ck0001616668-20210430
PROSPECTUS
October 19,
2021
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FLRT |
Pacer
Pacific Asset Floating Rate High Income
ETF |
Listed
on the NYSE Arca, Inc.
The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
of these securities or passed upon the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
INVESTMENT
PRODUCTS: *ARE
NOT FDIC INSURED *MAY
LOSE VALUE *ARE
NOT BANK GUARANTEED
Investment Objective
The Pacer Pacific Asset
Floating Rate High Income ETF (the “Fund”) is an exchange traded fund (“ETF”)
that seeks to provide a high level of current
income.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). The fees are expressed as a percentage
of the Fund’s average net assets. You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fees* |
0.60% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses** |
0.00% |
Total
Annual Fund Operating Expenses |
0.60% |
*Restated to reflect
current fees.
**Estimated for the current
fiscal year.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of the Shares at the end
of those periods. The example assumes that your investment has a 5% return each
year and that the Fund’s operating expenses remain the same.
Although your actual costs may be higher
or lower, based on these assumptions, your costs would
be:
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1
Year |
3
Years |
5
Years |
10
Years |
$61 |
$192 |
$335 |
$750 |
Portfolio
Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund Shares are held in a taxable
account. These costs, which are not reflected in annual fund operating expenses
or in the example, affect the Fund’s performance. During the most recent fiscal
year, the portfolio turnover rate for the Predecessor Fund (as defined below)
was 35% of the average value of its
portfolio.
Principal Investment Strategies of the
Fund
Pacific
Asset Management LLC (the “Sub-Adviser”) seeks to achieve the Fund’s investment
objective by selecting a focused portfolio comprised primarily of
income-producing adjustable rate securities.
Under
normal circumstances, the Fund will invest at least 80% of its net assets (plus
any borrowings for investment purposes) in senior secured floating rate loans
and other adjustable rate securities. Other adjustable rate securities will
typically include collateralized loan obligations (“CLOs”), asset-backed
securities (“ABS”), and commercial mortgage backed securities (“CMBS”)
(collectively, “Adjustable Rate Securities”). The Fund is expected to invest
primarily in loans and Adjustable Rate Securities that are rated below
investment grade (i.e.,
high yield securities, sometimes called “junk bonds” or non-investment grade
securities) or, if unrated, of comparable quality as determined by the
Sub-Adviser.
The
Fund may invest in U.S.-dollar denominated senior floating rate loans and
Adjustable Rate Securities of domestic and foreign issuers. Senior floating rate
loans are debt instruments that may have a right to payment that is senior to
most other debts of borrowers. Borrowers may include corporations, partnerships
and other entities that operate in a variety of industries and geographic
regions, which may from time to time prepay their loan obligations in response,
for example, to changes in interest rates. Senior loans in which the Fund may
invest include secured and unsecured loans. Generally, secured floating rate
loans are secured by specific assets of the borrower. An adjustable rate
security includes any fixed income security that requires periodic changes in
its interest rate based upon changes in a recognized index interest rate or
another method of determining prevailing interest rates. The Fund invests in
various types of ABS, such as auto loan and student loan ABS. The Fund is
actively managed.
The
Fund may invest up to 20% of its assets in certain other types of debt
instruments or securities, including corporate bonds (including floating rate
investment grade bonds) and secured or unsecured second lien floating rate
loans. Second lien loans generally are second in line behind senior loans in
terms of prepayment priority with respect to pledged collateral and therefore
have a lower credit quality as compared to senior loans but may produce a higher
yield to compensate for the additional risk.
The
secondary market on which high yield securities are traded may be less liquid
than the market for investment-grade securities. Less liquidity in the secondary
trading market could adversely affect the ability of the Fund to sell a high
yield security or the price at which the Fund could sell a high yield security,
and could adversely affect the daily NAV of Fund shares. When secondary markets
for high yield securities are less liquid than the market for investment-grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
The Fund may invest up to an aggregate amount of 15% of its net assets in
illiquid investments, as such term is defined by Rule 22e-4 under the Investment
Company Act of 1940, as amended (the “1940 Act”).
When
the Sub-Adviser believes that current market, economic, political or other
conditions are unsuitable and would impair the pursuit of the Fund’s investment
objectives, the Fund may invest some or all of its assets in cash or cash
equivalents, including but not limited to obligations of the U.S. government,
money market fund shares, commercial paper, certificates of deposit and/or
bankers acceptances, as well as other interest bearing or discount obligations
or debt instruments that carry an investment grade rating by a national rating
agency. When the Fund takes a temporary defensive position, the Fund may not
achieve its investment objectives. The Fund may invest from time to time more
heavily in one or more sectors of the economy than in other
sectors.
Principal Risks of Investing in the
Fund
You can lose money on your investment in the
Fund. The Fund is subject to the risks summarized below. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return and/or ability to meet its
objectives. For more information about the risks of investing in the Fund, see
the section in the Fund’s prospectus entitled “Additional Information about the
Principal Risks of Investing in the Fund.”
•Floating
Rate Loan Risk.
Floating rate loans (or bank loans) are usually rated below investment grade.
The market for floating rate loans may be subject to irregular trading activity,
wide bid/ask spreads, and extended trade settlement periods. Investments in
floating rate loans are typically in the form of an assignment or participation.
Investors in a loan participation assume the credit risk associated with the
borrower and may assume the credit risk associated with an interposed financial
intermediary. Accordingly, if a lead lender becomes insolvent or a loan is
foreclosed, the Fund could experience delays in receiving payments or suffer a
loss. In an assignment, the Fund effectively becomes a lender under the loan
agreement with the same rights and obligations as the assigning bank or other
financial intermediary. Accordingly, if the loan is foreclosed, the Fund could
become part owner of any collateral, and would bear the costs and liabilities
associated with owning and disposing of the collateral. In addition, the
floating rate feature of loans means that floating rate loans will not generally
experience capital appreciation in a declining interest rate environment.
Declines in interest rates may also increase prepayments of debt obligations and
require the Fund to invest assets at lower yields. Floating rate loans are also
subject to prepayment risk. Such loans may not be considered securities and,
therefore, may not be afforded the protections of the federal securities
laws.
◦Senior
Loans Risk. The
risks associated with senior loans are similar to the risks of junk bonds,
although senior loans typically are senior and secured, whereas junk bonds often
are subordinated and unsecured. Investments in senior loans typically are below
investment grade and are considered speculative because of the credit risk of
their issuers. Such companies are more likely to default on their payments of
interest and principal owed, and such defaults could reduce the Fund’s NAV and
income distributions. An economic downturn generally leads to a higher
nonpayment rate, and a senior loan may lose significant value before a default
occurs. There is no assurance that the liquidation of the collateral would
satisfy the claims of the borrower’s obligations in the event of the non-payment
of scheduled interest or principal, or that the collateral could be readily
liquidated. Economic and other events (whether real or perceived) can reduce the
demand for certain senior loans or senior loans generally, which may reduce
market prices. Senior loans and other debt securities also are subject to the
risk of price declines and to increases in prevailing interest rates, although
floating-rate debt instruments such as senior loans in which the Fund may be
expected to invest are substantially less exposed to this risk than fixed-rate
debt instruments. No active trading market may exist for certain senior loans,
which may impair the ability of the Fund to realize full value in the event of
the need to liquidate such assets. Adverse market conditions may impair the
liquidity of some actively traded senior loans. Longer interest rate reset
periods generally increase fluctuations in value as a result of changes in
market interest rates.
◦Covenant-Lite
Loan Risk.
Covenant-lite loans contain fewer maintenance covenants, or no maintenance
covenants at all, than traditional loans and may not include terms that allow
the lender to monitor the financial performance of the borrower and declare a
default if certain criteria are breached. This may hinder the Fund’s ability to
reprice credit risk associated with the borrower and reduce the Fund’s ability
to restructure a problematic loan and mitigate potential loss. As a result, the
Fund’s exposure to losses on such investments is increased, especially during a
downturn in the credit cycle. A significant portion of floating rate loans may
be “covenant-lite” loans.
◦Loan
Participation Risk.
The Fund may not have a readily available market for loan participation
interests and, in some cases, the Fund may have to dispose of such securities at
a substantial discount from face value. Loan participations also involve the
credit risk associated with the underlying corporate borrower.
•CLO
Risk. CLOs
are typically collateralized by a pool of loans, which may include, among
others, domestic and foreign senior secured loans, senior unsecured loans, and
subordinate corporate loans, including loans that may be rated below investment
grade or equivalent unrated loans. The cash flows from CLOs are split into two
or more portions, called tranches, varying in risk and yield. CLO tranches can
experience substantial losses due to actual defaults, increased sensitivity to
defaults due to collateral default and disappearance of protecting tranches as
well as market anticipation of defaults.
•Asset-Backed
Securities Risk. Asset-backed
securities represent interests in “pools” of assets, including consumer loans or
receivables. Movements in interest rates (both increases and decreases) may
quickly and significantly reduce the value of certain types of asset-backed
securities. Although certain asset-backed securities are guaranteed as to timely
payment of interest and principal by a government entity, the market price for
such securities is not guaranteed and will fluctuate. The purchase of
asset-backed securities issued by non-government entities may entail greater
risk than such securities that are issued or guaranteed by a government entity.
Asset-backed securities issued by non-government entities may offer higher
yields than those issued by government entities, but may also be subject to
greater volatility than government issues and can also be subject to greater
credit risk and the risk of default on the underlying assets. Investments in
asset-backed securities are subject to both extension risk, where borrowers pay
off their debt obligations more slowly in times of rising interest rates, and
prepayment risk, where borrowers pay off their debt obligations sooner than
expected in times of declining interest rates.
•CMBS
Risk. The
Fund may invest in CMBS. CMBS are not backed by the full faith and credit of the
U.S. government and are subject to risk of default on the underlying mortgages.
