ETF Watch: Cambria Plans Active Pot Fund

May 08, 2017

Cambria Investment Management has filed for five ETFs that target some very different slices of the global equity markets, including the marijuana industry. Although the marijuana ETF is actively managed, the others are index-based, tracking benchmarks based on Cambria’s proprietary algorithms.

The ETFs and their tickers are as follows:

Active Pot ETF
TOKE is the second filing for a fund that will cover the marijuana industry, but the first that is actively managed. According to the prospectus, the fund will cover companies that support or engage in the legal production of marijuana, those that conduct lawful research into how it can be used for medical or pharmaceutical purposes, and those that develop and produce equipment related to the marijuana industry or those that produce industrial hemp. Companies included in the index must either generate a significant portion of their earnings from these activities or publicly state that such activities are their primary business.    

Unsurprisingly, the words “legal” and “lawful” appear repeatedly in the prospectus. Generally, the fund will include 20 to 50 of the top marijuana companies in the global equity space. Holdings must meet size and liquidity requirements and also must not be subject to restrictions on ownership by U.S. citizens. The prospectus notes that the fund will be rebalanced at least annually, if not more frequently. Cambria will take a quantitative approach to managing the fund.

Tax-Optimized Funds
Both of these funds are equally weighted portfolios of 100 stocks, with one (DTAX) concentrated on domestic stocks and the other on foreign stocks (FTAX). Both rely on a quantitative approach that takes a multifactor perspective on value investing, with rankings based on such factors as price-to-sales, price-to-earnings and enterprise-value-to-EBITDA ratios.

Stocks with the highest dividend yields are screened out, as, the prospectus notes, they can be very tax inefficient, especially for those in the higher tax brackets. In addition, both funds have requirements with regard to market capitalization, sector concentration and liquidity. FTAX’s index also excludes any companies that are subject to restrictions on investments by U.S. citizens.

Robotics & REITs
RBOT tracks an index of companies that are involved in the global robotics automation and artificial intelligence industries. Companies with significant involvement in either of these spaces are eligible for inclusion. Their products can focus on a wide range of fields of usage, including everything from agricultural uses to 3D printers to video games to navigation systems.

Components must meet certain liquidity and market capitalization requirements and must not have restrictions on ownership by U.S. investors. The underlying index is equal weighted and can include 25 to 50 companies.

BLDG tracks an index that relies on value, quality and momentum metrics to select 100 REITs. The components are equal-weighted, and at least 30% of the index is allocated to non-U.S. REITs. As with the other funds, components in the index must meet size and liquidity requirements and be free of restrictions on ownership by U.S. investors, the prospectus said.

The filing did not include expense ratios or a listing exchange.

Contact Heather Bell at [email protected].

 

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