Arrow Investment Advisers, a Washington, D.C. based money-management firm, filed paperwork with the Securities and Exchange Commission to obtain permission to market actively managed ETFs, adding another layer to plans it first laid out two years ago to market index ETFs.
Arrow is one of a growing number of small advisory firms that are looking to add their own ETFs to their product mixes. In late July, a New York-based firm called Yorkville ETF Advisors filed to offer index ETFs. Also, Palo Alto, Calif.-based Wealthfront filed for permission to offer active equities and fixed-income ETFs in early July.
Arrow’s latest exemptive relief filing said the first active fund, tentatively named the Arrow Global Tactical ETF, will seek long-term capital appreciation, with capital preservation as secondary objective. It will invest mostly in equities, but also in fixed income and alternative asset classes to achieve capital preservation and for exposure to non-correlated assets, respectively.
Using a quantitative approach, Arrow said the fund will be designed to deliver its returns with reduced volatility and manageable risk. The equity portion of its allocation will come from common stocks, ETFs and other exchange-traded products, the filing said.
Arrow said that while the first fund isn’t likely to a so-called feeder fund, future funds it markets under the exemptive relief it is seeking will be feeder funds. Feeder funds wouldn’t make direct investments in any securities other than the shares of their respective master funds.
The company filed in August 2009 for regulatory approval to market index ETFs. The paperwork detailed a family of blended global funds that would combine equities and fixed-income in varying amounts depending on risk appetite.
Exemptive relief filings grant the ETF firms exception to sections of the Investment Act of 1940 and are just the first step in the path to launching ETFs. It often takes at least six to 12 months from the date of the initial filing for a company’s first ETF to hit the market.
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