Endowment Style ETF

Cambria filed for the Endowment Style ETF (ENDW) which of course will be fun to look at and blog about. Cambria does a lot of interesting research and are committed to differentiated strategies in their product suite and ENDW would fit right into that description if it actually gets listed. 

It will be a fund of funds and it will leverage up. It's going to be actively managed but will target 60% in equities (30% in domestic and 30% in foreign), 30% in fixed income, 20% in real assets including REITs and 20% in "various hedge and trend strategies," presumably managed futures. It reads like there will be a value bias and a trend overlay in addition to the trend strategies mentioned already.

The above is a possible do-it-yourself version, I compared it to the Permanent Portfolio Fund (PRPFX) and the Vanguard Balanced Index Fund which is a proxy for a 60/40 portfolio.

There's not a ton of differentiation the way we replicated it but I'd give Cambria the benefit of the doubt to track it when/if it lists. In 2022, ENDW replication was down 13.60%, PRPFX was down 5.49% and VBAIX was down 16.87%. I used the iShares Aggregate Bond Index ETF (AGG) because Cambria has not been put off using AGG or similar products in other multi-asset funds. If we replace AGG with TFLO which is a floating rate fund, the CAGR goes up to 8.34%, the standard deviation goes down to 11.25% and the 2022 decline would have been 9.10%.

Someone wanting to mimic this but with more control over the constituents could use any of the various capital efficient funds to create the leverage effect. 

There are also the WisdomTree efficient core funds, aka the 90/60 funds that you could play around with to build your own version.

And a quick side note about the YieldMax ETFs which are the single stock ETFs with a covered call overlay that have very high yields. We talk all the time about the importance of reinvesting most if not all of the dividends from derivative income funds. YieldMax had a Tweet that touted the one year anniversary of some of its funds and included in the Tweet was the hashtag #drip as in dividend reinvestment plan so they are also telling shareholders to reinvest.

The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.