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

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in yield exposure and volatility exposure compared with category peers. High yield exposure is attributed to holding high dividend-paying or buyback stocks, and is suitable for income seekers outside of fixed-income. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including overall reasonable fees and a high success ratio across its product shelf.

Analyst Rating

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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 Emerging Markets Cash Cows 100 ETF earns a High Process Pillar rating. 

The largest contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's five-year risk-adjusted success ratio of 69% also influences the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their commendable success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's superior risk-adjusted performance, as shown by its average overall Morningstar Rating of 3.3 stars, contributes to the process as well.

 This strategy tends to hold smaller, more undervalued companies compared with its average peer in the Diversified Emerging Mkts Morningstar Category. Looking at additional factor exposure, this strategy has continually had more high-yield exposure than the Morningstar Category average during recent years, with the portfolio holding more stocks with high dividend or buyback yields. Higher-yield stocks can provide steady income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. This strategy also has had an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Given the high trading volume of holdings, this fund also tilts toward liquid assets. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In this month, the strategy also had more exposure to the Liquidity 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 energy and basic materials relative to the category average by 13.2 and 9.2 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and technology, underweight the average by 22.0 and 10.5 percentage points of assets, respectively. The portfolio is composed of 118 holdings and its assets are more dispersed than peers in the category. In particular, 22.0% of the portfolio's assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 25.3%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 66% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Pacer’s team receives a Below Average People Pillar rating. The team is bolstered by its parent firm's five-year success ratio of 69%. 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 turnover 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 instability of its management team also holds the team back. The fund last saw a manager change two years ago.

Below Average

People

Pacer's track record as a steward is mixed, 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. The product lineup at Pacer has exhibited exemplary durability compared with peer asset managers when looked at over the past five years. Notably, its five-year risk-adjusted success ratio stands at 69%, meaning that 69% of its products have both survived and beaten their respective category median on a risk-adjusted basis. Portfolio management turnover at Pacer is higher than at peer firms, detracting from the overall assessment of the firm's stewardship. Turnover in the portfolio-management ranks can happen for a number of reasons, including mergers and liquidations, portfolio managers moving into other roles, or portfolio managers leaving the firm. In some cases, such change may not signal a serious or immediate problem at the firm, but can still be disruptive for investors, hinder the effectiveness of a firm’s investment processes, or suggest a weaker investment culture.

Average

Parent

Pacer Emerging Markets Cash Cows 100 ETF

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