Mebane Faber’s Cambria Funds made waves in the exchange traded funds industry in December with the launch of the Cambria Global Asset Allocation ETF (NYSEArca: GAA), the first ETF to come to market free of an expense ratio.
No, GAA is not a purely free ride. Rather, investors pay total fund operating expenses of 0.29%, which works out to be the average expense ratio on the 29 ETFs held by the new Cambria fund. But 0.29% is still reasonable among ETFs and an outright bargain among actively managed funds, ETF or mutual, of which GAA is.[No Expense Ratio ETF Debuts]
GAA is comprised of other underlying ETFs and seeks to replicate a true global market portfolio, investing in a basket of U.S. and foreign equities, bonds, real estate, commodities, and currencies, according to the statement. The 29 ETFs held by GAA, which are mostly Vanguard and iShares funds, give investors exposure to over 20,000 individual securities, according to Cambria.
The ETF is perking up this year, trading just ahead of the S&P 500. Notable is GAA’s solid performance, which has been accrued with a top 10 lineup that largely steers clear of U.S. equities. On a cyclically-adjusted, or CAPE basis, one of Faber’s oft-cited valuation metrics, U.S. stocks are among the most expensive in the world.
In part, the rich valuations on U.S. stocks explain why GAA features just three U.S.-focused ETFs (GAA is an ETF of ETFs) among its top 10 holdings: The iShares MSCI USA Momentum Factor ETF (NYSEArca: MTUM), Vanguard Mid-Cap ETF (NYSEArca: VO) and the Vanguard Total Stock Market ETF (NYSEArca: VTI).
Controversial and downtrodden Brazilian and Russian stocks are among the least expensive in the world and GAA offers exposure to those discounted valuations via a 6.8% weight to theVanguard FTSE Emerging Markets ETF (NYSEArca: VWO). [EM ETFs Could Rebound in Q2]