Pacer ETFs has introduced a new suite of income-focused equity ETFs that aim to deliver cash distributions multiple times higher than the yields offered by mainstream stock market indices.
Sean O’Hara, President of Pacer ETFs Distributors.
The suite, which has been brought to market in partnership with product structurers Metaurus Advisors, consists of two ETFs at launch, both targeting US large-cap equities.
They are the Pacer Metaurus US Large Cap Dividend Multiplier 300 ETF (TRPL US) and the Pacer Metaurus US Large Cap Dividend Multiplier 400 ETF (QDPL US).
TRPL and QDPL seek to provide cash distributions equal to 300% and 400% respectively of the S&P 500 dividend yield.
The funds are linked to proprietary indices developed by Metaurus Advisors which comprise two components – the S&P 500 Price Return Index and long positions in annual S&P 500 dividend futures contracts. Essentially, each index has separated the S&P 500 into the two return components of price appreciation/depreciation and dividend cash flow.
The indices do not use leverage but rather reduce their exposure to the S&P 500 Price Return Index in order to increase exposure to the dividend futures component and achieve the desired cash distribution multiple. The Dividend Multiplier 300 and Dividend Multiplier 400 ETFs are expected to have approximately 92% and 88% exposure to the S&P 500 Price Return Index, respectively.
Given the current market backdrop of historically low interest rates, policy-driven risks of inflation, and overall asset valuation levels, the ETFs may appeal to investors who wish to diversify away from fixed income while still maintaining high levels of current cash flow.
Both ETFs have been listed on NYSE Arca and come with expense ratios of 0.79%. Dividend distributions are paid quarterly.
Sean O’Hara, President of Pacer ETFs Distributors, said: “We are pleased to partner with Metaurus on these funds given their expertise. The emphasis on portfolio cash flow and income needs is not going away, and the market has shown a significant interest in strategies that creatively address this demand. At Pacer ETFs, we feel these two funds answer this call.”
Rick Silva, Senior Managing Director of Metaurus Advisors, added: “Pacer’s strategy-driven approach and keen sense of industry needs are what drew us to this partnership and creation of these innovative ETFs based on patented technologies. Our team is looking forward to bringing together our shared knowledge in the ETF space to deliver unique solutions to investors seeking to combine a multiple of the index’s dividend yield with diversified, broad market exposure.”