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ARROW DWA COUNTRY ROTATION ETF
DWCR
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 The
Nasdaq Stock Market, LLC (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 Dorsey Wright Country and Stock Momentum 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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0.70%
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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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0.90%
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Foreign Custody Transaction Expense
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0.09%
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Interest Expense
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0.03%
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Remaining Other Expenses
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0.78%
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Acquired Fund Fees and Expenses(1)
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0.08%
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Total Annual Fund Operating Expenses
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1.68%
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Fee Waiver(2)
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(0.73)%
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Total Annual Fund Operating Expenses After Fee Waiver
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0.95%
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(1)
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Acquired Fund Fees and Expenses are the indirect costs of investing in other
investment companies. The operating expenses in this fee table will not correlate to the expense ratio in the Fund’s financial
highlights because the financial statements include only the direct operating expenses incurred by the Fund, not the indirect costs
of investing in other investment companies
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(2)
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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 0.75%. 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 Fund’s 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 are as shown in the table above and
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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$97
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$458
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$844
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$1,926
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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 146% 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 relatively strong momentum characteristics
among the foreign universe. The foreign universe will be composed of countries from the developed and emerging markets, excluding
the United States. There is no consideration given to the allocation among developed and emerging 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 at least ten
countries with the highest relative strength among the universe of 41 foreign countries on a quarterly basis. The countries identified
are given equal weight. For each country identified, between five to ten equity securities within that country universe are selected
with the highest relative strength. The securities identified are equally weighted.
The Index looks at
a company’s location and economic ties in determining its country designation. Relative strength investing involves buying
securities that have appreciated in price more than the other securities in the country universe and holding those securities until
they underperform. The strategy is entirely based on market movement of the countries and relative strength of the securities within
those countries, and there is no company fundamental data involved in the analysis. The process is systematic and is repeated quarterly.
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.
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, other investment companies, 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
Investors should consider the following risk
factors and special considerations associated with investing in the Fund, which may cause them to lose money. Many factors may
adversely affect the Fund’s net asset value, trading prices, yield and performance.
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.
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 Markets Risk. In addition to
all of the risks of investing in foreign developed markets and emerging 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 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 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 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 Fund shares and the Fund’s net
asset value.
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The market price for the Fund’s shares may deviate from the Fund’s net asset value,
particularly during times of market stress, with the result that investors may pay significantly more or significantly less for
Fund shares than the Fund’s net asset value, which is reflected in the bid and ask price for Fund 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 Fund’s 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 Fund’s shares
and the Fund’s net asset value.
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In stressed market conditions, the market for the Fund’s shares may become less liquid in
response to the deteriorating liquidity of the Fund’s portfolio. This adverse effect on the liquidity of the Fund’s
shares may, in turn, lead to differences between the market value of the Fund’s shares and the Fund’s net asset value.
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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.
Momentum Risk. The price and performance
momentum of a security can change or may not continue, and securities with high relative performance may not continue to have such
relative performance.
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. The Fund does not take
defensive positions under any market conditions, including conditions that are adverse to the performance of the Fund, unless such
defensive positions are also taken by the Index.
Portfolio Turnover Risk. Portfolio turnover
refers to the rate at which the securities held by the Fund are replaced. The higher the rate, the higher the transactional and
brokerage costs associated with the turnover, which may reduce the Fund’s return unless the securities traded can be bought
and sold without corresponding commission costs. Active trading of securities may also increase the Fund’s realized capital
gains or losses, which may affect the taxes you pay as the Fund shareholder.
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.
Fund Performance
The bar chart and performance table below show
the variability of the Fund’s return, which is some indication of the risks of investing in the Fund. The bar chart shows
performance of the Fund’s shares for each full calendar year since the Fund’s inception. The performance table compares
the performance of the Fund’s shares over time to the performance of a broad market index and supplementary indexes. You
should be aware that the Fund’s past performance (before and after taxes) may not be an indication of how the Fund will perform
in the future. 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).
Total Return
(Year ended December 31):
Best Quarter
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9/30/2018
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2.33%
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Worst Quarter
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12/31/2018
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(11.89)%
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The year-to-date return as of the most recent
calendar quarter, which ended September 30, 2019 was 5.76%.
Average Annual Total Returns
(as of December 31, 2018)
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One
Year
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Since
Inception*
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Return Before Taxes
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(15.20)%
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(14.89)%
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Return after Taxes on Distributions
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(15.70)%
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(15.39)%
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Return after Taxes on Distributions and Sale of Fund Shares
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(8.78)%
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(11.42)%
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DWA Country and Stock Momentum Index(1)
(reflects no deduction for fees, expenses or taxes)
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(11.74)%
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(10.74)%
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MSCI ACWI Ex US Index(2)
(reflects no deduction for fees, expenses or taxes)
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(13.78)%
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(13.34)%
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MSCI Emerging Markets Investable Market Index(3)
(reflects no deduction for fees, expenses or taxes)
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(11.08)%
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(9.85)%
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*
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Commencement of trading was December 28, 2017
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(1)
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Dorsey Wright Country and Stock Momentum Total Return Index is constructed
pursuant to Dorsey, Wright & Associates proprietary methodology. The index has a relative strength focus that looks for the
10 strongest performing countries among a universe of 41 countries. Once the country is identified, the index methodology is designed
to identify 10 companies that demonstrate powerful relative strength characteristics within that country. The Fund and the index
are equally weighted and rebalanced and reconstituted quarterly.
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(2)
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The MSCI ACWI ex USA Index USD captures large and mid cap representation
across 22 of 23 Developed Markets countries (excluding the US) and 26 Emerging Markets countries. With 2,215 constituents, the
index covers approximately 85% of the global equity opportunity set outside the US.
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(3)
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The MSCI Emerging Markets Investable Market Index (IMI) USD captures large,
mid and small cap representation across 26 Emerging Markets (EM) countries. With 2,831 constituents, the index covers approximately
99% of the free float-adjusted market capitalization in each country.
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Investment Advisor: Arrow Investment
Advisors, LLC (the “Advisor”).
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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Since December 2017
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Joseph Barrato
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Portfolio Manager
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Since December 2017
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Jonathan S. Guyer
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Portfolio Manager
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Since December 2017
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Purchase and Redemption of Fund Shares
The Fund will issue and redeem Shares at NAV
only in large blocks of 50,000 Shares (each block of Shares is called a “Creation Unit”) to authorized participants
who have entered into agreements with the Fund’s distributor. Creation Units are issued and redeemed for cash and/or in-kind
for securities. Individual Shares of the Fund may only be purchased and sold in secondary market transactions through a broker
dealer. Except when aggregated in Creation Units, the Shares are not redeemable securities of the Fund. Shares of the Fund are
listed for trading on The Nasdaq Stock Market, LLC (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 are generally
taxable as ordinary income or capital gains. A sale of Shares may result in capital gain or loss.
Payments to Broker-Dealers and Other
Financial Intermediaries
Investors purchasing shares in the secondary
market through a brokerage account or with the assistance of a broker may be subject to brokerage commissions and charges. 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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