Pacer launches first Trendpilot bond ETF

Oct 24th, 2019 | By | Category: Fixed Income

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Pacer ETFs has launched its first bond product within its flagship family of ‘Trendpilot’ ETFs.

Sean O’Hara, President of Pacer ETFs Distributors.

Sean O’Hara, President of Pacer ETFs Distributors.

Trendpilot ETFs use a trend-following model in a bid to participate in an asset class’s upside potential while managing risk by shifting into safe-haven assets during periods of market stress.

The new fund is the Pacer Trendpilot US Bond ETF (PTBD US) which invests in US dollar-denominated high-yield bonds when the model’s outlook is positive and allocates part or all of its capital to mid-term US Treasuries when the outlook is less favourable.

The fund is linked to the proprietary Pacer Trendpilot US Bond Index which dynamically adjusts allocations to the S&P US High Yield Corporate Bond Index and S&P US Treasury Bond 7-10 Year Index according to a 100-day simple moving average (SMA) of the ‘risk ratio’.

The risk ratio is calculated by dividing the value of the US high-yield index by the value of the US Treasury index.

When the risk ratio closes above the 100-day SMA for five consecutive business days, the fund will have 100% exposure to the high-yield bond index. If the risk ratio closes below the 100-day SMA for five consecutive business days, the fund will switch exposure to 50% of the high-yield bond index and 50% of the US Treasury index. The fund will switch to 100% exposure to the US Treasury index when the risk ratio’s 100-day SMA closes lower than its value from five business days earlier.

The fund has listed on NYSE Arca and comes with an expense ratio of 0.60%.

Sean O’Hara, President of Pacer ETFs Distributors, commented, “We’ve experienced rapid growth and adoption by financial advisors and investors looking for a strategy that offers risk-mitigation tactics, especially in today’s volatile market environment. Our new Trendpilot Bond ETF gives investors exposure to potentially higher-yielding fixed income assets that complement a portfolio, but with the added benefit of a risk management strategy.”

Joe Thomson, Founder and President of Pacer Financial, added, “At Pacer ETFs, we pride ourselves on offering innovative and diverse investment options that meet the needs of our investors, which has been a key driver of our rapid growth. Expanding our successful Trendpilot strategy into the fixed income market shows our dedication to our client-first mentality.”

The launch brings the number of Trendpilot ETFs to seven. The Pacer Trendpilot US Large Cap ETF (PTLC US) is by far the largest in the suite with over $2.7 billion in assets under management. The fund uses a similar trend-following approach to allocate to the S&P 500 when US large-caps are rising and shift to short-term Treasuries when equity markets become turbulent.

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