Pacer Advisors Sued by Index Provider Benchmark

October 27, 2022

Pacer Advisors is being sued by one of its index providers after the investment adviser, which manages 46 exchange-traded funds, sought to use a competitor’s indexes for a pair of funds. 

Benchmark Investments is seeking a temporary restraining order that would prevent Malvern, Pennsylvania-based Pacer from switching to German index provider Solactive for two funds on Nov. 1.  

The suit, filed Oct. 24 in Delaware Court of Chancery, seeks unspecified damages from Pacer and for Benchmark, also referred to as Kelly Benchmark in the suit, to continue providing index services. 

The $876 million Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR) and the $208 million Pacer Benchmark Industrial Real Estate SCTR ETF (INDS) both launched in May 2018, tracking indexes provided by Benchmark. On Oct. 14, Pacer announced it was switching to Solactive indexes for the funds, saying it “has accepted the termination by Kelly Benchmark Indexes of its services.” 

Benchmark Indexes founder Kevin Kelly declined to comment to ETF.com about the lawsuit. Pacer, which manages $17 billion in ETFs, didn’t respond to an emailed request for comment. 

The lawsuit claims Pacer “engaged in a blatant money grab” in moving to terminate its agreement with Benchmark. It says Pacer tried to misappropriate the profits generated by the funds, which it refers to as “Benchmark’s ETFs.” It also says Pacer is looking to rewrite the contract to get rid of Benchmark in favor of a competing index provider, thus violating the original agreement’s noncompete clause.  

“Benchmark, the fund sponsor, engaged Pacer to help it establish and then operate the funds,” the brief said. “Benchmark invested significant time and resources into developing and maintaining these Subject Indexes, and Benchmark, not Pacer, bore the expense of forming and maintaining the Funds.”  

Pacer will also drop Benchmark from providing indexes for another three funds that are in registration and not yet trading at the end of the month, according to an Oct. 14 SEC filing.  

 

Contact Heather Bell at [email protected] 

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