Daily ETF Watch: Cambria Plans New Fund

August 29, 2014

Passively managed ETF will invest in multiple asset classes.

Cambria Funds recently filed paperwork with the SEC outlining plans for a multi-asset ETF that will track an index but that can buy a wide range of securities and investment vehicles.

The Cambria Global Asset Allocation ETF (GAA) will be tied to an in-house index and list on the NYSE Arca exchange. The fund is designed to “model absolute positive returns” while managing downside risk and volatility, according to the prospectus.

Asset allocation ETFs are a small but fast-growing area in the ETF space. Assets stood at slightly more than $5 billion, divided among nearly 40 funds, as of Aug. 22, according to ETF.com Analytics. That might not sound like much, but that represents a year-to-date increase in assets of about 31 percent.

GAA will rebalance its portfolio annually to 40 percent equity securities, 40 percent fixed-income securities and 20 percent other asset classes, the prospectus said. It also must allocate at least 40 percent of its portfolio to long or short exposures to foreign markets. In addition to being able to take short positions, the fund can also implement derivatives to achieve its objectives.

The index can include other exchange-traded products, such as ETFs, ETNs, closed-end funds and REITS, as well as individual securities. According to the prospectus, the index will rely on an algorithm to determine its components, which will be chosen based on how well they capture certain investment factors—value, momentum and trend investing, in particular.

Mebane Faber, Cambria Investment Management’s chief investment officer, will be one of GAA’s portfolio managers. Until a few months ago, Faber was the subadvisor to the Cambria Global Tactical ETF issued by AdvisorShares.

With his departure to focus on his own firm’s in-house ETFs, Morgan Creek Capital’s Mark Yusko took over the subadvising duties, and the fund was renamed the AdvisorShares Morgan Creek Global Tactical ETF (GTAA).

Much like GAA, the actively managed GTAA, on Cambria’s watch, used a qualitative approach and could invest in multiple asset classes and other exchange-traded products; it sought to earn positive returns while keeping downside risk in check. GTAA continues to pursue a similar course under Yusko’s management.

Cambria currently offers three ETFs, the largest of which is the Cambria Shareholder Yield ETF (SYLD | B-44), which has nearly $225 million in assets under management.

The filing for GAA did not include an expense ratio.

 

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