The value of the collateral securing CMBS may decline, be insufficient to meet
the obligations of the borrower, or be difficult to liquidate. As a result, CMBS
may not be fully collateralized and may decline significantly in value. In
addition, commercial mortgage loans are secured by commercial property and are
subject to risks of delinquency and foreclosure, and risks of loss. In the event
of any default under a mortgage, the Fund will bear a risk of loss of principal
to the extent of any deficiency between the value of the collateral and the
principal and accrued interest of the commercial mortgage loan. Stressed
conditions in
the
markets for CMBS and mortgage-related assets as well as the broader financial
markets have in the past resulted in a temporary but significant contraction in
liquidity for CMBS. To the extent that the market for CMBS suffers such a
contraction, securities that were previously considered liquid could become
temporarily illiquid, and the Adviser may experience delays or difficulty in
selling assets at the prices at which the Fund carries such assets, which may
result in a loss to the Fund.
•High
Yield Securities Risk.
High yield debt obligations (commonly known as “junk bonds”) are speculative
investments and entail greater risk of loss of principal than securities and
loans that are investment grade rated because of their greater exposure to
credit risk. The high yield market at times is subject to substantial volatility
and high yield debt obligations may be less liquid than higher quality
securities. As a result, the value of the Fund may be subject to greater
volatility than other funds, and the Fund may be exposed to greater tracking
risk (described below) than other funds.
•Fixed
Income Risk. The
value of the Fund’s direct or indirect investments in fixed income securities
will fluctuate with changes in interest rates. Typically, a rise in interest
rates causes a decline in the value of fixed income securities owned by the
Fund. On the other hand, if rates fall, the value of the fixed income securities
generally increases. The Fund may be subject to a greater risk of rising
interest rates due to the current period of historically low rates and the
effect of potential government fiscal policy initiatives and resulting market
reaction to those initiatives. In general, the market price of fixed income
securities with longer maturities will increase or decrease more in response to
changes in interest rates than shorter-term securities. The value of the Fund’s
direct or indirect investments in fixed income securities may be affected by the
inability of issuers to repay principal and interest or illiquidity in debt
securities markets.
◦Call
Risk.
During periods of falling interest rates, an issuer of a callable bond held by
the Fund may “call” or repay the security prior to its stated maturity, and the
Fund may have to reinvest the proceeds at lower interest rates, resulting in a
decline in the Fund’s income.
◦Credit
Risk.
Credit risk refers to the possibility that the issuer of a security will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of an investment in that issuer. Credit risk is heightened
to the extent the Fund invests in non-investment grade securities.
◦Event
Risk.
Event risk is the risk that corporate issuers may undergo restructurings, such
as mergers, leveraged buyouts, takeovers, or similar events financed by
increased debt. As a result of the added debt, the credit quality and market
value of a company’s bonds and/or other debt securities may decline
significantly.
◦Extension
Risk.
When interest rates rise, certain obligations will be paid off by the obligor
more slowly than anticipated, causing the value of these securities to fall.
◦Interest
Rate Risk.
Generally, the value of fixed income securities will change inversely with
changes in interest rates. As interest rates rise, the market value of fixed
income securities tends to decrease. Conversely, as interest rates fall, the
market value of fixed income securities tends to increase. This risk will be
greater for long-term securities than for short-term securities. Changes in
government intervention may have adverse effects on investments, volatility, and
illiquidity in debt markets.
◦Prepayment
Risk.
When interest rates fall, certain obligations will be paid off by the obligor
more quickly than originally anticipated, and the proceeds may have to be
invested in securities with lower yields. The Fund investing in such securities
will be forced to reinvest this money at lower yields, which can reduce the
Fund’s returns.
◦Income
Risk.
The income from the Fund’s investments may decline because of falling market
interest rates. This can result when the Fund invests the proceeds from new
share sales, or from matured or called bonds, at market interest rates that are
below the Fund’s portfolio current earnings rate.
•LIBOR
Risk.
Instruments in which the Fund invests may pay interest at floating rates based
on the London Inter-Bank Offered Rate (“LIBOR”) or may be subject to interest
caps or floors based on LIBOR. The Fund and issuers of instruments in which the
Fund invests may also obtain financing at floating rates based on LIBOR. Plans
are underway to phase out the use of LIBOR between December 31, 2021 and June
30, 2023. There is currently no definitive information regarding the future
utilization of LIBOR or of any particular replacement rate. Abandonment of or
modifications to LIBOR may affect the value, liquidity or return on certain Fund
investments that reference LIBOR without including fallback provisions and may
result in costs incurred in connection with closing out positions and entering
into new trades. Any pricing adjustments to the Fund’s investments resulting
from a substitute reference rate may also adversely affect the Fund’s
performance and/or NAV. The effect of a phase out of LIBOR on instruments in
which the Fund may invest is currently unclear.
•Foreign
Securities Risk. Investments
in non-U.S. securities involve certain risks that may not be present with
investments in U.S. securities. For example, investments in non-U.S. securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. Investments in non-U.S. securities also may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. These and other factors
can make investments in the Fund more volatile and potentially less liquid than
other types of investments. Markets and economies throughout the world are
becoming increasingly interconnected, and conditions or events in one market,
country or region may adversely impact investments or issuers in another market,
country or region.
•Market
Risk.
An investment in the Fund involves risks similar to those of investing in any
fund of equity securities, such as market fluctuations caused by such factors as
economic and political developments, changes in interest rates and perceived
trends in securities prices. The values of equity securities could decline
generally or could underperform other investments. Different types of equity
securities tend to go through cycles of out-performance and under-performance in
comparison to the general securities markets. In addition, securities may
decline in value due to factors affecting the securities markets generally or a
specific issuer or market. The Fund is subject to the risk that its investment
strategy, the implementation of which is subject to a number of constraints, may
not produce the intended results. Market risk refers to the possibility that the
market values of securities or other investments that the Fund holds will fall,
sometimes rapidly or unpredictably, or fail to rise. Security values may fall or
fail to rise because of a variety of actual or perceived factors affecting an
issuer (e.g.,
an unfavorable earnings report), the industry or sector in which it operates, or
the market as a whole, which may reduce the value of an investment in the Fund.
Accordingly, an investment in the Fund could lose money over short or long
periods. The market values of the securities the Fund holds can be affected by
changes or perceived changes in U.S. or foreign economies and financial markets,
and the liquidity of these securities, among other factors. Although equity
securities generally tend to have greater price volatility than debt securities,
under certain market conditions, debt securities may have comparable or greater
price volatility. In addition, stock prices may be sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase.
•ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
◦Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration
Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services, or (ii) market makers and/or liquidity providers
exit the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares of the Fund.
Due to the costs of buying or selling shares of the Fund, including brokerage
commissions imposed by brokers and bid/ask spreads, frequent trading of shares
of the Fund may significantly reduce investment results and an investment in
shares of the Fund may not be advisable for investors who anticipate regularly
making small investments.
◦Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s
portfolio
holdings. Although it is expected that the market price of the shares of the
Fund will approximate the Fund’s NAV, there may be times when the market price
of the shares is more than the NAV intra-day (premium) or less than the NAV
intra-day (discount). This risk is heightened in times of market volatility,
periods of steep market declines, and periods when there is limited trading
activity for shares in the secondary market, in which case such premiums or
discounts may be significant. Certain securities held by the Fund may trade on
foreign exchanges that are closed when the Fund’s primary listing exchange is
open, and the Fund may experience premiums and discounts greater than those of
ETFs that hold securities that are traded only in the United
States.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as NYSE Arca, Inc. (the “Exchange”), and may be traded on
U.S. exchanges other than the Exchange, there can be no assurance that shares of
the Fund will trade with any volume, or at all, on any stock exchange. In
stressed market conditions, the liquidity of shares of the Fund may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than shares of the Fund.
•Liquidity
Risk.
Liquidity risk exists when particular investments are difficult to purchase or
sell. This can reduce the Fund’s returns because the Fund may be unable to
transact at advantageous times or prices. Trading opportunities are more limited
for Adjustable Rate Securities that have complex terms or that are not widely
held. These features may make it more difficult to sell or buy a security at a
favorable price or time. Infrequent trading of securities may also lead to an
increase in their price volatility.
•Privately
Issued Securities Risk.
The Fund may invest in privately-issued securities, including those that may be
resold only in accordance with Rule 144A or Regulation S under the 1933 Act
(“Restricted Securities”). Restricted Securities are not publicly traded and are
subject to a variety of restrictions, which limit a purchaser’s ability to
acquire or resell such securities. Delay or difficulty in selling such
securities may result in a loss to the Fund.
•Management
Risk. The
Fund is subject to management risk because it is an actively managed portfolio.
In managing the Fund’s investment portfolio, the portfolio managers will apply
investment techniques and risk analyses that may not produce the desired result.
There can be no guarantee that the Fund will meet its investment
objective.
•Sector
Risk.
Sector risk is the possibility that securities within the same group of
industries will decline in price due to sector-specific market or economic
developments. If the Fund invests more heavily in a particular sector, the value
of its shares may be especially sensitive to factors and economic risks that
specifically affect that sector. As a result, the Fund’s share price may
fluctuate more widely than the value of shares of a fund that invests in a
broader range of industries.
◦Consumer
Discretionary Sector Risk.
The Fund may invest in companies in the consumer discretionary sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. The success of consumer product manufacturers and
retailers is tied closely to the performance of domestic and international
economies, interest rates, exchange rates, competition, consumer confidence,
changes in demographics and consumer preferences. Companies in the consumer
discretionary sector depend heavily on disposable household income and consumer
spending, and may be strongly affected by social trends and marketing campaigns.
These companies may be subject to severe competition, which may have an adverse
impact on their profitability.
◦Industrials
Sector Risk. The
Fund may invest in companies in the industrials sector, and therefore the
performance of the Fund could be negatively impacted by events affecting this
sector. The industrials sector may be affected by changes in the supply of and
demand for products and services, product obsolescence, claims for environmental
damage or product liability and general economic conditions, among other
factors.
•Small
Fund Risk.
When the Fund’s size is small, the Fund may experience low trading volume and
wide bid/ask spreads. In addition, the Fund may face the risk of being delisted
if the Fund does not meet certain conditions of the listing exchange. Any
resulting liquidation of the Fund could cause the Fund to incur elevated
transaction costs for the Fund and negative tax consequences for its
shareholders.
