Arrow Funds is launching a new ETF on the Bats Global Markets Exchange. It is a diversified, ultra-short term maturity fixed income portfolio that will be seeking capital preservation with maximum income. Called the Arrow Reserve Capital Management ETF, or ARCM on Bats, it aims to offer a sensible alternative to traditional money market funds or bank deposits.
“The current market environment has heightened the demand for compelling cash management strategies,” explains Joseph Barrato, CEO and director of investment strategy at Arrow.
The ETF is being sub-advised by Halyard Asset Management. Its objective is to maximise returns and income potential without substantially increasing portfolio risk. To this end it will be investing in a variety of fixed income securities that provide acceptable yield and return potential for a given level of credit risk and maturity. The average bond in the portfolio will have a maturity in the 18 month range, but this will ultimately vary depending on where Halyard sees interes rates heading.
“Regulatory changes in the money market space combined with a low interest rate environment have driven many investors to take a closer look at their cash management strategies,” says Michael Kastner, a principal at Halyard.
Arrows already has a number of ETFs available, including Arrow Dow Jones Global Yield (GYLD) and the active Arrow DWA Tactical ETF (DWAT).
Efficient, short-dated investment strategies like this are one way investors are getting spare cash to work harder, particularly while interest rates remain relatively low. Of course, investors will also have one eye on whether the Fed sticks to its plans to progressively raise rates through 2017. At the moment, imaginative, more high risk fixed income strategies are selling well.
This product has already been designed for big investors who want liquid exposure to an actively managed short term debt portfolio, but experienced investors may also wish to look at this as a short term high yield play.