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ARROW DOGS OF THE
WORLD ETF
DOGS
1-877-ARROW-FD
(1-877-277-6933)
www.ArrowFunds.com
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Summary Prospectus
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December 1, 2019
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Before you invest, you may want to review the
Fund’s prospectus, which contains more information about the Fund and its risks. The Fund’s prospectus and Statement
of Additional Information dated December 1, 2019, are incorporated by reference into this Summary Prospectus. You can obtain these
documents and other information about the Fund online at www.ArrowFunds.com. You can also obtain these documents at no cost
by calling 1-877-277-6933 or by sending an email request to Info@arrowfunds.com. Shares of the Fund are listed and traded on NYSE
Arca, Inc. (the “Exchange”).
Beginning on January 1, 2021, as permitted
by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder
reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will
be made available on the Fund’s website www.ArrowFunds.com, and you will be notified by mail each time a report is
posted and provided with a website link to access the report.
If you already elected to receive shareholder
reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder
reports and other communications from the Fund electronically by contacting your financial intermediary (such as a broker-dealer
or bank) or, if you are a direct investor, by following the instructions included with paper Fund documents that have been mailed
to you. You may also elect to receive all future reports in paper free of charge.
Investment Objective: The Fund
seeks long-term capital appreciation by tracking the investment results of the AI Dogs of the World ex US Total Return Index (the
“Index”).
Fees and Expenses: The table
below describes the fees and expenses that you may pay if you buy and hold shares of the Fund (“Shares”). Investors
may pay brokerage commissions on their purchases and sales of Shares in the secondary market, which are not reflected in the table
or the example below.
Shareholder Fees
(fees paid directly from your investment)
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None
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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Management Fees
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0.60%
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Distribution and/or Service (12b-1) Fees
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None
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Other Expenses
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3.11%
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Foreign Custody Transaction Expense
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0.47%
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Interest Expense
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0.22%
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Remaining Other Expenses
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2.42%
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Total Annual Fund Operating Expenses
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3.71%
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Fee Waiver(1)
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(2.37)%
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Total Annual Fund Operating Expenses After Fee Waiver
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1.34%
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(1)
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The Fund’s advisor has contractually agreed to waive its fees and/or
reimburse expenses of the Fund until December 31, 2020 to ensure that the Fund’s Total Annual Fund Operating Expenses After
Fee Waiver and/or Reimbursement (exclusive of any front-end or contingent deferred sales loads, taxes, leverage interest, brokerage
commissions, expenses incurred in connection with any merger or reorganization, dividend expense on securities sold short, underlying
fund fees and expenses, foreign custody transaction costs and foreign account set-up fees and extraordinary expenses such as litigation)
will not exceed 0.65%. These fee waivers and expense reimbursements are subject to possible recoupment from the Fund in
future years on a rolling three-year basis (within the three years after the fees have been waived or reimbursed) if such recoupment
can be achieved within the lesser of the foregoing expense limit or the limit in place at the time of recoupment. This agreement
may be terminated by the Board of Trustees on 60 days’ written notice.
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Example
This example is intended to help you compare
the cost of investing in the Fund with the cost of investing in other funds.
This example assumes that you invest $10,000
in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes
that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. This example does
not reflect the brokerage commissions that you may pay to buy and sell Shares. Although your actual costs may be higher or lower,
your costs, based on these assumptions, would be:
1 YEAR
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3 YEARS
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5 YEARS
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10 YEARS
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$136
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$916
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$1,715
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$3,805
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Portfolio Turnover
The Fund pays transaction costs, such as commissions,
when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover will cause the
Fund to incur additional transaction costs and may result in higher taxes when Shares are held in a taxable account. These costs,
which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. During
the most recent fiscal year, the Fund’s portfolio turnover rate was 100% of the average value of its portfolio.
