Cabana Asset Management entered the ETF industry today with a splash, launching with an ETF suite worth over $1 billion in assets under management.
Cabana has partnered with private label ETF advisor Exchange Traded Concepts (ETC) to launch the suite of Target Drawdown ETFs.
The new funds will be seeded this week with more than $1 billion in assets across the suite, a significant asset base for a new family of products.
Cabana Asset Management is a wholly-owned subsidiary of The Cabana Group, LLC, which is a SEC-registered investment adviser providing risk-managed investment products to investors, advisors, and institutions.
Building on the proven track record of Cabana’s Target Drawdown Professional Series of separately managed accounts (SMAs), which are available exclusively through the firm’s financial professionals and RIA partners, the new family of Target Drawdown ETFs is built with the goal of maintaining and growing investor wealth over the long term by clearly defining risk in terms of the maximum expected percentage loss (“target drawdown”).
There are five strategies in the initial suite of ETFs with target drawdown percentages ranging from 5% to 16%.
The Cabana Group CEO Chadd Mason said this year’s market environment has underscored the necessity of proper hedging, transparency, and risk mitigation as key parts of investor portfolios.
“It also makes clear the need to ensure that any strategy being put to use has a ‘real world’ track record and is backed by an experienced team that has lived and worked through times of significant market turbulence,” Mason said. “We’ve built Cabana since 2008 with the goal of providing all of our clients, be they advisors or individuals, with rigorously tested, high-quality risk management tools, and we are thrilled to be bringing our strategies to market today in the low-cost, highly-liquid ETF wrapper.”
Mason added the reason they came to market in the ETF industry is based on personal experiences shining the light on some problems with this industry as a whole – namely how portfolios are constructed, and how they’re communicated, in addition to how risk is really defined.
Cabana, which is one of the nation’s fastest-growing RIAs, utilizes a disciplined, rules-based strategy that seeks to manage expectations, minimize loss, and keep clients invested for long-term success. The firm’s proprietary Cyclical Asset Reallocation Algorithm (CARA) uses a combination of fundamental and technical data to help identify the current stage of the economic cycle and allocate to assets that are deemed attractive at that point in the cycle. CARA is designed to mitigate risk by incorporating inverse and non-correlated asset classes, as well as through reallocation in response to changing macroeconomic conditions.
Mason added, “A big part of what we’re trying to do is get people to participate in investing – this beautiful thing that is an equal opportunity for everyone in the world. If we can get people engaged, we can change lives.”
Cabana’s Target Drawdown Suite
Cabana’s new suite of Target Drawdown ETFs seeks to limit downside risk and position for upside growth based on investor outlook and risk tolerance – from conservative to aggressive – and includes the following funds:
- Cabana Target Drawdown 5 (TDSA): is the most conservative of the five ETFs in the series. It seeks to provide long-term growth within a targeted risk parameter of five percent (5%) from peak to trough.
- Cabana Target Drawdown 7 (TDSB): is one of five ETFs in the series It seeks to provide long-term growth within a targeted risk parameter of seven percent (7%) from peak to trough.
- Cabana Target Drawdown 10 (TDSC): is one of five ETFs in the series. It seeks to provide long-term growth within a targeted risk parameter of ten percent (10%) from peak to trough.
- Cabana Target Drawdown 13 (TDSD): is one of five ETFs in the series. It seeks to provide long-term growth within a targeted risk parameter of thirteen percent (13%) from peak to trough.
- Cabana Target Drawdown 16 (TDSE): is the most aggressive of the five ETFs in the series. It seeks to provide long-term growth within a targeted risk parameter of sixteen percent (16%) from peak to trough.
Each fund has a total annual fund expense ranging from 0.93% to 0.95%, and net expense ratios, after contractual fee waivers, of 0.67% to 0.69%.
“Our strategies never use derivatives and never get ‘out of the market,’’ he said. "When investors use derivatives, it is inevitable they will see slippage and erosion in alpha. Instead, we use asset class ETFs to express our views on those parts of the market that are going into or coming out of favor. Put simply, we’ve built our firm and the strategy behind these ETFs seeking to do the two things necessary to be a successful investor: avoid large losses and stay invested.
“There are many approaches to successful investing, but what we are most proud of is our client-focused message. Building products that people understand and can be easily communicated to clients, whether they are sophisticated or not, encourages them to engage in the process. If you can minimize losses and essentially do what you say your portfolio is intended to do, it empowers the client to stay invested for the long term.”
Cabana’s Target Drawdown investment approach is available to advisors and investors in the form of separately managed accounts (SMAs), collective investment trusts (CITs), a hedge fund, and now a suite of ETFs.
This article originally appeared on ETFTrends.com.
