ArrowShares joins the factor-based exchange traded fund movement today with the debut of the Arrow QVM Equity Factor ETF (NYSEArca: QVM).
The new ETF is an equal-weight fund comprised of 50 stocks that “simultaneously demonstrate strong quality, value and momentum characteristics. The use of a quality metric lends the portfolio a defensive characteristic by reducing overall volatility of returns and helping to mitigate losses during market declines. Meanwhile, the portfolio’s valuation and momentum metrics are designed to capture upward price movement,” according to Maryland-based Arrow.
The new ETF tracks the Arrow Insights Quality Value Momentum Index (AIQVM), which sports “a favorable risk/return profile relative to both the capitalization-weighted S&P 500 Index and the equal-weighted S&P 500 Index during the past 20 years,” according to ArrowShares. [ArrowShares Boosts ETF Lineup]
In addition to sporting a favorable risk/reward profile to the S&P 500 over the past two decades, the Arrow Insights Quality Value Momentum Index also compares favorably with single-factor strategies such as momentum and value.
“Arrow collaborated with Ford Equity Research to develop the AIQVM Index’s Tri-Factor screening process. Based in San Diego, California, Ford Equity has more than 40 years of experience providing their proprietary equity analysis to asset managers,” according to a statement issued by Arrow.
That tri-factor approaches marries the momentum, quality and value factors, perhaps the three most popular and studied investment factors. The new ETF uses the quality factor this way: “Quality factor scores are based on earnings variability, return on equity and return of earnings to shareholders in the form of dividends and buybacks.” [Quality and Dividends]
At the end of last year, the Arrow Insights Quality Value Momentum Index allocated 26.5% of its weight to the industrial sector and 18.5% to technology stocks. At 16.4%, financial services was the only other sector with a double-digit weight.
QVM is the third ETF from ArrowShares. In October, the firm introduced the actively managed Arrow DWA Tactical ETF (NasdaqGM: DWAT).
Arrow’s largest ETF is the Arrow Dow Jones Global Yield ETF (NYSEArca: GYLD). GYLD holds a basket of income-generating equity and fixed-income securities from non-traditional sources. GYLD has $188.5 million in assets under management.
ETF Trends editorial team contributed to this post.