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Arrow Dynamic Income Fund
CLASS A SHARES: ASFFX
CLASS C SHARES: ASFTX
CLASS I SHARES: ASFNX
1-877-277-6933
(1-877-ARROW-FD)
www.ArrowFunds.com
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Summary Prospectus
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December
1, 2019
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Before you invest, you may want to review the
Fund’s prospectus, which contains more information about the Fund and its risks. The Fund’s prospectus and Statement
of Additional Information dated December 1, 2019, are incorporated by reference into this Summary Prospectus. You can obtain these
documents and other information about the Fund online at www.ArrowFunds.com. You can also obtain these documents at no cost
by calling 1-877-277-6933 or by sending an email request to Info@arrowfunds.com. Shares of the Fund are listed and traded on The
New York Stock Exchange (the “Exchange”).
Beginning on January 1, 2021, as permitted
by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder
reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will
be made available on the Fund’s website www.ArrowFunds.com, and you will be notified by mail each time a report is
posted and provided with a website link to access the report.
If you have already elected to receive shareholder
reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder
reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer
or bank) or, if you are a direct investor, by following the instructions included with paper Fund documents that have been mailed
to you. You may also elect to receive all future reports in paper free of charge.
Investment Objective: The Arrow Dynamic
Income Fund (the “Fund”) seeks income, and long-term capital appreciation with an emphasis on absolute (positive) returns,
low volatility and low correlation to the equity and fixed income markets.
Fees and Expenses of the Fund: This
table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge
discounts on purchases of Class A shares if you and your family invest, or agree to invest in the future, at least $25,000 in the
Fund. More information about these and other discounts is available from your financial professional and in Information About
Shares on page 39 and Appendix A of the Fund’s Prospectus.
Shareholder Fees
(fees paid directly from your investment)
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Class
A
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Class
C
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Institutional
Class
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Maximum Sales Charge (Load) Imposed on Purchases
(as a% of offering price)
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5.75%
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None
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None
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Maximum Deferred Sales Charge (Load)
(as a % of redemption proceeds)
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1.00%
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None
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None
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Annual Fund Operating Expenses
(expenses that you pay each year
as a percentage of the value of your investment)
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Management Fees
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0.75%
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0.75%
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0.75%
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Distribution and/or Service (12b-1) Fees
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0.25%
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1.00%
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0.00%
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Other Expenses(1)
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0.75%
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0.75%
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0.75%
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Acquired Fund Fees and Expenses(2)
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0.27%
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0.27%
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0.27%
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Total Annual Fund Operating Expenses
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2.02%
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2.77%
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1.77%
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(1)
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“Other Expenses” does not include the fees paid to the counterparties
to the Fund’s swaps (the “Swaps”), or the management fees, performance fees, and expenses of the trading vehicles
or commodity pools (“Underlying Asset”) that serve as the reference asset of the Swaps. These fees and expenses, which
are not reflected in the Annual Fund Operating Expenses table, are embedded in the return of the Swap and represent an indirect
cost of investing in the Fund. Generally, the Swap counterparties charge between .50% and 1% of the notional value of the Swap,
and the management fees of the Underlying Asset, which are paid to the commodity trading adviser (“CTA”), are 2%.
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(2)
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Acquired Fund Fees and Expenses are the indirect costs of investing in other
investment companies. The operating expenses in this fee table will not correlate to the expense ratio in the Fund’s financial
highlights because the financial statements include only the direct operating expenses incurred by the Fund, not the indirect costs
of investing in other investment companies.
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Example: This Example is intended
to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. This Example assumes that
you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. This
Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher or lower, based upon these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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Class A
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$768
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$1,172
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$1,600
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$2,788
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Class C
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$280
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$859
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$1,464
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$3,099
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Institutional Class
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$180
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$557
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$959
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$2,084
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Portfolio Turnover: The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover
may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs,
which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 307% of the average value of its portfolio.