Fund
Performance
The
Fund is the successor to the Pacific Global Senior Loan ETF, a series of Pacific
Global ETF Trust, as a result of the reorganization of the Predecessor Fund into
the Fund at the close of business on October 22, 2021. In addition,
the Pacific Global Senior Loan ETF was the successor to the investment
performance of AdvisorShares Pacific Asset Enhanced Floating Rate ETF, a series
of AdvisorShares Trust, as a result of the reorganization of the series of
AdvisorShares Trust into a series of Pacific Global ETF that occurred on
December 27, 2019 (together, the “Predecessor Fund”).
Accordingly,
any performance information for periods prior to October 22, 2021 is
that of the series of Pacific Global ETF Trust; any performance for periods
prior to December 27, 2019 is that of the series of AdvisorShares Trust. While
the Predecessor Fund had the same investment objective as the Fund, the Fund’s
investment strategies and policies changed after the reorganization. From the
Predecessor Fund’s inception to October 22, the Predecessor Fund invested at
least 80% of its net assets (plus any borrowings for investment purposes) in
senior secured floating rate loans. After the reorganization, the Fund invests
at least 80% of its net assets (plus any borrowings for investment purposes) in
senior secured floating rate loans and other adjustable rate securities. As part
of the Fund’s 80% policy, other adjustable rate securities will typically
include CLOs, ABS, and CMBS (collectively, “Adjustable Rate Securities”). Other
than each Fund’s respective 80% policy and the associated risks with investing
in Adjustable Rate Securities, the Funds had similar investment objectives,
strategies, and policies.
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Predecessor Fund’s performance for
calendar years ended December 31. The table illustrates how the Predecessor
Fund’s average annual returns for the one-year, five-year, and since inception
periods compare to (i) the S&P 500 Index, which is a broad-based, unmanaged
measurement of changes in stock market conditions based on the average of 500
widely held common stocks and (ii) the S&P/LSTA U.S. Leveraged Loan 100
Index, which is an index designed to track the market-weighted performance of
the largest institutional leveraged loans based on market weightings, spreads
and interest payments. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is also available on the
Fund’s website at www.PacerETFs.com.
Calendar Year Total
Return
During the period of time shown
in the bar chart, the Predecessor Fund’s highest quarterly return
was 5.83% for the quarter ended June 30, 2020 and
the lowest quarterly return was
-9.07% for the quarter ended March 31, 2020. The
Predecessor Fund’s calendar year-to-date return as of
September 30, 2021 was
2.80%.
Average
Annual Total Returns
For
the Periods Ended December 31, 2020
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Pacer
Pacific Asset Floating Rate High Income ETF |
1
Year |
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5
Year |
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Since
Inception
(2/18/15) |
Return Before
Taxes |
2.51% |
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4.27% |
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3.25% |
Return After Taxes on
Distributions |
1.00% |
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2.68% |
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1.68% |
Return After Taxes on Distributions and
Sale of Fund Shares |
1.44% |
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2.57% |
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1.78% |
S&P 500®
Index (reflects no deduction for
fees, expenses, or taxes)
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18.40% |
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15.22% |
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12.67% |
S&P/LSTA
U.S. Leveraged Loan 100 Index (reflects
no deduction for fees, expenses, or taxes) |
2.84% |
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5.31% |
|
3.77% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. In certain cases, the figure
representing “Return After Taxes on Distributions and Sale of Fund Shares” may
be higher than the other return figures for the same period.
After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Management
Investment
Adviser
Pacer
Advisors, Inc. (the “Adviser”) serves as investment adviser to the
Fund.
Investment
Sub-Adviser
Pacific
Asset Management LLC (the “Sub-Adviser” or “Pacific Asset Management”) serves as
investment sub-adviser to the Fund.
Portfolio
Managers
Bob
Boyd, Portfolio Manager and Managing Director of the Sub-Adviser, and Ying Qiu,
CFA, Portfolio Manager and Managing Director of the Sub-Adviser, are the primary
persons responsible for the day-to-day management of the Fund. Mr. Boyd has
served as the Sub-Adviser’s portfolio manager for the Fund since the Predecessor
Fund’s inception in February 2015. Ms. Qiu has served as the Sub-Adviser’s
portfolio manager for the Fund since October 2021.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.PacerETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser, the Sub-Adviser, and their related companies may pay the
intermediary for activities related to the marketing and promotion of the Fund.
These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your sales person to recommend the Fund
over another investment. Ask your sales person or visit your financial
intermediary’s website for more information.
Additional
Information About the Fund
Investment
Objective.
The Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed by the Board of Trustees (the “Board”) of Pacer Funds
Trust (the “Trust”) without a vote of shareholders upon 60 days’ written notice
to shareholders.
Additional
Information About Investment Strategies
The
Sub-Adviser seeks to achieve the Fund’s investment objective by selecting a
focused portfolio comprised primarily of income producing adjustable-rate
securities of domestic and U.S. dollar denominated foreign issuers.
Senior
floating rate loans will generally be purchased from banks or other financial
institutions through assignments or participations. A direct interest in a
senior floating rate loan may be acquired directly from the agent of the lender
or another lender by assignment or an indirect interest may be acquired as a
participation in another lender’s portion of such loan. The Fund invests in
various types of ABS, such as auto and student loan ABS. The Fund is actively
managed.
The
Fund may invest up to 20% of its assets in certain other types of debt
instruments or securities including corporate bonds (including floating rate
investment grade bonds) and secured or unsecured second lien floating rate
loans. Second lien loans generally are second in line behind senior loans in
terms of prepayment priority with respect to pledged collateral and therefore
have a lower credit quality as compared to senior loans but may produce a higher
yield to compensate for the additional risk.
The
secondary market on which high yield securities are traded may be less liquid
than the market for investment-grade securities. Less liquidity in the secondary
trading market could adversely affect the ability of the Fund to sell a high
yield security or the price at which the Fund could sell a high yield security,
and could adversely affect the daily NAV of Fund shares. When secondary markets
for high yield securities are less liquid than the market for investment-grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
The Fund may invest up to an aggregate amount of 15% of its net assets in
illiquid investments, as such term is defined by Rule 22e-4 under the 1940
Act.
Investment
Philosophy.
The Sub-Adviser believes a disciplined portfolio decision-making process that
focuses on credit fundamentals for individual security selection will lead to
outstanding long-term performance versus the Fund’s peers and benchmark. The
Sub-Adviser believes that the focus should be on the fundamentals of the
businesses in which the Fund invests.
Selection
Process.
The Sub-Adviser’s selection process consists of four steps:
1.Determine
Universe of Investable Securities: The Fund aims to provide exposure to the most
liquid segment of the bank loan and adjustable rate securities marketplace. The
factors considered by the Sub-Adviser when determining liquidity specifically
for loans may include the frequency of trading or quotes, the number of dealers
in the market willing to purchase or sell the loan, trading volume, the nature
of the security, and the market for the security including prospects for future
demand for the loan.
2.Portfolio
Risk Assessment: Once the Sub-Adviser has determined the investable universe,
both the macro-economic environment and technical factors that could materially
impact the credit markets are assessed. The Sub-Adviser assesses the economic
and market climates and then determines an overall target of portfolio risk to
employ for the near term.
3.Portfolio
Construction: Once the Sub-Adviser has determined the target risk and investable
universe, the Sub-Adviser constructs what is believed to be the most effective
mix of investments in accordance with the overall portfolio guidelines. As a
result, investments with the most favorable risk/reward analyses will tend to
have a greater representation in the Fund’s portfolio. Due to the nature of ETF
structure and liquidity requirements, the portfolio will place a higher value on
liquidity relative to products without such a requirement. The portfolio will
be
diversified by industry and issuer, with no individual issuer representing more
than 5% of the portfolio. The Sub-Adviser will consider duration when
constructing the portfolio. Duration is a measure of the expected change in
value of a fixed income security for a given change in interest rates. For
example, if interest rates changed by one percent, the value of a security
having an effective duration of two years generally would vary by two percent.
Duration takes the length of the time intervals between the present time and
time that the interest and principal payments are scheduled, or in the case of a
callable bond, expected to be received, and weighs them by the present values of
the cash to be received at each future point in time. The typical duration
positioning of the portfolio will be between 0.25 years to 0.75 years or as
determined by the Sub-Adviser.
4.Monitor:
Once an investment is made, monitoring takes place each business day. Portfolio
values are monitored through daily third-party pricing. Credit updates are
captured through the Sub-Adviser’s research system. This system serves as a
centralized credit hub for the Sub-Adviser’s research team. The system
aggregates information such as portfolio holdings, outlooks, analyst comments,
and investment theses for the portfolio management, operations, and credit
teams.
Investments
are sold based upon relative value opportunities or changes in corporate
fundamentals, or when the Sub-Adviser believes another security is a more
attractive investment opportunity.
Additional
Information about the Principal Risks of Investing in the Fund
This
section provides additional information regarding the principal risks described
under “Principal Risks of Investing in the Fund” in each of the Fund Summaries.
Each of the factors below could have a negative impact on the applicable Fund’s
performance and trading prices.
Floating
Rate Loan Risk
Floating
rate loans (or bank loans) are usually rated below investment grade. The market
for floating rate loans may be subject to irregular trading activity, wide
bid/ask spreads, and extended trade settlement periods. The Fund’s investment in
loans may take the form of a participation or an assignment. Loan participations
typically represent direct participation in a loan to a borrower, and generally
are offered by financial institutions or lending syndicates. The Fund may
participate in such syndications, or can buy part of a loan, becoming a part
lender. When purchasing loan participations, the Fund assumes the credit risk
associated with the borrower and may assume the credit risk associated with an
interposed financial intermediary. If the lead lender in a typical lending
syndicate becomes insolvent, enters FDIC receivership or, if not FDIC insured,
enters into bankruptcy, the Fund may incur certain costs and delays in receiving
payment or may suffer a loss of principal and/or interest. When the Fund is a
purchaser of an assignment, it succeeds to all the rights and obligations under
the loan agreement of the assigning bank or other financial intermediary and
becomes a lender under the loan agreement with the same rights and obligations
as the assigning bank or other financial intermediary. For example, if a loan is
foreclosed, the Fund could become part owner of any collateral, and would bear
the costs and liabilities associated with owning and disposing of the
collateral.
