Real Estate ETF Suite Debuts

Pacer Financial has launched the first three ETFs of what is expected to be an eight-fund suite. Yesterday, the firm rolled out the Pacer Benchmark Industrial Real Estate SCTR ETF (INDS), and today it debuted the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR) and the Pacer Benchmark Retail Real Estate SCTR ETF (RTL).

The three funds each come with an expense ratio of 0.60% and list on the NYSE Arca exchange.

Methodology

All three funds’ underlying indexes require that eligible companies meet liquidity requirements and have at least $200 million in market capitalization. Within the indexes, constituents are weighted by free-float market capitalization, with some constraints. Individual component weights are capped at 15% of the index, while companies that have weightings of 4.5% or more cannot represent more than 45% of the total index. Rebalancing occurs on a quarterly basis, according to the prospectus.

INDS targets companies focused on the industrial real estate sector that generate at least 50% of their revenue or profits from such operations, and its underlying index must have a weighting in self-storage companies of at least 20%. The underlying index included 20 stocks as of the end of November 2017, with Prologis representing 15% of the index, followed by Duke Realty Corp. at nearly 12% and WP Carey weighted at nearly 9%.

SRVR covers the data and infrastructure real estate segment, which is driven by technology like cloud computing. It includes companies that provide the space needed to store, compute and transmit large quantities of data such as data centers and communications towers. Such operations must represent at least half of a company’s revenue or profits. The fund’s underlying index included 26 companies as of the end of November, with American Tower, Crown Castle International and Equinix each weighted at 15% of the index.

RTL focuses on companies that derive at least 85% of their revenues or earnings from the management of retail properties such as shopping malls. At the end of November, the underlying index covered 30 companies, with Simon Property Group topping the list at 15% of the index, followed by Realty Income and GGP at 11.82% and 10.63%, respectively.

Real estate is a new direction for Pacer, which has previously focused primarily on funds falling under its Cash Cows or Trendpilot families. The other five funds included in the filings for its real estate funds include those targeting companies in the hotel, apartment, office and health care segments, as well as a fund specializing in real estate companies that engage in net lease agreements.

Contact Heather Bell at [email protected]