Despite People Pillar weakness and an Average Process Pillar, Pacer WealthShield ETF gets enough right to retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy gets an Average Process Pillar. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in the Europe-Developed region and an overweight in developed markets regions compared with category peers. The team managing this passive strategy earns a Low People Pillar rating. The strategy's parent firm has some investor-friendly attributes, like overall low fees and a high success ratio across its product shelf. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

Microsoft

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Berkshire Hathaway Inc. - Ordinary Shares - Class B

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Visa

salesforce.com

Mastercard

Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. Pacer WealthShield ETF earns an Average Process Pillar rating.  The predominant 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 strengthens the process. 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 noteworthy success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the instability of talent across its parent firm. The firm's asset-weighted manager tenure of seven years suggests it could do more to retain portfolio managers.

 The investment strategy as stated in the fund's prospectus is as follows: 

 The investment seeks to track the total return performance, before fees and expenses, of the Pacer WealthShield Index.  The index utilizes a systematic risk management strategy that directs the index's exposure to U.S. equity securities, U.S. Treasury securities, or a mix of each. The Advisor attempts to invest all, or substantially all, and of its assets in the component securities that make up (i) the component securities of the index or (ii) ETFs that seek to track the performance of some or all of the component securities of the index in the same approximate weight as such component securities.  

 The portfolio is overweight in consumer cyclical and healthcare relative to the category average by 12.4 and 8.6 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and consumer defensive, underweight the average by 10.6 and 5.8 percentage points , respectively. The portfolio is overweight in North America by 16.6 percentage points compared with the category average, and Emerging Europe's allocation is similar to its peers. The regions with low exposure compared to their category peers are Developed Europe and Japan, underweight the average by 6.2 percentage points and 2.7 percentage points, respectively.

Average

Process

Pacer’s team receives a Low People Pillar rating. The main detractor from the rating is the turnover of talent 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 limits the team. It shows that the funds they manage have lagged their respective category's average return. The turnover of its management team hinders the team further. Specifically, the fund last had a manager change two years ago.

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.

Parent

Pacer WealthShield ETF

PWS tracks an index that toggles between equity and Treasurys, or a combination of both, on a monthly basis depending on monthly moving averages.

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