The more recent trend in fund flows has shown that ETF investors are a cost-conscious group. Firms such as Vanguard and Charles Schwab have built successful brands in this industry on the back of rock bottom expense ratios to enhance value for the end-user. After all, lower fees entail a higher return for those seeking an index-based approach.
Cambria Global Asset Allocation ETF
The Cambria Global Asset Allocation ETF (NYSE: GAA) uses a quantitative approach to selecting a diversified basket of global stocks and bonds. This ETF uses a “fund of funds” approach that selects other low-cost ETFs from Vanguard, iShares, even within the Cambria fund family itself.
Blended Expense Ratio, But No Additional Fee
While the underlying holdings have a blended expense ratio of just 0.29 percent, there is no additional management fee added to that for owning GAA.
At launch, the underlying portfolio included 29 diversified ETFs that represent thousands of domestic and foreign securities. The current asset allocation is 50 percent bonds, 43 percent stocks and 7 percent broad-based commodities.
The advantage of a fund such as GAA is a global multi-asset portfolio with minimal overall expenses, which can be used as a core holding or strategic position. The weightings within the various asset classes will be rebalanced on an annual basis, which removes the burden of restructuring individual holdings from the account side as well.
This new ETF will go head to head with established multi-asset funds such as the suite of risk-based investments from Barclays that includes the iShares S&P Growth Allocation Fund ETF (NYSE: AOR). In addition, State Street offers the SPDR SSgA Global Allocation ETF (NYSE: GAL), which charges an expense ratio of 0.35 percent.
Cambria is making a bold move in offering a true zero expense ratio ETF, and clearly hopes to attract investors to its expanding brand of shareholder yield, global value and momentum-based strategies.
This pioneering effort will hopefully continue to pressure other ETF providers to continue to evaluate their fee structure and enhance value for investors that favor these vehicles.
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