Cambria Investment Management makes professional-quality investing accessible to many types of investors. First, we offer the Cambria Digital Advisor, a managed account service consisting of six unique portfolios, each one with a tailored risk/return profile. Second, we offer a suite of unique ETFs. Third, we provide investing education and market commentary through our CIO’s various books, white papers, and podcast. Overall, we make smarter investing simpler investing.
The investment industry is being revolutionized by automated investing services. Cambria is one of only a few groups to offer an automated service AND use its own ETFs in the service — which we feel is a huge cost/revenue advantage. We expect the leaders that emerge from this industry shift will take more of the $71.4 trillion in globally managed assets. Our ambition is simple - for Cambria to be one of these global leaders. Here are a few highlights from our company's history as we move closer toward our goal.
2016 – Cambria launches “Cambria Digital Advisor,” its automated account management service. As of the time of this writing, 250+ new clients have opened accounts.
2016 – Cambria’s CIO, Meb Faber, launches his investing podcast, "The Meb Faber Show." In roughly four months, episodes have been downloaded roughly 200,000 times in 120+ countries.
2016 – Cambria launches its eighth and most recent ETF.
2014 – Cambria raises approximately $1.57 million from 19 outside accredited investors.
2013 - Cambria launches its first ETF.
2011 – Cambria launches its first insurance dedicated fund. It has raised approximately $33 million in assets to date.
2008/2009 – Cambria raises approximately $250,000 from an outside angel investor.
2007 – Cambria begins managing client assets in separately managed accounts.
2006 - Cambria is founded by Eric Richardson and Meb Faber as a registered investment advisor.
There are three features that we believe distinguish Cambria: 1) our managed account service, 2) our niche ETFs, and 3) our brand/positioning in the market.
1. Managed Account Service - the Cambria Digital Advisor:
Digital investment advisors, sometimes called “roboadvisors,” are disrupting the investment industry. These digital advisors are offering lost-cost, automated investment portfolios to retail clients, endangering some traditional advisors charging higher fees. We believe the robo-technology itself will eventually be a commodity. Therefore, we feel that the advisors that are able to generate revenues by using their own funds within their automated service are the groups that will thrive, as they’ll benefit from this structural revenue advantage.
Cambria is one of just three groups (Schwab and Vanguard being the other two) that offers a digital advisor and populates it with its own ETFs. Yet of those three, only Cambria offers a tactical digital advisor. Schwab and Vanguard just offer passive, buy-and-hold services. We believe our active, tactical service will outperform buy-and-hold services over longer investment periods.
Additionally, the Cambria Digital Advisor has partnered with Betterment, as Cambria believes that Betterment has the leading technology platform in the digital advisor industry.
2. Our Niche ETFs:
Just this past May, the global ETF market reached $3 trillion in combined assets under management. What is especially noteworthy is the speed at which the ETF industry has reached its various milestones. As noted by Deborah Fuhr, a researcher at ETFGI, “It took the global ETF/ETP industry 19 years to reach US$1 trillion in assets under management, 23 years to reach US$2 trillion in AUM and just 25 years to reach US$3 trillion in AUM. The increasing rate of asset growth illustrates how ETFs have been embraced as an investment solution by institutional investors, financial advisors and retail investors around the world.”
Looking forward, all expectations point toward significant continued growth for ETFs. A recent outlook report from Goldman Sachs concluded, “We think ETFs will continue to see robust asset gathering... Specifically, we expect ETFs to continue growing at an 12%-13% organic rate, likely doubling in AUM to +$6tn by 2020 amidst rapid growth in RIA, roll-over of 401(k) into IRAs, increasing use of auto-allocation products, regulatory push into lower-cost products, geographic expansion, and innovation.”
We believe Cambria’s eight niche ETFs are well-positioned to benefit from this heavy capital flow. While investors can find plain vanilla ETFs from any number of providers, we believe Cambria’s unique ETFs will fill a market void, and will be difficult for other providers to copy. Currently, Cambria’s ETFs target investing factors including shareholder yield, momentum, value, and sovereign bonds.
Even if the value of Cambria’s ETFs rises only in lockstep with the anticipated growth rate of the ETF industry as a whole (the aforementioned 12-13% annual rate), such growth would result in significant revenue increases for the company and a significant growth in Cambria’s valuation.
3) Our Brand/Positioning in the Market:
We feel Cambria has an additional, unique advantage – a branded, marquee personality representing us. Our Chief Investment Officer, Meb Faber, is a well-known and highly-respected figure in the investment industry, having written thousands of investing articles and five books. He’s a frequent contributor to financial publications such as Barron’s, and makes numerous TV appearances on networks including CNBC, Bloomberg, and Fox Business Network.
Additionally, in June, Meb launched his investing podcast, The Meb Faber Show. It has enjoyed great success to date, with episodes downloaded roughly 200,000 times in 120+ countries since launch (as of the time of this writing).
We believe that Meb’s profile will only continue growing, providing Cambria a branding and prestige advantage that is difficult to replicate by both lesser known management groups, as well as enormous companies such as Schwab.
According to recent reports, the amount of global assets under management is approximately a staggering $71.4 trillion. But to help contextualize this number as it relates to Cambria on a smaller scale, let’s narrow down.
