Diversifying Highly Appreciated Securities with 351 ETF Conversions-Slide handout

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Pdf Summary

The July 29, 2025 presentation by Cambria Investment Management at NAPFA 2025 covers the current market environment, global valuations, and introduces a tax-efficient strategy for diversifying concentrated stock holdings through a "351 to ETF Exchange." This method allows investors to transfer diversified portfolios—including stocks or ETFs—to an exchange-traded fund (ETF) without triggering taxable gains or losses, facilitating the diversification process while minimizing tax drag.<br /><br />Key conditions for portfolio contributions include diversification requirements (no single position over 25%, with a practical minimum of 11 positions), securities must be exchange-traded, and contributions cannot be ongoing. Examples of qualifying portfolios include those roughly equally weighted across multiple stocks or consisting entirely of ETFs, while concentrated portfolios or mutual funds do not qualify.<br /><br />The presentation also outlines the operational timeline for launching such an ETF, covering preparatory steps from indication of interest to final tax opinion issuance roughly seven weeks before and after launch.<br /><br />Highlighting Cambria’s upcoming Global Equal Weight ETF (GEW), set for a September 25, 2025 launch, the fund aims to provide global large-cap equity exposure with an equal weight methodology at a low expense ratio of 0.25%. Cambria has prior experience launching ETFs using the 351 exchange process, with assets under management noted for earlier launches in December 2024 and April 2025.<br /><br />The presentation concludes with disclosures about investment risks including market volatility, leverage, liquidity, and international exposure. It stresses the importance of reviewing fund prospectuses, consulting tax professionals, and understanding that tax-aware strategies may reduce but not eliminate tax liabilities. Definitions of key terms such as the 351 conversion and various indices are provided for investor clarity.

Keywords

Cambria Investment Management

NAPFA 2025

351 to ETF Exchange

tax-efficient diversification

concentrated stock holdings

Global Equal Weight ETF

equal weight methodology

tax drag minimization

portfolio diversification requirements

investment risk disclosures