Yesterday, Pacer rolled out an ETF that switches between bond index exposures. The Pacer Trendpilot US Bond ETF (PTBD) is the latest addition to the issuer’s Trendpilot family, which implements trend-following strategies.
The fund comes with an expense ratio of 0.60% and lists on the NYSE Arca.
PTBD has three allocations that it switches between based on a metric referred to as the risk ratio, which is the value of the S&P U.S. High Yield Corporate Bond Index divided by the value of the S&P U.S. Treasury Bond 7-10 Year Index. The fund allocates between those two indexes based on where the risk ratio is relative to its 100-day moving average, according to the prospectus.
When the risk ratio is above its 100-day moving average for five consecutive trading days, the fund allocates all its weight to the high-yield index. When the risk ratio is below its 100-day moving average for five consecutive trading days, the fund allocates between the two indexes. And when the risk ratio itself closes below its own 100-day moving average for five consecutive trading days, it allocates fully to the Treasury bond index, the document says.
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