Cambria Files For Cambria Currency Strategies ETF

Cambria has filed paperwork with the SEC for a “Cambria Currency Strategies ETF.” The Cambria Currency Strategies ETF seeks to preserve and grow capital from investments in securities and instruments that provide exposure to the global currency and bond markets, independent of market direction. They did not specify a trading symbol or expense ratio in the initial filing.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to generate positive absolute returns by investing in securities and instruments that create exposure to currencies.  The Fund will be exposed primarily to currencies of developed countries that, in Cambria’s opinion, have liquid currency markets, including the countries in the G-20.  Currencies the Fund may have exposure to include, but are not limited to, the currencies of Argentina, Australia, Brazil, Canada, China, the European Union, India, Indonesia, Japan, Mexico, New Zealand, Norway, Russia, Saudi Arabia, South Africa, South Korea, Sweden, Switzerland, Turkey, the United Kingdom and the United States.

Under normal market conditions, the Fund exposes at least 80% of the value of its net assets (plus borrowings for investment purposes) to currency-related investments.  Cambria considers currency-related investments to mean:

  • Forward foreign currency contracts that create exposures for the Fund to foreign currencies;     .
  • Foreign currencies and ETPs that invest in foreign currencies and ETFs that provide exposure to foreign currencies;
  • Sovereign debt securities denominated in foreign currencies and ETFs that invest in such sovereign debt securities;
  • ETPs and ETNs that invest in or provide exposure to foreign currencies or gold; and
  • Money market instruments or other high quality debt securities denominated in foreign currencies and ETFs that invest in such instruments.

When making currency-related investments, a “long” exposure to one currency inherently creates a “short” exposure to other currencies, since exposure to a particular currency through a currency-related investment is measured in relation to other currencies.  Thus, the Fund may effectively take long and short positions in particular currencies through instruments, like ETFs, ETPs and forward foreign currency contracts, which provide long or short exposure to such currencies.  In this manner, the Fund’s exposures may include inverse exposures to certain currencies.   Through forward foreign currency contracts, the Fund may create exposures for the Fund to currencies in amounts up to two times the Fund’s net asset value, which includes both the long exposure to one currency and the corresponding short exposure to other currencies.  When using forward foreign currency contracts, fund assets will be primarily invested in a combination of U.S. dollar denominated money market instruments or other high quality debt securities, or ETFs that invest in such instruments.  During these times, the Fund remains exposed to currency-related investments through forward foreign currency contracts, and the Fund will consider the notional value of its forward foreign currency contracts to measure compliance with the 80% test described above.

The Fund is an actively managed ETF and thus does not seek to replicate the performance of a specific index.  Rather, Cambria has discretion on a daily basis to actively manage the Fund’s portfolio in accordance with the Fund’s investment objective.  The Fund may be considered a “fund-of-funds” because it seeks to achieve its investment objective, in part, by investing in other ETFs (the “Underlying ETFs”).

Cambria utilizes a quantitative model to select long and short currency exposures for the Fund.  The model reviews fundamental and technical characteristics of potential investments, such as the interest rate of a security and/or its price momentum, to identify potentially attractive investments for the Fund and the opportune time to purchase and sell such investments.

Cambria’s quantitative model is based on factors that, historically, have been uncorrelated to the debt and equity markets.  Accordingly, it helps Cambria to construct the Fund’s portfolio so as to preserve and grow capital irrespective of the performance of the traditional equity and fixed income markets, by investing in foreign currencies or a combination of bonds and forward foreign currency contracts.

Cambria considers the preservation and growth of capital irrespective of the performance of the traditional equity and fixed income markets to be a “positive absolute return.”  Positive absolute returns may be generated from the income produced by the Underlying ETFs, including the investments of the Underlying ETFs, plus (or minus) the gains (or losses) resulting from fluctuations in the values of currencies to which the Fund is exposed relative to the U.S. dollar.

The Fund’s portfolio will be rebalanced to target allocations at least monthly and, as a result, may experience high portfolio turnover.  The Fund may allocate up to 20% of its exposures to high yield fixed income instruments (“junk bonds”) and Underlying ETFs that invest in such instruments.

For the complete filing click: HERE

 

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