Six years of growth has seen US ETF issuer Pacer achieve USD7.5 billion in assets under management in its range of rules-based ETFs.
Since Pacer’s inception with the flagship Trendpilot strategy in 2015, the firm has grown its offerings to 36 ETFs, while also expanding to 92 total employees between its home office in suburban Philadelphia and 43 Wirehouse and Independent territories across the country.
Pacer ETF Distributors’ President, Sean O’Hara says: “2020 was tough but so far this year, we are up over USD2 billion and that’s not from the market – it’s coming from three different areas.”
Those areas are the high yield fixed income strategy within the Pacer Trendpilot ETF Series, the Pacer Trendpilot US Bond ETF (PTBD), a fixed-income fund that seeks risk mitigation by alternating exposure between high-yield corporate bonds and US Treasury bonds. Since its launch in 2019, PTBD has amassed USD1 billion in assets.
“It’s a fixed income strategy that rotates between high yield and Treasuries,” O’Hara explains. “It had a tremendous year in 2020 and is a live performance demonstrator of how it avoids nasty downturns.”
The firm also has a powerful suite of ETFs based on the Cash Cows Index. “These are our value strategy product and we don’t do value in a traditional way – it’s not benchmark value who label low price to book,” O’Hara says. “For three decades from 1959 to 1989, that worked great and it created a tilt to value and we all tried to extract the value premium but since 1990 to today that’s issued zero excess return and we think it’s because the component parts of the stock market have changed.”
O’Hara explains that in 1975, 87 per cent of the assets in the S&P 500 were tangible. “We were still a manufacturing society which meant I could go out to a plant or count someone’s inventory, but today, at the end of 2020, it’s now 90 per cent intangible, with only 10 per cent tangible. We are a consumption services, technology, healthcare services and consumer discretionary brand-based economy today and you can’t measure those names on a price to book basis.”
Instead, the Cash Cows range is based on free cash flow and yield to identify stocks that are cheap. An example O’Hara gives is the Discovery Channel and Viacom CBS. The latter screening firm has proved inexpensive against the better-known Netflix. “We bought them both really cheap and they have achieved 100 per cent over the first quarter of this year because people started to ramp up their subscriptions. If you look at the Discovery network in the US, there are 10-12 channels with great gobs of content already developed that doesn’t require USD20 million to pay a big Hollywood star to make a movie – it’s reality TV based on inexpensive content.”
The third suite that has gathered some assets is multi factor strategies, launched in partnership with Lunt Capital Management and Salt Financial. O’Hara says: “Everyone invests using factors – they just don’t know it.”
Lunt Capital Management created three factor-based funds, one being the Pacer Lunt Large Cap Alternator ETF (ALTL), known for alternating between low-volatility and high-beta stocks in the S&P 500 Index and Salt Financial created two ETFs utilising the truBeta strategy. The series has risen in popularity – and performance – in recent months, amassing over USD200 million in assets under management.