The previous post in this two-part series covered the three actively-managed products out of the five Cambria ETFs with a sufficiently long history. This post will focus on the remaining two index ETFs.
Let’s start with the analysis of the Cambria Foreign Shareholder Yield ETF (FYLD). According to the sponsor, the fund follows a proprietary index that
…consists of stocks with high cash distribution characteristics. The initial screening universe for this Index includes stocks in foreign developed countries with marketing capitalizations over $200 million. The Index is comprised of the 100 companies with the best combined rank of dividend payments and net stock buybacks, which are the key components of shareholder yield. The Index also screens for value and quality factors, including low financial leverage.
As in the case of actively-managed Cambria ETFs, the evaluation with begin in the first full calendar month since the fund’s inception and end in July 2016. Here is a chart with related statistics of the cumulative RealAlpha™ for the fund:
Similarly to its predecessors, the fund failed to outperform its reference ETF portfolio which had a slightly smaller volatility, measured as the standard deviation of monthly returns. The fund’s RealBeta™ was moderately higher than that of a broad-based domestic equity ETF.
The following chart and corresponding statistics show the constant composition of the reference ETF portfolio for the fund over the same period:
The fund had major equivalent positions in the Schwab International Small-Cap Equity ETF (SCHC), WisdomTree International SmallCap Dividend Fund (DLS), First Trust Dow Jones Global Select Dividend Index Fund (FGD), iShares MSCI United Kingdom ETF (EWU), PowerShares DWA Industrials Momentum Portfolio (PRN), and Vanguard FTSE Europe ETF (VGK). The Other component in the chart collectively represents additional five foreign-stock ETFs covering the New Zealand, Japan, Australia, Spain and Mexico markets. The reference weights indicate a significant foreign small-cap equity tilt of the fund.
Lastly, we will evaluate the Cambria Global Value ETF (GVAL). The issuer states that this product implements a proprietary index which
…consists of stocks with strong value characteristics. The Index begins with a universe of 45 countries located in developed and emerging markets. […] The Index next separates the top 25% of these countries as measured by Cambria’s proprietary long term valuation metrics. The Index then screens stocks with market capitalizations over $200 million. The Index is comprised of approximately 100 companies.
The following chart and associated statistics depict the cumulative RealAlpha™ for the fund:
Compared to its reference ETF portfolio, the fund added a modest amount of value (mostly in the last four months of the analysis period), although the portfolio had a slightly lower volatility. The RealBeta™ of the fund was substantially higher than that of a broad-based U.S. stock ETF.
The following chart and statistics demonstrate the fixed membership and weights of the reference ETF portfolio for the fund:
The fund had main equivalent positions in the iShares MSCI Italy Capped ETF (EWI), WisdomTree Europe SmallCap Dividend Fund (DFE), Guggenheim CurrencyShares® Euro Trust (FXE), iShares MSCI Poland Capped ETF (EPOL), iShares Latin America 40 ETF (ILF), and Global X MSCI Greece ETF (GREK). The remaining six ETFs in the above table, spanning the Spain, Brazil and Germany equities as well as international-corporate and emerging-markets bonds, collectively constitute the Other item in the above chart.
One of our previous posts outlined the benefits of similar analyses of iShares smart beta ETFs, which we will not repeat here for brevity. This evaluation of Cambria ETFs provides investors with similar insights.
Just like any other composite investment vehicles, Cambria ETFs change their holdings over time. Therefore, a question arises about the value of an analysis in which a static ETF portfolio is calculated from long-term data. The answer is to use a more advanced variant of Alpholio™ patented methodology, in which the membership of the reference ETF portfolio is still fixed but weights can fluctuate. Such a dynamic portfolio tends to more accurately track the analyzed fund over time.
For example, here is a chart with accompanying statistics of a reference ETF portfolio determined in that manner for the Cambria Shareholder Yield ETF (SYLD):
This gives a more accurate view of the fund’s recent average exposures.
If you would like to use our ETP Analysis Service to investigate similar products, please register on our website.
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.
The second part of this series will review the Cambria Foreign Shareholder Yield ETF (FYLD) and the Cambria Global Value ETF (GVAL).
If you would like to use our ETP Analysis Service to examine similar products, please register on our website.