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Are You Worried About
Equity Concentration?

The S&P 500 represents approximately 76% of the U.S. total market value, among these 500 stocks:
  • The combined market value of the top 44 companies is greater than the remaining 456.
  • The largest 25 companies represent over 40% of the S&P 500 total market value.
  • The largest 10 companies represent over 25% of the U.S. total market value.
YPS is a smart beta ETF innovation that can help bridge the gap between investment exposure. Most investors think they have large-cap exposure when what they really have is a concentrated mega-cap portfolio.


Top 10 Companies
% of Overall Market Value
Top100MktVal-YPS043021.jpg
Past performance does not guarantee future results. Data source: Morningstar, calculated by Arrow, as of 4/30/2021. Top 10 companies represent the top 10 companies of the overall market.

Unique Exposure to
Hidden Gems 

Market-cap weighting results in a top-heavy portfolio.

The reverse approach on the S&P 500 does the opposite, weighting companies the inverse of their relative market-cap.

This provides exposure to hidden gems within the S&P 500.

YPS can provide more diversification with less concentration in mega-cap stocks.

Unique Approach: WeightingUniqueApproach-Weighting-350px.jpg
For illustrative purposes only.

Online Brokers
(CBOE: YPS) can be found through your financial advisor or at most leading online brokers.

InteractiveBrokers ETrade CharlesSchwab
TDAmeritrade TradeStationrobinhood300.png
Fidelity Vanguard

Trademarks and names are the property of their respective owners and do not imply any endorsement of Arrow Funds and its affiliates. By clicking on or copying any of the links above you will be leaving the Arrow Funds site and entering a third party site. Arrow Funds is not responsible for any information contained on these third party sites. Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.

Smart Beta to Bridge the Gap 
in Your Portfolio

Portfolios that allocate weightings by market capitalization skew to the largest stocks. This leaves large sections of the market under-represented or not represented at all.

Reverse-cap weighting results in a weighted average market cap that is both lower than market-cap weighted large-cap funds and higher than mid-cap funds.

YPS gives investors a tool to gain exposure to a sizeable gap in their holdings.

SmartBetaTable-052421.jpg
Past weights are not indicative of future weights. Source: Morningstar, calculated by Arrow. Data as of May 24, 2021. Market-Cap is S&P 500 and Reverse-Cap is the Arrow Reverse Cap 500 ETF.
Value Tilting

  • YPS's benchmark finds value in the smaller companies within the S&P 500. 

  • Large companies with strong fundamental attributes are more likely to pay dividends, have solid balance sheets, and are better equipped to withstand an economic slowdown.

  • An inverse* capitalization approach to the S&P 500 has outperformed the S&P 500 Value
    over a rolling 10-year basis 99% of the time since 1997.

  • An inverse* capitalization approach to the S&P 500 has outperformed
    the S&P 500 over a rolling 10-year basis 91% of the time since 1997.


Hedge Your Market-Cap Exposure

YPS can be used as a tactical position to help lower your portfolio’s average market-cap exposure. This focused methodology makes YPS a better core position.

Reverse cap weighting attempts to fill this gap by:
  • Lowering your portfolio’s average market-cap exposure.
  • Providing more diversification with a less concentrated portfolio.
  • Avoiding the “buying high” bias by rebalancing based on current market capitalization every quarter.
  Exchange Traded Funds Mutual Funds
  % Top 10 HoldingsAvg # of Holdings% Top 10 HoldingsAvg # of Holdings
Large Blend41.38%30832.55%337
Large Growth44.20%15844.01%112
Large Value28.15%21628.67%145

Past holdings are not indicative of future holdings. Morningstar Categories Source: Morningstar, as of February 2021.


Prepared for Market Environment Change

The market concentration ratio measures the long-term return spreads between a market-cap and a balanced portfolio. 
  • New high in March 2020 (previously February 1999)
  • Trended downward from February 1999 to September 2009
    • S&P 500 cap-weighted underperforms value
When the U.S. equity market is trending away from its concentrated focus, portfolios that favor value stocks can help hedge from the market risk that comes from that transition. 

Market Concentration Ratio - Shifting Away from Passive Market
MktContrRatio-043021v2.jpg

Past performance is not indicative of future returns: S&P 500 Value, S&P 500 CW (cap weighted- S&P 500), S&P 500 IW* (Inverse Weighted Strategy of the S&P 500). Source: Morningstar and S&P, calculated by Arrow.

Market Intelligence
Studying the asset flow trends of the overall equity market can also be very telling.

Flows-YPS-042021.jpg

Past flows are not indicative of future flows. Source: Morningstar, as of April 2021.

The Arrow Reverse 500 Cap ETF may not be suitable for all investors. Investments involve risk. Principal loss is possible. As with all index funds, the performance of the Fund and its Index may differ from each other for a variety of reasons. For example, the Fund incurs operating expenses and portfolio transaction costs not incurred by the Index. In addition, the Fund may not be fully invested in the securities of the Index at all times or may hold securities not included in the Index. The Fund has the same risks as the underlying securities traded on the exchange through the day. To the extent the Fund invests more heavily in particular sectors of the economy, the Fund’s performance may be more sensitive to developments that significantly affect those sectors. Diversification does not assure a profit nor protect against loss in a declining market.


Past performance does not guarantee future results. Categories display the holding and flows of current funds in the Morningstar category during the time period shown, subject to survivorship and/or re-categorization. Index and strategy research returns assume reinvestment of dividends, but do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and are not available for direct investment.

*The S&P 500 CW is the S&P 500 cap-weighted. The S&P 500 was created in 1957. The S&P 500 IW is based on applying the inverse weighting to the S&P 500. The S&P 500 Inverse weighted strategy takes the same constituents of the S&P 500 but weighted them based on the inverse of their market capitalization. The strategy returns are hypothetical and are for educational purposes and do not represent the performance of the Arrow Reverse Cap 500 ETF. 


The S&P 500 Index is a market capitalization-weighted index focused on the large-cap segment of the market. The index is comprised of 500 of the top companies in leading industries in the U.S. economy. It is not possible to invest directly in an index. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); and this trademark have been licensed for use by SPDJI and sublicensed for certain purposes by AIA. These Funds are not sponsored, endorsed, sold or promoted by S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Reverse Cap Weighted U.S. Large Cap Index.


To view the most recent performance data, visit Arrow Fund's website here.

As with all funds, there is the risk that you could lose money through your investment in the Fund. Many factors affect the Fund’s net asset value, price of shares, and performance. As with any fund, there is no guarantee that the Fund will achieve its objective.

Before investing, please read the prospectus and shareholder reports to learn about the investment strategy and potential risks. Investing involves risks, including the potential for loss of principal. An investor should consider the fund’s investment objective, charges, expenses and risks carefully before investing. This and other information about the fund is contained in the fund’s prospectus, which can be obtained by calling 1-877-277-6933. 

Content reviewed by an affiliate, Archer Distributors, LLC.

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