Specifically, the strategy follows strict guideline with three indicators, including an equity indicator, 50/50 indicator and a T-bill indicator.
The Equity Indicator refers to when the Benchmark Total Return Index closes above its 200-day SMA for five consecutive business days, the exposure will be 100% to the Benchmark Index. From the equity position, the Index will change to the 50/50 position or the T-Bill position depending on the 50/50 Indicator and the T-Bill Indicator.
The Price Signal 50/50 Indicator refers to when the Benchmark Total Return Index closes below its 200-day SMA for five consecutive business days, the exposure will be 50% to the Benchmark Index and 50% to 3-Month US Treasury bills. From the 50/50 position, the Trendpilot Index will return to the equity position or change to the T-Bill position depending on the Equity Indicator or T-Bill Indicator.
Lastly, the Trend Signal T-Bill Indicator refers to when the Benchmark Total Return Index’s 200-day SMA closes lower than its value from five business days earlier, the exposure will be 100% to 3-Month US Treasury bills. From the T-Bill position, the Trendpilot Index will change to the equity position when the Equity Indicator is triggered. It will not return to its 50/50 position unless the Equity Indicator is first triggered.
PTLC implements the Pacer Trendpilot strategy with the S&P 500 Index as its benchmark. PTMC takes on the S&P 500 MidCap 400 Index for middle-capitalization stock exposure. PTNQ is exposed to the widely observed Nasdaq-100 Index. Lastly, PTEU implements the trend following strategy with the FTSE Eurozone Index.
“The Pacer Trendpilot ETF Series is designed to complement an existing equity portfolio. In using a risk management strategy alongside alpha and beta equities, clients are better positioned for more downside risk management from the market,” O’Hara added.
Financial advisors who are interested in learning more about trend-following strategies can watch the webcast here on demand.