GTAA: ETF Version Of The Ivy Portfolio

AdvisorShares Cambria Global Tactical ETF (GTAA), an actively-managed absolute return fund of funds (ETF of ETFs), began trading yesterday (10/26/2010).  The sponsor hopes to preserve and grow capital by producing absolute returns with reduced volatility and drawdowns.

GTAA is relatively expensive as other AdvisorShares offering, even after a 1.35% cap for the next eleven months.  Subadvisor Cambria will receive a 0.90% management fee as part of the overall expense ratio.  The fund's basic investment approach is described by managers Mebane Faber and Eric Richardson in their book “The Ivy Portfolio.”

According to the GTAA fact sheet (pdf), initial allocation by asset class will be stocks 31%, bonds 30%, real estate 15%, commodities 14%, and currencies 10%.  Each asset class is further divided into subcategories.

The fund currently has just 40 holdings versus the targeted 50-100.  Six ETFs received an initial weighting of 5% each:  Vanguard Emerging Markets ETF (VWO), iShares MSCI EAFE Small Cap (SCZ), SPDR Dow Jones International Real Estate (RWX), iShares Barclays 20+ Year Treasury Bond (TLT), iShares Dow Jones US Real Estate (IYR), and SPDR Dow Jones REIT (RWR).

Holdings and allocations are by no means static.  As I recall, the book describes the asset class allocations remaining constant for 12 months, while the underlying ETFs within each asset class are risk-managed with a 10-month moving-average strategy.  I could not find a description of the asset allocation methodology for GTAA in the prospectus (pdf) or other fund literature, but the trend following and risk management algorithms seem to be more complex than the book's approach.

Additional information about GTAA is in the overview and press release.  The prospectus statement that “the Advisor had approximately $69,500,000 million in assets under management” appears to be a typo as that is more than $69 trillion.

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.