Arch Indices VOI Absolute Income ETF retains its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in the Europe-Developed region and the communication services sector compared with category peers. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including modest portfolio manager turnover but is held back by portfolio managers with limited tenures at the firm.

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Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. Arch Indices VOI Absolute Income ETF earns an Above Average Process Pillar rating.  The leading factor in the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 100% also underpins the process. Lastly, the process is limited by the experience of the management team, which averages eight years at this fund.

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

 The investment seeks to track the performance, before fees and expenses, of the Arch Indices VOI Absolute Income Index.  The fund is an exchange-traded fund (“ETF”) that uses a “passive management” (or indexing) investment approach to track the performance, before fees and expenses, and of the index. The fund primarily invests in securities comprising the index.  

 The portfolio is overweight in consumer defensive and financial services relative to the category average by 18.6 and 18.3 percentage points, respectively. The sectors with low exposure compared to category peers are technology and healthcare, underweight the average by 20.2 and 8.2 percentage points , respectively. The portfolio is overweight in United Kingdom and Latin America regions relative to the category average by 10.3 percentage points and 4.0 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Developed Europe, underweight the average by 5.6 percentage points and 4.9 percentage points, respectively.

 The fund’s fixed-income allocation takes on less interest rate risk as the fund’s average duration is 1.8 years, to the category average’s 5.1 years.

Above Average

Process

Arch Indices’s team receives a Below Average People Pillar rating. The team benefits from the fund's structure. It tracks an index, which is helpful because historical data, like Morningstar's Active/Passive Barometer, reveals that index funds have generally outperformed their active counterparts, especially over longer time periods. However, the rating is weakened by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns. The number of months that the management team has been running this vehicle together also holds the rating back. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.

Below Average

People

A short track record, in this case only five months, is usually cause for caution when evaluating asset managers. However, Arch Indices has displayed qualities that suggest it can be trusted as much as the next asset manager, earning it an Average Parent Pillar rating. The firm currently manages one vehicle, with a total of $2.2 million under management across a team of three strategy managers.  The firm's earliest portfolio manager hire, Rafael Zayas, has 16 years of industry experience and has performed well on other strategies, which is reassuring. 
 
   

 As Arch Indices builds and continues to develop a track record, its rating will be adjusted accordingly.

Average

Parent

Arch Indices VOI Absolute Income ETF

VWI is a passively managed ETF that tracks an index of US equity securities and bond ETFs. The asset allocation fund uses an optimizer to maximize income and minimize volatility.

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Arch Indices has launched its debut exchange traded fund today that seeks to meet long-term investment goals while minimizing volatility. The Arch Indices VOI Absolute Income ETF (NYSE Arca: VWI) is a multi-asset fund targeting dividend stocks and bond ETFs.

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VWI is built around Arch Indices' proprietary Variance Optimized Indexing (VOI) methodology, a dynamic portfolio construction approach that weights each security in its underlying universe by taking into account its yield, volatility, and correlation to the rest of the portfolio.

Investors and Advisors Have Powerful New Tool In Efforts to Maximize Returns While Minimizing Volatility With the Launch of the Arch Indices VOI Absolute Income ETF (VWI)

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