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Sean O'Hara, Pacer ETF

Pacer acquires USAI in next step on its growth path

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Fast growing Pacer ETFs has continued on its rapid expansion path by making its first acquisition of an existing two-year-old ETF, USAI, now renamed as Pacer American Energy Independence ETF.

Fast growing Pacer ETFs has continued on its rapid expansion path by making its first acquisition of an existing two-year-old ETF, USAI, now renamed as Pacer American Energy Independence ETF.

Sean O’Hara, president of Pacer ETFs Distributors, explains that the acquisition came from the USAI founder, Simon Lack’s desire to raise assets for the fledgling ETF and Pacer’s desire to be in the mid-stream energy sector.

The Pacer American Energy Independence ETF offers investors exposure to the growth potential of infrastructure development supporting domestic energy supplies. Analysts anticipate that through 2025, the US will continue its leadership as the world’s largest oil and gas producer, accounting for almost 20 per cent of global oil production and 25 per cent of natural gas production. 

The passively managed Pacer USAI fund is designed to capitalise on this trajectory by following the American Energy Independence Index, composed of US and Canadian midstream energy infrastructure companies and C-corps as well as master limited partnerships (MLPs) and general partners of MLPs.

The portfolio receives favourable tax treatment due to its structure and tracks its index well, O’Hara says. “This sector has been undervalued for a while particularly in the mid-stream market and its free cash flow is projected to go up over time with increased movement of oil and natural gas through the midstream structure and as these firms build out their networks. It’s good timing for us and good timing for him.”

Pacer has reached over USD5 billion in assets in four years, and now has 22 strategy-driven ETFs focusing on four fund ‘families’: the Pacer Trendpilot Series, Pacer Cash Cows Index Series, Pacer Custom ETF Series, and Pacer Leaders ETF Series. 

“At Pacer we focus on the distribution side,” O’Hara says. “We have a good relationship with bigger independents and wirehouses and about 41 wholesalers in the field on whom we rely to raise assets in the old fashioned way.”

The firm is entirely focused on the US at the moment. “The US market is still the most attractive market for ETFs, we believe, so there is a lot of growth ahead of us before we worry about where else we might be doing business.”

The Trendpilot ETF series is proving popular with investors who recognise potential market change on the horizon. “We are at the long end of this bull market expansion,” O’Hara says. “Having some sort of risk management or mitigation in an ETF can help investors who still want to be in the market but also away from market exposure.”

Going forward, O’Hara believes that active management will be a bigger part of the business but the firm has no plans to launch in the new semi-transparent ETF structure. 

“We don’t have an active strategy at the moment but if we were to launch one it would be fully transparent,” O’Hara says, not convinced that the semi-transparent structure would work for his size of firm and not prepared to take on the reputation risk if it didn’t work. “We like to play it pretty straight,” he says.

The growth trajectory makes O’Hara happy. “We try to stick to our knitting and we believe that the only really reliable way to grow is to have a robust sales and marketing effort. It’s not that different from the traditional mutual fund business.”

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