The combination of an Average People Pillar rating and a Low Process Pillar rating limit  Arrow Reserve Capital Management ETF to a Morningstar Medalist Rating of Negative.  Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest quintile among peers.  

 The strategy merits a Low Process Pillar rating. The management team aligns their interests with shareholders by investing alongside them, but it still gets an Average People Pillar rating. To be considered a quality steward, this strategy's parent organization needs to improve factors like a bench of relatively inexperienced portfolio managers and discontinuity among portfolio managers. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Arrow Reserve Capital Management ETF earns a Low Process Pillar rating.    The main driver of the rating is the parent firm's five-year retention rate of 67%, which suggests it could do more to retain its portfolio managers. The parent firm's five-year risk-adjusted success ratio of 25% also weakens the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup. Unimpressive long-term risk-adjusted performance further hinders the process. This can be seen in the fund's five-year alpha calculated relative to the category average, which suggests that the process has struggled over that period.

 The investment strategy as stated in the fund's prospectus is as follows: 


The investment seeks to preserve capital while maximizing current income.  The fund invests in a variety of domestic fixed income securities. The fund invests in fixed income instruments with a dollar-weighted average effective maturity of 0 to 2 years issued by U.S. Dollar-denominated issuers, including mortgage- or asset-backed securities, rated Baa- or higher by Moody’s Investors Service, Inc.(“Moody’s”), or equivalently rated by Standard & Poor’s Ratings Services (“S&P”) or Fitch, Inc.(“Fitch”), or, if unrated, and determined by the fund’s sub-advisor to be of comparable quality.

 This strategy's 12-month yield is 4.5%, lower than its average peers' 4.7%. A lower yield tends to indicate lower credit risk.

Process

Arrow Reserve Capital Management ETF earns an Average People Pillar rating. The main contributor to the rating is the portfolio managers' outperformance of peers at the funds they run, as measured by their combined three-year manager excess returns. The scale of the portfolio management team also influences the rating. With six portfolio managers, the fund is well-staffed. Lastly, the rating is limited by the instability of talent across its parent firm. The firm's asset-weighted manager tenure of seven years suggests it could do more to retain portfolio managers.


Jonathan S. Guyer’s veteran status, with 18 years of listed portfolio management experience, brings a wealth of experience to the table. The strategies they currently manage have an average Morningstar Rating of 2.7 stars, demonstrating disappointing risk-adjusted performance compared with category peers. The team's personal investments in the fund are insignificant, with the maximum investment by any one manager being between $10,000 and $50,000. That amount is too small to help align managers' interests with the fund's investors.

Average

People

In an increasingly competitive industry, ArrowShares falls behind on a number of key metrics, resulting in a Below Average Parent Pillar rating. With an average tenure of seven years among the longest-tenured managers at ArrowShares, the firm is on par with peers. Seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions. ArrowShares management has lacked continuity over the past five years, denoted by higher-than-average portfolio manager turnover, which detracts from the firm's stewardship rating. The firm charges fees on its open-end and exchange-traded funds that are on par with category peers. On average, fund fees on its products fall in the middle quintile, giving it neither an advantage nor disadvantage compared with the competition.

Below Average

Parent

Arrow Reserve Capital Management ETF

ARCM is an actively managed fund that seeks to preserve capital and maximize income potential by investing in investment-grade, short-term debt securities.

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