Pacer ETFs today expanded its $34 billion cash cows series with the launch of a new ETF.
The new fund provides international developed markets exposure to companies with above average free cash flow margins. These companies are commonly referred to as cash cows.
The Pacer Developed Markets Cash Cows Growth Leaders ETF (EAFG) offers access to mid- and large-cap companies generating strong free cash flow in developed markets excluding the U.S. and Canada.
The launch of this fund coincides with a new partnership between Pacer and MSCI. EAFG is the first of Pacer’s cash cows series to screen equity names using an MSCI Index, according to a statement from the firm.
See more: “ETC and Bancreek Launch Active International ETF“
Under the Hood of EAFG: the Newest ETF in the Cash Cows Series
The initial index universe comprises companies in the MSCI EAFE Index. The universe is then screened based on average projected free cash flows and earnings over the next two fiscal years.
Companies with negative average projected free cash flows or earnings are removed from the universe. Additionally, companies in the financial or real estate sectors are also excluded from the universe.
The remaining companies are then ranked by their free cash flow margin for the trailing-twelve-month period. The 100 companies with the highest free cash flow margin are then selected, weighted by their price momentum score.
Furthermore, the weight of any individual company included in the index is capped at 5%.
“As markets have been impacted by elevated interest rates and geopolitical tensions, investors’ attention has shifted towards resilient strategies like the high free cash flow approach of our Cash Cows funds,” Sean O’Hara, president of Pacer ETF Distributors, said in a statement.
“Launching EAFG aims to provide investors with a novel growth opportunity that’s designed to navigate the current global landscape while leveraging names in developed markets beyond our borders,” O’Hara added.
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