Principal Investment Strategies
Under normal circumstances,
substantially all of the Fund’s total assets will be invested in the component securities of the Index and investments that
have economic characteristics that are substantially identical to the economic characteristics of such component securities (e.g.,
depositary receipts, exchange traded instruments). Strictly in accordance with its guidelines and mandated procedures of the index
provider, the index selection methodology consists of long positions in the equity markets of foreign countries exhibiting weaker
momentum characteristics (worst performing countries over a designated period of time) among the foreign universe for the possibility
of a mean reversion opportunity, or a move in equity market prices and returns back to its historical average. The foreign universe
will be composed of countries from the developed, emerging market and frontier markets, excluding the United States. There is no
consideration given to the allocation among developed and emerging and frontier markets; the strategy of the Index will allocate
among them depending on global price trends.
In general, momentum
is the tendency of an investment to exhibit persistence in its relative performance; a “momentum style” of investing
emphasizes investing in securities that have had better performance compared to other securities. The Index selects securities
based on a contrarian approach that looks for value in securities where a return reversal is expected during a rolling 12-month
period for markets that previously experienced negative relative performance.
Mean Reversion strategies
prices and returns for the worst performing countries eventually move back toward the mean or average. On an annual basis, the
Index will allocate among the five countries with the weakest relative strength among the countries in the investment universe.
The investment universe is currently comprised of 44 countries, but may range from 40-48 countries. The Index selects stock baskets
representing the top 75% of the market capitalization for each country selected. The Index looks at a company’s location
and economic ties in determining its country designation. In general, weak relative strength is the tendency of an investment to
exhibit persistence in its relative performance to a comparable universe over a period of time. The Index is looking for countries
with the weakest relative strength among the countries in the investment universe.
Arrow Investment Advisors,
LLC (the “Advisor”) expects that, over time, the correlation between the Fund’s performance and that of the Index,
before fees and expenses, will be 95% or higher. The Fund may concentrate its investments in a particular industry or group of
industries to the extent that the Index concentrates in an industry or group of industries. Arrow Insights, a division of the Advisor,
is the index provider.
The Fund will generally
use a “replication” strategy to seek to achieve its investment objective, meaning the Fund will invest in all of the
component securities of the Index in the same approximate proportions as in the Index, but may, when the Advisor believes it is
in the best interests of the Fund, use a “representative sampling” strategy, meaning the Fund may invest in a sample
of the securities in the Index whose risk, return and other characteristics closely resemble the risk, return and other characteristics
of the Index as a whole. The Fund may also invest its assets in cash and cash equivalents, as well as securities and other instruments
not included in the Index but which the Advisor believes will help the Fund track the Index. For example, the Fund may invest in
securities that are not components of the Index to reflect various corporate actions and other changes to the Index (such as reconstitutions,
additions and deletions).
Principal Investment Risks
The following summarizes the principal investment
risks of the Fund.
The Shares will change in value, and you
could lose money by investing in the Fund. The Fund may not achieve its investment objective and an investment in the Fund is not
by itself a complete or balanced investment program. An investment in the Fund is not a deposit with a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Asset Class Risk. Securities in the
Index or in the Fund’s portfolio may underperform in comparison to the general securities markets or other asset classes.
Concentration Risk. The Fund may focus
its investments in securities of a particular industry to the extent the Index does. Economic, legislative or regulatory developments
may occur that significantly affect the industry. This may cause the Fund’s net asset value (“NAV”) to fluctuate
more than that of a fund that does not focus in a particular industry.
Early Close/Trading Halt Risk. An exchange
or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial
instruments may be restricted, which may prevent the Fund from buying or selling certain securities or financial instruments. In
these circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and may
incur substantial trading losses.
Emerging and Frontier Markets Risk. In
addition to all of the risks of investing in foreign developed markets, emerging and frontier market securities involve risks attendant
to less mature and stable governments and economies, such as lower trading volume, trading suspension, security price volatility,
repatriation restrictions, government confiscation, inflation, deflation, currency devaluation and adverse government regulations
of industries or markets. As a result of these risks, the prices of emerging and frontier market securities tend to be more volatile
than the securities of issuers located in developed markets.