Floating
rate loans generally are subject to restrictions on transfer, and the Fund may
be unable to sell its bank loans at a time when it may otherwise be desirable to
do so or may be able to sell them only at prices that are less than their fair
market value. The Fund may find it difficult to establish a fair value for loans
it holds. Further, the trading market for floating rate loans could be impacted
by regulatory action or reforms around the manner in which floating interest
rates are determined. If a published rate is unavailable, the rate of interest
on a floating rate loan could effectively become fixed, which would in turn
adversely affect the value of the floating rate loan. In addition, floating rate
loans generally are subject to extended settlement periods in excess of seven
days, which may impair the Fund’s ability to sell or realize the full value of
its loans in the event of a need to liquidate such loans. A loan may not be
fully collateralized and can decline significantly in value. In addition, the
Fund’s access to collateral may be limited by bankruptcy or other insolvency
laws. Further, loans held by the Fund may not be considered securities and,
therefore, purchasers, such as the Fund, may not be entitled to rely on the
anti-fraud protections of the federal securities laws.
If
the Fund acquires a participation in a loan, the Fund may not be able to control
the exercise of remedies that the lender would have under the loan and likely
would not have any rights against the borrower directly. Loans made to finance
highly leveraged corporate acquisitions may be especially vulnerable to adverse
changes in economic or market
conditions.
A loan may also be in the form of a bridge loan, which are designed to provide
temporary or “bridge” financing to a borrower, pending the sale of identified
assets or the arrangement of longer-term loans or the issuance and sale of debt
obligations. A borrower’s use of a bridge loan involves a risk that the borrower
may be unable to locate permanent financing to replace the bridge loan, which
may impair the borrower’s perceived creditworthiness.
•Senior
Loans Risk. The
risks associated with senior loans are similar to the risks of junk bonds,
although senior loans typically are senior and secured, whereas junk bonds often
are subordinated and unsecured. While senior loans are less risky than junior
loans, they still have significant risk. Investments in senior loans, similar to
junk bonds, typically are below investment grade and are considered speculative
because of the credit risk of their issuers. Such companies are more likely to
default on their payments of interest and principal owed, and such defaults
could reduce the Fund’s NAV and income distributions. An economic downturn
generally leads to a higher nonpayment rate, and a senior loan may lose
significant value before a default occurs. There is no assurance that the
liquidation of the collateral would satisfy the claims of the borrower’s
obligations in the event of the non-payment of scheduled interest or principal,
or that the collateral could be readily liquidated. Economic and other events
(whether real or perceived) can reduce the demand for certain senior loans or
senior loans generally, which may reduce market prices. Senior loans and other
debt securities also are subject to the risk of price declines and to increases
in prevailing interest rates, although floating-rate debt instruments such as
senior loans in which the Fund may be expected to invest are substantially less
exposed to this risk than fixed-rate debt instruments. No active trading market
may exist for certain senior loans, which may impair the ability of the Fund to
realize full value in the event of the need to liquidate such assets. Adverse
market conditions may impair the liquidity of some actively traded senior loans.
Longer interest rate reset periods generally increase fluctuations in value as a
result of changes in market interest rates.
Some
loans are subject to the risk that a court, pursuant to fraudulent conveyance or
other similar laws, could subordinate the loans to presently existing or future
indebtedness of the borrower or take other action detrimental to lenders,
including the Fund, such as invalidation of loans or causing interest previously
paid to be refunded to the borrower. Investments in loans also are subject to
the risk of changes in legislation or state or federal regulations. If such
legislation or regulations impose additional requirements or restrictions on the
ability of financial institutions to make loans, the availability of loans for
investment by the Fund may be adversely affected. Many loans are not registered
with the SEC or any state securities commission and often are not rated by any
nationally recognized rating service. Generally, there is less readily
available, reliable information about most loans than is the case for many other
types of securities. Although a loan may be senior to equity and other debt
securities in a borrower’s capital structure, such obligations may be
structurally subordinated to obligations of the borrower’s
subsidiaries.
There
is no organized exchange on which loans are traded and reliable market
quotations may not be readily available. Therefore, elements of judgment may
play a greater role in valuation of loans than for securities with a more
developed secondary market and the Fund may not realize full value in the event
of the need to sell a loan. To the extent that a secondary market does exist for
certain loans, the market may be subject to volatility, irregular trading
activity, wide bid/ask spreads, decreased liquidity and extended trade
settlement periods, any of which may impair the Fund’s ability to sell loans
within its desired time frame or at an acceptable price and its ability to
accurately value existing and prospective investments. Extended trade settlement
periods for certain loans may result in cash not being immediately available to
the Fund upon sale of the loan. As a result, the Fund may have to sell other
investments with shorter settlement periods or engage in borrowing transactions
to raise cash to meet its obligations.
•Covenant-Lite
Loan Risk. Covenant-lite
loans contain fewer maintenance covenants, or no maintenance covenants at all,
than traditional loans and may not include terms that allow the lender to
monitor the financial performance of the borrower and declare a default if
certain criteria are breached. This may hinder the Fund’s ability to reprice
credit risk associated with the borrower and reduce the Fund’s ability to
restructure a problematic loan and mitigate potential loss. As a result, the
Fund’s exposure to losses on such investments is increased, especially during a
downturn in the credit cycle. A significant portion of floating rate loans may
be “covenant-lite” loans.
•Loan
Participation Risk. A
loan participation agreement involves the purchase of a share of a loan made by
a bank to a company in return for a corresponding share of borrower’s principal
and interest payments. The principal credit risk associated with acquiring loan
participation interests is the credit risk associated with the underlying
corporate
borrower.
There is also a risk that there may not be a readily available market for loan
participation interests and, in some cases, this could result in the Fund
disposing of such securities at a substantial discount from face value or
holding such securities until maturity.
CLO
Risk
A
CLO is a trust typically collateralized by a pool of loans, which may include,
among others, domestic and foreign senior secured loans, senior unsecured loans,
and subordinate corporate loans, including loans that may be rated below
investment grade or equivalent unrated loans. CLO tranches can experience
substantial losses due to actual defaults, increased sensitivity to defaults due
to collateral default and disappearance of protecting tranches, market
anticipation of defaults.
For
a CLO, the cash flows from the trust are split into two or more portions, called
tranches, varying in risk and yield. The riskiest portion is the “equity”
tranche which bears the bulk of defaults from the bonds or loans in the trust
and serves to protect the other, more senior tranches from default in all but
the most severe circumstances. Since it is partially protected from defaults, a
senior tranche from a CLO trust typically has higher ratings and lower yields
than their underlying securities, and can be rated investment grade. Despite the
protection from the equity tranche, CLO tranches can experience substantial
losses due to actual defaults, increased sensitivity to defaults due to
collateral default and disappearance of protecting tranches, market anticipation
of defaults, as well as aversion to CLO securities as a class.
Asset-Backed
Securities Risk
Asset-backed
securities represent interests in a pool of assets other than mortgages, such as
home equity loans, automobile receivables or credit card receivables. Most
asset-backed securities involve consumer or commercial debts with maturities of
less than 10 years. However, almost any type of fixed-income asset (including
other fixed-income securities) may be used to create an asset-backed security.
Asset-backed securities may take the form of commercial paper, notes or
pass-through certificates. A structured asset-backed security is a multiclass
instrument that is typically backed by a pool of auto loans, credit card
receivables, home equity loans or student loans.
Unscheduled
prepayments of asset-backed securities may result in a loss of income if the
proceeds are invested in lower-yielding securities. Conversely, in a rising
interest rate environment, a declining prepayment rate will extend the average
life of many asset-backed securities, which increases the risk of depreciation
due to future increases in market interest rates. In addition, issuers of
asset-backed securities may have limited ability to enforce the security
interest in the underlying assets, and credit enhancements (if any) may be
inadequate in the event of default. Asset-backed securities may experience
losses on the underlying assets as a result of certain rights provided to
consumer debtors under federal and state law. The value of asset-backed
securities may be affected by the factors described above and other factors,
such as interest rate risk, the availability of information concerning the pool
and its structure, the creditworthiness of the servicing agent for the pool, the
originator of the underlying assets or the entities providing credit
enhancements and the ability of the servicer to service the underlying
collateral. The value of asset-backed securities representing interests in a
pool of utilities receivables may be adversely affected by changes in government
regulations. Under certain market conditions, asset-backed securities may be
less liquid and may be difficult to value. If a structured asset-backed security
is subordinated to other classes backed by the same pool of collateral, the
likelihood that it will make payments of principal may be substantially
limited.
CMBS
Risk
The
Fund will invest in CMBS. CMBS are not backed by the full faith and credit of
the U.S. government and are subject to risk of default on the underlying
mortgages. The value of the collateral securing CMBS may decline, be
insufficient to meet the obligations of the borrower, or be difficult to
liquidate. As a result, CMBS may not be fully collateralized and may decline
significantly in value. CMBS may also react differently to changes in interest
rates than other bonds and the prices of CMBS may reflect adverse economic and
market conditions. Small movements in interest rates may significantly reduce
the value of CMBS. The CMBS in which the Fund is expected to invest are subject
to the risks of the underlying mortgage loans. Commercial mortgage loans are
secured by commercial property and are subject to risks of delinquency and
foreclosure, and risks of loss. The ability of a borrower to repay a loan
secured by an income-producing property typically is dependent primarily upon
the successful operation of such property rather than upon the existence of
independent income or assets of the borrower. If the net operating income of the
property is reduced, the borrower’s
ability
to repay the loan may be impaired. Net operating income of an income-producing
property can be affected by, among other things, tenant mix, success of tenant
businesses, property management decisions, property location and condition,
competition from comparable types of properties, changes in laws that increase
operating expense or limit rents that may be charged, any need to address
environmental contamination at the property, the occurrence of any uninsured
casualty at the property, changes in national, regional or local economic
conditions and/or specific industry segments, declines in regional or local real
estate values, declines in regional or local rental or occupancy rates,
increases in interest rates, real estate tax rates and other operating expenses,
changes in governmental rules, regulations and fiscal policies, including
environmental legislation, acts of God, terrorism, social unrest and civil
disturbances.
In
the event of any default under a mortgage, the Fund will bear a risk of loss of
principal to the extent of any deficiency between the value of the collateral
and the principal and accrued interest of the commercial mortgage loan.
