The combination of an Average People Pillar rating and a Low Process Pillar rating limit  Arrow Dow Jones Global Yield ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy gets a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in the Africa and Middle East region and an underweight in developed markets regions compared with category peers. The team managing the passive strategy earns the strategy an Average People Pillar rating. To be considered a quality steward, this strategy's parent organization needs to improve factors like a bench of portfolio managers with limited tenure and an unstable portfolio manager lineup. As a result, the firm obtains a Below Average Parent Pillar rating.

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Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Arrow Dow Jones Global Yield ETF earns a Low Process Pillar rating.  The main driver of the rating is the fund's weak long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 67% also detracts from the process. The parent firm's five-year risk-adjusted success ratio of 25% further holds the rating back. 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 modest success ratio suggests that the firm could do better across its fund lineup.

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

 The investment seeks investment results that generally correspond, before fees and expenses, and to the price and yield performance of the Dow Jones Global Composite Yield Index (the "index").  The fund uses a "passive" or "indexing" investment approach to seek to track the price and yield performance of the index. It invests at least 80% of its total assets in the component securities of the index (or depositary receipts representing those securities). The index seeks to identify the 150 highest yielding investable securities in the world within three "asset classes."  

 The portfolio is overweight in energy and real estate relative to the category average by 31.7 and 22.4 percentage points, respectively. The sectors with low exposure compared to category peers are technology and financial services, underweight the average by 15.5 and 13.5 percentage points , respectively. The portfolio is overweight in Middle East and Africa and Australasia regions relative to the category average by 5.3 percentage points and 4.5 percentage points, respectively. The regions with low exposure compared to their category peers are Developed Europe and United Kingdom, underweight the average by 5.6 percentage points and 4.9 percentage points, respectively.

Process

ArrowShares’s team receives An Average People Pillar rating. The most significant contributor to the rating is the combined average five-year excess return of each manager, which shows that the funds they manage have surpassed an average manager. The rating is limited by the instability of its management team. The fund last saw a manager change three years ago, which suggests that it could do more to retain its portfolio managers.

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 Dow Jones Global Yield ETF

GYLD tracks an index weighted equally between equities, sovereign debt, corporate debt, real estate and energy. The ETF seeks to invest in 150 securities and provide monthly distributions.

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