In a conversation last week with MFWire
, Arrow Funds
CEO Joe Barrato
laid out his company's plans for expansion, including the launch of its own distributor, and discussed his impressions of the changing ETF landscape. FINRA just approved Archer, the new Arrow distributor, which should be up and running later this year, and Barrato said the company is considering starting a focused RIA channel sometime in the next few years.
Arrow has been expanding at a deliberate pace into the crowded ETF field, launching its first ETF
in May and partnering with Gemini Fund Services
to set up an ETF trust, with the aim of advising active ETFs, as reported last Friday
. With exemptive relief to manage both passive and active ETFs, Barrato plans to partner with handpicked ETF shops and provide them with the regulatory framework to launch their products, with Arrow as the advisor.
And now Arrow is readying its own distributor, called Archer. Barrato said that the company "just got FINRA approval" for the launch. The company plans to move its sales force under the Archer umbrella, which Barrato says should give Arrow more flexibility.
An Arrow spokeswoman clarified that the new distribution arm is still "in the works," with no funds currently distributed through it, and said that it would probably get off the ground in the fourth quarter.
Barrato said that the example of companies like Russell and FocusShares that have gotten out of the ETF business highlights the need for quality distribution and a slow-and-steady approach.
"We got our passive ETF exemption in 2009. We knew we wanted to get into the ETF space, but we needed the distribution in place, and we wanted a product that we could really hang our hat on," he said. "Now we have a nice steady volume. I'm not saying we have a magic formula, but that doesn't happen without salespeople out on the street who understand the product."
Barrato said that the companies that have pulled out of the ETF space offer instructive cautionary examples. "Look at Russell. The went into ETFs and they failed," Barrato said. "One way not to fail is not to build ten or fifteen products at once." He added that FocusShares' decision to liquidate its ETF line "was not a surprise to me. That's a company that had good product ideas but a lack of distribution."
So after a year in which Arrow has formed a mutual fund trust and an ETF trust, launched its first ETF, and set up a distributor, Barrato said the company isn't done expanding. He said Arrow execs are considering starting a focused RIA channel down the road, "maybe when we hit a billion" in AUM. "That's something we've been talking about for a while," he said.
Finally, the firm is considering a move to Burtonsville, Maryland, from it's present home in Olney, Maryland, in order to accommodate its growth and centralize the operations. Burrato said that Arrow currently rents four separate office spaces in Olney, and hopes that the move, if it happens, will permit all the company's teams to work from a single location.
Stay ahead of the news ... Sign up for our email alerts now