Meb Faber is a well-known quantitative investor who founded the investment management firm Cambria Investment Management. He is best known for popularizing global asset allocation strategies that combine trend following and value investing principles. Faber has authored many books and papers on quantitative investing and has a large social media following among retail investors interested in learning about systematic investment strategies. This article will provide an overview of Faber’s background, his investment philosophy, key strategies such as the Global Tactical Asset Allocation (GTAA), and the influence he has had on the growth of quantitative investing.
Meb Faber’s background in quantitative finance
Meb Faber has a PhD in finance from the University of Chicago and worked as a vice president at the investment bank Bear Stearns in the early 2000s. He grew disillusioned with the traditional long-only approach to investing and became interested in applying quantitative techniques like momentum and trend following. In 2006, Faber left Bear Stearns to start his own investment firm aimed at managing portfolios for high net worth individuals. He co-founded Cambria Investment Management which has grown to over $700 million in assets under management. Faber has authored four books, including ‘Global Asset Allocation’ and ‘The Ivy Portfolio’, both of which discuss the quantitative strategies he employs at Cambria. He also writes extensively on systematic global macro investing at his blog ‘Meb Faber Research’ which has a large readership among retail investors.
Meb Faber’s investment philosophy and process
Meb Faber’s investment philosophy is rooted in taking a quantitative, rules-based approach to asset allocation and security selection. At Cambria, Faber employs a global tactical asset allocation strategy that uses price trend signals to determine which asset classes look attractive based on momentum. His approach combines passive strategic asset allocation with dynamic tactical tilts based on metrics like the 200-day moving average. Faber favors diversification across countries and asset classes to mitigate risk rather than trying to predict market conditions. His investment process focuses on identifying persistent historical return premiums, such as value and momentum, across liquid ETFs and futures contracts. Faber relies almost exclusively on quantitative signals for trading decisions rather than fundamental analysis or human discretion.
Key investment strategies advocated by Meb Faber
Some of the influential quantitative investment strategies developed or advocated by Meb Faber include:
– Global Tactical Asset Allocation (GTAA) – Faber’s flagship strategy that uses cross-sectional momentum to determine which asset classes to own and time series momentum to act as a risk overlay. GTAA Strategies can invest long-only or use leverage/shorting.
– Dual Momentum – Combines relative strength momentum with absolute momentum to select the top performing assets. Faber has written extensively about variations like traditional and composite dual momentum.
– Ivy Portfolio – A simple asset allocation strategy advocated in Faber’s book ‘The Ivy Portfolio’ combining diversified passive ETFs with modest rebalancing.
The influence of Meb Faber on quantitative investing
Meb Faber has contributed significantly to increasing the awareness and adoption of systematic, rules-based investment strategies among both retail and institutional investors. Some of his notable influences include:
– Popularizing global asset allocation approaches that incorporate momentum signals.
– Providing educational resources and inspiration for investors interested in learning about quantitative techniques.
– Advocating for simplicity rather than complexity when designing and implementing quant strategies.
– Emphasizing the benefits of combining passive strategic asset allocation with dynamic tactical tilts.
– Encouraging investors to take a more structured, unemotional approach to determining asset allocations.
In summary, Meb Faber has played an important role in the growth of quantitative investing by developing influential strategies like Global Tactical Asset Allocation and authoring books that make complex concepts accessible. Faber’s evidence-based, rules-driven approach serves as inspiration for many investors looking to improve performance.