Principal Investment Strategies: The
Fund primarily invests in fixed income securities of any maturity issued by the U.S. government or its agencies, collateralized
or corporate debt of any credit rating. In addition to the direct investments in U.S. government, collateralized and corporate
debt, the Fund will use swap agreements and other derivatives such as futures, options, and structured notes, as well as exchange
traded funds (“ETFs”), and other investment companies, (including affiliated funds), to obtain long and short exposure
within the same asset classes.
Arrow Investment Advisors, LLC (the “Advisor”),
actively manages the Fund’s dynamic fixed income strategies. These strategies consider micro and macro market factors derived
from analytical models taking US Treasury, credit, and high yield market trends into consideration. The Fund will invest in securities
of a particular fixed income asset category when market trends of that category are positive or, conversely, sell or hedge securities
in a fixed income asset category when trends are unfavorable. The Fund also allocates a portion of its assets to fixed income securities
for the purpose of generating income.
The Advisor allocates the Fund’s portfolio
across fixed income market segments (such as corporate) high yield debt securities, liquid credit default instruments (such as
credit default swaps), collateralized debt (such as mortgage-backed securities (“MBS”)) and longer-term U.S. Treasury
bonds (generally, 10-30 years). The Advisor seeks exposure to each market segment by taking a long, short, or neutral (investing
in cash or cash equivalents) position in the portfolio securities. The Fund’s exposure to any one investment segment will
vary over time.
The Fund’s investments in corporate debt
securities may be rated below investment grade (rated BB+ or lower by S&P or comparably rated by another nationally recognized
statistical rating organization (“NRSRO”)), also known as “high-yield” or “junk” bonds, and
in unrated debt securities determined by the Advisor to be of comparable quality.
MBS refers to a type of fixed income instrument
that represents an interest in a pool of mortgages, including residential MBS and commercial MBS, and includes securities issued
by government sponsored entities. The Fund may invest without limit in MBS that are rated below investment grade (i.e., “high
yield” or “junk” ratings). The Advisor considers MBS to be of investment grade quality if they are rated BBB
(or comparable) or higher by a NRSRO.
The Advisor utilizes research to invest in
(“hold long”) those assets expected to outperform their asset class, and sell all or part of an asset or sell short
(“short”) those assets expected to underperform their asset class. This long/short portfolio construction attempts
to provide absolute (positive) returns by minimizing the risk of substantial losses stemming from market declines, while reducing
volatility. The Advisor may also invest in cash and cash equivalents (“neutral”) when those assets are expected to
outperform other asset classes. The Advisor may generate income with hedging techniques on fixed income securities being held when
trends for that market segment are unfavorable. The Advisor may engage in frequent buying and selling of portfolio securities to
achieve the Fund’s investment objective.
Principal Investment Risks: As with all
mutual funds, there is the risk that you could lose money through your investment in the Fund. The Fund is not intended to be a
complete investment program. Many factors affect the Fund’s net asset value and performance.
The following risks apply to the Fund:
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Affiliated Investment Company Risk: The Fund invests in affiliated underlying funds (the “Arrow Advised Funds”),
unaffiliated underlying funds, or a combination of both. The Advisor, therefore, is subject to conflicts of interest in allocating
the Fund’s assets among the underlying funds. The Advisor will receive more revenue to the extent it selects an Arrow Advised
Fund rather than an unaffiliated fund for inclusion in the Fund’s portfolio. In addition, the Advisor may have an incentive
to allocate the Fund’s assets to those Arrow Advised Funds for which the net advisory fees payable to the Advisor are higher
than the fees payable by other Arrow Advised Funds. The Arrow Advised Funds in which the Fund may invest are not money market funds
and are more risky than a money market fund.
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Counterparty Risk: A counterparty (the other party to a transaction or an agreement or the
party with whom the Fund executes transactions) to a transaction with the Fund may be unable or unwilling to make timely principal,
interest or settlement payments, or otherwise honor its obligations.
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Credit Risk: There is a risk that issuers and counterparties will not make payments on securities
and other investments held by a Fund, resulting in losses to the Fund. In addition, the credit quality of securities held by the
Fund may be lowered if an issuer’s financial condition changes. Lower credit quality may lead to greater volatility in the
price of a security and in shares of the Fund. Lower credit quality also may affect liquidity and make it difficult for the Fund
to sell the security. The Fund may invest, directly or indirectly, in “junk bonds.” Such securities are speculative
investments that carry greater risks than higher quality debt securities.
