Pacer US Small Cap Cash Cows 100 ETF retains its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent firm has some investor-friendly attributes, like overall affordable fees and a favorable lineup success ratio. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

Mueller Industries

American Eagle Outfitters

Signet Jewelers

Andersons

Newell Brands

SM Energy

CVR Energy

Owens & Minor

California Resources

Insight Enterprises

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Pacer US Small Cap Cash Cows 100 ETF earns an Above Average Process Pillar rating. 

The leading factor in the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Strong risk-adjusted performance also bolsters the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the parent firm's five-year retention rate of 52%, which suggests it could do more to hold onto its portfolio managers.

 This strategy, over time, has preferred smaller market-cap companies, compared with others in the Small Value Morningstar Category.  But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Examining additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had a defensive tilt, with exposure to higher-quality stocks compared with peers in recent years. This means that the fund holds companies that are profitable, growing, and have solid balance sheets. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it weather downturns better than Morningstar Category peers. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This contributes to a higher-risk, higher-reward approach. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in consumer cyclical and energy relative to the category average by 15.7 and 5.4 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and real estate, underweight the average by 22.7 and 6.3 percentage points of assets, respectively. The portfolio is composed of 102 holdings and is less top-heavy than peers. Specifically, 20.6% of the portfolio's assets are concentrated within the top 10 fund holdings, compared to the typical peer's 28.9%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 101% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Pacer’s team receives a Below Average People Pillar rating. The team benefits from its parent firm's five-year success ratio of 56%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. However, the rating is held back by the instability of management across its parent firm. The firm's asset-weighted manager tenure of seven years suggests it could do more to retain portfolio managers. The combined average five-year excess return of each manager also holds the team back. It suggests that the funds they manage have lagged their respective category's average return.

Below Average

People

In a competitive industry, Pacer doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One notable advantage of Pacer is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the second-lowest quintile of category peers. Pacer has showcased a durable product shelf. This is demonstrated by the firm's three-year risk-adjusted success ratio of 64%, meaning that 64% of its products have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. Pacer has faced above-average manager turnover in the past five years. This is a concern, as long-term stability tends to support positive results.

Average

Parent

Pacer US Small Cap Cash Cows 100 ETF

CALF tracks an index of 100 companies out of the S&P Small Cap 600 Index selected and weighted by free cash flow.

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