The Pacer Cash Cows Fund of Funds ETF (HERD) seeks to provide exposure to companies with strong free cash flow generation through a fund-of-funds approach. This strategy targets businesses that consistently convert earnings into actual cash, focusing on financial strength and dividend-paying potential across various market capitalizations and sectors.
How It Works
HERD employs a fund-of-funds structure that invests in other Pacer ETFs focused on cash flow metrics, creating a diversified portfolio of cash-generating companies. The underlying funds typically use rules-based screening to identify companies with high free cash flow yields relative to enterprise value. Holdings are weighted based on cash flow metrics rather than market capitalization, with quarterly rebalancing to maintain exposure to the strongest cash generators across different market segments.
Key Features
- Fund-of-funds structure provides instant diversification across multiple cash flow-focused strategies and market capitalizations
- Zero expense ratio makes it one of the most cost-effective ways to access cash flow investing strategies
- 1.44% dividend yield reflects focus on cash-generating companies that typically return capital to shareholders
Risks
- This ETF can lose value if cash flow metrics deteriorate during economic downturns, as high-yielding stocks often underperform growth stocks in bull markets
- Fund-of-funds structure creates potential tracking error and complexity, as performance depends on multiple underlying fund managers' decisions
- Value-oriented cash flow strategies may underperform for extended periods during growth stock rallies, potentially lagging broader market returns by 10-20%
Who Should Own This
Best suited for income-focused investors with 3-5 year time horizons seeking dividend growth and capital preservation. Medium risk tolerance required due to value stock volatility. Works as a satellite holding (10-20% allocation) for investors prioritizing cash flow generation over pure growth, particularly in retirement portfolios or during late-cycle market conditions.