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Derivatives Risk: The Fund may use derivatives (including swaps, structured notes, options,
futures and options on futures) to enhance returns or hedge against market declines. The Fund’s use of derivative instruments
involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional
investments.
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ETF Risk: ETFs are subject to investment advisory and other expenses, which will be indirectly
paid by the Fund. As a result, the cost of investing in the Fund will be higher than the cost of investing directly in ETFs and
may be higher than other mutual funds that invest directly in stocks and bonds. The ETFs in which the Fund invests will not be
able to replicate exactly the performance of the indices they track and the market value of ETF shares may differ from their net
asset value. Each ETF is subject to specific risks, depending on the nature of the ETF and ETFs that invest in the “Alternative
Asset” market segment may be more volatile than other Fund investments.
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Fixed Income Risk: The value of the Fund’s investments in fixed income securities
and derivatives will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value
of fixed income securities and derivatives owned by the Fund. On the other hand, if rates fall, the value of the fixed income securities
and derivatives generally increases. Your investment will decline in value if the value of the Fund’s investments decreases.
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Futures Risk: The Fund’s use of futures involves risks different from, or possibly
greater than, the risks associated with investing directly in securities and other traditional investments. These risks include
(i) leverage risk (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the futures contract
may not correlate perfectly with the underlying index. Investments in futures involve leverage, which means a small percentage
of assets invested in futures can have a disproportionately large impact on the Fund. This risk could cause the Fund to lose more
than the principal amount invested. Futures contracts may become mispriced or improperly valued when compared to the Advisor’s
expectation and may not produce the desired investment results. Additionally, changes in the value of futures contracts may not
track or correlate perfectly with the underlying index because of temporary, or even long-term, supply and demand imbalances and
because futures do not pay dividends unlike the stocks upon which they are based.
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Government Securities Risk: The Fund may invest in securities issued or guaranteed by the
U.S. government or its agencies and instrumentalities. These securities may be backed by the credit of the government as a whole
or only by the issuing agency. No assurance can be given that the U.S. government would provide financial support to its agencies
and instrumentalities if not required to do so by law. Neither the U.S. government nor its agencies guarantee the market value
of their securities, and interest rate changes, prepayments and other factors may affect the value of government securities.
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Issuer-Specific Risk: The value of a specific security can be more volatile than the market
as a whole and can perform differently from the value of the market as a whole. The value of securities of smaller issuers can
be more volatile than that of larger issuers. The value of certain types of securities can be more volatile due to increased sensitivity
to adverse issuer, political, regulatory, market, or economic developments.
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Junk Bond Risk: Lower-quality bonds, known as “high yield” or “junk”
bonds, present greater risk than bonds of higher quality, including an increased risk of default. An economic downturn or period
of rising interest rates could adversely affect the market for these bonds and reduce the Fund’s ability to sell its bonds.
The lack of a liquid market for these bonds could decrease the Fund’s share price.
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Leverage Risk: Using derivatives to increase the Fund’s combined long and short exposure
creates leverage, which can magnify the Fund’s potential for gain or loss and, therefore, amplify the effects of market volatility
on the Fund’s share price.
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Management Risk: The Advisor’s investment decisions about individual securities impact
the Fund’s ability to achieve its investment objective. The Advisor’s judgments about the attractiveness and potential
appreciation of particular investments in which the Fund invests may prove to be incorrect and there is no guarantee that the Advisor’s
investment strategy will produce the desired results.
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Market Risk: Overall securities and derivatives market risks will affect the value of individual
instruments in which the Fund invests. Factors such as domestic economic growth and market conditions, interest rate levels, and
political events affect the securities and derivatives markets. When the value of the Fund’s investments goes down, your
investment in the Fund decreases in value and you could lose money.