Foreclosure of a commercial mortgage loan can be an expensive and lengthy
process which could have a substantial negative effect on the Fund’s anticipated
return on the foreclosed mortgage loan. Stressed conditions in the markets for
CMBS and mortgage-related assets as well as the broader financial markets have
in the past resulted in a temporary but significant contraction in liquidity for
CMBS. To the extent that the market for CMBS suffers such a contraction,
securities that were previously considered liquid could become temporarily
illiquid, and the Sub-Adviser may experience delays or difficulty in selling
assets at the prices at which the Fund carries such assets, which may result in
a loss to the Fund. There is no way to predict reliably when such market
conditions could re-occur or how long such conditions could persist. In the
event of a severe market contraction precipitated by general market turmoil,
economic conditions, changes in prevailing interest rates or otherwise, the Fund
may have to consider selling its holdings at a loss including at prices below
the current value on the Fund’s books, borrowing money to satisfy redemptions in
accordance with the Fund’s borrowing policy, suspending redemptions, or other
extraordinary measures. In addition, if the Fund needed to sell large blocks of
investments to raise cash, those sales could further reduce prices, particularly
for lower-rated and unrated securities.
High
Yield Securities Risk
Securities
rated “BB+” or below by S&P or “Ba+” or below by Moody’s are known as high
yield securities and are commonly referred to as “junk bonds.” Such securities
entail greater price volatility and credit and interest rate risk than
investment-grade securities. Analysis of the creditworthiness of high yield
issuers is more complex than for higher-rated securities, making it more
difficult for the Sub-Adviser to accurately predict risk. There is a greater
risk with high yield fixed income securities that an issuer will not be able to
make principal and interest payments when due. If the Fund pursues missed
payments, there is a risk that Fund expenses could increase. In addition,
lower-rated securities may not trade as often and may be less liquid than
higher-rated securities, especially during periods of economic uncertainty or
change. As a result of all of these factors, these securities are generally
considered to be speculative.
Fixed
Income Risk
The
value of the Fund’s direct or indirect investments in fixed income securities
will fluctuate with changes in interest rates. Typically, a rise in interest
rates causes a decline in the value of fixed income securities owned by the
Fund. On the other hand, if rates fall, the value of the fixed income securities
generally increases. The Fund may be subject to a greater risk of rising
interest rates due to the current period of historically low rates and the
effect of potential government fiscal policy initiatives and resulting market
reaction to those initiatives. In general, the market price of fixed income
securities with longer maturities will increase or decrease more in response to
changes in interest rates than shorter-term securities. The value of the Fund’s
direct or indirect investments in fixed income securities may be affected by the
inability of issuers to repay principal and interest or illiquidity in debt
securities markets.
•Call
Risk.
During periods of falling interest rates, an issuer of a callable bond held by
the Fund may “call” or repay the security prior to its stated maturity, and the
Fund may have to reinvest the proceeds at lower interest rates, resulting in a
decline in the Fund’s income.
•Credit
Risk.
Credit risk refers to the possibility that the issuer of a security will not be
able to make payments of interest and principal when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of an investment in that issuer. Credit risk is heightened
to the extent the Fund invests in non-investment grade securities.
•Event
Risk.
Event risk is the risk that corporate issuers may undergo restructurings, such
as mergers, leveraged buyouts, takeovers, or similar events financed by
increased debt. As a result of the added debt, the credit quality and market
value of a company’s bonds and/or other debt securities may decline
significantly.
•Extension
Risk.
When interest rates rise, certain obligations will be paid off by the obligor
more slowly than anticipated, causing the value of these securities to fall.
•Interest
Rate Risk.
Generally, the value of fixed income securities will change inversely with
changes in interest rates. As interest rates rise, the market value of fixed
income securities tends to decrease. Conversely, as interest rates fall, the
market value of fixed income securities tends to increase. This risk will be
greater for long-term securities than for short-term securities. Changes in
government intervention may have adverse effects on investments, volatility, and
illiquidity in debt markets.
•Prepayment
Risk.
When interest rates fall, certain obligations will be paid off by the obligor
more quickly than originally anticipated, and the proceeds may have to be
invested in securities with lower yields. The Fund investing in such securities
will be forced to reinvest this money at lower yields, which can reduce the
Fund’s returns.
LIBOR
Risk
Instruments
in which the Fund invests may pay interest at floating rates based on LIBOR or
may be subject to interest caps or floors based on LIBOR. The Fund and issuers
of instruments in which the Fund invests may also obtain financing at floating
rates based on LIBOR. Derivative instruments utilized by the Fund and/or issuers
of instruments in which the Fund may invest may also reference LIBOR. The Fund
also may utilize leverage or borrowings primarily based on LIBOR. Plans are
underway to phase out the use of LIBOR between December 31, 2021 and June 30,
2023. There is currently no definitive information regarding the future
utilization of LIBOR or of any particular replacement rate. Abandonment of or
modifications to LIBOR could have adverse impacts on newly issued financial
instruments and existing financial instruments that reference LIBOR. The effect
of a phase out of LIBOR on U.S. instruments in which the Fund may invest is
currently unclear. While some instruments may contemplate a scenario where LIBOR
is no longer available by providing for an alternative rate setting methodology,
not all instruments may have such provisions, and there is significant
uncertainty regarding the effectiveness of any such alternative methodologies.
To the extent that any replacement rate differs from that utilized for a
structured product that holds those securities, the structured product would
experience an interest rate mismatch between its assets and liabilities.
Structured products generally contemplate a scenario where LIBOR is no longer
available by requiring the structured product’s administrator to calculate a
replacement rate primarily through dealer polling on the applicable measurement
date. However, there is uncertainty regarding the effectiveness of the dealer
polling processes, including the willingness of banks to provide such
quotations. Recently, some structured products have included, or have been
amended to include, language permitting the structured product’s investment
manager to implement a market replacement rate upon the occurrence of certain
material disruption events. However, not all structured products may adopt such
provisions, nor can there be any assurance that structured products’ investment
managers will undertake the suggested amendments when able. Abandonment of or
modifications to LIBOR could lead to significant short-term and long-term
uncertainty and market instability. It remains uncertain how such changes would
be implemented and the effects such changes would have on the Fund, issuers of
instruments in which the Fund invests and financial markets
generally.
Foreign
Securities Risk
Investments
in non-U.S. securities involve certain risks that may not be present with
investments in U.S. securities. For example, investments in non-U.S. securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when the Fund
does not price its shares, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund’s Shares. Conversely, Fund Shares
may
trade on days when foreign exchanges are close. Each of these factors can make
investments in the Fund more volatile and potentially less liquid than other
types of investments.
Market
Risk
Overall
market risks may affect the value of the Fund. Factors such as U.S. economic
growth and market conditions, interest rate levels and political events affect
the securities markets. The prices of securities held by the Fund may decline in
response to certain events taking place in the U.S. and around the world,
including those directly involving the companies whose securities are owned by
the Fund. Securities in the Fund’s portfolio may underperform due to inflation
(or expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters, pandemics, epidemics, terrorism,
regulatory events and governmental or quasi-governmental actions. There is a
risk that you may lose money by investing in the Fund.
ETF
Risks
The
Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
•APs,
Market Makers, and Liquidity Providers Concentration Risk. The
Fund may have a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services; or (ii) market makers and/or liquidity providers
exit the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
•Costs
of Buying or Selling Shares. Investors
buying or selling Shares in the secondary market will pay brokerage commissions
or other charges imposed by brokers, as determined by that broker. Brokerage
commissions are often a fixed amount and may be a significant proportional cost
for investors seeking to buy or sell relatively small amounts of Shares. In
addition, secondary market investors will also incur the cost of the difference
between the price at which an investor is willing to buy Shares (the “bid”
price) and the price at which an investor is willing to sell Shares (the “ask”
price). This difference in bid and ask prices is often referred to as the
“spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Fund, asset swings in the Fund and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs of buying or selling Shares,
including bid/ask spreads, frequent trading of Shares may significantly reduce
investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
•Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant. Certain securities held by the Fund may trade on foreign exchanges
that are closed when the Fund’s primary listing exchange is open, and the Fund
may experience premiums and discounts greater than those of ETFs that hold
securities that are traded only in the United States.
•Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than its applicable Exchange,
there can be no assurance that an active trading market for such Shares will
develop or be maintained. Trading in Shares may be halted due to market
conditions or for reasons that, in the view of its applicable Exchange, make
trading in Shares inadvisable. In addition, trading in Shares on its applicable
Exchange is subject to trading halts caused by extraordinary market volatility
pursuant to each Exchange’s “circuit breaker” rules, which temporarily halt
trading on such Exchange when a decline in the S&P 500 Index during a single
day reaches certain thresholds (e.g., 7%, 13%, and 20%). Additional rules
applicable to each Exchange may halt trading in Shares when extraordinary
volatility causes sudden, significant swings in the market price of Shares.
There can be no assurance that Shares will trade with any volume, or at all, on
any stock exchange. In stressed market conditions, the liquidity of Shares may
begin to mirror the liquidity of the Fund’s underlying portfolio holdings, which
can be significantly less liquid than Shares.
Liquidity
Risk
In
certain circumstances, it may be difficult for the Fund to purchase and sell
particular portfolio investments due to infrequent trading in such investments.
The prices of such securities may change over time or experience significant
volatility, make it more difficult for the Fund to transact significant amounts
of such securities without an unfavorable impact on prevailing market prices, or
make it difficult for the Sub-Adviser to dispose of such securities at a fair
price at the time the Sub-Adviser believes it is desirable to do so. Adjustable
Rate Securities that have complex terms may have limited trading opportunities.
Floating rate loans and Adjustable Rate Securities generally are subject to
extended settlement periods in excess of seven days, which may impair the Fund’s
ability to sell or realize the full value of its loans in the event of a need to
liquidate such loans.
Privately
Issued Securities Risk
The
Fund may invest in privately-issued securities, including those that may be
resold only in accordance with Rule 144A or Regulation S under the 1933 Act
(“Restricted Securities”). Restricted Securities are not publicly traded and are
subject to a variety of restrictions, which limit a purchaser’s ability to
acquire or resell such securities. Delay or difficulty in selling such
securities may result in a loss to the Fund.
