A New Global Momentum ETF Strategy That Targets Outperforming Countries

Arrow Funds has partnered up with Dorsey Wright Associates to launch a global ETF strategy based on relative strength indicators to focus on countries with strong momentum.

On the last day of trading for 2017, Arrow rolled out the Arrow DWA Country Rotation ETF (NasdaqGM: DWCR), which has a 0.75% expense ratio.

The Country Rotation ETF tries to reflect the performance of the Dorsey Wright Country and Stock Momentum Index, which is comprised of developed and emerging country stocks exhibiting relatively strong momentum characteristics, according to a prospectus sheet.

Momentum reflects the tendency to exhibit persistence in relative performance, emphasizing securities that outperformed other securities. The index will pick out 10 countries out out 41 countries that have the highest relative strength on a quarterly basis and are equally weighted. The underlying benchmark will screen for a company’s location and economic ties in determining country designation.

“The momentum anomaly says that countries with high returns in the past will continue to outperform in the near future. There have been countless studies that show the benefit of momentum strategies in U.S. and foreign markets, and momentum strategies have had consistent performance. There are fundamental reasons to explain why momentum anomalies across countries are viable. There is a natural under-reaction by the market to information, and price momentum is not impacted by such fundamental trends. Another may be behavioral biases like investor herding,” according to Arrow Funds.

The new fund may provide investors with low correlation to domestic equity markets and another tool to diversify traditional international portfolios.

For more information on new fund products, visit our new ETFs category.