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MBS and Other Asset-Backed Securities Risk: In addition to the risks associated with other
fixed income securities, MBS and asset-backed securities are subject to certain other risks. The value of these securities will
be influenced by the factors affecting the housing market or the other assets underlying such securities. As a result, during periods
of declining asset values, difficult or frozen credit markets, significant changes in interest rates, or deteriorating economic
conditions, mortgage-backed and asset-backed securities may decline in value, face valuation difficulties, become more volatile
and/or become illiquid. The liquidity of these assets may change over time.
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Options Risk: There are risks associated with the sale and purchase of options. As a seller
(writer) of a put option, the Fund will tend to lose money if the value of the reference index or security falls below the strike
price. As the seller (writer) of a call option, the Fund will tend to lose money if the value of the reference index or security
rises above the strike price. As the buyer of a put or call option, the Fund risks losing the entire premium invested in the option
if the Fund does not exercise the option.
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Other Investment Company Risk: Other investment companies are subject to investment advisory
and other expenses, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund will be higher than
the cost of investing directly those other investment companies and may be higher than other mutual funds that invest directly
in stocks and bonds. Other investment companies are subject to specific risks, depending on the nature of the fund.
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Portfolio Turnover Risk: Portfolio turnover refers to the rate at which the securities held
by the Fund are replaced. The higher the rate, the higher the transactional and brokerage costs associated with the turnover, which
may reduce the Fund’s return unless the securities traded can be bought and sold without corresponding commission costs.
Active trading of securities may also increase a Fund’s realized capital gains or losses, which may affect the taxes you
pay as a Fund shareholder.
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Regulatory Risk: Regulatory authorities in the United States or other countries may restrict
the ability of the Fund to fully implement its strategy, either generally, or with respect to certain securities, industries or
countries, which may impact the Fund’s ability to fully implement its investment strategies.
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Residential Mortgage-Backed Securities (“RMBS”) Risk: RMBS are subject to the
risks generally associated with MBS. RMBS may not be backed by the full faith and credit of the U.S. Government and are subject
to risk of default on the underlying mortgages. RMBS issued by non-government entities may offer higher yields than those issued
by government entities, but also may be subject to greater volatility than government issues. Delinquencies and defaults by borrowers
in payments on the underlying mortgages, and the related losses, are affected by general economic conditions, the borrower’s
equity in the mortgaged property and the borrower’s financial circumstances.
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Sector Risk: The Fund may focus its investments in securities of a particular sector. Economic,
legislative or regulatory developments may occur that significantly affect the entire sector. This may cause the Fund’s net
asset value to fluctuate more than that of a fund that does not focus in a particular sector.
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Short Position Risk: The Fund will incur a loss as a result of a short position if the price
of the short position instrument increases in value between the date of the short position sale and the date on which the Fund
purchases an offsetting position. Short positions may be considered speculative transactions and involve special risks, including
greater reliance on the Advisor’s ability to accurately anticipate the future value of a security or instrument. The Fund’s
losses are potentially unlimited in a short position transaction.
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Swap Risk: Swaps are subject to tracking risk because they may not be perfect substitutes for the instruments they
are intended to hedge or replace. Over the counter swaps are subject to counterparty default. Leverage inherent in derivatives
will tend to magnify the Fund’s losses. The Fund is also subject to credit risk on the amount the Fund expects to receive
from swap agreement counterparties. If a swap counterparty defaults on its payment obligations to the Fund, this default will cause
the value of your investment in the Fund to decrease.
Performance: The bar chart and performance
table below show the variability of the Fund’s returns, which is some indication of the risks of investing in the Fund. The
bar chart shows performance of the Fund’s Class A shares for the past ten calendar years. The performance table compares
the performance of the Fund’s Class A shares over time to the performance of a broad-based market index and a supplementary
indexes. The Fund was reorganized on March 1, 2012 from a series of Northern Lights Fund Trust, a Delaware statutory trust, (the
“Predecessor Fund”) to a series of Arrow Investments Trust, a Delaware statutory trust (the “Reorganization”).