Management
Risk
The
Fund is subject to management risk because it is an actively managed portfolio.
In managing the Fund’s investment portfolio, the portfolio managers will apply
investment techniques and risk analyses that may not produce the desired result.
There can be no guarantee that the Fund will meet its investment objective(s),
meet relevant benchmarks or perform as well as other funds with similar
objectives.
Sector
Risk
To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors.
•Consumer
Discretionary Sector Risk.
The Fund may invest in companies in the consumer discretionary sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. The success of consumer product manufacturers and
retailers is tied closely to the performance of domestic and international
economies, interest rates, exchange rates, competition, consumer confidence,
changes in demographics and consumer preferences. Companies in the consumer
discretionary sector depend heavily on disposable household income and consumer
spending, and may be strongly affected by social trends and marketing campaigns.
These companies may be subject to severe competition, which may have an adverse
impact on their profitability.
•Industrials
Sector Risk.
The Fund may invest in companies in the industrials sector, and therefore the
performance of the Fund could be negatively impacted by events affecting this
sector. The industrials sector may be affected by changes in the supply of and
demand for products and services, product obsolescence, claims for environmental
damage or product liability and general economic conditions, among other
factors. As the demand for, or prices of, industrials increase, the value of the
Fund’s investments generally would be expected to also increase. Conversely,
declines in the demand for, or prices of, industrials generally would be
expected to contribute to declines in the value of such securities. Such
declines may occur quickly and without warning and may negatively impact the
value of the Fund and your investment.
Small
Fund Risk
When
the Fund's size is small, the Fund may experience low trading volume and wide
bid/ask spreads. In addition, the Fund may face the risk of being delisted if
the Fund does not meet certain conditions of the listing exchange. Any resulting
liquidation of the Fund could cause the Fund to incur elevated transaction costs
for the Fund and negative tax consequences for its shareholders.
Cash
Equivalents and Short-Term Investments
Normally,
the Fund invests substantially all of its assets to meet its investment
objective. The Fund may invest the remainder of its assets in securities with
maturities of less than one year or cash equivalents, or each may hold cash. The
percentage of the Fund invested in such holdings varies and depends on several
factors, including market conditions. For temporary defensive purposes and
during periods of high cash inflows or outflows, the Fund may depart from its
principal investment strategies and invest part or all of its assets in these
securities, or it may hold cash. During such periods, the Fund may not be able
to achieve its investment objective. The Fund may adopt a temporary defensive
strategy when the portfolio managers believe securities in which the Fund
normally invests have elevated risks due to political or economic factors and in
other extraordinary circumstances. For more information on eligible short-term
investments, see the SAI.
Absence
of a Prior Active Market
Although
the Fund’s Shares are approved for listing on a national securities exchange,
there can be no assurance that an active trading market will develop and be
maintained for Fund Shares. There can be no assurance that the Fund will grow to
or maintain an economically viable size, in which case the Fund may ultimately
liquidate.
Liquidity
Risk
The
Fund may hold certain investments that may be subject to restrictions on resale,
trade over-the-counter or in limited volume, or lack an active trading market.
Accordingly, the Fund may not be able to sell or close out of such investments
at favorable times or prices (or at all), or at prices approximating those at
which the Fund currently values them. Illiquid securities may trade at a
discount from comparable, more liquid investments and may be subject to wide
fluctuations in market value.
Risk
of Investing in the United States
Certain
changes in the U.S. economy, such as when the U.S. economy weakens or when its
financial markets decline, may have an adverse effect on the securities to which
the Fund has exposure. A decrease in imports or exports, changes in trade
regulations, and/or an economic recession in the United States may have a
material adverse effect on the U.S. economy and the securities listed on U.S.
exchanges. Proposed and adopted policy and legislative changes in the United
States are changing many aspects of financial and other regulation and may have
a significant effect on the U.S. markets generally, as well as on the value of
certain securities. In addition, a continued rise in the U.S. public debt level
or the imposition of U.S. austerity measures may adversely affect U.S. economic
growth and the securities to which the Fund has exposure. The United States has
developed increasingly strained relations with a number of foreign countries. If
relations with certain countries continue to worsen, it could adversely affect
U.S. issuers as well as non-U.S. issuers that rely on the United States for
trade. The United States has also experienced increased internal unrest and
discord. If this trend were to continue, it may have an adverse impact on the
U.S. economy and the issuers in which the Fund invests.
Securities
Lending
Risk
There
are certain risks associated with securities lending, including the risk that
the borrower may fail to return the securities on a timely basis or even the
loss of rights in the collateral deposited by the borrower, if the borrower
should fail financially. As a result, the Fund may lose money. The Fund could
also lose money in the event of a decline in the value of collateral provided
for loaned securities or a decline in the value of any investments made with
cash collateral. These events could also trigger adverse tax consequences for
the Fund.
Information
about the Fund’s daily portfolio holdings is available at www.PacerETFs.com. A
summarized description of the Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio holdings is available in the Fund’s Statement
of Additional Information (“SAI”).
The
Fund is series of Pacer Funds Trust (the “Trust”), a Delaware statutory trust,
which is overseen by a board of trustees.
Investment
Adviser
The
Adviser has overall responsibility for the general management and administration
of the Trust and each of its separate investment portfolios. The Adviser is a
registered investment adviser with offices located at 500 Chesterfield Parkway,
Malvern, Pennsylvania 19355. The Adviser has managed ETFs since 2015. The
Adviser also arranges for sub-advisory, transfer agency, custody, fund
administration, securities lending, and all other related services necessary for
the Fund to operate.
The
Adviser provides oversight of the sub-adviser, monitoring of the sub-adviser’s
buying and selling of securities for the Fund, and review of the sub-adviser’s
performance. For its services, the Adviser receives a fee of 0.60%, computed
daily and paid monthly, based on a percentage of the Fund’s average daily net
assets.
Under
the Investment Advisory Agreement between the Adviser and the Trust, on behalf
of the Fund (the “Investment Advisory Agreement”), the Adviser has agreed to pay
all expenses of the Fund, except for: the fee paid to the Adviser pursuant to
the Investment Advisory Agreement, interest charges on any borrowings, taxes,
brokerage commissions and other expenses incurred in placing orders for the
purchase and sale of securities and other investment instruments, acquired fund
fees and expenses, accrued deferred tax liability, extraordinary expenses,
distribution (12b-1) fees and expenses, and the unified management fee payable
to the Adviser. The Adviser, in turn, compensates the sub-adviser from the
management fee it receives.
The
basis for the Board of Trustees’ approval of the Investment Advisory Agreement
will be available in the Fund’s first Annual or Semi-Annual Report to
Shareholders.
Sub-Adviser
Pacific
Asset Management LLC (the “Sub-Adviser” or “Pacific Asset Management”), located
at 840 Newport Center Drive, 7th
Floor, Newport Beach, CA 92660, serves as the investment sub-adviser to the
Fund. As of June 30, 2021, the Sub-Adviser had approximately $16.7 billion in
assets under management. The Sub-Adviser provides advisory services to
registered investment companies, private domestic and offshore pooled investment
vehicles and institutional accounts. The Sub-Adviser is an indirect wholly-owned
subsidiary of Pacific Life Insurance Company. The Sub-Adviser is responsible for
the day-to-day management of the Fund’s portfolio pursuant to an investment
sub-advisory agreement between the Trust, the Adviser and the Sub-Adviser with
respect to the Fund (“Sub-Advisory Agreement”). For its services, the Adviser
pays Pacific Asset Management the following percentages of net profits as a
sub-advisory fee: 40% on assets up to $500 million; 50% on assets of more than
$500 million.
Net
profits for the Fund are determined as the management fee of the Fund, less (i)
0.10% of the Fund’s average net assets and (ii) expenses related to operating
the Fund.
The
basis for the Board of Trustees’ approval of the Fund’s Sub-Advisory Agreement
will be available in the Fund’s first Annual or Semi-Annual Report to
Shareholders.
Portfolio
Managers
The
Fund’s portfolio management team consists of Bob Boyd and Yin Qiu, who are
jointly and primarily responsible for the day-to-day management of the Fund’s
portfolios.
Bob
Boyd, Portfolio Manager.
Mr. Boyd is a Managing Director for the Sub-Adviser. He serves as a Portfolio
Manager and Credit Analyst for Pacific Asset Management. Mr. Boyd joined the
Sub-Adviser in 2012. Previously, he was with Pacific Investment Management
Company (“PIMCO”) for 14 years, where he was a Vice President, Bank Loan
Portfolio
Manager,
and Credit Analyst. Mr. Boyd has over 19 years of investment experience, focused
on leveraged finance, credit analysis, and structured products. He holds a
bachelor’s degree from California State University, Long Beach and an MBA from
the University of Southern California.
Yin
Qiu, CFA, Portfolio Manager.
Ms. Qiu is a Managing Director for the Sub-Adviser. She serves as a Portfolio
Manager for various investment grade portfolios and Pacific Asset Management’s
CLO Opportunity Strategy. In addition, Ms. Qiu has credit research
responsibilities focusing on Asset-Backed Securities (“ABS”). Prior to joining
Pacific Asset Management, Ms. Qiu was with PIMCO for 8 years, where she was a
Senior Vice President, portfolio manager and trader for both investment grade
corporate and ABS. Prior to that, she worked at ING Investment Management for 9
years and was an ABS portfolio manager and trader. Ms. Qiu has 22 years fixed
income investment experience, is a CFA Charterholder, and holds a bachelor’s
degree from Renmin University of China and an MBA from Emory
University.
The
SAI provides additional information about each Portfolio Manager’s compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers’ ownership of Shares of the Fund.
Most
investors will buy and sell Shares of the Fund through brokers. Shares of the
Fund trade on its applicable Exchange and elsewhere during the trading day and
can be bought and sold throughout the trading day like other shares of publicly
traded securities.
When
buying or selling Shares through a broker, most investors will incur customary
brokerage commissions and charges. Shares of the Fund trade under the trading
symbol listed on the cover of this Prospectus. Only authorized participants
(“Authorized Participants” or “APs”) who have entered into agreements with the
Fund’s distributor may acquire Shares directly from the Fund, and only APs may
tender their Shares for redemption directly to the Fund, at NAV in Creation
Units. Once created, Shares trade in the secondary market in amounts less than a
Creation Unit.
