FAIL Profile
The Cambria Global Tail Risk ETF is designed to provide investors with a strategy that seeks to hedge against significant market downturns by investing in a diversified bond portfolio and allocating a portion of its assets to protective options strategies. Under normal market conditions, the fund's bond portfolio is structured to invest at least 40% of its total assets in investment-grade, intermediate U.S. Treasuries and Treasury Inflation-Protected Securities (TIPS). Additionally, it allocates another 40% of its assets to ex-U.S. sovereign bonds, which include both investment-grade and non-investment-grade bonds issued by developed and emerging market governments with short and intermediate durations. This diversified approach aims to provide a stable income stream while also offering some protection against inflation and interest rate fluctuations.
In addition to its bond investments, the Cambria Global Tail Risk ETF employs a defensive options strategy to mitigate the impact of severe market declines. The investment adviser dedicates approximately one percent of the funds total assets each month to purchasing put options on equity indices. These options are designed to provide downside protection, or a "tail risk" hedge, against extreme market events, often referred to as "black swan" events. By incorporating this options strategy, the fund aims to offer a level of protection during periods of heightened market volatility, making it a potentially valuable tool for investors concerned about significant market downturns.
The fund's global bond allocation and tail risk hedge make it a unique offering within the ETF landscape, particularly for investors seeking to balance income generation with risk management. The inclusion of non-U.S. sovereign bonds allows investors to gain exposure to international markets, which can enhance diversification and potentially improve risk-adjusted returns. Meanwhile, the focus on short and intermediate bond durations helps to reduce interest rate sensitivity, which can be a critical factor in managing fixed-income investments, especially during periods of rising interest rates.
As a non-diversified fund, the Cambria Global Tail Risk ETF is more concentrated in its investments compared to broader market ETFs, which can result in greater exposure to specific risks associated with the underlying bonds and options strategies. However, this concentration is intentional, aiming to provide targeted protection against severe market downturns. Investors considering this ETF should be aware of the potential trade-offs between seeking downside protection and the associated costs of maintaining the options strategy. This fund may appeal to those looking for a sophisticated approach to managing tail risk while maintaining exposure to global fixed-income markets.
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