The Fund is a continuation of the Predecessor Fund and, therefore, the performance information includes performance of the Predecessor
Fund. You should be aware that the Fund’s past performance (before and after taxes) may not be an indication of how the Fund
will perform in the future. Although Class C shares (formerly known as Advisor Class shares) and Institutional Class shares would
have similar annual returns to Class A shares because the classes are invested in the same portfolio of securities, the returns
for Class C and Institutional Class shares would be different from Class A shares because Class C and Institutional Class shares
have different expenses than Class A shares. Updated performance information and daily net asset value per share information is
available at no cost by visiting www.ArrowFunds.com or by calling 1-877-277-6933 (1-877-ARROW-FD).
Class A Annual Total Return
(Years ended December 31):
Returns do not reflect sales charges and would
be lower if they did.
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Best Quarter
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9/30/2016
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3.58%
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Worst Quarter
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6/30/2010
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(5.28)%
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The year-to-date return as of the most recent
calendar quarter, which ended September 30, 2019 was 2.88%
Average Annual Total Returns
(as of December 31, 2018)
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Inception
Date
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One
Year
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Five
Years
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Ten
Years
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Since
Inception
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Class A Return Before Taxes
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10/31/07
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(6.55)%
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1.25%
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0.05%
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(0.91)%
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Return after Taxes on Distributions
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(6.82)%
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(0.02)%
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(0.67)%
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(1.63)%
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Return after Taxes on Distributions and Sale of Fund Shares
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(3.87)%
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0.41%
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(0.26)%
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(0.96)%
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Class C Return Before Taxes
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10/31/07
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(1.55)%
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1.71%
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(0.12)%
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(1.11)%
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Institutional Class Shares Return Before Taxes
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3/21/12
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(0.63)%
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2.71%
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N/A
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1.50%
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Bloomberg Barclays US Aggregate Bond Index
(reflects no deduction for fees, expenses or taxes)
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0.01%
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2.52%
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3.48%
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3.77%1
2.16%2
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Credit Suisse Fixed Income Arbitrage Hedge Fund Index
(reflects no deduction for fees, expenses or taxes)
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1.10%
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3.35%
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7.39%
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3.39%1
4.29%2
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PCM Emerald Long/Short Debt HF Index
(reflects no deduction for fees, expenses or taxes)
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(1.39)%
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(0.05)%
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2.94%
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3.45%1
(0.57)%2
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After-tax returns are calculated using the
highest historical individual federal marginal income tax rate and do not reflect the impact of state and local taxes. Actual after-tax
returns depend on a shareholder’s tax situation and may differ from those shown. After-tax returns for Class C and Institutional
Class shares will differ from those of Class A shares. The after-tax returns are not relevant if you hold your Fund shares in tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (“IRA”).
Investment Advisor: Arrow Investment Advisors, LLC
Portfolio Managers: The following individuals are primarily
responsible for the day-to-day management of the Fund’s portfolio:
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William E. Flaig, Jr.
Chief Investment Officer
Since October 2007
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Joseph Barrato
Portfolio Manager
Since July 2014
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Jonathan S. Guyer
Portfolio Manager
Since July 2014
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Purchase and Sale of Fund Shares: The
minimum initial investment in Class A and Class C shares of the Fund is $5,000 ($2,000 for retirement accounts) and the minimum
subsequent investment is $250. The minimum subsequent investment in Class A and Class C shares may be waived upon request. The
minimum initial investment in Institutional Class shares of the Fund is $1,000,000. Subsequent investments in Institutional Class
shares may be made in any amount. You may purchase and redeem shares of the Fund on any day that the New York Stock Exchange is
open. Redemption requests may be made in writing, by telephone, online at www.ArrowFunds.com, or through a financial intermediary
and will be paid by check or wire transfer.
Tax
Information: Dividends and capital gain distributions you receive from the Fund, whether you reinvest your distributions in
additional Fund shares or receive them in cash, are taxable to you at either ordinary income or capital gains tax rates unless
you are investing through a tax-free plan. However, these dividend and capital gain distributions may be taxable upon their
eventual withdrawal from tax-deferred plans.
Payments to Broker-Dealers and Other Financial
Intermediaries: If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund
and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create
a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another
investment. Ask your salesperson or visit your financial intermediary’s website for more information.
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