ETF Launch Scorecard
Launch only funds you would own, that differ, satisfy demand, and should work
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 99%
Before Cambria launches an ETF, Faber applies a compact product scorecard. The fund must be something he wants to own with his own money, meaning the creator has genuine skin in the game. It must differ from products already available rather than copying broad exposures that firms such as Vanguard or State Street already provide. There must also be real investor demand. Finally, the underlying idea must be expected to work or offer a meaningful form of uniqueness. Passing the scorecard precedes the regulatory and operational launch process. The mechanism filters ideas before the expensive approval cycle and stands in contrast to the industry's shotgun approach of launching many products, seeing what sticks, and relying on investors to chase recent returns.
Origin
Faber described the criteria Cambria uses before undertaking the lengthy and expensive process of launching an ETF.
Core principles
- 01Put your own capital behind the product
- 02Do not copy exposures established providers already offer
- 03Confirm that investors want the product
- 04Require a credible and distinctive investment idea
How to run it
- 1
Apply the ownership test
Ask whether you genuinely want to place your own net worth in the proposed fund.
Pro tip Treat personal allocation as evidence of conviction.
Watch out Do not use customers to test a strategy you would not own.
- 2
Map existing products
Compare the proposed exposure and method with funds already available from established providers.
Watch out Reject a copycat product with no meaningful distinction.
- 3
Verify demand
Establish that investors want the exposure or strategy before committing to launch.
Pro tip Separate genuine demand from temporary performance chasing.
- 4
Test merit and uniqueness
Document why the strategy should work and what makes it distinctive.
Pro tip Develop the idea in research before turning it into a product.
- 5
Enter the launch process
Only after the criteria pass, pursue the required regulatory approval and fund setup.
Pro tip Allow for months of execution after approval authority is secured.
Watch out The approval process is lengthy and expensive.
In the wild
Cambria had researched shareholder yield since 2006 and found no comparable low-cost fund despite wanting to invest in the concept. The firm published the research and then launched a simple ETF.
→ A researched, personally investable gap became a differentiated product.
Common mistakes
Launching copycat exposure
Faber says Cambria will not duplicate the straightforward asset-class funds that large providers already offer.
Using the shotgun approach
Launching everything to see what sticks shifts product selection toward marketing and return chasing rather than conviction.
Is it for you?
Best for
Investment firms evaluating whether a proposed ETF deserves the cost and effort of launch.
Not ideal for
A shotgun product strategy designed to launch many funds and let return-chasing determine survivors.
From the transcript
“It has to be something I want to put my own money into”
“That obviously has to be different than what's out there already.”
“And it has to be something that people also want, right so there has to be a demand out there”
From the episode
Cambria CIO Meb Faber: Masters in Business (Audio)
Meb Faber