Pacer ETFs has added an international equities ETF to its “Cash Cows Growth Leaders” product line-up.
Sean O’Hara, President of Pacer ETFs Distributors.
The Pacer Developed Markets Cash Cows Growth Leaders ETF (EAFG US) has been listed on NYSE Arca with an expense ratio of 0.65%.
Pacer’s Cash Cows ETFs are smart beta funds that generally select and weight their constituent stocks based on a free cash flow yield filter, a methodology that aims to target financially robust companies, thereby tilting portfolios towards the quality factor.
Free cash flow is the cash remaining after a company has paid expenses, interest, taxes, and long-term investments. It can be used to buy back stock, pay dividends, or participate in mergers and acquisitions. The ability to generate a high free cash flow yield indicates a company is producing more cash than it needs to run the business and can invest in growth opportunities.
Pacer’s traditional Cash Cows line-up consists of seven ETFs delivering US large-cap, US small-cap, US growth, global, developed ex-US, and emerging market exposures, as well as a diversified fund that allocates across the other ETFs in the series.
More recently, the firm has also begun rolling out a new series of Cash Cows ETFs that add a growth element to the strategy by tilting toward stocks with the highest share price momentum over the previous 12 months. EAFG represents the third fund in this suite with the existing two products targeting US large-cap and small-cap equities.
Pacer’s entire Cash Cows offering has amassed over $34 billion in assets.
Sean O’Hara, President of Pacer ETF Distributors, commented: “As markets have been impacted by elevated interest rates and geopolitical tensions, investors’ attention has shifted towards resilient strategies like the high free cash flow approach of our Cash Cows funds.
“Launching EAFG aims to provide investors with a novel growth opportunity that’s designed to navigate the current global landscape while leveraging names in developed markets beyond our borders.
“This addition to our product lineup underscores our firm’s commitment to delivering diversified and impactful solutions with investors’ goals in mind. We have found strategically screening companies with the highest free cash flow margin over time may produce higher current and future sales and earnings growth.”
Methodology
EAFG tracks the Pacer Developed Markets Cash Cows Growth Leaders Index which is constructed from the MSCI EAFE Index, a broad market benchmark consisting of large and mid-cap equities from developed market countries outside of North America.
The methodology selects the 100 securities with the highest free cash flow margins over the past 12-month period. Constituents are then weighted by price momentum with an individual cap of 5%.
The index is reconstituted and rebalanced semi-annually.