Equity Securities Risk. Equity securities
are susceptible to general stock market fluctuations and to volatile increases and decreases in value. The equity securities held
by the Fund may experience sudden, unpredictable drops in value or long periods of decline in value. This may occur because of
factors affecting securities markets generally, the equity securities of a particular sector, or a particular company.
ETF Structure Risks. The Fund is structured
as an exchange traded fund (“ETF”) and as a result is subject to the special risks, including:
Not Individually Redeemable.
Shares of the Fund (“Shares”) are not individually redeemable and may be redeemed by the Fund at NAV only in large
blocks known as “Creation Units.” You may incur brokerage costs purchasing enough Shares to constitute a Creation Unit.
Trading Issues. Trading in
Shares on the Fund’s primary listing exchange (the “Exchange”) may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable, such as extraordinary market volatility. There can
be no assurance that Shares will continue to meet the listing requirements of the Exchange. An active trading market for the Fund’s
shares may not be developed or maintained. If the securities in the Fund’s portfolio are traded outside a collateralized
settlement system, the number of financial institutions that can act as authorized participants that can post collateral on an
agency basis is limited, which may limit the market for the Fund’s shares.
Market Price Variance Risk. The
market prices of Shares will fluctuate in response to changes in NAV and supply and demand for Shares and will include a “bid-ask
spread” charged by the exchange specialists, market makers or other participants that trade the particular security. There
may be times when the market price and the NAV vary significantly. This means that Shares may trade at a discount to NAV.
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In times of market stress, market makers may step away from their role of market making in shares
of ETFs and in executing trades, which can lead to differences between the market value of the Shares and the Fund’s NAV.
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The market price for the Shares may deviate from the Fund’s NAV, particularly during times
of market stress, with the result that investors may pay significantly more or significantly less for the Shares than the Fund’s
NAV, which is reflected in the bid and ask price the Shares or in the closing price.
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When all or a portion of an ETF’s underlying securities trade in a market that is closed
when the market for the Shares is open, there may be changes from the last quote of the closed market and the quote from the Fund’s
domestic trading day, which could lead to differences between the market value of the Shares and the Fund’s NAV.
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In stressed market conditions, the market for the Shares may become less liquid in response to
the deteriorating liquidity of the Fund’s portfolio. This adverse effect on the liquidity of the Shares may, in turn, lead
to differences between the market value of the Shares and the Fund’s NAV.
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Foreign Investment Risk. Returns on
investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Exposures
to foreign securities entail special risks, including risks due to: (i) differences in information available about foreign issuers;
(ii) differences in investor protection standards in other jurisdictions; (iii) capital controls risks, including the risk of a
foreign jurisdiction imposing restrictions on the ability to repatriate or transfer currency or other assets; (iv) political, diplomatic
and economic risks; (v) regulatory risks; and (vi) foreign market and trading risks, including the costs of trading and risks of
settlement in foreign jurisdictions. In addition, the Fund’s investments in securities denominated in other currencies could
decline due to changes in local currency relative to the value of the U.S. dollar, which may affect the Fund’s returns.
Geographic Concentration Risk. To the
extent the Fund invests a significant portion of its assets in the securities of companies of a single country or region, it is
more likely to be impacted by events or conditions affecting that country or region.
Index Risk. Unlike many investment companies,
the Fund does not utilize an investing strategy that seeks returns in excess of the Index. Therefore, it would not necessarily
sell a security unless that security is removed from the Index, even if that security generally is underperforming.
Limited History of Operations Risk. The
Fund is newly-formed with a limited history for investors to evaluate.
Management Risk. As the Fund may not
fully replicate the Index, it is subject to the risk that investment management strategy may not produce the intended results.
Non-Correlation Risk. The Fund’s
return may not match the return of the Index for a number of reasons, including: the Fund incurs operating expenses not applicable
to the Index, and incurs costs in buying and selling securities; the Fund may not be fully invested at times; the performance of
the Fund and the Index may vary due to asset valuation differences and differences between the Fund’s portfolio and the Index
resulting from legal restrictions, cost or liquidity constraints and; if used, representative sampling may cause the Fund’s
tracking error to be higher than would be the case if the Fund purchased all of the securities in the Index.
