Cambria Introduces A Global Core Portfolio ETF With Zero Management Fees

| About: Cambria Global (GAA)
This article is now exclusive for PRO subscribers.


Mebane Faber's Cambria Funds has added another ETF to its stable.

The fund is a fund-of-funds comprising a core global portfolio of stocks, bonds, commodities and real estate.

Cambria charges no management fees for the ETF. Acquired fees for the component funds are 0.29%.

A Global Core Portfolio ETF With Zero Management Fees

The latest ETF from investment iconoclast Mebane Faber is poised to be an industry disrupter. The Cambria Global Asset Allocation ETF (BATS:GAA) is a fund of funds offering a global portfolio of stocks, bonds, commodities and real estate. "So," you say, "what's so disruptive about that?" Well, the ETF has no management fee beyond the acquired fees of the component funds. None. Acquired fund expenses amount to a mere 0.29%.

Fig. 1. Still from Treasure of the Sierra Madre (1948).

More on the fee structure later, let's take a look at the fund first.

The Fund

The fund is a designed as a core global market portfolio, what Faber describes on as a "one-stop shop for core global allocation… for super-low cost." He goes so far as to ordain the fund the "global benchmark."

The table below lists the current portfolio.



Percent of Holdings

Vanguard Tot Bond Mkt ETF



Vanguard Emerging Mkt ETF



United States Comm Index



Vanguard Intl Bond ETF



Vanguard Emerg Mkts Gov B



Ishares MSCI USA Momentum



Vanguard Mid-Cap ETF



Vanguard Viper



Vanguard Europe Pac ETF



Mkt Vectors Em Lc Bd ETF



Cambria Gloabl Value ETF



Market Vectors Emer Hy



Vanguard Reit ETF



Cambria Shrhldr Yld ETF



Ishares Lehman 7-10yr Trs



Ishares Iboxx Inv Gr Corp






Schwab U.S. TIPS ETF



Vanguard Gbl X U.S. Re ETF



Ishares 20+Yrs Treas ETF



Vanguard St Bond ETF



Vanguard-S/T Corp ETF



Cambria Forgn Shrhldr ETF



SPDR Barclays Int Corp



Vanguard Ftse All World



Spdr Barclays High Yield



Wisdomtree Em Small Cap



Market Vectors Intl





Wisdomtree Emg Mkts Eq



Here's a couple of charts breaking the portfolio down at high-level geographic and asset class allocations. In the charts I've categorized the funds as Global (all-world), International (global ex. U.S.), Developed Markets ex. U.S., Emerging Markets, and Domestic (US) based on the individual funds' mandates. I've not made any effort to break down the holdings by sub-categories within the funds. Obviously, Global would encompass all of the funds and International would encompass the two ex. U.S. categories but I've not done that here.

Fig 2 and 3. Portfolio composition of Cambria Global Asset Allocation ETF . Charts by author. Data from Cambria.

As we see, the portfolio breaks down to about half U.S. and half international. Slightly under half of the holdings is in bonds which cover sovereign and corporate debt at a full range of durations. There's a 6.6% allocation to commodities, and 6% to real estate split equally between U.S. and international. The 36.7% that's in stocks is split with about half in U.S. equity. If one adds the U.S. portion of the global funds, the mix would be slightly more than half in domestic securities.

Zero Management Fee

Now, about those fees. Or shall I say, the lack of fees? Surely no one opens an ETF without some reasonable expectation of turning a profit on it. How can they do that without charging fees?

Two factors contribute to answer this question. First, according to Faber, this is an extremely low-cost fund to manage. GAA is essentially buy and hold. Although one assumes there will be some periodic rebalancing, the details are not discussed in the literature I examined. Furthermore, Faber claims that management is sufficiently lean and the fund is sufficiently cost-efficient that should it fails to raise a single dollar, the cost to Cambria will only be about $100,000. Or, to put it another way, the fund need only generate that $100,000 for Cambria to break even on it. But, with no fees, how can they generate even that amount?

This raises the second point, and it is the key to making GAA viable. Three of the holdings are Cambria funds: SYLD, FYLD and GVAL, representing 8.84% of the portfolio. Faber claims that for a fund value of about $100M for GAA, the fees from those funds will generate sufficient revenue to Cambria for GAA to break even.

To sum up, I see GAA an intriguing experiment. It provides exposure to a core global portfolio of 29 ETFs at absolutely minimal cost. An investor could buy the world market in its entirety with this single fund and simply forget about it. Doing so provides a truly passive, index investment. It will be interesting to follow how investors respond. If it succeeds it may well be remembered as the disruptive force Faber considers it to be.

Disclosure: The author is long DGS, FYLD, SYLD, TLT, VNQ.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.