Arch Indices has unveiled its inaugural exchange-traded fund (ETF), the Arch Indices VOI Absolute Income ETF (VWI). This multi-asset fund is designed to meet long-term investment goals while minimizing volatility. VWI aims to benefit from the capital appreciation potential of quality dividend-paying stocks, combined with potential volatility reduction from fixed income ETFs. It typically comprises 60 to 100 equity securities and up to 12 bond ETFs. These holdings are weighted using Arch’s “Variance Optimized Indexing” (VOI) methodology, which considers yield, volatility, and correlation to the portfolio when determining weights.
VWI is built to provide a goal-focused income solution with effective volatility reduction. It is based on the Arch Indices VOI Core Absolute Income Index and is listed on the NYSE Arca.
Arch Indices Co-Founder and CEO Yang Tang explained that VWI seeks to bypass the limitations of both passive and active management. While passive ETFs can be market-exposure-centric and not well-designed, active strategies can introduce errors. VWI aims to provide an optimized alternative by taking into account how stocks and bonds move together while maintaining a rules-based, transparent approach.
To be eligible for inclusion in the Index, equity securities must meet several criteria, including a minimum market cap of $2 billion, minimum daily average trading volume, and a minimum 3% dividend yield. They must also have a five-year track record of regular dividend payments. Bond ETFs are selected based on factors such as their historical correlation to equities.