Cambria currently offers eight ETFs. Of those, five have a history longer than twelve calendar months, which is a minimum Alpholio™ requires to conduct an initial analysis. Of these remaining five products, three are actively-managed and two follow proprietary Cambria indices. This post, the first in a two-part series, focuses on the actively-managed Cambria ETFs. The second part will cover index-based funds.
We will evaluate each fund from the first full month since its inception through July 2016 using the simplest variant of the Alpholio™ patented methodology. This approach constructs a reference ETF portfolio with both fixed membership and weights that most closely tracks the returns of the analyzed fund. In essence, the reference ETF portfolio embodies average core exposures of the analyzed fund to various factors, indices and strategies over the analysis period. Since it constitutes a potential static substitute for the analyzed fund, i.e. it is an investment alternative, it also serves as a relevant performance benchmark for the fund. (Unlike with pure indices that are not investable, this real benchmark accounts for actual implementation costs.)
Let’s start with the oldest product, the Cambria Shareholder Yield ETF (SYLD). According to the firm, this actively-managed fund
…invests in 100 [U.S. listed] stocks with market caps greater than $200 million that rank among the highest in (a) paying cash dividends, (b) engaging in net share repurchases, and (c) paying down debt on their balance sheets.
Here is the resulting chart with statistics of the cumulative RealAlpha™ for the fund (to learn more about this and other performance measures, please visit our FAQ):
The fund did not not add value when compared to a reference ETF portfolio, which had a slightly lower volatility. The RealBeta™ of the fund was slightly higher than that of a broad-based domestic equity ETF.
The following chart with related statistics shows the constant composition of the reference ETF portfolio for the fund over the same evaluation period:
The fund had major equivalent positions in the PowerShares BuyBack Achievers Portfolio (PKW; an index-based ETF), WisdomTree MidCap Dividend Fund (DON), Guggenheim S&P 500® Equal Weight Technology ETF (RYT), FlexShares Quality Dividend Index Fund (QDF), PowerShares Dynamic Market Portfolio (PWC), and First Trust Large Cap Value AlphaDEX® Fund (FTA). The Other component in the chart collectively represents additional six ETFs with smaller weights, listed in the above table.
It should be noted that one of the well-known investment analytics firms classifies SYLD into the mid-cap value category. While this may be based on the assessment of the fund’s individual holdings, our analysis shows that the fund had primarily large-cap exposures. As a matter of fact, the fund’s prospectus states that
Although the Fund generally expects to invest in companies with larger market capitalizations, the Fund may invest in small- and mid-capitalization companies.
Next, we will analyze the Cambria Global Momentum ETF (GMOM). According to its issuer, the fund
…intends to target investing in the top 33% of a target universe of approximately 50 ETFs based on measures of trailing momentum and trend. The portfolio begins with a universe of assets consisting of domestic and foreign stocks, bonds, real estate, commodities and currencies.
The following chart with corresponding statistics illustrates the cumulative RealAlpha™ for the fund:
This fund also failed to add value compared to its reference ETF portfolio of a somewhat lower volatility. However, its RealBeta™ was only about one-third that of the broad-based stock market.
The following chart with associated statistics depicts the fixed composition of the reference ETF portfolio for the fund over the same analysis period:
The fund had major equivalent positions in the PowerShares Build America Bond Portfolio (BAB; an index-based ETF), SPDR® Nuveen S&P High Yield Municipal Bond ETF (HYMB), iShares Edge MSCI USA Quality Factor ETF (QUAL), iShares U.S. Utilities ETF (IDU), PowerShares Dynamic Food & Beverage Portfolio (PBJ), and iShares Global Healthcare ETF (IXJ). As in the previous analysis, the Other item in the chart collectively represents additional six ETFs with smaller weights, listed in the above table.
Finally, we will examine the Cambria Global Asset Allocation ETF (GAA). According to its issuer, the fund
…targets investing in approximately 29 ETFs that reflect the global universe of assets consisting of domestic and foreign stocks, bonds, real estate, commodities and currencies.
The following chart with accompanying statistics demonstrates the cumulative RealAlpha™ for the fund:
The fund moderately underperformed its reference ETF portfolio that had a slightly smaller standard deviation. The RealBeta™ of the fund was approximately the same as that of a traditional 60% stock / 40% bonds balanced portfolio.
The following chart and statistics show the composition of the reference ETF portfolio for the fund over the same period:
The fund had major equivalent positions in the iShares MSCI Kokusai ETF (TOK), PowerShares DB Commodity Index Tracking Fund (DBC), FlexShares iBoxx 5-Year Target Duration TIPS Index Fund (TDTF), iShares U.S. Real Estate ETF (IYR), VanEck Vectors Emerging Markets High Yield Bond ETF (HYEM), and SPDR® Barclays Investment Grade Floating Rate ETF (FLRN). The remaining ETFs in the above table constitute the Other element in the chart.
It has to be noted that GMOM and GAA are relatively new products with only about 18 months of available history as of this writing. Typically, Alpholio™ uses at least 36 months of data for a more accurate analysis, which was the case with SYLD.
If you would like to use our ETP Analysis Service to examine similar products, please register on our website.