Arrow Investment Advisors has expanded its exchange traded fund (ETF) lineup with the launch of the Arrow QVM Equity Factor ETF (NYSE: QVM).
As the first ETF to leverage Arrow's self-indexing relief, QVM builds on the firm's existing ETF suite which includes the passively-managed Arrow Dow Jones Global Yield ETF (NYSE: GYLD) and the actively-managed Arrow DWA Tactical ETF (NASDAQ: DWAT).
"We are excited to introduce the Arrow QVM Equity Factor ETF as a compelling option for investors seeking an equity strategy that focuses on capturing market gains while minimising risk," says Joseph Barrato, CEO and Director of Investment Strategy at Arrow Investment Advisors, LLC. "While many equity index strategies are promoting 'smart beta' based on single market factors, QVM uses a Tri-Factor approach that equally incorporates three of the primary factors that drive stock prices: quality, value and momentum."
Based on the Arrow Insights Quality Value Momentum Index (AIQVM), the Arrow QVM Equity Factor ETF represents an equally-weighted portfolio of 50 stocks that simultaneously demonstrate strong quality, value and momentum characteristics. The use of a quality metric lends the portfolio a defensive characteristic by reducing overall volatility of returns and helping to mitigate losses during market declines. Meanwhile, the portfolio's valuation and momentum metrics are designed to capture upward price movement.
Historical analysis of the AIQVM methodology indicates a favourable risk/return profile relative to both the capitalisation-weighted S&P 500 Index and the equal-weighted S&P 500 Index during the past 20-years. The index analysis also compares well versus many single style/factor strategies, such as value stocks or price momentum stocks. Arrow QVM Equity Factor ETF (QVM) seeks to replicate the AIQVM Index — but it is important to keep in mind that the ETF's performance will differ from the index.
Arrow collaborated with Ford Equity Research to develop the AIQVM Index's Tri-Factor screening process. Based in San Diego, California, Ford Equity has more than 40 years of experience providing their proprietary equity analysis to asset managers.
"Ford Equity has a stellar reputation and we are pleased to leverage their research and analysis to develop the AIQVM Index and bring QVM to market," says Barrato. "We see QVM as a core equity holding for investors who wish to capitalize on the potential benefits of a blended approach to quality, value and momentum investing."