Passive Investment Risk. The Fund is
not actively managed and may be affected by a general decline in market segments related to the Index. The Fund invests in securities
included in, or representative of securities included in the Index, regardless of their investment merits.
Sampling Risk. The Fund’s use
of a representative sampling approach, if used, could result in its holding a smaller number of securities than are in the Index.
As a result, an adverse development with an issuer of securities held by the Fund could result in a greater decline in NAV than
would be the case if the Fund held all of the securities in the Index. To the extent the assets in the Fund are smaller, these
risks will be greater.
Small and Medium Capitalization Stock Risk.
The earnings and prospects of small and medium sized companies are more volatile than larger companies and may experience higher
failure rates than larger companies. Small and medium sized companies normally have a lower trading volume than larger companies,
which may tend to make their market price fall more disproportionately than larger companies in response to selling pressures and
may have limited markets, product lines, or financial resources and lack management experience.
Stock Market Risk. Overall stock market
risks may affect the value of the Fund. Factors such as domestic economic growth and market conditions, interest rate levels and
political events affect the securities markets. The values of equity securities could decline generally or could underperform other
investments due to factors affecting a specific issuer, market or securities markets generally.
Tracking Error Risk. Tracking error
is the divergence of the Fund’s performance from that of the Index. Tracking error may occur because of imperfect correlation
between the Fund’s holdings of portfolio securities and those in the Index, pricing differences, the Fund’s holding
of cash, differences on timing of the accrual of dividends, changes to the Index or the need to meet various regulatory requirements.
This risk may be heightened during times of increased market volatility or other unusual market conditions. Tracking error also
may result because the Fund incurs fees and expenses, while the Index does not.
Value Investing Risk. Value securities
are securities of companies in countries that may have experienced adverse business, industry or other developments or may be subject
to special risks that have caused the securities of those countries to be out of favor and, in turn, potentially undervalued. It
may take longer than expected for the value of such securities to rise to the anticipated value, or the value may never do so.
Fund Performance
Because the Fund does not yet have a full calendar
year of operations, no performance information is presented for the Fund at this time. Once available, performance information
will be presented in this section of this Prospectus. Also, shareholder reports containing financial and performance information
will be mailed to shareholders semi-annually. Updated performance information will be available at no cost by visiting www.ArrowFunds.com
or by calling 1-877-277-6933 (1-877-ARROW-FD).
Investment Advisor: Arrow Investment
Advisors, LLC.
Portfolio Managers: The following
individuals are primarily responsible for the day-to-day management of the Fund’s portfolio:
Name
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Title with Advisor
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When Began Managing Fund
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William E. Flaig Jr.
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Chief Investment Officer
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December 2017
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Joseph Barrato
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CEO
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December 2017
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Jon Guyer
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Portfolio Manager
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December 2017
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Amit Gutt
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Portfolio Manager
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January 2018
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Purchase and Sale of Fund Shares
The Fund will issue and redeem Shares at NAV
only in large blocks of 25,000 Shares (each block of Shares is called a “Creation Unit”). Creation Units are issued
and redeemed for cash and/or in-kind for securities. Individual Shares may only be purchased and sold in secondary market transactions
through brokers. Except when aggregated in Creation Units, the Shares are not redeemable securities of the Fund.
Shares of the Fund are listed for trading on
NYSE Arca, Inc. (the “Exchange”) and trade at market prices rather than NAV. Shares of the Fund may trade at a price
that is greater than, at, or less than NAV.
Tax Information
The Fund’s distributions generally will
be taxable as ordinary income or long-term capital gains. A sale of Shares may result in capital gain or loss.
Payments to Broker-Dealers and Other
Financial Intermediaries
If you purchase the Fund through a broker-dealer
or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary
and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s
website for more information.
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