launch with its most successful being the recently launched Mars Hill Global Relative Value ETF (NYSE:GRV) – a long/short fund that has garnered more than $40 million in assets in quick time.
AdvisorShares filed for the Cambria Global Tactical ETF back in June of this year. GTAA will attempt to grow capital by investing across every major asset class – US equity, foreign equity, fixed-income, real estate, commodities and currency markets. There are only 2 existing Active ETFs on the market that provide a multi-asset class exposure – the iShares Diversified Alternatives Trust (NYSE:ALT) and the AdvisorShares’ own Dent Tactical ETF (NYSE:DENT). The managers will implement their strategy by investing in other ETFs that provide the desired exposures. The fund is looking to achieve absolute returns – ie. it will attempt to achieve a positive return regardless of the general market direction.
Essentially, GTAA will utilize a trend-following strategy that is based on a quantitative model to actively manage the portfolio and no effort will be made to forecast future market direction or conditions. Instead, the managers will look to capture these trends as and when they appear. Such a philosophy is the crux of many trend-following strategies because the managers do not believe they can forecast future markets accurately, so they instead focus efforts on spotting a change in trends and capitalizing on them. The fund’s portfolio manager, Mebane Faber, confirms their strategy in a press release from AdvisorShares, saying that, “Investors will appreciate the fact that we make no effort to forecast future market trends or direction, but rather attempt to capture profits in these trends when and where they develop”. As with all actively-managed ETFs in the US, the fund will disclose the portfolio holdings on its website every day after close of trading.
GTAA will be sub-advised by Cambria Investment Management and the two portfolio managers of the fund will be Mebane Faber, CIO of Cambria and Eric Richardson, CEO of Cambria. Mebane Faber is the author of the book “The Ivy Portfolio” and also writes on a well-frequented blog called World Beta at http://www.mebanefaber.com/.
Noah Hamman, CEO and Founder of AdvisorShares added, “Cambria has done an outstanding job developing research and education related to a GTAA strategy via their popular white paper, ‘A Quantitative Approach to Tactical Asset Allocation,’ and their recent book, ‘The Ivy Portfolio.’ We are very excited to be able to offer this risk-managing strategy to investors in an actively managed ETF.”
Cambria is based out of California and was set up in 2006. As of June 2010, it managed $26 million in assets. The prospectus provides some details on the historical track record of the Global Tactical Asset Allocation composite which has largely similar strategies and objectives. The composite, with an inception date of March 1, 2007 has outperformed its “blended benchmark” since inception by an impressive 6.69% and outperformed the S&P500 by 7.34%, on an annualized basis. In the last 1 year though, the Global Tactical Asset Allocation composite returned 11.24% where the S&P500 returned 47.28%, which gives an indication that this portfolio might be a good holding in down markets, but could underperform in upward trending markets.
The fund will charge investors a total expense ratio of 1.35%, including a base management fee of 0.90%. Both the fund manager, AdvisorShares, and the fund sub-advisor, Cambria, have a tiered fee structure established that will depend on level of assets in the fund. The total expenses include “Acquired Fund Fees” of 0.30% to account for the expense ratios of all the underlying ETFs that the fund will invest in. AdvisorShares is providing a fee reduction of 0.16% to bring the expenses down from 1.51% to 1.35%.
Written By Shishir Nigam from ActiveETFs | InFocus Disclosure: No positions in above-mentioned names.
Shishir Nigam is the founder of ActiveETFs | InFocus (http://www.etfshub.com/), which provides extensive coverage and analysis of actively-managed ETFs in US and Canada, including debates on major industry trends, insights on the latest product launches from issuers in the Active ETF space as well as in-depth interviews with industry executives and thought leaders.
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