Pacer launches trend following ETF

Dec 19th, 2017 | By | Category: Alternatives / Multi-Asset

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Pacer has launched the Pacer WealthShield ETF (PWS US), a trend following ETF that rotates between fixed income and equity sectors using quantitative signals based on risk and momentum.

Pacer launches enhanced trend following ETF

The ETF rotates between equities and fixed income based on risk and momentum.

PWS tracks the Pacer WealthShield Index. The index is allocated between fixed income and equities primarily based on the ‘risk ratio’ – the ratio of the S&P US High Yield Corporate Bond Index to the S&P treasury Bond 7-10 Year Index. When this ratio is above its 5-month exponential moving average (EMA), the index shifts to ‘risk on’ exposure, and when the ratio is below its 5-month EMA, the index shifts to ‘risk off’ exposure.

When in ‘risk on’ mode, the index is equally allocated between the five sectors that have the highest momentum based on 6-month total returns. If any of the top five sectors has an EMA below its 7-month average, the weight for that sector will be allotted to 3-month US Treasury bills.

When the index is in ‘risk off’ mode, the entire portfolio is allocated to either 20+ year US government bonds or 3-month US T-Bills depending on whether the S&P US Treasury Bond 20+ Year Total Return Index is above or below its 7-month EMA.

PWS comes with an annual charge of 0.60%.

Pacer already offers four trend following ETFs under the Trendpilot brand name that rotate between fixed income and equities. What makes PWS unique is that rather than investing in some combination of one equity and one bond index, the ETF seeks to pick outperforming sectors within each asset class to improve returns

The largest Pacer Trendpilot ETF is the Pacer Trendpilot US Large Cap ETF (PTLC US), which has $708 million in assets with an annual charge of 0.60%.

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