Pacer Plans Multi-Asset Fund

Pacer has filed for an ETF that will allocate its exposures among U.S. equities and U.S. Treasury securities based on criteria like momentum. The Pacer Wealth Shield ETF will rely on a “risk ratio” that is basically the ratio between the S&P U.S. High Yield Corporate Bond Index and the S&P U.S. Treasury Bond 7-10 Year Index. 

Every month, the methodology looks at the risk ratio, and if it is above its five-month moving average, the index allocates to equities until the next month. The index allocates to fixed income when the risk ratio is at or below its five-month moving average.

Equities Allocation

When the index allocates to equities, it selects the five top-performing indexes for the portfolio based on trailing six-month total return from the following choices:

• S&P 500 Energy Sector Total Return Index
• S&P 500 Materials Sector Total Return Index
• S&P 500 Information Technology Sector Total Return Index
• S&P 500 Industrials Sector Total Return Index
• S&P 500 Financials Sector Total Return Index
• S&P 500 Health Care Sector Total Return Index
• S&P 500 Utilities Sector Total Return Index
• S&P 500 Real Estate Sector Total Return Index
• S&P 500 Consumer Staples Sector Total Return Index
• S&P Biotechnology Select Industry Total Return Index
• S&P 500 Consumer Discretionary Sector Total Return Index
• Dow Jones Internet Composite Index
• S&P 500 Telecommunication Sector Total Return Index

The five component indexes in the equity allocation are equally weighted, but if any of them are below their seven-month exponential moving average—which assigns more weight to more recent values—they are replaced in the index by a 20% allocation to three-month U.S. Treasury bills. The prospectus notes that, at any given time, the equity allocation will include roughly 400 individual equity securities.

Fixed Income Allocation

The fixed-income allocation is much simpler. When it is warranted, the index allocates 100% of its value to the S&P U.S. Treasury Bond 20+ Year Total Return Index, unless the index’s value has fallen below its seven-month exponential moving average. In that situation, the index allocates entirely to three-month Treasury bills.

The methodology is reminiscent of Pacer’s “Trendpilot” products that switch between Treasury bills and an equity index exposure based on moving averages. The firm’s largest ETF is the Pacer Trendpilot 750 ETF (PTLC), with nearly $550 million in assets under management.

The filing does not include an expense ratio or ticker. However, the document indicates that the fund will list on the Bats exchange. Bats is owned by ETF.com’s parent company, CBOE.

Contact Heather Bell at [email protected]