securities with low RS rankings. Dorsey Wright supplements the RS strategy with technical analysis to make investment decisions.
The new fund is positioned mainly as a fund of funds, which means it implements its investment strategy by buying other ETFs, including those covering developed and emerging markets.
DWAT offers targeted exposure to REITs and can buy debt securities of any credit rating. It can also take position in commodity futures, a segment the fund classifies as the alternative bucket, through a wholly-owned subsidiary in the Cayman Islands due to the location’s tax advantages.
The fund can invest up to 90 percent of the portfolio in alternative assets though no more than 25 percent of total assets can be routed through the Cayman subsidiary. It can also invest up to 30 percent of its portfolio in inverse ETFs to hedge downside risk if US equities decline for an extended period of time.
Healthcare Select Sector SPDR (XLV), Vanguard Mid-cap Value ETF (VOE) and Materials Select Sector SPDR (XLB) are the top three holdings of the fund.
DWAT has an annual expense ratio of 1.52 percent.
Disclosure: No holdings