Cambria Launches Global Momentum Fund Today (GMOM)

Charles

We've mentioned this one a couple times in previous commentary and on the board:

Morningstar Conference Notes

Meb Faber gets it right in interesting ways

Fund summary:

The Cambria Global Momentum EtF (the "Fund") seeks to preserve and grow capital from investments in the U.S. and foreign equity, fixed income, commodity and currency markets, independent of market direction. 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.

Link to fund webpage and fact sheet:

Cambria Global Momentum EtF

finder

Dear Charles,

Can you explain why there is such an interest in Meb Faber and his funds? Perhaps he is a good theorist and a good writer, but his first ETF GTAA has grown by 5% since its inception 4 years ago, while world stock funds were up almost 50% and ARTGX has grown up 68% during the same time.

Then he started a new ETF, GVAL, in March 2014, and since that time GVAL plunged down 13.5% whereas ARTGX was 2% up.

So now he is starting yet another ETF, and MFO discusses how Meb Faber gets it right in interesting ways. Am I missing something?

AndyJ

The "gets it right" piece is about having skin in the game at his company, nothing to do with investment returns, which as finder and the numbers say, have been underwhelming.

Meb F's investing with his own company is commendable, but he must not need much of a return from his investments if he's continued to have a big stake in GTAA. Since GTAA will be all AdvisorShares' responsibility from now on, presumably Meb's $ will come back to Cambria and the new fund, which sounds like it'll be the 'second coming' of GTAA.

scott

I like Faber's writing very much, but GTAA was underwhelming. Correct me if I'm wrong - I've only briefly skimmed the prospectus - this fund does seem like GTAA v 2.0.

finder

Well, at least GTAA did not fall during 4 years (it hugely underperformed other global funds). But his new global fund GVAL plunged down 13.5% during the first 8 months of its life. I do not know what is wrong with Meb as a money manager. Having his money in his funds is commendable, but should we follow his example? He is getting paid even when his funds are going down.

scott

finder said:

Well, at least GTAA did not fall during 4 years (it hugely underperformed other global funds). But his new global fund GVAL plunged down 13.5% during the first 8 months of its life. I do not know what is wrong with Meb as a money manager. Having his money in his funds is commendable, but should we follow his example? He is getting paid even when his funds are going down.

GVAL has a ton in Brazil and Europe (Spain, Italy, etc.)

Brazil has been a mess and doesn't look to be really improving. Europe is problematic, as well.

From the fund website:

"Removing Emotional Decision Making - One of the difficulties of investing in foreign countries is the inability to stay the course when geopolitical headlines
are negative. The Cambria Global Value ETF rebalances into countries that are trading at low valuations, which often coincide with negative headlines and
bear markets in such countries’ stock indexes. GVAL gives the investor the potential benefit of owning securities in over-sold markets."

So you have a fund that searches out stocks trading at levels believed to be below intrinsic value, but is it taking into account anything else, like potential catalysts? Appears to be no.

So, you have a fund that's going to lag, possibly for a long time, while it tries to move towards undervalued areas but is unconcerned if there's any sort of catalyst/reason.

Not quite sure on this methodology of searching out value based purely on unseen metrics, or at the very least it's something that should be a small % of a portfolio and understood that it's a long-term time horizon. Not something I'm really interested in, but that's just me.

JohnChisum

It looks like this ETF does not invest in stocks but in other ETFs. Maybe a fine line there. From the Fact Sheet;


"The Cambria Global Momentum ETF (the "Fund") seeks to preserve and grow capital from investments in the U.S. and foreign equity, fixed income, commodity and currency markets, independent of market direction. 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."

Maybe I'm the one that confused.

finder

I looked at the countries in the Cambria Global Value. Indeed 8% in Brasil and 10% in Russia, 4.5% in Hungary, 5.4% in Czech Republic. Lots of money in Greece, Italy, Ireland, Portugal. Zero in US, Germany, UK, France, Finland, Sweden, Norway, Denmark, Switzerland. Looks like an ultimate top down approach. Maybe it can work if paired with his new momentum ETF. But since GVAL takes low valuation to an extreme, it may require lots of discipline and trust to the manager for a very long time. Maybe the combination of value and momentum in the two new funds will work, but I would watch it for a while before coming to any conclusions. I would also like to understand why his previous charge, GTAA, was such a disappointment.

Charles

@finder.

I share same disappointment about GTAA performance. It's never been easy to love.

I tried to articulate both Mebane's disappointments and successes so far in the piece "The Existential Pleasure of Engineering Beta."

I actually think he's is one of the more prominent figures in the fund industry today, particularly exchange traded fund industry.

Certainly not by AUM.

But in his ability to distill complex and breakout investment strategies (at least for the common investor) into terms we can understand. Then, his attempts to employ them via ETFs.

I first came across his work in the standout paper on timing methods, entitled "A Quantitative Approach to Tactical Asset Allocation."

Then, his books Ivy Portfolio, Shareholder Yield, and Global Value. All straight-forward, unpretentious, transparent...yet innovative.

All must reads. (But granted, I'm a fan.)

Scott (our jewel of a contributor on the board) was person that alerted me to GTAA and its disappointing performance.

I attribute it to three main factors: 1) all-asset (aka "Ivy League") have performed pretty poor over the period since GTAA started, 2) AdvisorShares excessive fee structure, and 3) volatility in commodities and foreign equity also likely detracted, since timing does best in trending markets versus short-term gyrations.

Certainly, the new Cambria ETFs address the fee issue. Its fees are considerably less the those charged by AdvisorShares.

Time will tell on the other two factors!

A one month drop (or rise) in GVAL should not really concern an investor, since the long-haul strategy looks to benefit from undervalued companies in undervalued countries (aka hated companies in hated countries). So, expect a bumpy ride.

And, SYLD seems to be doing quite well.

Hey none of this helps much, I know, if you happen to be holding a fund that is doing poorly. Trust me, no matter how many times M* told me Dodge & Cox employed a time-proven value strategy with experienced staff, low cost, shared incentive, high integrity, and share-holder friendly policies...none of that helped me to stomach its performance in 2008 or even late 2011.

Well, after it recovered, maybe it did.

At the end of the day, David encourages us to call attention to funds trying to do good things, especially smaller and younger ones. I certainly think Cambria qualifies.

Again, these are young funds, and time will tell if the strategies and their implementation pay-off in satisfactory excess returns. But, if they don't, we will be first to call attention to it.

Hope my rambling helps explain a little.

(Hey, what to you think of championing a policy that financial writers must be invested in any fund they recommend? Ha!)

heezsafe

Some...day...my prince....will come.

Charles

Nice post today by Dr. Gray...

http://www.alphaarchitect.com/blog/2014/11/13/meb-fabers-affordable-global-momentum-fund/?utm_source