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Cloning Investments

Case Study 2 – Meb Faber

Meb Faber is the founder and the CIO of Cambria Investment Management. He completed his education from the University of Virginia, with a double major in Biology and Engineering Science.

 

AlphaClone is a cloning investment tool that lets an investor find and track the stock ideas of top money managers, which is developed by Faber himself.

 

Smart Pilot Strategy:

Smart Pilot Strategy is a cloning strategy which uses its methodology and selects ten managers with the highest performance potential. 

 

There are two smart pilot strategies, known as Smart Pilot (Hedge) and Smart Pilot (long). Here are the returns of the two strategies, in comparison to the S&P 500 index, net of a management fee of 1%, over the last decade:

 

 

Conclusion:

Cloning is not an end but the start of a process to find suitable investment ideas. Blindly cloning generally doesn't help. An investor must develop a strong reasoning before lapping up any stock. 

 

Once again, it must be noted that cloning is not foolproof. There is no guarantee of success. Even after following the process, it is possible that an investor can generate negative returns.

 

Empirical market data has proved cloning to be a sound & successful strategy.Nonetheless, it remains quite unpopular in the present investor realm.

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Units 8/8