Cambria Investment Management, an ETF provider with a focus on quantitative asset management and alternative investments, has launched two active ETFs, including one that the company says is completely new to the industry.
The Cambria Tactical Yield ETF (TYLD) and the Cambria Micro and Small Cap Shareholder Yield ETF (MYLD), which launched last week, gives the Manhattan Beach, Calif.-based firm a lineup of 14 ETFs.
The Tactical Yield ETF is one that Meb Faber, co-founder and CIO of Cambria, said is a new concept for the industry and one that may take time to develop.
“There’s so many fixed-income ETFs out there that it’s rare that you say there is something totally new,” he said of the new ETF. “I haven’t seen anything like it and there’s shockingly little in the academic literature about it.”
The fund uses risk-free T-bills as its baseline or home base, according to Faber.
“[It] increases exposure to other bond sectors when spreads relative to U.S. Treasury Bills are wide,” he said in a release. “With rates where they are and bond yields back in focus, it’s an excellent tool for investors looking for core bond exposure.”
When the spreads increase in other bonds, a percentage of the investment will migrate to that bond. Each bond has a specific spread that will trigger the migration, Faber explained.
The other bonds that the fund could invest in include U.S. Treasury bonds, Treasury notes and Treasury bills, intermediate-term U.S. investment grade bonds, corporate bonds, high-yield bonds, residential and commercial mortgage-backed securities (MBS), Treasury Inflation-Protected Securities (TIPS), emerging market government bonds and REITs.
Cambria will give the ETF at least 10 years to attract attention and accumulate assets, Faber said.
The other fund the firm launched, the Micro and Small Cap Shareholder Yield ETF, complements Cambria’s three other shareholder yield ETFs. Those three, which focus on U.S. markets, foreign markets and emerging markets, have amassed more than $1.5 billion, Faber said.
The latest ETF focuses on high-cash distribution companies that are returning cash to investors using three attributes: dividends, buybacks and debt paydown, or shareholder yield, according to the firm.
“The concept of including stock buyback with cash dividends is to me a very obvious idea,” Faber said. “Once you understand it, you can’t go back to thinking in terms of just dividend income or growth alone.”
The emphasis for the ETF is on valuation and quality metrics and will deal with U.S.-based companies with a market capitalization range of $100 million to $5 billion, according to the firm.
The ETF can work as an equity replacement within a portfolio, Faber said. It can also provide dividends or income exposure.
The funds have an expense ratio of 59 basis points.