Is the Tail Wagging the CALF?

Is the Tail Wagging the CALF?

Investors worry about the size of the small cap ETF.

Senior ETF Analyst
Reviewed by: Staff
Edited by: James Rubin

Is the Pacer US Small Cap Cash Cows 100 ETF (CALF) too successful?  

The seven-year-old fund has $9 billion in assets under management today, almost quadruple what it had a year ago. 

The ETF’s strong performance—up 94% since inception versus 56% for the iShares Russell 2000 ETF (IWM)—has attracted a lot of investor interest. 

But some investors have begun to wonder whether CALF has gotten so large that it’s starting to influence the prices of its underlying holdings. 

CALF holds more than 10% of the shares outstanding of nine of its holdings, including 28% of the shares outstanding for Central Garden & Pet Co. and 24% of the shares outstanding for Designer Brands Inc. 

Eight of those nine stocks have underperformed IWM this year with losses of as much as 69%. 

IWM and the Vanguard Small-Cap Value Index Fund ETF (VBR) are up 0.2% and 1.9%, respectively, this year, while CALF is lower by 8.6%. 

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While that may just be a coincidence, it’s theoretically possible that an ETF can get so large relative to its underlying market that it becomes a “tail wagging the dog” situation.  

As money flows into the ETF, the fund might have to pay a premium to purchase its target stocks, while it may push their prices significantly lower when it sells.  

The total market cap of the S&P Small Cap 600—the index from which CALF pulls its 100 holdings—is $1.2 trillion. 

That’s less than the market cap of Meta and less than half the market cap of Microsoft, Apple or Nvidia. 

Since the start of the year, investors have poured $3.1 billion into CALF, but they’ve pulled $150 million out of the fund over the past month. 

Some CALF holdings have performed particularly poorly in that timeframe. Shares of Central Garden & Pet Co. and Designer Brands Inc. have tumbled 16% and 21%, respectively, over the past month, while Medifast is lower by 14%.  

CALF owns 13% of the shares outstanding for Medifast, a nutrition and weight loss company that has been struggling due to competition from GLP-1 drugs. 

While much of Medifast’s decline reflects its deteriorating fundamentals, it’s certainly possible that selling by CALF may have exacerbated its fall. 

Limited Impact  

Sean O’Hara, president of Pacer ETFs, rejected the narrative that CALF had gotten too large. 

In this week’s episode of Talk ETFs, O’Hara told me that his firm has ways in which it can minimize the impact that the fund has on stock prices.  

“One of the things that we are aware of as the issuer of the fund is that when we do rebalance, we have to be very careful about how we do so. The methodology allows for a five-day transitionary period, for example,” he said. 
“So, if we’re trying to rebalance out of names where we might be a pretty big holder, we don’t necessarily have to do all of that in one day; we can stretch it out over five days. And we can work with market makers on a whole host of other tactics that we use when we rebalance all of our funds to minimize the price impact, not only on the names that we’re going to be moving out of the portfolio, but the names that are going to come in,” O’Hara added. 

Check out the full Talk ETFs episode scheduled for June 26 to hear more from O’Hara. 

Sumit Roy is the senior ETF analyst for, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for, with a particular focus on stock and bond exchange-traded funds.

He is the host of’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays,’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.