Share
Trading Prices
Transactions
in the Fund’s Shares will be priced at NAV only if you purchase Shares directly
from the Fund in Creation Units. As with other types of securities, the trading
prices of Shares in the secondary market can be affected by market forces such
as supply and demand, economic conditions and other factors. The price you pay
or receive when you buy or sell your Shares in the secondary market may be more
or less than the NAV of such Shares.
Determination
of Net Asset Value
The
NAV of the Fund’s Shares is calculated each day the New York Stock Exchange
(“NYSE”) is open for trading as of the close of regular trading on the NYSE,
generally 4:00 p.m. Eastern Time (the “NAV Calculation Time”). If the NYSE
closes before 4:00 p.m. Eastern Time, as it occasionally does, the NAV
Calculation Time will be the time the NYSE closes. In addition, any U.S.
fixed-income assets may be valued as of the announced closing time of trading in
fixed income instruments on any day that the Securities Industry and Financial
Markets Association announces an early closing time. The Fund’s NAV per share is
calculated by dividing the Fund’s net assets by the number of Fund Shares
outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. Debt obligations with
maturities of 60 days or less are valued at amortized cost.
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund investments
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been
de-listed or has had its trading halted or suspended; (ii) a security’s primary
pricing source is unable or unwilling to provide a price; (iii) a security’s
primary trading market is closed during regular market hours; or (iv) a
security’s value is materially affected by events occurring after the close of
the security’s primary trading market. Generally, when fair valuing an
investment, the Adviser and Sub-Adviser will take into account all reasonably
available information that may be relevant to a particular valuation including,
but not limited to, fundamental analytical data regarding the issuer,
information relating to the issuer’s business, recent trades or offers of the
security, general and/or specific market conditions and the
specific
facts giving rise to the need to fair value the security. The Adviser and
Sub-Adviser makes fair value determinations in good faith and in accordance with
the fair value methodologies included in the Board-adopted valuation procedures.
Due to the subjective and variable nature of fair value pricing, there can be no
assurance that the Adviser or Sub-Adviser will be able to obtain the fair value
assigned to the investment upon the sale of such investment.
Dividends
and Distributions
The
Fund expects to declare and distribute all of its net investment income, if any,
to shareholders as dividends monthly. The Fund expects to distribute its net
realized capital gains to investors annually. The Fund occasionally may be
required to make supplemental distributions at some other time during the year.
Distributions in cash may be reinvested automatically in additional whole Shares
only if the broker through whom you purchased Shares makes such option
available. Your broker is responsible for distributing the income and capital
gain distributions to you.
Book
Entry
Shares
of the Fund are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company (“DTC”) or its nominee is the record
owner of all outstanding Shares of the Fund.
Investors
owning Shares of the Fund are beneficial owners as shown on the records of DTC
or its participants. DTC serves as the securities depository for all Shares of
the Fund. Participants include DTC, securities brokers and dealers, banks, trust
companies, clearing corporations, and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book-entry or “street name” form. Your broker will provide you with account
statements, confirmations of your purchases and sales, and tax
information.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Fund is available through certain broker-dealers. If
you are interested in enrolling in householding and receiving a single copy of
prospectuses and other shareholder documents, please contact your broker-dealer.
If you are currently enrolled in householding and wish to change your
householding status, please contact your broker-dealer.
Frequent
Purchases and Redemptions of Fund Shares
The
Fund imposes no restrictions on the frequency of purchases and redemptions of
Fund Shares. In determining not to impose such restrictions, the Board evaluated
the risks of market timing activities by Fund shareholders. Purchases and
redemptions by APs, who are the only parties that may purchase or redeem Shares
directly with the Fund, are an essential part of the ETF process and help keep
Fund share trading prices in line with NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, the Board has also
determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Fund imposes transaction fees on purchases and redemptions
of Creation Units to cover the custodial and other costs incurred by the Fund in
effective trades. In addition, the Fund and the Adviser reserve the right to
reject any purchase order at any time.
Investments
by Registered Investment Companies
Section
12(d)(1) of the 1940 Act restricts investments by registered investment
companies in the securities of other investment companies, including Shares of
the Fund. Registered investment companies are permitted to invest in the Fund
beyond the limits set forth in section 12(d)(1), subject to certain terms and
conditions set forth in an SEC exemptive order issued to the Trust, including
that such investment companies enter into an agreement with the Fund.
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax advisor
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
The
Fund intends to qualify each year for treatment as a regulated investment
company (“RIC”). If it meets certain minimum distribution requirements, a RIC is
not subject to tax at the fund level on income and gains from investments that
are timely distributed to shareholders. However, the Fund’s failure to qualify
as a RIC or to meet minimum distribution requirements would result (if certain
relief provisions were not available) in fund-level taxation and, consequently,
a reduction in income available for distribution to shareholders.
Unless
you are a tax-exempt entity or your investment in Fund Shares is made through a
tax advantaged retirement account, such as an IRA, you need to be aware of the
possible tax consequences when:
•The
Fund makes distributions;
•You
sell Fund Shares; and
•You
purchase or redeem Creation Units (institutional investors only).
Taxes
on Distributions
Tax
reform legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”)
was enacted on December 22, 2017. The Tax Act made significant changes to the
U.S. federal income tax rules for individuals and corporations, generally
effective for taxable years beginning after December 31, 2017. The application
of certain provisions of the Tax Act is uncertain, and the changes in the act
may have indirect effects on the Fund, its investments and its shareholders that
cannot be predicted. For federal income tax purposes, distributions of
investment income are generally taxable as ordinary income or “qualified
dividend income.” Taxes on distributions of capital gains (if any) depend on how
long the Fund owned the assets that generated them, rather than how long a
shareholder has owned his or her Fund Shares. Sales of assets held by the Fund
for more than one year generally result in long-term capital gains and losses,
and sales of assets held by the Fund for one year or less generally result in
short-term capital gains and losses. Distributions of the Fund’s net capital
gain (the excess of net long-term capital gains over net short-term capital
losses) that are properly reported by the Fund as capital gain dividends
(“Capital Gain Dividends”) are taxable as long-term capital gains. For
noncorporate shareholders, long-term capital gains are generally subject to tax
at reduced rates and currently set at a maximum rate of 20%. Distributions of
short-term capital gain are generally taxable as ordinary income. Distributions
of investment income reported by the Fund as derived from “qualified dividend
income” will be taxed at long term capital gain rates for non-corporate
shareholders.
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8%
Medicare contribution tax on all or a portion of their “net investment income,”
which includes interest, dividends, and certain capital gains (generally
including capital gain distributions and capital gains realized on the sale or
exchange of Fund Shares).
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are
generally taxable even if they are paid from income or gains earned by the Fund
before your investment (and thus were included in the Fund Shares’ NAV when you
purchased your Fund Shares).
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Nonresident
aliens, foreign corporations and other foreign shareholders in the Fund will
generally be exempt from U.S. federal income tax on Capital Gain Dividends. The
exemption may not apply, however, if the investment in the Fund is connected to
a trade or business for the foreign shareholder in the United States or if the
foreign shareholder is present in the United States for 183 days or more in a
year and certain other conditions are met.
Distributions
(other than Capital Gain Dividends) paid to individual shareholders that are
neither citizens nor residents of the U.S. or to foreign entities will generally
be subject to a U.S. withholding tax at the rate of 30%, unless a lower treaty
rate applies. The Fund may, under certain circumstances, report all or a portion
of a dividend as an “interest-related dividend” or a “short-term capital gain
dividend,” which would generally be exempt from this 30% U.S. withholding tax,
provided certain other requirements are met. Short-term capital gain dividends
received by a nonresident alien individual who is present in the U.S. for a
period or periods aggregating 183 days or more during the taxable year are not
exempt from this 30% withholding tax. Gains realized by foreign shareholders
from the sale or other disposition of Shares of the Fund generally are not
subject to U.S. taxation, unless the recipient is an individual who is
physically present in the U.S. for 183 days or more per year.
The
Fund (or a financial intermediary, such as a broker, through which shareholders
own Fund Shares) generally is required to withhold and to remit to the US
Treasury a percentage of the taxable distributions and the sale or redemption
proceeds paid to any shareholder who fails to properly furnish a correct
taxpayer identification number, who has under-reported dividend or interest
income, or who fails to certify that he, she or it is not subject to such
withholding.
A
U.S. withholding tax at a 30% rate will be imposed on dividends effective July
1, 2014 (and proceeds of sales in respect of Fund Shares (including certain
capital gain dividends) received by Fund shareholders beginning after December
31, 2018) for shareholders who own their Shares through foreign accounts or
foreign intermediaries if certain disclosure requirements related to U.S.
accounts or ownership are not satisfied. The Fund will not pay any additional
amounts in respect to any amounts withheld.
To
the extent that the Fund invests in foreign securities, it may be subject to
foreign withholding taxes with respect to dividends or interest the Fund
received from sources in foreign countries. If more than 50% of the total assets
of the Fund consists of foreign securities, the Fund will be eligible to elect
to treat some of those taxes as a distribution to shareholders, which would
allow shareholders to offset some of their U.S. federal income tax. The Fund (or
its administrative agent) will notify you if it makes such an election and
provide you with the information necessary to reflect foreign taxes paid on your
income tax return.
Taxes
When Fund Shares Are Sold
Any
capital gain or loss realized upon a sale of Fund Shares is generally treated as
a long-term gain or loss if the Shares have been held for more than one year.
Any capital gain or loss realized upon a sale of Fund Shares held for one year
or less is generally treated as a short-term gain or loss, except that any
capital loss on a sale of Shares held for six months or less is treated as
long-term capital loss to the extent that Capital Gain Dividends were paid with
respect to such Shares. The ability to deduct capital losses may be limited
depending on your circumstances.
A
foreign shareholder will generally not be subject to U.S. tax on gains realized
on sales or exchange of Fund Shares unless the investment in the Fund is
connected to a trade or business of the investor in the United States or if the
shareholder is present in the United States for 183 days or more in a year and
certain other conditions are met. All foreign shareholders should consult their
own tax advisors regarding the tax consequences in their country of residence of
an investment in the Fund.
