Pacer has extended its ETF offering by bolting on two factor-based strategies it has acquired from New York issuer Salt Financial.
Sean O’Hara, President of Pacer ETFs.
The Salt High truBeta US Market ETF (SLT US) and Salt Low truBeta US Market ETF (LSLT US) provide exposure to US large-cap equities with high-beta and low-beta characteristics, respectively.
The funds utilize Salt’s proprietary ‘truBeta’ process in a bid to more accurately forecast a firm’s sensitivity to market movements.
Salt defines truBeta as a company’s beta forecast for the next quarter, using a blend of intraday, near, and longer-term historical data. The process is aided by a machine-learning algorithm to arrive at what the company believes to be a more responsive and accurate beta forecast.
Salt launched SLT in February 2018 and LSLT in March 2019. Neither fund has generated significant investor interest with each housing under $10 million in assets under management.
The ETFs have been renamed to include the Pacer brand but will maintain their original ticker codes.
Pacer has, however, bumped up the funds’ expense ratios with each now costing 0.60% – SLT and LSLT were originally launched with price tags of 0.50% and 0.29%.
Methodology
The Pacer Salt High truBeta US Market ETF tracks the Salt truBeta High Exposure Index which first screens the Solactive US Large- and Mid-Cap Index, a universe comprising the 1,000 largest US stocks by market capitalization, to select the top 500 stocks by 30-day average trading volume.
The methodology then uses truBeta estimates to select the 100 stocks with the highest sensitivity to the SPDR S&P 500 ETF (SPY US). Constituents are equally weighted and rebalanced quarterly with a cap of 30% per sector.
Meanwhile, the Pacer Salt Low truBeta US Market ETF is linked to the Salt Low truBeta US Market Index. It utilizes the same process but instead selects and equally weights the 100 stocks with the lowest truBeta sensitivity to SPY.
Sean O’Hara, President of Pacer ETFs, commented, “The acquisition of these funds comes at a turning point in our market environment. As market volatility continues, investors are eager to access funds that can take into account the potential risks and rewards in this market with a factor-based approach. The funds’ strategic focus on assessing beta allows us to provide investors with two unique products that align with our investment approach and rules-based philosophy.”
Joe Thomson, Founder and President of Pacer Financial, added, “Our mission is to provide investors with a diverse range of products to help meet their investment goals. The acquisition of these funds assists us in meeting the varied risk appetite of our client base in spite of the unprecedented uncertainty facing investors today.”