Pacer ETFs has introduced the Pacer Military Times Best Employers ETF (VETS US), a new thematic fund tracking US-listed firms that support training and professional development of military veterans, service members and their families.

VETS provides exposure to US-listed companies that demonstrate strong support for US military veterans through post-service employment opportunities.

Sean O’Hara, president of Pacer ETFs, commented, “Pacer ETFs strongly believes that America’s military and veterans exemplify the best part of our country. Companies that treat veterans well should be recognized for their care and support of our best and brightest. Doing so through our new ETF is a unique and wonderful way to spotlight these companies.”

The fund tracks the Military Times Best for VETS Index, calculated by Wilshire. To be included in the index, companies must have a market cap of at least $200 million, and meet certain liquidity thresholds. To screen for veteran-friendly firms, the index harnesses analytics from The Military Times, which bills itself as a trusted independent news source for America’s military and its veterans.

Each year, The Military Times announces the results of its Best for Vets: Employers Survey, which ranks companies based on their military recruitment efforts, corporate culture, reservist policies and military and veteran family policies. The survey is voluntary although The Military Times maintains that not every company that applies is successful with approximately 60% making the cut in 2017.

Companies must have been named in the Best for Vets list for three consecutive years to be eligible for index inclusion. The result of these several layers of screening is an index currently containing 37 constituents. These constituents were equally weighted at the previous annual reconstitution and rebalancing, which occurred in September.

There is evidence that firms which have policies supporting veterans in employment may perform better than those without. Known as the ‘veteran opportunity’, proponents maintain that the skills and hard-working ethos developed in the armed forces enable veterans to become valuable, productive employees.

Joe Thomson, founder and president of Pacer Financial, and who previously served as a First Lieutenant in the US Army, explains, “The years I served in the military provided me with the discipline and real-world education needed to succeed throughout my career. In creating our new ETF, we are spotlighting companies that do more than just appreciate America’s veterans. They also understand that America’s military develops amazing employees. Companies with a culture that supports veterans have proven themselves to be among the most well-run.”

Other factors which may help these firms outperform include positive reputational benefits from being perceived as patriotic; marketing effects from being included in lists such as Best for Vets; and a wider, loyal customer base in that veterans tend to reciprocate support for companies that support them.

The fund is listed on Nasdaq Exchange and has an expense ratio of 0.60%.

Earlier this year, UBS Investment Bank launched an ETF on NYSE Arca with a similar strategy to VETS. The InsightShares Patriotic Employers ETF (HONR US) tracks an equally weighted index on US-listed stocks that have above-average scores in Victory Media’s Military Friendly Employer ratings. HONR’s methodology leads to a wider range of holdings compared to VETS with 107 current constituents. Its expense ratio is slightly more expensive at 0.65%.