Alternative Investment Awards 2016 9 TM “When it comes to delivering returns and managing risk, each of our mutual funds and ETFs is unique in its investment methodology. As a firm, howev- er, we strive to deliver investments products that can help reduce risk and enhance returns as part of an overall, diversified investment portfolio.” Within the wider investment industry as a whole Joseph explains how the vast choice clients enjoy has had an effect on both Arrow and the market as a whole. “Investors today have more options than ever before. It used to be the case that unless you were a high-net worth or institutional investor you were pretty much limited to a stock and bond portfolio. The finance industry has evolved to address investors’ needs in a much more comprehensive way, providing financial advisors and their clients with access to alternatives and tactical investment strategies like managed futures, hedge fund replication strategies, smart beta equity strategies and more. At Arrow Funds we see ourselves as helping to push the industry along to better meet investors’ needs. We have been successful by packaging tactical and alternative in- vestments in retail-friendly product structures like mutual funds and ETFs that provide enhanced liquidity, affordability and convenience for investors. “While the industry has evolved to provide investors with more options, the road to getting investors to embrace non-traditional investments has not been a smooth one. During the financial crisis of 2008, the market environment called into question whether or not some of these alternatives really do have the ability to help manage risk and provide diversified sources of returns for investors. For instance, many mutual funds that were marketed as “absolute return” strategies fell short of investor expectations. What’s more—stocks bounced back in a big way in recent years, leading many to question the need for alternatives in the first place. During a bullish market it is easy to forget the lessons of the past and give into the temptation to go all-in on equities. “As a firm we have had to respond to these challenges by conducting a thorough review of our product line-up, making enhancements as needed and placing a renewed emphasis on providing investor education surround- ing the importance of incorporating tactical and alternative strategies into an investment portfolio. In a way we view alternatives much like we view insur- ance policies. The right time to be incorporating them into your portfolio is not when the stock market is tanking and you are looking for diversification. It’s more prudent to have an overall asset allocation plan in place ahead of time that incorporates diversified assets and investment strategies. “Therefore, as tactical and alternative investments continue to gain traction among financial advisors and their investor clients, many firms are beginning to look at ways to develop non-traditional mutual funds and ETFs. However, making institutional-style investments mainstream is part of our DNA at Arrow. Prior to founding the firm in 2006, my colleagues and I led product development for Rydex Investments (now part of Guggenheim). An industry innovator in leveraged/inverse mutual funds, Rydex also helped pioneer an industry push to package alternative assets and investment strategies in retail-friendly, ’40 Act mutual funds and ETF product structures. We played a crucial role in helping Rydex develop 40 investment vehicles to include many industry-firsts such as the first equally-weighted ETF (RSP), the first currency-based exchange traded products (CurrencyShares) and the first managed futures mutual fund. “At Arrow we have continued to build on our team’s legacy of innovation by delivering unique equity, managed futures, commodity, hedge fund replication and alternative income strategies to our clients. We have also been instrumental to the industry’s first MLP-based ETF by serving as the subadvisor for Alerian’s AMLP which grew to more than $1 billion in assets during its first year.” Ultimately, Joseph was keen to emphasise the firm’s dedication to educating and supporting clients. By helping them to manage their portfolios in an educated way they are aiding both the clients and the wider investment industry. “Here at Arrow Investment Advisors we are extremely committed to pro- viding investors with education and timely research to help them make informed investment decisions. This is a key focus for our business, and therefore we have a dedicated research arm—Arrow Investment In- sights—which publishes regular commentary and a quarterly newsletter. “Education is also a big part of our marketing and investor communica- tion efforts. We use our website and marketing emails to promote investor education, and have made a diverse line-up of educational collateral available on-line including pieces that explore yield, absolute returns, alternatives, commodities and other topical investing topics. For example, in 2008 we created a piece about equity Market Turns. In 2013 we started to educate the market about Relative Strength Turns. Both were powerful and timely opportunities for those that were brave enough to act. “Today the key topic of discussion is the commodity market turning. As with every investment product, commodities have historically gone in and out of favor. When they are in a prolonged period of delivering negative returns, at some point investors begin to wonder when they may begin to make a new upward turn. Many wait until the market has already gone up before they buy, and then panic when the market drops and sell when prices are low. Unfortunately, this investor behavior erodes returns on even the best-performing assets. We create these educational pieces to raise awareness with the hope of helping improve some of this investor behavior.” Moving forward, Joseph stated that the firm was keen to continue offering innovative investment solutions to clients, levering the relationships it has made in the wider industry to ensure investors receive the best value. “Looking to the future, we are always looking to bring value to our financial advisor clients, and one of the ways we do that is by partnering with other firms in the industry who have a well-defined skill set or area of expertise that is synergistic to Arrow’s capabilities and value proposition. For example, we have formed tremendous partnerships with firms such as DUNN Capital Management (managed futures), Dorsey Wright (Tech- nical Analysis), Ford Equity Research (smart-beta) and others to offer our clients access to unique investment strategies. We are experts in our field and our boutique nature enables us to be nimble and look for unique ways to bring value to our clients—whether through industry partnerships or through advisor-focused product development research and expertise. “As a boutique asset management firm we can be nimble and explore opportunities with a true focus on meeting financial advisors’ needs and delivering products that are differentiated in the market place. Look out for Arrow as we continue to build partnerships that benefit our clients.”