ETFs
Pacer launches three “Cash Cows” ETFs in Europe | ETF Strategy
Based in Pennsylvania Pacer ETF has entered the European ETF market with the introduction of three funds implementing the company’s popular investment strategy, ‘cash cows’.
Sean O’Hara, President of FNB Pacer Distributors.
Cash cows refer to companies with high free cash flow yields – free cash flow is a measure of a company’s financial performance, calculated as operating cash flow minus capital expenditures. It represents the cash a company generates after spending the money necessary to maintain or expand its asset base.
This metric is important because it shows that a company is producing more cash than it needs to run the business and can invest in growth opportunities.
By focusing on free cash flow, the Cash Cows methodology may be better able to examine the underlying fundamentals of each company. This is because management tends to have less discretion over how free cash flow is presented, compared to other measures such as sales, profits, assets or liabilities which may, in some cases , be manipulated.
Pacer’s U.S.-listed Cash Cows ETF family is home to more than $35 billion in assets across ten funds, having increased its assets under management by nearly 120% in 2023 on the back of strong performance and at the request of investors.
In Europe, Pacer’s first Cash Cows ETFs focus on global, US and non-US developed equity markets.
Registered on Euronext Dublin And Euronext Amsterdamthe three funds are the Pacer Global Cash Cows Dividend UCITS ETF (GCOW)THE Pacer US Cash Cows 100 UCITS ETF (COWZ)and the Pacer Developed Markets International Cash Cows 100 UCITS ETF (ICOW).
GCOW, COWZ and ICOW have expense ratios of 0.60%, 0.49% and 0.65% respectively.
Sean O’Hara, President of Pacer ETFs Distributors, commented: “By entering the European market, we aim to serve a broader demographic of investors and advisors who are looking to exploit the opportunities offered by these focused funds. free cash flow.
Methodology
GCOW applies a selection process to the FTSE Developed Large Cap Index, which includes approximately the world’s top 1,000 developed market stocks, identifying the 300 companies with the highest free cash flow yields. From this subset, the index selects the 100 companies with the highest 12-month dividend yields. These components are then weighted according to their dividend yield, with a maximum weighting of 2% per share.
COWZ filters the Russell 1000 Index, which represents approximately the 1,000 largest stocks in the United States, to isolate the 100 companies with the highest free cash flow yields. Selected components are weighted based on their trailing 12-month free cash flow, with the weighting of individual stocks capped at 2%.
ICOW examines the FTSE Developed ex-US Index, which includes approximately the 500 largest stocks listed in developed markets outside the United States, for the 100 companies with the highest free cash flow yields. These companies are weighted by their 12-month free cash flow, with a 2% cap on each stock’s weight.
The three ETFs are reconstituted and rebalanced semi-annually, with adjustments made in June and December.