Pacer Cash Cows Fund of Funds ETF (HERD US) – Portfolio Construction Methodology

The underlying Pacer Cash Cows Fund of Funds Index provides rules-based exposure to five Pacer Cash Cows equity ETFs, each linked to a free-cash-flow-yield–focused equity index. At each quarterly rebalance, the index allocates 20% to each ETF: Pacer US Cash Cows 100 (screening the Russell 1000), Pacer US Small Cap Cash Cows 100 (screening the S&P SmallCap 600, whose committee-selected constituents typically span roughly USD 750 million–4 billion in market cap), Pacer US Cash Cows Growth (screening the S&P 900 Pure Growth), Pacer Global Cash Cows Dividend (screening the FTSE Developed large-cap universe) and Pacer Developed Markets International Cash Cows 100 (screening the FTSE Developed ex-US universe). Each underlying Cash Cows Index first removes companies lacking usable two-year forward estimates for free cash flow or earnings, then selects the highest free-cash-flow-yield names (100 stocks for most indices, 50 for the growth variant, 300 then 100 by dividend yield for the global dividend index). Underlyings are typically weighted by free-cash-flow yield (or market cap for the growth index) with tight single-name caps of about 2–5% at their own rebalances. The Fund of Funds Index itself is simply equal-weighted across the five ETFs between quarterly rebalances, so relative performance is driven by the differing regional and style tilts of the component Cash Cows strategies.

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