With the recent launch of the Arrow DWA Tactical ETF (DWAT), which tracks our Global Macro strategy, we wanted to provide some ideas for some types of clients that are likely to be good prospects for the strategy. (Global Macro is now available as an ETF (DWAT), a mutual fund (DWTFX), as a SMA, and as a UMA (Wells Fargo Masters and DMA platforms).
“I love my Pie…Until I don’t” Guy
Strategic asset allocation seemed like such a prudent way to invest for this client. That is, until he noticed that his allocations to the different asset classes didn’t change much. Yes, he had exposure to U.S. Large, Mid, and Small equities, Developed and Emerging Market Equities, Fixed Income, and a sliver of Commodities. Yet, the exposure remained approximately the same in 1999, 2000, 2001, 2002…. And, yes, it remained approximately the same during the financial crisis of 2008-2009. This client has become increasingly aware of the fact that asset classes go through bull and bear markets and has asked you about what options there may be to be more flexible.
“Small Account with Big Expectations” Guy
You took the client on, even though he only had $100,000. Normally, your target client has $1 million or more in investable assets, but this client was a friend of one of your best clients. No way to turn this one down. However, this smaller client is well aware of the level of service that you provide your clients. He is aware of your commitment to being a craftsman in the Dorsey Wright methodology and he expects the same level of service that he has heard so much about. It is also in your DNA to do the very best job that you can for every one of your clients. While this small account might not be big enough to justify the time that you provide your bigger clients, DWAT will allow you to employ a methodology that you are comfortable with and that resembles the methodology that you use with all of your clients. Furthermore, when you speak to this smaller client it will be natural for you to explain the current exposure in the ETF and what types of asset class leadership you are currently seeing in the market.
“I love hedge funds, but not 2/20” Guy
This guy loves the concept of flexibility. He loves the idea of active management. He loves the idea of risk diversification. However, he doesn’t like lock-up periods, high minimums, high fees, and no transparency. Global Macro, aka the Arrow DWA Tactical ETF (DWAT), provides a welcomed alternative. DWAT offers transparency, intra-day liquidity, and much lower fees.
This guy makes the Dalbar numbers what they are. He buys high and he sells low. After the financial crisis he moved the bulk of his assets into bonds. He hasn’t lost money, but he has sure missed out on the spectacular gains in the equity markets. However, he is afraid he is about to repeat his old mistakes. He looks at the current holdings of DWAT and sees the heavy overweight to U.S. equities. He has been expecting “the other shoe to drop” for years now and is afraid of another major bear market. However, this client is thrilled when he learns of the adaptive nature of relative strength. Frankly, he is tired of trying to forecast the markets. He finds comfort that in learning that DWAT is a trend following strategy that has the ability to get very defensive in major bear markets. He is also now aware that part of risk management is participating in good equity markets and he likes the idea that this strategy will force him into asset classes that may not feel good to him, but that are favored from a relative strength perspective.
“Value Investor” Guy
This client is all about value. His favorite store is Wal-Mart and he only buys his suits on clearance. And he loves his value managers. In fact, the bulk of his portfolio is invested in strategies where the managers scour the globe for opportunities “where the market price is below intrinsic value.” However, he is not fond of the extended periods of time when value can be out of favor. He gets a rush off the first leg of new bull markets when his value managers tend to rocket off the bottom, but during the trend continuation phase of the market he gets antsy. When you explain to him that there is something called relative strength that tends to have a low correlation to value, he shows interest. With the addition of DWAT to his portfolio, he feels a much greater sense of diversification…even if he is still a value guy.
Click here for a prospectus. The relative strength strategy is NOT a guarantee. There may be times where all investments and strategies are unfavorable and depreciate in value.