How it started.
How it's going.
This general sort of catastrophic anecdote has repeated over and over forever and will continue on into the future forever.
The modern version of 60/40? Simplify has some thoughts.
The link talks about actively managed bonds and suggests their AGGH to fill that role. AGGH owns a whole lot of AGG with a treasury options overlay to generate extra income, 7.52% versus 3.81% for AGG.
The data goes back to AGGH's inception on Feb 15, 2022. Yes the total return has exceeded AGG cumulatively and in all four full and partial years but not reinvesting the distributions makes for a tough hold. The idea of a 60/20/10 actively managed fixed income/10 alternatives that go a little broader than just managed futures can probably be structured to be very robust but 20% AGG plus 10% AGGH is very close to 30% AGG and would not be robust in the face of another big move up in interest rates.
Portfolio 1 is their idea but using DBMF instead of CTA to go back just a little further in 2022. Portfolio 2 is their idea using funds we talk about here very regularly, FLOT and BKLN are client holdings.
The max drawdown for Portfolio 2 occurred in April of this year, it didn't really offer the protection it did in 2022 as you can see below.
Yesterday, I mentioned a Twitter thread from Meb Faber about single ticker portfolios. Left off of Meb's list was Cambria's own Trinity ETF (TRTY) that someone else mentioned in the comments. We've looked at this fund a couple of times and over its seven+ years, it has struggled cumulatively but it has had a couple of very strong years in there. Testfol.io has TRTY compounding at 4.94% versus 3.58% for price inflation.
Here's the year by year.
In four years (2019, 2020, 2023, 2024) it got left way behind 60/40 as measured by VBAIX.
TRTY allocates 35% to trend, 25% to equities, 25% to fixed income and 15% to alternatives. If you look at the current holdings, it's not so easy or obvious to see how some things are categorized. For example, it has a position in the Cambria Tactical Yield ETF (TYLD) which flips between T-bills and other fixed income market sectors based on how wide or narrow yield spreads are. Based on the chart, I believe it has been in T-bills only, since it started trading. You could argue, that's a form of trend as opposed to fixed income. What about an equity ETF that tracks the momentum factor? Arguably that is trend too.
Looking back, it doesn't look so hot but if there's a reason to be optimistic, I could see where TRTY benefits from the evolution of ETFs, TRTY is a fund of funds. Cambria are smart guys and it seems like a reasonable probability that TRTY can enhance the long term result finding better ways to build out their allocation that includes 35% in trend and 15% in other alts.
The following is similar to what we've looked at before in trying to understand TRTY.
I certainly don't know what if any constraints Cambria has for what funds go into TRTY but as is frequently the case, the allocation strategy works, taking their idea for Portfolio 2, with funds we regularly use here and the result looks good.
This is another example of taking bits of process from various sources to create your own process.
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.
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