Cambria Investment Management, the CA-based exchange-traded fund issuer better known for its alternative investment strategies (or Alts), did an encore recently by taking the “low-fee” concept a step further: it launched a zero-fee fund.
Cambria’s latest product – Cambria Global Asset Allocation ETF (GAA), charges 0.00 percent in management fees. Rather, it charges a modest 0.29 percent for meeting annual operating expenses to cover the average expense-ratio of the underlying 29 ETFs held by the portfolio.
GAA is essentially a “fund of funds” that invests in other ETFs. The actively-managed fund seeks to replicate the performance of a truly diversified global portfolio and invests in a basket of US and foreign equities, bonds, REITs, currencies and commodities.
Most of ETFs in the fund’s portfolio are issued by iShares and Vanguard and collectively give exposure to more than 20,000 individual securities around the world, according to Cambria.
At launch, GAA had about 50 percent exposure in bonds, 43 percent in equities and seven percent in commodities. Cambria recoups part of its own expenses by owning several of the firm’s four pre-existing ETFs although the fund initially will be a “net loser” until assets grow to $60-$100 million, according to portfolio manager Meb Faber.
The fund’s top 10 holdings include such funds as the Vanguard Total Bond Market ETF (BND), Vanguard FTSE Emerging Markets ETF (VWO), Vanguard Total International Bond ETF (BNDX) and iShares MSCI USA Momentum Factor ETF (MTUM). Other issuers include State Street, WisdomTree and Charles Schwab.
To be sure, apart from the obvious cost advantage, the fund has a few drawbacks. While GAA’s greater tilt toward fixed income assets may attract older investors, younger investors are unlikely to find it suitable; particularly the fund’s exposure in passive government bond funds like Vanguard’s BNDX – which has heavy exposure in German and Japanese government. bonds (both yielding around 0.5 percent for 10-year maturities), may actually give negative real returns in the short to mid-term.
But if you are looking for an inexpensive buy-and-hold portfolio with a slightly longer investment horizon, you may find GAA attractive.
Disclosure: No holdings
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