OLNEY, MD--(Marketwire - Jan 25, 2012) - Price gyrations in the commodities markets last year have highlighted important differences between familiar commodity indices and the benchmark for the Arrow Commodity Strategy Fund (
In 2011, the LEX outperformed the similarly comprised and weighted Dow Jones-UBS Commodity Index by 11.09%, while the S&P GSCI outperformed the LEX by 1.05% due to its heavy concentration in energy. Over the 10-year period, however, the LEX has outpaced both commodity indices with higher performance and lower volatility. The LEX delivered annualized 10-year returns of 14.22% with a standard deviation of 17.05% compared to the Dow Jones-UBS Commodity Index's 6.63% returns and 18.29% standard deviation and the S&P GSCI's 5.64% returns and 25.17% standard deviation for the same time period (Source: Bloomberg).
"We launched Arrow Commodity Strategy Fund just over a year ago to provide an alternative to the many commodity mutual funds and ETFs whose indices are not necessarily aligned with the goals and objectives of long-term investors," says Joseph Barrato, CEO and director of investment strategies at Arrow Funds. "The fund and its benchmark are designed to appeal to investors who seek broad-based commodities exposure, but with less of the asset class's characteristic volatility and turnover."
The Arrow Commodity Strategy Fund targets the performance of the Longview Extended Commodity Index (LEX), a commodity index created by Longview Strategic Research (www.Longview-SR.com), calculated and published daily by Dow Jones Indexes. As a benchmark, the LEX is differentiated by its long-term view of the commodities markets and its use of far-dated futures contracts. Unlike other commodity indices, which tend to use monthly rolls of futures contracts one to three months out, the LEX follows an annual roll cycle of futures contracts that are 12 to 15 months away from expiration.
"We believe the LEX provides a more pure representation of long-term global commodities markets versus other commodity indices," says William Albright, CEO of Longview. "Our methodology is based on longer-term holding periods with lower turnover which has historically improved performance by reducing short-term volatility and mitigating the effects of contango and portfolio turnover."
The LEX methodology offers broad-based commodities exposure across six major sectors: energy, livestock, grains, softs, precious metals and industrial metals. Each of the 16 individual commodity components was selected based on its liquidity, economic relevance and long-term market viability. Unlike other indexes that determine their component weights by committee or computer optimization, the LEX weights are based on the price value of the underlying futures contracts. This market-weighted approach allows the index to perpetually adjust, in terms of real dollars, to the ever-changing global commodities markets.
| Arrow Commodity Strategy Fund - Performance as of 12/31/2011 | ||||
| Ticker | YTD | 1-year | 3-year | Inception (12/31/2010) |
| CSFFX (A-Shares NAV) | -4.99% | -4.99% | -- | -4.99% |
| CSFFX (w/ Load) | -10.45% | -10.45% | -- | -10.45% |
| CSFTX (C-Shares) | -5.57% | -5.57% | -- | -4.99% |
| LEX | -2.23% | -2.23% | 13.49% | -2.23% |
| DJ-UBS Commodity | -13.32% | -13.32% | 6.39% | -13.32% |
| S&P GSCI | -1.18% | -1.18% | 6.93% | -1.18% |
Past performance does not guarantee future results. For periods less than one year, performance is not annualized. The performance data quoted represents past performance at net asset value and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-877-277-6933. The maximum sales charge for A-Shares is 5.75% and may be eligible for a reduction in sales charges. The fund charges a fee of 1.00% on redemptions of shares held less than 30 days. Arrow Commodity Strategy Fund has a contractual fee waiver in effect until at least 4/30/2012 to ensure that total annual operating expenses do not exceed 2.00% (A-Shares) and 2.75% (C-Shares), with total expenses estimated for the current fiscal year at 1.49% and 2.24%, respectively. Index returns assume reinvestment of dividends and do not reflect any management fees, transaction costs or expenses. Indexes are generally unmanaged and are not available for direct investment.
About Arrow Investment Advisors
Arrow Investment Advisors, LLC, the advisor to Arrow Funds, is an investment management firm dedicated to providing investment solutions, education and research to financial intermediaries. Arrow Funds identifies and develops investment products that seek to enhance returns and mitigate risk. The firm is committed to delivering superior performance while providing the highest level of customer service. To learn more, visit www.ArrowFunds.com.
Longview Extended Commodity Index (LEX) is a fundamentally constructed broad-based index for measuring the performance of the commodity markets. Unlike mutual funds, index returns do not include transaction costs, management fees or expenses. Longview Extended Commodity Index (LEX) is calculated by Dow Jones Indexes, the marketing name and a licensed trademark of CME Group Index Services LLC (CME Indexes). "Dow Jones Indexes" is a service mark of Dow Jones Trademark Holdings LLC (Dow Jones). The Arrow Commodity Strategy Fund, based on the LEX, is not sponsored, endorsed, sold or promoted by CME Indexes, Dow Jones or their respective affiliates, and CME Indexes, Dow Jones and their respective affiliates make no representation regarding the advisability of investing in such product(s).
For the 1-year period, the fund ranked in the 29th percentile among 117 funds in the Commodities Broad Basket category for the time period ended 12/31/2011. The ranking is for Class A-Shares only; other classes may have different performance characteristics. ©2011 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar, nor its content providers, are responsible for any damages or losses arising from any use of this information.
An investor should consider the fund's investment objective, risks, charges and expenses carefully before investing or sending money. This and other information about Arrow Funds is contained in the funds' prospectus, which can be obtained by calling 1-877-277-6933. Please read the prospectus carefully before investing. Arrow Investment Advisors serves as investment advisor to Arrow Funds, distributed through Northern Lights Distributors, LLC (member FINRA). Northern Lights Distributors, LLC and Arrow Investment Advisors are not affiliated entities.
The Arrow Commodity Strategy Fund may not be suitable for all investors. The fund may not replicate the exact performance of the benchmark because of fees, expenses, trading costs and portfolio tracking error of the underlying investments. The fund may invest in commodity-related securities, which may be subject to greater volatility than investments in traditional securities. The use of derivatives such as futures, options, structured notes, repurchase agreements and swap agreements may expose the fund to additional risks than investing directly in the underlying securities. Using derivatives with leverage can magnify gains or losses. Fixed income securities and derivatives may fluctuate with changes in interest rates. The fund may allocate assets to an offshore subsidiary, which is not subject to the Investment Company Act of 1940. Changes in laws could result in the inability of the fund to operate as described in the prospectus. Performance may be affected by underlying costs associated with the subsidiary, which are not directly reflected in the fund's expenses. (
0129-NLD-1/20/2012