Creation
and Redemption Units
An
Authorized Participant who exchanges securities for Creation Units generally
will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time and the
sum of the exchanger’s aggregate basis in the securities surrendered plus the
amount of cash paid for such Creation Units. A person who redeems Creation Units
will generally recognize a gain or loss equal to the difference between the
exchanger’s basis in the Creation Units and the sum of the aggregate market
value of any securities received plus the amount of any cash received for such
Creation Units. The Internal Revenue Service, however, may assert that a loss
realized upon an exchange of securities for Creation Units cannot be deducted
currently under the rules governing “wash sales,” or on the basis that there has
been no significant change in economic position.
Any
capital gain or loss realized upon the creation of Creation Units will generally
be treated as long-term capital gain or loss if the securities exchanged for
such Creation Units have been held for more than one year. Any capital gain or
loss realized upon the redemption of Creation Units will generally be treated as
long-term capital gain or loss if the Shares comprising the Creation Units have
been held for more than one year. Otherwise, such capital gains or losses will
be
treated
as short-term capital gains or losses. Persons purchasing or redeeming Creation
Units should consult their own tax advisors with respect to the tax treatment of
any creation or redemption transaction.
The
Fund has the right to reject an order for Creation Units if the purchaser (or
group of purchasers) would, upon obtaining the Shares so ordered, own 80% or
more of the outstanding Shares of the Fund and if, pursuant to section 351 of
the Internal Revenue Code, the Fund would have a basis in the deposit securities
different from the market value of such securities on the date of deposit. The
Fund also has the right to require information necessary to determine beneficial
Share ownership for purposes of the 80% determination.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
State
and Local Taxes
Shareholders
may also be subject to state and local taxes on income and gain attributable to
your ownership of Fund Shares. State income taxes may not apply, however, to the
portions of the Fund’s distributions, if any, that are attributable to interest
earned by the Fund on U.S. government securities. You should consult your tax
professional regarding the tax status of distributions in your state and
locality.
Foreign
Taxes
To
the extent the Fund invests in foreign securities, it may be subject to foreign
withholding taxes with respect to dividends or interest the Fund received from
sources in foreign countries.
The
Distributor, Pacer Financial, Inc., is a broker-dealer registered with the U.S.
Securities and Exchange Commission. The Distributor distributes Creation Units
for the Fund on an agency basis and does not maintain a secondary market in
Shares. The Distributor has no role in determining the policies of the Fund or
the securities that are purchased or sold by the Fund. The Distributor’s
principal address is 500 Chesterfield Parkway, Malvern, Pennsylvania, 19355. The
Distributor is an affiliate of the Adviser.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of the Fund’s assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges.
Information
regarding how often Shares of the Fund traded on an Exchange at a price above
(i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the fund will be available in the future on the Fund’s
website at www.PacerETFs.com.
Shares
are not sponsored, endorsed, or promoted by NYSE Arca, Inc. (the “Exchange”).
The Exchange makes no representation or warranty, express or implied, to the
owners of the Shares or any member of the public regarding the ability of the
Fund to achieve its investment objective. The Exchange is not responsible for,
nor has it participated in, the determination of the timing of, prices of, or
quantities of the shares of the Fund to be issued, nor in the determination or
calculation of the equation by which the Shares are redeemable. The Exchange has
no obligation or liability to owners of the shares of the Fund in connection
with the administration, marketing, or trading of the shares of the Fund.
Without limiting any of the foregoing, in no event shall the Exchange have any
liability for any lost profits or indirect, punitive, special, or consequential
damages even if notified of the possibility thereof.
The
financial highlights tables are intended to help you understand the Fund’s
financial performance for the period of the Fund’s operations. The financial
information presented for each applicable period is that of the Predecessor
Fund. The Pacer Pacific Asset Floating Rate High Income ETF (“FLRT”) is the
accounting successor to its Predecessor Fund as a result of the reorganization
of the Predecessor Fund into FLRT as of the close of business on October
22, 2021. FLRT has adopted the Financial Statements of the series of Pacific
Global ETF Trust. In addition, FLRT is the accounting successor to
AdvisorShares Pacific Asset Enhanced Floating Rate ETF, a series of
AdvisorShares Trust, as a result of the reorganization of the series of
AdvisorShares Trust into the series of Pacific Global ETF Trust as of the close
of business on December 27, 2019. The financial information presented for
FLRT for the period from February 18, 2015, the inception date of the series of
AdvisorShares Trust, through December 27, 2019, the date on which Shares of the
series of AdvisorShares Trust converted to Shares of the Predecessor Fund, is
that of the series of AdvisorShares Trust.
Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The information presented in the table below for the periods
ended June 30, 2021 and June 30, 2020 has been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, whose report, along with
the Predecessor Fund's financial statements, are included in the annual report
of the Predecessor Fund, which is available upon request. The information for
each of the three years in the period June 30, 2019, June 30, 2018, and June 30,
2017 for the Target Fund, were audited by other auditors.
Pacer
Pacific Asset Floating Rate High Income ETF
FINANCIAL
HIGHLIGHTS
For
a capital share outstanding throughout each year/period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended |
|
Year
Ended |
|
Year
Ended |
|
Year
Ended |
|
Year
Ended |
|
|
June
30, 2021 |
|
June
30, 2020 |
|
June
30, 2019 |
|
June
30, 2018 |
|
June
30, 2017 |
Net
Asset Value, Beginning of Period |
|
$ |
46.52 |
|
|
$ |
48.73 |
|
|
$ |
48.87 |
|
|
$ |
49.35 |
|
|
$ |
48.73 |
|
Income
(Loss) from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
Net
Investment Income (Loss)
(1) |
|
1.47 |
|
|
1.90 |
|
|
2.10 |
|
|
1.78 |
|
|
1.73 |
|
Net
Gain (Loss) on Investments (Realized and Unrealized) |
|
2.47 |
|
|
(2.20) |
|
|
(0.15) |
|
|
(0.63) |
|
|
0.58 |
|
Total
from Investment Operations |
|
3.94 |
|
|
(0.30) |
|
|
1.95 |
|
|
1.15 |
|
|
2.31 |
|
Less
Distributions: |
|
|
|
|
) |
|
|
|
|
|
From
Net Investment Income |
|
(1.56) |
|
|
(1.91) |
|
|
(2.09) |
|
|
(1.63) |
|
|
(1.69) |
|
Total
Distributions |
|
(1.56) |
|
|
(1.91) |
|
|
(2.09) |
|
|
(1.63) |
|
|
(1.69) |
|
Capital
Share Transactions: |
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
|
$ |
48.90 |
|
|
$ |
46.52 |
|
|
$ |
48.73 |
|
|
$ |
48.87 |
|
|
$ |
49.35 |
|
Net
Asset Value Total Return |
|
8.63 |
% |
|
-0.70 |
% |
|
4.09 |
% |
% |
2.36 |
% |
|
4.78 |
% |
Ratio
/ Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
Net
Assets, End of Period (000's) |
|
$ |
31,788 |
|
|
$ |
27,911 |
|
|
$ |
29,240 |
|
|
$ |
29,323 |
|
|
$ |
27,143 |
|
Ratio
of Expenses (Prior to Expense Waivers) to Average Net Assets |
|
0.68 |
% |
|
1.06 |
% |
|
1.63 |
% |
|
1.62 |
% |
|
1.39 |
% |
Expenses
After Advisory Fees (Waived) and Other Fees (Reimbursed)/Recouped
(2) |
|
0.68 |
% |
|
0.86 |
% |
|
1.10 |
% |
|
1.10 |
% |
|
1.10 |
% |
Ratio
of Net Investment Income (Loss) to Average Net Assets |
|
3.04 |
% |
|
3.98 |
% |
|
4.31 |
% |
|
3.61 |
% |
|
3.49 |
% |
Portfolio
Turnover Rate |
|
35 |
% |
|
48 |
% |
|
70 |
% |
|
73 |
% |
|
52 |
% |
__________
(1)
Calculated based on average shares outstanding during the period.
(2)
As of December 30, 2019, the expense cap for the Fund changed from 1.10% to
0.68%.
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
Pacer
Advisors, Inc.
500
Chesterfield Parkway
Malvern,
Pennsylvania 19355 |
Distributor |
Pacer
Financial, Inc.
500
Chesterfield Parkway
Malvern,
Pennsylvania 19355 |
Sub-Adviser |
Pacific
Asset Management LLC
840
Newport Center Drive, 7th
Fl
Newport
Beach, CA 92660 |
Fund
Accountant, Administrator and Transfer Agent |
U.S.
Bank Global Fund Services
615
East Michigan Street Milwaukee, Wisconsin 53202 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Drive
Milwaukee,
Wisconsin 53212 |
Legal
Counsel |
Practus
LLP
11300
Tomahawk Creek Parkway, Suite 310, Leawood, Kansas
66211 |
Independent
Registered Public Accounting Firm |
Sanville
& Company
1514
Old York Road
Abington,
PA 19001 |
|
|
The
Trust’s current SAI provides additional detailed information about the Fund. A
current SAI dated October 19, 2021, as supplemented from time to time, is on
file with the SEC and is herein incorporated by reference into this
Prospectus.
Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders (when available). In the annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund’s performance after the first fiscal year the
Fund is in operation.
To
make shareholder inquiries, for more detailed information on the Fund, or to
request the SAI or annual or semi-annual shareholder reports (once available)
free of charge, please:
|
|
|
|
|
|
|
|
|
|
|
|
Call: |
1-800-617-0004
Monday
through Friday
8:00
a.m. – 5:00 p.m. (Central time) |
Write: |
Pacer
Funds Trust, (Name of Fund)
c/o
U.S. Bank Global Fund Services, LLC
P.O.
Box 701
Milwaukee,
Wisconsin 53202 |
Visit: |
www.PacerETFs.com |
|
|
Reports
and other information about the Fund are available on the EDGAR Database on the
SEC’s Internet site at www.sec.gov, and copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the following
e-mail address: [email protected].
No
person is authorized to give any information or to make any representations
about the Fund and its Shares not contained in this Prospectus and you should
not rely on any other information. Read and keep this Prospectus for future
reference.
(The
Trust’s SEC Investment Company Act file number is 811-23024)