Making its debut on 06/16/2017, smart beta exchange traded fund Pacer US Small Cap Cash Cows 100 ETF (CALF) provides investors broad exposure to the Style Box - Small Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by Pacer Etfs, CALF has amassed assets over $8.91 billion, making it one of the larger ETFs in the Style Box - Small Cap Value. CALF, before fees and expenses, seeks to match the performance of the Pacer US Small Cap Cash Cows Index.
The Pacer US Small Cap Cash Cows Index uses an objective, rules-based methodology to provide exposure to small-capitalization U.S. companies with high free cash flow yields.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.59% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.09%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For CALF, it has heaviest allocation in the Consumer Discretionary sector --about 28.20% of the portfolio --while Energy and Industrials round out the top three.
When you look at individual holdings, Peabody Energy Corp (BTU) accounts for about 2.28% of the fund's total assets, followed by Signet Jewelers Ltd (SIG) and Sylvamo Corp (SLVM).
The top 10 holdings account for about 20.74% of total assets under management.
Performance and Risk
Year-to-date, the Pacer US Small Cap Cash Cows 100 ETF has lost about -4.71% so far, and is up about 17% over the last 12 months (as of 10/29/2024). CALF has traded between $39.41 and $49.16 in this past 52-week period.
The fund has a beta of 1.18 and standard deviation of 24.41% for the trailing three-year period. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Pacer US Small Cap Cash Cows 100 ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Avantis U.S. Small Cap Value ETF (AVUV) tracks ---------------------------------------- and the Vanguard Small-Cap Value ETF (VBR) tracks CRSP U.S. Small Cap Value Index. Avantis U.S. Small Cap Value ETF has $14.15 billion in assets, Vanguard Small-Cap Value ETF has $30.89 billion. AVUV has an expense ratio of 0.25% and VBR charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>Pacer US Small Cap Cash Cows 100 ETF (CALF): ETF Research Reports
Peabody Energy Corporation (BTU) : Free Stock Analysis Report
Signet Jewelers Limited (SIG) : Free Stock Analysis Report
Vanguard Small-Cap Value ETF (VBR): ETF Research Reports
Avantis U.S. Small Cap Value ETF (AVUV): ETF Research Reports
Sylvamo Corporation (SLVM) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
