Arrow Plans High-Yield Bond ETF

May 07, 2013

Arrow Investments lays the groundwork to continue its push into yield-focused ETFs.

Arrow Investments this week put into registration with regulators a high-yield bond fund that would follow on the budding success the firm has had with its Arrow Dow Jones Global Yield ETF (NYSEArca: GYLD).

The proposed Arrow Global Enhanced High Yield Bond ETF will track the Global Enhanced HY Bond Issuers Index, and comprise below-investment-grade global corporate debt denominated in either U.S. dollars, euros, Canadian dollars or British pounds.

The fund will invest primarily in junk bonds, but may also allocate as much as 20 percent of the portfolio to other ETFs and derivatives, according to the filing with the Securities and Exchange Commission that was dated May 6, 2013.

The latest ETF amounts to Arrow’s effort to bring out more narrowly focused yield-generating strategies following on its first ETF, GYLD, which has gathered almost $80 million in roughly a year. The fund will face a roster of competitors including the iShares Global High Yield Corporate Bond Fund (NYSEArca: GHYG) and funds from Pimco and Invesco PowerShares, to name a few.

Hunting for yield is a popular theme in investing these days given the paltry income environment linked to the more traditional fixed-income instruments. Arrow is thus looking for ways to capture that investor demand, as its Chief Executive Officer Joseph Barrato pointed out in a recent interview with IndexUniverse.

In fact, the company has a lineup of passive and active strategies it’s looking to put into the regulatory pipeline—and hopefully launch—later this year, Barrato said.

Also, Arrow isn’t the only firm going out of its way to design and roll out yield-focused strategies in an ETF wrapper. For example, Christian Magoon—a well-known ETF expert who’s led Claymore in the past—said he is starting a new ETF firm, YieldShares, that will do nothing but create ETFs that focus on capturing and delivering yield.

Arrow didn’t disclose a ticker, fees or the index provider in the filing.

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