Inside The New Global Momentum ETF From Cambria

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November 11, 2014 5:37pm NYSE:EDV NYSE:FM

etfs etfsLos Angeles-based Cambria, with a keen eye on launching funds based on the global markets with a risk management touch, has recently come up with a new fund.


The newly launched product –Cambria Global Momentum ETF – also provides exposure to global markets and has a risk management strategy in place. It, however, focuses on multiple assets with a momentum play.

Below we have highlighted some of the details of the newly launched product:

GMOM in Focus

The newly launched ETF is a fund of funds that uses a multi-asset approach to provide income as well as capital growth by investing in other ETFs, ETNs, real estate investment trusts (REITs) and closed ended funds. GMOM seeks to provide exposure to the U.S. as well as foreign markets by investing in various asset classes including equity, fixed income, commodity and currency markets.

For this purpose the fund uses a quantitative strategy with risk management controls to provide exposure to the top performing asset classes based on the latest momentum and trend performance. The fund, however, has the flexibility to shift its funds from one asset class to another based on market conditions.

GMOM shifts its holdings into relatively less volatile assets like cash and bonds if the high momentum sectors are trading below their long-term trends.

Presently GMOM holds 17 funds with 65% allocation to stocks, 29% in fixed-income and 6% in alternative assets and is rebalanced on a monthly basis.Vanguard Extended Duration Treasury ETF (EDV), iShares Global Healthcare ETF (IXJ) and iShares MSCI Frontier 100 ETF (FM) are the top three holdings, each having a 5.9% exposure in the fund.

The active management strategy renders the fund slightly expensive with 94 basis points as fees (read: Buy These 3 Top-Ranked Mid Cap ETFs to End 2014).

How Does it Fit in a Portfolio?

The fund is an intriguing option for investors seeking exposure to multiple assets within the global economy. The momentum play provides a nice opportunity to capture the returns of the best asset classes including domestic and foreign stocks, bonds, real estate, commodities and currencies during strong bull markets.

Moreover, the fund’s strategy of shifting its assets to cash and bonds from high momentum sectors during volatile market conditions is also noteworthy. A research report by the issuer states that historically such a strategy based on momentum plays has led to out performance.

“The fund attempts to achieve better than equity like returns while still having strict risk control method,” says Mebane T. Faber, the portfolio manager of GMOM.

ETF Competition 

The good news for the recently launched ETF is that there aren’t any other actively managed momentum ETFs in the space that provides exposure to such a wide variety of asset classes across the globe. However, Global X has recently come up with a fund – GLOBAL X JPMorgan Efficiente Index ETF (EFFE) – which follows a somewhat similar global multi-asset strategy (see World ETFs here).

Also, we do have certain U.S. based momentum ETFs currently in the market.PowerShares DWA Momentum Portfolio (PDP) with an asset base of $1.4 billion is currently one of the largest products in the space. However, the fund covers only large and mid cap U.S. companies, charging 65 basis points as fees.

iShares MSCI USA Momentum Factor ETF (MTUM), Dorsey Wright Focus 5 ETF (FV) and SPDR S&P 1500 Momentum Tilt ETF (MMTM) are some of the other products in the space.

Given the limited competition in the space, the fund has a good chance of building a sizeable asset base, at least if it manages to generate decent returns in excess of its expense ratio, using its quantitative strategy. However, with GMOM and EFFE rolling out in the markets at the same time, it will be interesting to see which among the two manages to gain an edge over the other.

This article is brought to you courtesy of Zacks.


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