Similar to Cambria, Schwab and Vanguard both offer automated investing services and populate those services with their own ETFs. Schwab has approximately $2.6 trillion in assets under management. Vanguard has approximately $3.5 trillion. In comparison, Cambria’s current assets under management are only approximately $330 million.
We view this as a tremendous opportunity. Our current, smaller size means we have ample room to grow in two ways: first, as the overall industry grows, and second, by taking market share from Schwab and Vanguard with our differentiated products. We feel Cambria could triple, quadruple, or even quintuple simply through market-share-win alone, whereas Schwab and Vanguard will likely only see significant growth as the overall industry continues to grow.
Schwab and Vanguard are our primary competitors. However, we believe Cambria holds a key advantage over them – our strategy.
Schwab’s and Vanguard’s automated services are 100% buy-and-hold. We believe buy-and-hold is an excellent place to start, but is an investing strategy upon which we can greatly improve. That’s why our automated investing service is rooted in buy-and-hold, yet complemented by active, tactical strategies. In other words, we’re not a “roboadvisor” – we’re people-powered. This enables us to react to different market conditions when Schwab’s and Vanguard’s buy-and-hold services cannot. We believe this will result in outperformance for our clients over longer-term investment cycles.
Like any company, our biggest risk is that our cash flows from operations fail to cover expenses. The difference is that in our business, our cash flows are directly tied to the size of our assets under management (AUM), and our business is highly scalable, meaning that significant revenue growth does not require significant growth in our expenses.
Our AUM is partially determined by the performance of our financial products. This performance directly affects the two other influencers on our success – the number of clients we have and the number of dollars those clients have invested in our products. So our ability to generate healthy cash flow and grow as a company largely depends on 1) successful financial products, and 2) satisfied investors.
As to the first point, we feel our ETFs and Cambria Digital Advisor are unique, best-in-breed products. We believe that over the course of an entire business/investing cycle, each will outperform competing offerings, and result in satisfied Cambria clients. However, our biggest risk is that our clients’ expectations do not align with the realities of short-term market performance, which leads us to the second point.
Cambria’s investment strategies could have years when they underperform their benchmarks, even producing negative returns. While this is normal for the investment markets, the psychological impact this can have on the average investor can be traumatic, leading to emotional-based selling. Were this to happen, it would negatively impact Cambria’s cash flows and the overall health of our company.
Therefore, one thing we’re working hard to accomplish with our new Cambria Digital Advisor clients is to manage expectations. Our early touch-points with new clients address this very issue of expectations. It’s something we’re keenly focused on, and eager to manage.
Cambria generates revenues from the management fees on its various ETFs. While our Cambria Digital Advisor accounts do not charge any management fees, we populate each portfolio with our own ETFs. We offer six different Cambria Digital Advisor portfolios, each of which owns Cambria-managed ETFs in different weightings (the portfolios also contain funds from third party providers). Therefore, we generate revenues from the management fees associated with our underlying ETFs in these accounts.
(To read more about our ETFs and their expense ratios, please visit our Cambria Funds website: http://cambriafunds.com/)
Additionally, Cambria generates approximately 10% of revenues from non-core operations, such as its interest in The Idea Farm, an investing research service operated by Meb Faber.
The three primary means by which we anticipate acquiring new clients are: 1) expanding our suite of innovative ETFs, 2) growing our Cambria Digital Advisor service, and 3) raising Cambria’s profile through various organic marketing efforts.
We believe our track record demonstrates we can acquire new clients by creating and selling innovative ETFs that meet market demand. We believe that continued launches of new products will strengthen our business by bringing in new clients, enabling us to realize additional inflows, maintain and grow our AUM, and generate revenues. Given the right market conditions, we might choose to launch three-four quality ETFs each year. Currently, we have nine new funds filed with the SEC.
2) Cambria Digital Advisor:
On August 1, 2016, Cambria launched our managed account service, Cambria Digital Advisor. It offers clients six unique portfolios, each one with a different target-level of risk, volatility, and expected returns. As of the time of this writing, we have opened over 250 new accounts. We anticipate more account openings as our marketing efforts ramp up (more on this below).
We also expect significant growth in Cambria Digital Advisor as financial advisors funnel their client dollars into our service. You see, while we initially expected Cambria Digital Advisor would gather assets one client at a time, we’re seeing significant interest from financial advisors wanting to allocate their client dollar into our portfolios. This suggests future growth could scale quickly as these advisors bring multiple clients to us at once versus the “one-at-a-time” growth we initially anticipated.
3) Organic Marketing:
As detailed earlier, Cambria’s CIO, Meb Faber, is a prolific writer and highly-respected financial commentator. His content creation has been a tremendous tailwind to Cambria’s growth. We anticipate Meb will continue generating quality content that will elevate Cambria’s profile within the investment community, leading to new clients.
As one example, this past June, Meb launched a podcast, “The Meb Faber Show.” We’ve received numerous emails from listeners explaining how he/she stumbled upon the podcast and is now a Cambria/Meb fan. Though we cannot directly tie this podcast success to increased Cambria assets under management, we feel there is a cumulative effect. We believe that over time, such marketing efforts will result in an expanded client base, assets under management, and therefore revenues.
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