Daily ETF Watch: A Free New Fund? Sort Of

December 10, 2014

Meb Faber, head of El Segundo, California-based Cambria Investment Management, today launched a globally focused multi-asset-class fund-of-fund ETFs that won’t have a management fee, a creative stroke likely to get the attention of others in the ETF industry that do charge advisory fees.

To be completely clear, the new Cambria Global Asset Allocation ETF (GAA) will cost investors 0.29 percent a year, or $29 for each $10,000 invested. That figure is the sum of so-called acquired fund fees that reflect the collective cost of the 29 different ETFs that make up the security. What Faber is not charging is the advisory fee for putting all those separate ETFs into one smoothly running exchange-traded wrapper.

GAA is an index fund that offers in one wrapper a global portfolio of stocks, bonds, commodities and real estate that is designed to, alone, represent an entire core asset allocation. GAA is a buy-and-hold version of more tactical approaches to global asset allocation, such as Cambria’s most recent fund, the Cambria Global Momentum ETF (GMOM).

Importantly, Cambria will actually begin to turn a profit on GAA should assets under management ever cross the $100 million threshold, as 10 percent of the ETF’s allocation is linked to three funds Cambria sponsors separately that are in the new security, Faber told ETF.com in a recent interview.

In broad perspective, Cambria’s waiving of its management fee is likely to get the attention of a variety of players in the ETF traffic. That includes robo advisors such as Wealthfront or Betterment that offer algorithmic riffs on buy-hold-and-rebalance index investing as well as ETF strategists that offer expertise in managing core-satellite-type ETF allocations. Both charge fees, ranging from 25 basis points a year to around 75 basis points.

One wonders whether Faber’s plan, if successful, won’t put new downward pressure on advisory fees that are already falling relative to what they were even five years ago. All of this downward pressure on fees is, of course, good for ETF investors, who can now access huge swaths of the investment universe and at rather low prices.

The new ETF, which has its primary listing on NYSE Arca, will trade under the symbol “GAA,” according to the fund’s latest prospectus.

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