Pacer Industrials and Logistics ETF retains its Morningstar Medalist Rating of Silver. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 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 underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' 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 organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including overall affordable fees and a favorable lineup success ratio.

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 Industrials and Logistics ETF earns a High Process Pillar rating. The leading factor in 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 commendable success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's strong risk-adjusted performance, as shown by its average overall Morningstar Rating of 3.3 stars, supports the rating as well.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the total return performance, before fees and expenses, of the Pacer Global Supply Chain Infrastructure Index.  The fund employs a “passive management” (or indexing) investment approach designed to track the total return performance, before fees and expenses, and of the index. The index consists of globally-listed stocks and depositary receipts of industrials and logistics companies. The fund is non-diversified. 

 The portfolio is overweight in technology by 10.5 percentage points in terms of assets compared with the category average, and its communication services allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and consumer cyclical, with industrials underweighting the average portfolio by 8.4 percentage points of assets and consumer cyclical similar to the average. The strategy owns 99 securities and is diversified among those holdings. In its most recent portfolio, 59.8% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category’s 69.8% average. And in closing, in terms of portfolio turnover, on a year-over-year basis, 10% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

Pacer’s team earns 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 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 number of months that the management team has been running this vehicle together also holds the rating back. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.

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 Industrials and Logistics ETF

SHPP tracks a market cap-weighted index of global companies engaged in transportation, logistics software and hardware, as well as the ancillary services that support the global distribution supply chains.

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