Pacer US Cash Cows Bond ETF (MILK US) – Portfolio Construction Methodology

The underlying Solactive Pacer US Cash Cows Bond Index targets a diversified portfolio of US corporate and individual bonds issued by companies identified as high free cash flow generators in the Pacer US Cash Cows 100 Index and Pacer US Large Cap Cash Cows Growth Leaders Index. Issuers therefore generally exhibit high free cash flow yields or margins and strong debt-coverage metrics. From this issuer set, the index includes bonds across the credit spectrum to balance yield, credit quality and liquidity, maintaining at least 75 effective bond holdings from a minimum of 25 issuers and targeting 101 securities in total. Constituents are weighted to emphasise income while controlling single-name risk through caps of 4% per issuer and 1% per individual bond at each annual reconstitution and rebalance. The rules allow inclusion of both investment-grade and sub-investment-grade corporate issues, creating a concentrated but diversified exposure to free-cash-flow-focused corporate credit.

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