PRESCOTT, AZ (TheStreet) -- As the quest for yield by investors continues, new ETF provider Arrow Funds is showing that it is willing to go anywhere, including Venezuela, to give investors what they want in the new Arrow Dow Jones Global Yield ETF (GYLD). This is a multi-asset class fund with equal 20% weightings to global corporate debt, global sovereign debt, global equity, global real estate stocks and global alternative. The global alternative segment is comprised of master limited partnerships and Canadian royalty trusts.
Within each of the five segments there are 30 holdings and each of the 30 has an equal target weighting. Arrow reports that the yield of the index is 7.43%,which after accounting for the 0.75% expense ratio should put the yield in the mid sixes. It is worth mentioning that ETFs do not always yield what they should. This can be due to rapid growth in assets managed by the fund; in the case of GYLD, it is because dividends paid by foreign companies tend to fluctuate more than with U.S. companies.
Arrow very usefully provides the yield of each of the five segments, which breaks down as follows: corporate debt yields 7.88%, sovereign debt yield 9.09%, equity 5.82%, real estate 6.45% and alternatives yields 7.91%. The 9% from the sovereign tranche is eye-popping, but it should be noted that in addition to Venezuela, this segment is heavily weighted to countries like Ireland, Hungary and Spain, so fund holders will be taking on credit risk.
There are also risks with the equity exposure. These segments are not made up of names like Consolidated Edison (ED) and AT&T (T). As one example, Navios Maritime Partners (NMM), is a cargo container company that currently yields 12.3%. At one point in 2008, the stock was down 82%. Another 2008-style meltdown is a very low probability, but it sets an expectation of the potential volatility the fund might have the next time there is a large decline in global markets -- even if that next large decline is not as steep as in 2008.The above risks don't necessarily mean the fund should be avoided. It is important to understand how a fund might work; as long as the market continues to go as it has for the last couple of years, this fund can do well and payout an attractive yield.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV