ck0001616668-20221031
PROSPECTUS
February 28,
2023
|
|
|
|
|
| |
| PSCX |
Pacer
Swan SOS Conservative (January) ETF |
| PSCW |
Pacer
Swan SOS Conservative (April) ETF |
| PSCJ |
Pacer
Swan SOS Conservative (July) ETF |
| PSCQ |
Pacer
Swan SOS Conservative (October) ETF |
| PSMD |
Pacer
Swan SOS Moderate (January) ETF |
| PSMR |
Pacer
Swan SOS Moderate (April) ETF |
| PSMJ |
Pacer
Swan SOS Moderate (July) ETF |
| PSMO |
Pacer
Swan SOS Moderate (October) ETF |
| PSFD |
Pacer
Swan SOS Flex (January) ETF |
| PSFM |
Pacer
Swan SOS Flex (April) ETF |
| PSFJ |
Pacer
Swan SOS Flex (July) ETF |
| PSFO |
Pacer
Swan SOS Flex (October) ETF |
| PSFF |
Pacer
Swan SOS Fund of Funds ETF |
Listed
on Cboe BZX Exchange, 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
|
|
|
|
|
| |
|
The
following information describes some of the risks associated with each of
the funds listed on the cover of this Prospectus other than the Pacer Swan
SOS Fund of Funds ETF (each an “SOS Fund,” and collectively, the “SOS
Funds”). Additional information about these and other risks related to the
SOS Funds and information pertaining to the Pacer Swan SOS Fund of Funds
ETF can be found below in this Prospectus.
Each
SOS Fund uses a “structured outcome strategy” to seek to produce
pre-determined target investment outcomes based upon the performance of
the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). The pre-determined structured outcomes
sought by the SOS Funds, which include the buffer and cap discussed below,
are based upon the performance of the Underlying ETF over a one year
period referred to with respect to an SOS Fund as the initial “Investment
Period.” Following an SOS Fund’s initial Investment Period, each
subsequent Investment Period will be a one-year period. |
|
| |
| • |
An
SOS Fund will not terminate after the conclusion of the Investment Period.
After the conclusion of an Investment Period with respect to an SOS Fund,
another will begin. There
is no guarantee that the structured outcomes for an Investment Period will
be realized. |
|
| |
| • |
The
structured outcomes may only be realized if you are holding shares on the
first day of an Investment Period and continue to hold them on the last
day of that Investment Period. If
you purchase shares after an Investment Period has begun or sell shares
prior to an Investment Period’s conclusion, you may experience investment
returns very different from those that the SOS Fund seeks to
provide.
If the Investment Period has begun and the Fund has increased in value to
a level near to the Cap (as defined below), an investor purchasing at that
price has little or no ability to achieve gains but remains vulnerable to
downside risks. Similarly, if the Investment Period has begun and the SOS
Fund has decreased in value beyond the pre-determined buffer (as described
below), an investor purchasing shares at that price may not benefit from
the buffer. There is no guarantee that an SOS Fund will successfully
achieve its investment objective. |
|
| |
| • |
SOS
Fund shareholders are subject to an upside return cap (the “Cap”) that
represents the maximum percentage return an investor can achieve from an
investment in an SOS Fund for an Investment Period. Therefore, even though
the SOS Funds’ returns are based upon the Underlying ETF, if the
Underlying ETF experiences returns for an Investment Period in excess of
the Cap, you will not experience those excess gains. An SOS Fund’s Cap may
rise or fall from one Investment Period to the next. There is no guarantee
that an SOS Fund’s Cap will remain the same upon the conclusion of its
Investment Period. |
|
| |
| • |
Each
SOS Fund only seeks to provide shareholders that hold shares for an entire
Investment Period with a buffer against a pre-determined percentage of
Underlying ETF losses. You will bear all Underlying ETF losses beyond that
pre-determined percentage as described below. While each SOS Fund seeks to
limit losses for shareholders who hold shares for the entire Investment
Period, there is no guarantee it will successfully do so. |
|
| |
|
| |
|
| |
|
| |
|
| |
| • |
The
SOS Funds’ website,
www.https://www.paceretfs.com/products/structured-outcome-strategies,
provides important information (including Investment Period start and end
dates and each SOS Fund’s Cap and buffer), as well information relating to
the potential outcomes of an investment in an SOS Fund on a daily basis.
If you are contemplating purchasing shares, please visit the website.
Investors considering purchasing shares after an Investment Period has
begun or selling shares prior to the end of an Investment Period should
visit the website to fully understand potential investment
outcomes. |
|
| |
|
| |
|
| |
|
| |
|
| |
| • |
Although
each SOS Fund seeks to achieve its investment objective, there is no
guarantee that it will do so. The returns that an SOS Fund seeks to
provide do not include the costs associated with purchasing shares of that
SOS Fund and certain expenses incurred by the SOS Fund. The SOS Funds have
characteristics unlike many other traditional investment products and may
not be suitable for all investors. The table on the following page
provides considerations for determining whether an investment in an SOS
Fund is appropriate for you. |
Table
of Contents
SUMMARY
SECTION
|
|
| |
|
Pacer
Swan SOS Conservative (January)
ETF |
Investment
Objective
The
Pacer Swan SOS Conservative (January) ETF (the “Fund”) seeks to provide
investors with returns that, before fees and expenses of the Fund, match those
of the SPDR®
S&P 500®
ETF
Trust (the “Underlying ETF”) up to a predetermined upside cap of 17.10% (before
fees and expenses of the Fund) and 16.35% (after fees and expenses of the Fund),
while providing a buffer against Underlying ETF losses between 5% and 30% over
the period from January 3, 2023 to December 29,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
|
Total
Annual Fund Operating Expenses1 |
0.75% |
1
Total Annual
Fund Operating Expenses do not correlate to the expense ratios in the Fund’s
Financial Highlights because the Financial Highlights include non-recurring
proxy expense incurred at October 31, 2022 of 0.01%.
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
19% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an approximate one-year period (the
“Investment Period”), subject to a buffer (the “Buffer”) against certain
Underlying ETF losses and a cap (the “Cap”) as set forth in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| January
3, 2023 |
December
29, 2023 |
5%
to 30% |
17.10% |
16.35% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 5%, the
strategy is intended for the Fund to experience such losses on a one-to-one
basis with the Underlying ETF, before fees and expenses of the Fund. For
example, if the Underlying ETF loses 4% over the Investment Period, the strategy
is designed for the Fund to lose 4%, before Fund fees and expenses.
•If
the Underlying ETF declines in value over the Investment Period by more than 5%
but less than or equal to 30%, the strategy is intended for the Fund to bear
only the first 5% of such losses (i.e.,
to buffer against Underlying ETF losses beyond 5% and up to 30%), before Fund
fees and expenses. For example, if the Underlying ETF loses 10%, 20%, or 30%
over the Investment Period, the strategy is intended for the Fund to lose 5%,
before Fund fees and expenses. As a result, the maximum effect of the Buffer is
to protect the Fund from losses of 25% if the Underlying ETF loses 30% over the
Investment Period (30% minus the first 5% of losses).
•If
the Underlying ETF has declined in value by more than 30% over the Investment
Period, the strategy is intended for the Fund to experience losses that are 25%
less than the those of the Underlying ETF. For example, if the Underlying ETF
loses 40% over the Investment Period, the strategy is designed for the Fund to
lose 15% (40% minus 25%), before Fund fees and expenses. An investor that
purchases Shares at a value reflecting losses of more than 30% from the
beginning of the Investment Period has the potential to lose his or her entire
investment and may not experience any benefit from the Buffer.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment
Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for that entire Investment Period.
Buffer
The
Fund seeks to provide a Buffer of Underlying ETF losses of between 5% and 30%
over each Investment Period. In other words, the Fund’s strategy seeks to
provide a buffer of 25% against Underlying ETF losses equal to or greater than
30%. The Fund will bear the first 5% of losses, and after the Underlying ETF has
decreased in value by more than 30%, the Fund will experience subsequent losses
on a one-to-one basis. The Buffer is before taking into account the fees and
expenses of the Fund charged to shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by an amount equal to or greater than
30% from the value of the Fund on the first day of the Investment Period (the
“Initial Fund Value”), an investor purchasing Shares at that price will have
increased gains available prior to reaching the Cap
but
may
not benefit from the Buffer
that the Fund seeks to offer for the remainder of the Investment Period. The Cap
and Buffer relative to the Initial Fund Value, however, will not change over the
Investment Period.
Conversely,
if an investor is considering purchasing Shares during the Investment Period and
the Fund has already increased in value, an investor purchasing Shares at that
price may experience losses prior to gaining the protection offered by the
Buffer (because the Fund must first decrease in value to 5% less than its
Initial Fund Value for the Investment Period before subsequent losses will be
protected by the Buffer), which is not guaranteed.
Cap
The
returns of the Fund are subject to the Cap set forth in the above table for the
Investment Period. Unlike other investment products, the potential returns an
investor can receive from the Fund are subject to a pre-determined upside return
Cap that represents the maximum percentage return an investor can achieve from
an investment in the Fund for an entire Investment Period. In the event the
Underlying ETF experiences gains over an Investment Period, the Fund seeks to
provide investment returns that match the percentage increase of the Underlying
ETF, but any percentage gains over the amount of the Cap will not be experienced
by the Fund. This
means that, if the Underlying ETF experiences gains for an Investment Period in
excess of the Cap for that Investment Period, the Fund will not benefit from
those excess gains.
Therefore,
regardless of the performance of the Underlying ETF, the Cap is the maximum
return an investor can achieve from an investment in the Fund for that
Investment Period.
The
Cap is set on the first day of each Investment Period. The defined Cap
applicable to an Investment Period will vary based on prevailing market
conditions at the time, including then-current interest rate levels, Underlying
ETF volatility, and the relationship of puts and calls on the underlying FLEX
Options. Following the close of business on the last day of the Investment
Period, the Fund will supplement its prospectus by filing and mailing to
shareholders a notice disclosing the Fund’s Cap for the next Investment Period
if such Cap is lower than the Cap for the prior Investment Period. The
information will also be available on the Fund’s website at
www.paceretfs.com/products/structured-outcome-strategies.
The
Cap is determined prior to taking into account annual operating expenses of the
Fund, which are disclosed above under “Fees and Expenses of the Fund,” as well
as brokerage commissions, trading fees, taxes, and any extraordinary expenses
incurred by the Fund. Such extraordinary expenses (incurred outside of the
ordinary operation of the Fund) may include, for example, unexpected litigation,
regulatory, or tax expenses.
The
Cap level is a result of the design of the Fund’s principal investment strategy.
To provide the Buffer, the Fund purchases a series of put and call FLEX Options
on the first day of an Investment Period. As the purchaser of these FLEX
Options, the Fund is obligated to pay a premium to the seller of those FLEX
Options. The portfolio manager will calculate the amount of premiums that the
Fund will owe on the put options acquired and sold to provide the Buffer and
will then go into the market and sell call options with terms that entitle the
Fund to receive premiums such that the net amount of premiums paid per unit of
the Underlying ETF is approximately equal to the price per unit of shares of the
Underlying ETF. The Cap is the strike price of those sold FLEX
Options.
The
Cap, and the Fund’s position relative to it on any given day, should be
considered before investing in the Fund. If
an investor purchases Shares during an Investment Period, and the Fund has
already increased in value above its Initial Fund Value for that Investment
Period to a level near to the Cap, an investor purchasing Shares will have
limited to no gain potential for the remainder of the Investment Period.
However, the investor will remain vulnerable to significant downside risk
because the investor will bear the losses between the price at which it
purchased its Shares and the Initial Fund Value for the Investment Period before
subsequent losses will be protected by the Buffer.
General
Information about FLEX Options
FLEX
Options are exchange-traded options contracts with uniquely customizable terms
like exercise price, style, and expiration date. The Underlying ETF is an
exchange-traded unit investment trust that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance
of the S&P 500®
Index. The Underlying ETF uses a full replication strategy, meaning it invests
in all of the component securities of the S&P 500®
Index in the same approximate proportions as in the S&P 500®
Index. See
“Additional Information About the Funds—The Underlying ETF” below for more
information.
The
FLEX Options that the Fund will hold that reference the Underlying ETF will give
the Fund the right to receive or deliver shares of the Underlying ETF on the
option expiration date at a strike price, depending on whether the option is a
put or call option and whether the Fund purchases or sells the option. The FLEX
Options held by the Fund are European-style options, which are exercisable at
the strike price only on the FLEX Option expiration date.
The
Fund will generally, under normal conditions, hold four kinds of FLEX Options
for each Investment Period. The Fund will purchase a call option (giving the
Fund the right to receive shares of the Underlying ETF) and a put option (giving
the Fund the right to deliver shares of the Underlying ETF), while
simultaneously selling (i.e.,
writing) a call option (giving the Fund the obligation to deliver shares of the
Underlying ETF) and a put option (giving the Fund the obligation to receive
shares of the Underlying ETF). The Fund intends to structure the FLEX Options so
that any amount owed by the Fund on the written FLEX Options will be covered by
payouts at expiration from the purchased FLEX Options. As a result, the FLEX
Options will be fully covered and no additional collateral will be necessary
during the life of the Fund. The Fund receives premiums in exchange for the
written FLEX Options and pays premiums in exchange for the purchased FLEX
Options. Each of the FLEX Options purchased and sold throughout the Investment
Period will have the same terms, such as strike price and expiration date, as
the FLEX Options purchased and sold on the first day of the Investment
Period.
On
the FLEX Options’ expiration date, the Fund intends to sell the FLEX Options
prior to their expiration and use the resulting proceeds to purchase new FLEX
Options for the next Investment Period.
The Fund is classified as “non-diversified”
under the Investment Company Act of 1940, as amended (the “1940
Act”).
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 Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Buffered
Loss Risk.
There can be no guarantee that the Fund will be successful in its strategy to
buffer against Underlying ETF losses. Despite
the intended Buffer, a shareholder could lose their entire
investment.
The Fund’s strategy seeks to deliver returns that match the Underlying ETF (up
to the Cap), while limiting downside losses, if Shares are bought on the day on
which the Fund enters into the FLEX Options and held until those FLEX Options
expire at the end of each Investment Period. In the event an investor purchases
Shares after the date on which the FLEX Options were entered into or sells
Shares prior to the expiration of the FLEX Options, the Buffer that the Fund
seeks to provide may not be available and the investor may not get the full
benefit of the Buffer. The Fund might not achieve its objective in certain
circumstances. The Fund does not provide principal protection and an investor
may experience significant losses on its investment, including loss of its
entire investment.
•Cap
Change Risk.
A new Cap is established at the beginning of each Investment Period and is
dependent on prevailing market conditions. As a result, the Cap may rise or fall
from one Investment Period to the next and is unlikely to remain the same for
consecutive Investment Periods.
•Capped
Upside Risk.
The Fund’s strategy seeks to provide returns that match those of the Underlying
ETF for Shares purchased on the first day of an Investment Period and held for
the entire Investment Period, subject to a pre-determined upside Cap. If an
investor does not hold its Shares for an entire Investment Period, the returns
realized by that investor may not match those the Fund seeks to achieve. If the
Underlying ETF experiences gains during an Investment Period, the Fund will not
participate in those gains beyond the Cap. In the event an investor purchases
Shares after the first day of an Investment Period and the Fund has risen in
value to a level near to the Cap, there may be little or no ability for that
investor to experience an investment gain on their Shares.
•Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The OCC acts
as guarantor and central counterparty with respect to FLEX Options. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to
meet its obligations. In the unlikely event that the OCC becomes insolvent or is
otherwise unable to meet its settlement obligations, the Fund could suffer
significant losses.
•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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund
to
recognize a capital gain that it might not have recognized if it had made a
redemption in-kind. As a result, the Fund may pay out higher annual capital gain
distributions than if the in-kind redemption process was used.
◦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.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as Cboe BZX Exchange, 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.
•FLEX
Options Correlation Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
Underlying ETF. Factors that may influence the value of the FLEX Options, other
than changes in the value of the Underlying ETF, may include interest rate
changes, changing supply and demand, decreased liquidity of the FLEX Options,
and changing volatility levels of the Underlying ETF.
•FLEX
Options Liquidity Risk.
The FLEX Options are listed on an exchange; however, no one can guarantee that a
liquid secondary trading market will exist for the FLEX Options. In the event
that trading in the FLEX Options is limited or absent, the value of the Fund’s
FLEX Options may decrease. In a less liquid market for the FLEX Options,
liquidating the FLEX Options may require the payment of a premium (for written
FLEX Options) or acceptance of a discounted price (for purchased FLEX Options)
and may take longer to complete. A less liquid trading market may adversely
impact the value of the FLEX Options and Fund shares and result in the Fund
being unable to achieve its investment objective. The trading in FLEX Options
may be less deep and liquid than the market for certain other securities. FLEX
Options may be less liquid than certain non-customized options. In a less liquid
market for the FLEX Options, the liquidation of a large number of options may
more significantly impact the price. A less liquid trading market may adversely
impact the value of the FLEX Options and the value of your
investment.
•FLEX
Options Valuation Risk.
The value of the FLEX Options will be determined based upon market quotations or
using other recognized pricing methods. The value of the FLEX Options prior to
the expiration date may vary because of related factors other than the value of
the Underlying ETF. During periods of reduced market liquidity or in the absence
of readily available market quotations for the holdings of the Fund, the ability
of the Fund to value the FLEX Options becomes more difficult and the judgment of
the Fund’s investment adviser or sub-adviser (employing the fair value
procedures adopted by the Board of Trustees of the Trust) may play a greater
role in the valuation of the Fund’s holdings due to reduced availability of
reliable objective pricing data.
•Investment
Period Risk.
The Fund’s investment strategy is designed to deliver returns that match the
Underlying ETF if Shares are bought on the day on which the Fund enters into the
FLEX Options (i.e.,
the first day of an Investment Period) and held until those FLEX Options expire
at the end of the Investment Period. In the event an investor purchases Shares
after the first day of an Investment Period or sells Shares prior to the
expiration of the
Investment
Period, the value of that investor’s investment in Shares may not be buffered
against a decline in the value of the Underlying ETF and may not participate in
a gain in the value of the Underlying ETF up to the Cap for the investor’s
investment period.
•Large-Capitalization
Investing Risk. The
Fund may invest in the securities of large-capitalization companies. As a
result, the Fund’s performance may be adversely affected if securities of
large-capitalization companies underperform securities of smaller-capitalization
companies or the market as a whole. The securities of large-capitalization
companies may be relatively mature compared to smaller companies and therefore
subject to slower growth during times of economic expansion.
▪Limited
Operating History.
The Fund is a recently organized management investment company with limited
operating history. As a result, prospective investors have a limited track
record on which to base their investment decision. An investment in the Fund may
therefore involve greater uncertainty than an investment in a fund with a more
established record of performance.
•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 manager 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.
•Market
Risk. Market
risk is the risk that a particular security, or Shares in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates, and perceived trends in securities prices. Shares could decline in value
or underperform other investments. In addition, local, regional, or global
events such as war, acts of terrorism, spread of infectious diseases or other
public health issues, recessions, or other events could have a significant
negative impact on the Fund and its investments. Such events may affect certain
geographic regions, countries, sectors, and industries more significantly than
others. Such events could adversely affect the prices and liquidity of the
Fund’s portfolio securities or other instruments and could result in disruptions
in the trading markets.
•Non-Diversification
Risk. The Fund is
considered to be non-diversified, which means that it may invest more of its
assets in the securities of a single issuer or a smaller number of issuers than
if it were a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s
performance.
•Special
Tax Risk.
The Fund intends to qualify as a “regulated Investment company” (“RIC”),
however, the federal income tax treatment of certain aspects of the proposed
operations of the Fund are not entirely clear. This includes the tax aspects of
the Fund’s options strategy, its hedging strategy, the possible application of
the “straddle” rules, and various loss limitation provisions of the Internal
Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as
a regulated investment company under the applicable tax laws, the Fund would be
taxed as an ordinary corporation. Certain options on an ETF may not qualify as
“Section 1256 contracts” under Section 1256 of the Code, and disposition of such
options will likely result in short-term or long-term capital gains or losses
depending on the holding period.
In
the event that a shareholder purchases Shares shortly before a distribution by
the Fund, the entire distribution may be taxable to the shareholder even though
a portion of the distribution effectively represents a return of the purchase
price.
•Underlying
ETF Risk.
The Fund invests in FLEX Options that reference an ETF, which subjects the Fund
to certain of the risks of owning shares of an ETFs, as well as the types of
instruments in which the Underlying ETF invests. The value of an ETF will
fluctuate over time based on fluctuations in the values of the securities held
by the ETF, which may be affected by changes in general economic conditions,
expectations for future growth and profits, interest rates and the supply and
demand for those securities. In addition, ETFs are subject to authorized
participant concentration risk, market maker risk, premium/discount risk,
tracking error risk and trading issues risk. Brokerage, tax and other expenses
may negatively impact the performance of the Underlying ETF and, in
turn, the value of the Fund’s shares. An
ETF that tracks an index may not exactly match the performance of the index due
to cash drag, differences between the portfolio of the ETF and the components of
the index, expenses, and other factors.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compare with those
of the Index and a broad measure of market performance. The Fund’s
past performance, before and after taxes, is not necessarily an indication of
how the Fund will perform in the future. Updated performance
information is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year
Total Return
During the period of time shown in the bar chart, the Fund’s
highest
quarterly return was 3.07% for the quarter ended
March 31, 2021 and the
lowest
quarterly return was -6.90% for the quarter
ended June 30,
2022.
Average
Annual Total Returns
For
the Period Ended December 31, 2022
|
|
|
|
|
|
|
|
| |
| Pacer
Swan SOS Conservative (January) ETF |
1
Year |
Since
Inception
(12/22/2020) |
|
Return
Before Taxes |
-6.87% |
1.12% |
|
Return
After Taxes on Distributions |
-6.87% |
1.12% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-4.06% |
0.85% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses, or
taxes) |
-18.11% |
3.59% |
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
Shares” may be higher than the other return figures for the same period. A
higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the investor.
After-tax
returns shown are not relevant to investors who hold their Fund 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
Swan
Global Management, LLC (“Swan” or the “Sub-Adviser”) serves as investment
sub-adviser to the Fund.
Portfolio
Manager
Chris
Hausman, CMT, CAIA, Senior Portfolio Manager and Managing Director-Risk of the
Sub-Adviser, has served as the Fund’s portfolio manager since its inception. Mr.
Hausman is responsible for the day-to-day management of the Fund.
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
individual retirement account (“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.
|
|
| |
|
Pacer
Swan SOS Conservative (April)
ETF |
Investment
Objective
The
Pacer Swan SOS Conservative (April) ETF (the “Fund”) seeks to provide investors
with returns that, before fees and expenses of the Fund, match those of the
SPDR®
S&P 500®
ETF
Trust (the “Underlying ETF”) up to a predetermined upside cap of 10.23% (before
fees and expenses of the Fund) and 9.48% (after fees and expenses of the Fund),
while providing a buffer against Underlying ETF losses between 5% and 30% over
the period from April 1, 2022 to March 31,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
|
Total
Annual Fund Operating Expenses1 |
0.75% |
1
Total Annual
Fund Operating Expenses do not correlate to the expense ratios in the Fund’s
Financial Highlights because the Financial Highlights include non-recurring
proxy expense incurred at October 31, 2022 of 0.01%.
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
0% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an
approximate
one-year period (the “Investment Period”), subject to a buffer (the “Buffer”)
against certain Underlying ETF losses and a cap (the “Cap”) as set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| April
1, 2022 |
March
31, 2023 |
5%
to 30% |
10.23% |
9.48% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 5%, the
strategy is intended for the Fund to experience such losses on a one-to-one
basis with the Underlying ETF, before fees and expenses of the Fund. For
example, if the Underlying ETF loses 4% over the Investment Period, the strategy
is designed for the Fund to lose 4%, before Fund fees and expenses.
•If
the Underlying ETF declines in value over the Investment Period by more than 5%
but less than or equal to 30%, the strategy is intended for the Fund to bear
only the first 5% of such losses (i.e.,
to buffer against Underlying ETF losses beyond 5% and up to 30%), before Fund
fees and expenses. For example, if the Underlying ETF loses 10%, 20%, or 30%
over the Investment Period, the strategy is intended for the Fund to lose 5%,
before Fund fees and expenses. As a result, the maximum effect of the Buffer is
to protect the Fund from losses of 25% if the Underlying ETF loses 30% over the
Investment Period (30% minus the first 5% of losses).
•If
the Underlying ETF has declined in value by more than 30% over the Investment
Period, the strategy is intended for the Fund to experience losses that are 25%
less than the those of the Underlying ETF. For example, if the Underlying ETF
loses 40% over the Investment Period, the strategy is designed for the Fund to
lose 15% (40% minus 25%), before Fund fees and expenses. An investor that
purchases Shares at a value reflecting losses of more than 30% from the
beginning of the Investment Period has the potential to lose his or her entire
investment and may not experience any benefit from the Buffer.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment
Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for that entire Investment Period.
Buffer
The
Fund seeks to provide a Buffer of Underlying ETF losses of between 5% and 30%
over each Investment Period. In other words, the Fund’s strategy seeks to
provide a buffer of 25% against Underlying ETF losses equal to or greater than
30%. The Fund will bear the first 5% of losses, and after the Underlying ETF has
decreased in value by more than 30%, the Fund will experience subsequent losses
on a one-to-one basis. The Buffer is before taking into account the fees and
expenses of the Fund charged to shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by an amount equal to or greater than
30% from the value of the Fund on the first day of the Investment Period (the
“Initial Fund Value”), an investor purchasing Shares at that price will have
increased gains available prior to reaching the Cap
but
may
not benefit from the Buffer
that the Fund seeks to offer for the remainder of the Investment Period. The Cap
and Buffer relative to the Initial Fund Value, however, will not change over the
Investment Period.
Conversely,
if an investor is considering purchasing Shares during the Investment Period and
the Fund has already increased in value, an investor purchasing Shares at that
price may experience losses prior to gaining the protection offered by the
Buffer (because the Fund must first decrease in value to 5% less than its
Initial Fund Value for the Investment Period before subsequent losses will be
protected by the Buffer), which is not guaranteed.
Cap
The
returns of the Fund are subject to the Cap set forth in the above table for the
Investment Period. Unlike other investment products, the potential returns an
investor can receive from the Fund are subject to a pre-determined upside return
Cap that represents the maximum percentage return an investor can achieve from
an investment in the Fund for an entire Investment Period. In the event the
Underlying ETF experiences gains over an Investment Period, the Fund seeks to
provide investment returns that match the percentage increase of the Underlying
ETF, but any percentage gains over the amount of the Cap will not be experienced
by the Fund. This
means that, if the Underlying ETF experiences gains for an Investment Period in
excess of the Cap for that Investment Period, the Fund will not benefit from
those excess gains.
Therefore,
regardless of the performance of the Underlying ETF, the Cap is the maximum
return an investor can achieve from an investment in the Fund for that
Investment Period.
The
Cap is set on the first day of each Investment Period. The defined Cap
applicable to an Investment Period will vary based on prevailing market
conditions at the time, including then-current interest rate levels, Underlying
ETF volatility, and the relationship of puts and calls on the underlying FLEX
Options. Following the close of business on the last day of the Investment
Period, the Fund will supplement its prospectus by filing and mailing to
shareholders a notice disclosing the Fund’s Cap for the next Investment Period
if such Cap is lower than the Cap for the prior Investment Period. The
information will also be available on the Fund’s website at
www.paceretfs.com/products/structured-outcome-strategies.
The
Cap is determined prior to taking into account annual operating expenses of the
Fund, which are disclosed above under “Fees and Expenses of the Fund,” as well
as brokerage commissions, trading fees, taxes, and any extraordinary expenses
incurred by the Fund. Such extraordinary expenses (incurred outside of the
ordinary operation of the Fund) may include, for example, unexpected litigation,
regulatory, or tax expenses.
The
Cap level is a result of the design of the Fund’s principal investment strategy.
To provide the Buffer, the Fund purchases a series of put and call FLEX Options
on the first day of an Investment Period. As the purchaser of these FLEX
Options, the Fund is obligated to pay a premium to the seller of those FLEX
Options. The portfolio manager will calculate the amount of premiums that the
Fund will owe on the put options acquired and sold to provide the Buffer and
will then go into the market and sell call options with terms that entitle the
Fund to receive premiums such that the net amount of premiums paid per unit of
the Underlying ETF is approximately equal to the price per unit of shares of the
Underlying ETF. The Cap is the strike price of those sold FLEX
Options.
The
Cap, and the Fund’s position relative to it on any given day, should be
considered before investing in the Fund. If
an investor purchases Shares during an Investment Period, and the Fund has
already increased in value above its Initial Fund Value for that Investment
Period to a level near to the Cap, an investor purchasing Shares will have
limited to no gain potential for the remainder of the Investment Period.
However, the investor will remain vulnerable to significant downside risk
because the investor will bear the losses between the price at which it
purchased its Shares and the Initial Fund Value for the Investment Period before
subsequent losses will be protected by the Buffer.
General
Information about FLEX Options
FLEX
Options are exchange-traded options contracts with uniquely customizable terms
like exercise price, style, and expiration date. The Underlying ETF is an
exchange-traded unit investment trust that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance
of the S&P 500®
Index. The Underlying ETF uses a full replication strategy, meaning it invests
in all of the component securities of the S&P 500®
Index in the same approximate proportions as in the S&P 500®
Index. See
“Additional Information About the Funds—The Underlying ETF” below for more
information.
The
FLEX Options that the Fund will hold that reference the Underlying ETF will give
the Fund the right to receive or deliver shares of the Underlying ETF on the
option expiration date at a strike price, depending on whether the option is a
put or call option and whether the Fund purchases or sells the option. The FLEX
Options held by the Fund are European-style options, which are exercisable at
the strike price only on the FLEX Option expiration date.
The
Fund will generally, under normal conditions, hold four kinds of FLEX Options
for each Investment Period. The Fund will purchase a call option (giving the
Fund the right to receive shares of the Underlying ETF) and a put option (giving
the Fund the right to deliver shares of the Underlying ETF), while
simultaneously selling (i.e.,
writing) a call option (giving the Fund the obligation to deliver shares of the
Underlying ETF) and a put option (giving the Fund the obligation to receive
shares of the Underlying ETF). The Fund intends to structure the FLEX Options so
that any amount owed by the Fund on the written FLEX Options will be covered by
payouts at expiration from the purchased FLEX Options. As a result, the FLEX
Options will be fully covered and no additional collateral will be necessary
during the life of the Fund. The Fund receives premiums in exchange for the
written FLEX Options and pays premiums in exchange for the purchased FLEX
Options. Each of the FLEX Options purchased and sold throughout the Investment
Period will have the same terms, such as strike price and expiration date, as
the FLEX Options purchased and sold on the first day of the Investment
Period.
On
the FLEX Options’ expiration date, the Fund intends to sell the FLEX Options
prior to their expiration and use the resulting proceeds to purchase new FLEX
Options for the next Investment Period.
The Fund is classified as “non-diversified”
under the Investment Company Act of 1940, as amended (the “1940
Act”).
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 Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Buffered
Loss Risk.
There can be no guarantee that the Fund will be successful in its strategy to
buffer against Underlying ETF losses. Despite
the intended Buffer, a shareholder could lose their entire
investment.
The Fund’s strategy seeks to deliver returns that match the Underlying ETF (up
to the Cap), while limiting downside losses, if Shares are bought on the day on
which the Fund enters into the FLEX Options and held until those FLEX Options
expire at the end of each Investment Period. In the event an investor purchases
Shares after the date on which the FLEX Options were entered into or sells
Shares prior to the expiration of the FLEX Options, the Buffer that the Fund
seeks to provide may not be available and the investor may not get the full
benefit of the Buffer. The Fund might not achieve its objective in certain
circumstances. The Fund does not provide principal protection and an investor
may experience significant losses on its investment, including loss of its
entire investment.
•Cap
Change Risk.
A new Cap is established at the beginning of each Investment Period and is
dependent on prevailing market conditions. As a result, the Cap may rise or fall
from one Investment Period to the next and is unlikely to remain the same for
consecutive Investment Periods.
•Capped
Upside Risk.
The Fund’s strategy seeks to provide returns that match those of the Underlying
ETF for Shares purchased on the first day of an Investment Period and held for
the entire Investment Period, subject to a pre-determined upside Cap. If an
investor does not hold its Shares for an entire Investment Period, the returns
realized by that investor may not match those the Fund seeks to achieve. If the
Underlying ETF experiences gains during an Investment Period, the Fund will not
participate in those gains beyond the Cap. In the event an investor purchases
Shares after the first day of an Investment Period and the Fund has risen in
value to a level near to the Cap, there may be little or no ability for that
investor to experience an investment gain on their Shares.
•Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The OCC acts
as guarantor and central counterparty with respect to FLEX Options. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to
meet its obligations. In the unlikely event that the OCC becomes insolvent or is
otherwise unable to meet its settlement obligations, the Fund could suffer
significant losses.
•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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund
to
recognize a capital gain that it might not have recognized if it had made a
redemption in-kind. As a result, the Fund may pay out higher annual capital gain
distributions than if the in-kind redemption process was used.
◦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.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as Cboe BZX Exchange, 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.
•FLEX
Options Correlation Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
Underlying ETF. Factors that may influence the value of the FLEX Options, other
than changes in the value of the Underlying ETF, may include interest rate
changes, changing supply and demand, decreased liquidity of the FLEX Options,
and changing volatility levels of the Underlying ETF.
•FLEX
Options Liquidity Risk.
The FLEX Options are listed on an exchange; however, no one can guarantee that a
liquid secondary trading market will exist for the FLEX Options. In the event
that trading in the FLEX Options is limited or absent, the value of the Fund’s
FLEX Options may decrease. In a less liquid market for the FLEX Options,
liquidating the FLEX Options may require the payment of a premium (for written
FLEX Options) or acceptance of a discounted price (for purchased FLEX Options)
and may take longer to complete. A less liquid trading market may adversely
impact the value of the FLEX Options and Fund shares and result in the Fund
being unable to achieve its investment objective. The trading in FLEX Options
may be less deep and liquid than the market for certain other securities. FLEX
Options may be less liquid than certain non-customized options. In a less liquid
market for the FLEX Options, the liquidation of a large number of options may
more significantly impact the price. A less liquid trading market may adversely
impact the value of the FLEX Options and the value of your
investment.
•FLEX
Options Valuation Risk.
The value of the FLEX Options will be determined based upon market quotations or
using other recognized pricing methods. The value of the FLEX Options prior to
the expiration date may vary because of related factors other than the value of
the Underlying ETF. During periods of reduced market liquidity or in the absence
of readily available market quotations for the holdings of the Fund, the ability
of the Fund to value the FLEX Options becomes more difficult and the judgment of
the Fund’s investment adviser or sub-adviser (employing the fair value
procedures adopted by the Board of Trustees of the Trust) may play a greater
role in the valuation of the Fund’s holdings due to reduced availability of
reliable objective pricing data.
•Investment
Period Risk.
The Fund’s investment strategy is designed to deliver returns that match the
Underlying ETF if Shares are bought on the day on which the Fund enters into the
FLEX Options (i.e.,
the first day of an Investment Period) and held until those FLEX Options expire
at the end of the Investment Period. In the event an investor purchases Shares
after the first day of an Investment Period or sells Shares prior to the
expiration of the
Investment
Period, the value of that investor’s investment in Shares may not be buffered
against a decline in the value of the Underlying ETF and may not participate in
a gain in the value of the Underlying ETF up to the Cap for the investor’s
investment period.
•Large-Capitalization
Investing Risk. The
Fund may invest in the securities of large-capitalization companies. As a
result, the Fund’s performance may be adversely affected if securities of
large-capitalization companies underperform securities of smaller-capitalization
companies or the market as a whole. The securities of large-capitalization
companies may be relatively mature compared to smaller companies and therefore
subject to slower growth during times of economic expansion.
▪Limited
Operating History.
The Fund is a recently organized management investment company with limited
operating history. As a result, prospective investors have a limited track
record on which to base their investment decision. An investment in the Fund may
therefore involve greater uncertainty than an investment in a fund with a more
established record of performance.
•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 manager 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.
•Market
Risk. Market
risk is the risk that a particular security, or Shares in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates, and perceived trends in securities prices. Shares could decline in value
or underperform other investments. In addition, local, regional, or global
events such as war, acts of terrorism, spread of infectious diseases or other
public health issues, recessions, or other events could have a significant
negative impact on the Fund and its investments. Such events may affect certain
geographic regions, countries, sectors, and industries more significantly than
others. Such events could adversely affect the prices and liquidity of the
Fund’s portfolio securities or other instruments and could result in disruptions
in the trading markets.
•Non-Diversification
Risk. The Fund is
considered to be non-diversified, which means that it may invest more of its
assets in the securities of a single issuer or a smaller number of issuers than
if it were a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s
performance.
•Special
Tax Risk.
The Fund intends to qualify as a “regulated Investment company” (“RIC”),
however, the federal income tax treatment of certain aspects of the proposed
operations of the Fund are not entirely clear. This includes the tax aspects of
the Fund’s options strategy, its hedging strategy, the possible application of
the “straddle” rules, and various loss limitation provisions of the Internal
Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as
a regulated investment company under the applicable tax laws, the Fund would be
taxed as an ordinary corporation. Certain options on an ETF may not qualify as
“Section 1256 contracts” under Section 1256 of the Code, and disposition of such
options will likely result in short-term or long-term capital gains or losses
depending on the holding period.
In
the event that a shareholder purchases Shares shortly before a distribution by
the Fund, the entire distribution may be taxable to the shareholder even though
a portion of the distribution effectively represents a return of the purchase
price.
•Underlying
ETF Risk.
The Fund invests in FLEX Options that reference an ETF, which subjects the Fund
to certain of the risks of owning shares of an ETFs, as well as the types of
instruments in which the Underlying ETF invests. The value of an ETF will
fluctuate over time based on fluctuations in the values of the securities held
by the ETF, which may be affected by changes in general economic conditions,
expectations for future growth and profits, interest rates and the supply and
demand for those securities. In addition, ETFs are subject to authorized
participant concentration risk, market maker risk, premium/discount risk,
tracking error risk and trading issues risk. Brokerage, tax and other expenses
may negatively impact the performance of the Underlying ETF and, in
turn, the value of the Fund’s shares. An
ETF that tracks an index may not exactly match the performance of the index due
to cash drag, differences between the portfolio of the ETF and the components of
the index, expenses, and other factors.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compare with those
of the Index and a broad measure of market performance. The Fund’s
past performance, before and after taxes, is not necessarily an indication of
how the Fund will perform in the future. Updated performance
information is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year
Total Return
During the period of time shown in the bar chart, the Fund’s
highest
quarterly return was 3.05% for the quarter ended
December 31, 2022 and
the lowest
quarterly return was -8.15% for the quarter
ended June 30,
2022.
Average
Annual Total Returns
For
the Period Ended December 31, 2022
|
|
|
|
|
|
|
|
| |
| Pacer
Swan SOS Conservative (April) ETF |
1
Year |
Since
Inception
(3/31/2021) |
|
Return
Before Taxes |
-5.51% |
0.39% |
|
Return
After Taxes on Distributions |
-5.51% |
0.39% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-3.26% |
0.30% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses, or
taxes) |
-18.11% |
-0.42% |
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
Shares” may be higher than the other return figures for the same period. A
higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the investor.
After-tax
returns shown are not relevant to investors who hold their Fund 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
Swan
Global Management, LLC (“Swan” or the “Sub-Adviser”) serves as investment
sub-adviser to the Fund.
Portfolio
Manager
Chris
Hausman, CMT, CAIA, Senior Portfolio Manager and Managing Director-Risk of the
Sub-Adviser, has served as the Fund’s portfolio manager since its inception. Mr.
Hausman is responsible for the day-to-day management of the Fund.
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
individual retirement account (“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.
|
|
| |
|
Pacer
Swan SOS Conservative (July)
ETF |
Investment
Objective
The
Pacer Swan SOS Conservative (July) ETF (the “Fund”) seeks to provide investors
with returns that, before fees and expenses of the Fund, match those of the
SPDR®
S&P 500®
ETF
Trust (the “Underlying ETF”) up to a predetermined upside cap of 15.30% (before
fees and expenses of the Fund) and 14.55% (after fees and expenses of the Fund),
while providing a buffer against Underlying ETF losses between 5% and 30% over
the period from July 1, 2022 to June 30,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
|
Total
Annual Fund Operating Expenses1 |
0.75% |
1
Total Annual
Fund Operating Expenses do not correlate to the expense ratios in the Fund’s
Financial Highlights because the Financial Highlights include non-recurring
proxy expense incurred at October 31, 2022 of 0.01%.
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
0% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an
approximate
one-year period (the “Investment Period”), subject to a buffer (the “Buffer”)
against certain Underlying ETF losses and a cap (the “Cap”) as set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| July
1, 2022 |
June
30, 2023 |
5%
to 30% |
15.30% |
14.55% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 5%, the
strategy is intended for the Fund to experience such losses on a one-to-one
basis with the Underlying ETF, before fees and expenses of the Fund. For
example, if the Underlying ETF loses 4% over the Investment Period, the strategy
is designed for the Fund to lose 4%, before Fund fees and expenses.
•If
the Underlying ETF declines in value over the Investment Period by more than 5%
but less than or equal to 30%, the strategy is intended for the Fund to bear
only the first 5% of such losses (i.e.,
to buffer against Underlying ETF losses beyond 5% and up to 30%), before Fund
fees and expenses. For example, if the Underlying ETF loses 10%, 20%, or 30%
over the Investment Period, the strategy is intended for the Fund to lose 5%,
before Fund fees and expenses. As a result, the maximum effect of the Buffer is
to protect the Fund from losses of 25% if the Underlying ETF loses 30% over the
Investment Period (30% minus the first 5% of losses).
•If
the Underlying ETF has declined in value by more than 30% over the Investment
Period, the strategy is intended for the Fund to experience losses that are 25%
less than the those of the Underlying ETF. For example, if the Underlying ETF
loses 40% over the Investment Period, the strategy is designed for the Fund to
lose 15% (40% minus 25%), before Fund fees and expenses. An investor that
purchases Shares at a value reflecting losses of more than 30% from the
beginning of the Investment Period has the potential to lose his or her entire
investment and may not experience any benefit from the Buffer.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment
Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for that entire Investment Period.
Buffer
The
Fund seeks to provide a Buffer of Underlying ETF losses of between 5% and 30%
over each Investment Period. In other words, the Fund’s strategy seeks to
provide a buffer of 25% against Underlying ETF losses equal to or greater than
30%. The Fund will bear the first 5% of losses, and after the Underlying ETF has
decreased in value by more than 30%, the Fund will experience subsequent losses
on a one-to-one basis. The Buffer is before taking into account the fees and
expenses of the Fund charged to shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by an amount equal to or greater than
30% from the value of the Fund on the first day of the Investment Period (the
“Initial Fund Value”), an investor purchasing Shares at that price will have
increased gains available prior to reaching the Cap
but
may
not benefit from the Buffer
that the Fund seeks to offer for the remainder of the Investment Period. The Cap
and Buffer relative to the Initial Fund Value, however, will not change over the
Investment Period.
Conversely,
if an investor is considering purchasing Shares during the Investment Period and
the Fund has already increased in value, an investor purchasing Shares at that
price may experience losses prior to gaining the protection offered by the
Buffer (because the Fund must first decrease in value to 5% less than its
Initial Fund Value for the Investment Period before subsequent losses will be
protected by the Buffer), which is not guaranteed.
Cap
The
returns of the Fund are subject to the Cap set forth in the above table for the
Investment Period. Unlike other investment products, the potential returns an
investor can receive from the Fund are subject to a pre-determined upside return
Cap that represents the maximum percentage return an investor can achieve from
an investment in the Fund for an entire Investment Period. In the event the
Underlying ETF experiences gains over an Investment Period, the Fund seeks to
provide investment returns that match the percentage increase of the Underlying
ETF, but any percentage gains over the amount of the Cap will not be experienced
by the Fund. This
means that, if the Underlying ETF experiences gains for an Investment Period in
excess of the Cap for that Investment Period, the Fund will not benefit from
those excess gains.
Therefore,
regardless of the performance of the Underlying ETF, the Cap is the maximum
return an investor can achieve from an investment in the Fund for that
Investment Period.
The
Cap is set on the first day of each Investment Period. The defined Cap
applicable to an Investment Period will vary based on prevailing market
conditions at the time, including then-current interest rate levels, Underlying
ETF volatility, and the relationship of puts and calls on the underlying FLEX
Options. Following the close of business on the last day of the Investment
Period, the Fund will supplement its prospectus by filing and mailing to
shareholders a notice disclosing the Fund’s Cap for the next Investment Period
if such Cap is lower than the Cap for the prior Investment Period. The
information will also be available on the Fund’s website at
www.paceretfs.com/products/structured-outcome-strategies.
The
Cap is determined prior to taking into account annual operating expenses of the
Fund, which are disclosed above under “Fees and Expenses of the Fund,” as well
as brokerage commissions, trading fees, taxes, and any extraordinary expenses
incurred by the Fund. Such extraordinary expenses (incurred outside of the
ordinary operation of the Fund) may include, for example, unexpected litigation,
regulatory, or tax expenses.
The
Cap level is a result of the design of the Fund’s principal investment strategy.
To provide the Buffer, the Fund purchases a series of put and call FLEX Options
on the first day of an Investment Period. As the purchaser of these FLEX
Options, the Fund is obligated to pay a premium to the seller of those FLEX
Options. The portfolio manager will calculate the amount of premiums that the
Fund will owe on the put options acquired and sold to provide the Buffer and
will then go into the market and sell call options with terms that entitle the
Fund to receive premiums such that the net amount of premiums paid per unit of
the Underlying ETF is approximately equal to the price per unit of shares of the
Underlying ETF. The Cap is the strike price of those sold FLEX
Options.
The
Cap, and the Fund’s position relative to it on any given day, should be
considered before investing in the Fund. If
an investor purchases Shares during an Investment Period, and the Fund has
already increased in value above its Initial Fund Value for that Investment
Period to a level near to the Cap, an investor purchasing Shares will have
limited to no gain potential for the remainder of the Investment Period.
However, the investor will remain vulnerable to significant downside risk
because the investor will bear the losses between the price at which it
purchased its Shares and the Initial Fund Value for the Investment Period before
subsequent losses will be protected by the Buffer.
General
Information about FLEX Options
FLEX
Options are exchange-traded options contracts with uniquely customizable terms
like exercise price, style, and expiration date. The Underlying ETF is an
exchange-traded unit investment trust that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance
of the S&P 500®
Index. The Underlying ETF uses a full replication strategy, meaning it invests
in all of the component securities of the S&P 500®
Index in the same approximate proportions as in the S&P 500®
Index. See
“Additional Information About the Funds—The Underlying ETF” below for more
information.
The
FLEX Options that the Fund will hold that reference the Underlying ETF will give
the Fund the right to receive or deliver shares of the Underlying ETF on the
option expiration date at a strike price, depending on whether the option is a
put or call option and whether the Fund purchases or sells the option. The FLEX
Options held by the Fund are European-style options, which are exercisable at
the strike price only on the FLEX Option expiration date.
The
Fund will generally, under normal conditions, hold four kinds of FLEX Options
for each Investment Period. The Fund will purchase a call option (giving the
Fund the right to receive shares of the Underlying ETF) and a put option (giving
the Fund the right to deliver shares of the Underlying ETF), while
simultaneously selling (i.e.,
writing) a call option (giving the Fund the obligation to deliver shares of the
Underlying ETF) and a put option (giving the Fund the obligation to receive
shares of the Underlying ETF). The Fund intends to structure the FLEX Options so
that any amount owed by the Fund on the written FLEX Options will be covered by
payouts at expiration from the purchased FLEX Options. As a result, the FLEX
Options will be fully covered and no additional collateral will be necessary
during the life of the Fund. The Fund receives premiums in exchange for the
written FLEX Options and pays premiums in exchange for the purchased FLEX
Options. Each of the FLEX Options purchased and sold throughout the Investment
Period will have the same terms, such as strike price and expiration date, as
the FLEX Options purchased and sold on the first day of the Investment
Period.
On
the FLEX Options’ expiration date, the Fund intends to sell the FLEX Options
prior to their expiration and use the resulting proceeds to purchase new FLEX
Options for the next Investment Period.
The Fund is classified as “non-diversified”
under the Investment Company Act of 1940, as amended (the “1940
Act”).
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 Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Buffered
Loss Risk.
There can be no guarantee that the Fund will be successful in its strategy to
buffer against Underlying ETF losses. Despite
the intended Buffer, a shareholder could lose their entire
investment.
The Fund’s strategy seeks to deliver returns that match the Underlying ETF (up
to the Cap), while limiting downside losses, if Shares are bought on the day on
which the Fund enters into the FLEX Options and held until those FLEX Options
expire at the end of each Investment Period. In the event an investor purchases
Shares after the date on which the FLEX Options were entered into or sells
Shares prior to the expiration of the FLEX Options, the Buffer that the Fund
seeks to provide may not be available and the investor may not get the full
benefit of the Buffer. The Fund might not achieve its objective in certain
circumstances. The Fund does not provide principal protection and an investor
may experience significant losses on its investment, including loss of its
entire investment.
•Cap
Change Risk.
A new Cap is established at the beginning of each Investment Period and is
dependent on prevailing market conditions. As a result, the Cap may rise or fall
from one Investment Period to the next and is unlikely to remain the same for
consecutive Investment Periods.
•Capped
Upside Risk.
The Fund’s strategy seeks to provide returns that match those of the Underlying
ETF for Shares purchased on the first day of an Investment Period and held for
the entire Investment Period, subject to a pre-determined upside Cap. If an
investor does not hold its Shares for an entire Investment Period, the returns
realized by that investor may not match those the Fund seeks to achieve. If the
Underlying ETF experiences gains during an Investment Period, the Fund will not
participate in those gains beyond the Cap. In the event an investor purchases
Shares after the first day of an Investment Period and the Fund has risen in
value to a level near to the Cap, there may be little or no ability for that
investor to experience an investment gain on their Shares.
•Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The OCC acts
as guarantor and central counterparty with respect to FLEX Options. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to
meet its obligations. In the unlikely event that the OCC becomes insolvent or is
otherwise unable to meet its settlement obligations, the Fund could suffer
significant losses.
•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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund
to
recognize a capital gain that it might not have recognized if it had made a
redemption in-kind. As a result, the Fund may pay out higher annual capital gain
distributions than if the in-kind redemption process was used.
◦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.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as Cboe BZX Exchange, 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.
•FLEX
Options Correlation Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
Underlying ETF. Factors that may influence the value of the FLEX Options, other
than changes in the value of the Underlying ETF, may include interest rate
changes, changing supply and demand, decreased liquidity of the FLEX Options,
and changing volatility levels of the Underlying ETF.
•FLEX
Options Liquidity Risk.
The FLEX Options are listed on an exchange; however, no one can guarantee that a
liquid secondary trading market will exist for the FLEX Options. In the event
that trading in the FLEX Options is limited or absent, the value of the Fund’s
FLEX Options may decrease. In a less liquid market for the FLEX Options,
liquidating the FLEX Options may require the payment of a premium (for written
FLEX Options) or acceptance of a discounted price (for purchased FLEX Options)
and may take longer to complete. A less liquid trading market may adversely
impact the value of the FLEX Options and Fund shares and result in the Fund
being unable to achieve its investment objective. The trading in FLEX Options
may be less deep and liquid than the market for certain other securities. FLEX
Options may be less liquid than certain non-customized options. In a less liquid
market for the FLEX Options, the liquidation of a large number of options may
more significantly impact the price. A less liquid trading market may adversely
impact the value of the FLEX Options and the value of your
investment.
•FLEX
Options Valuation Risk.
The value of the FLEX Options will be determined based upon market quotations or
using other recognized pricing methods. The value of the FLEX Options prior to
the expiration date may vary because of related factors other than the value of
the Underlying ETF. During periods of reduced market liquidity or in the absence
of readily available market quotations for the holdings of the Fund, the ability
of the Fund to value the FLEX Options becomes more difficult and the judgment of
the Fund’s investment adviser or sub-adviser (employing the fair value
procedures adopted by the Board of Trustees of the Trust) may play a greater
role in the valuation of the Fund’s holdings due to reduced availability of
reliable objective pricing data.
•Investment
Period Risk.
The Fund’s investment strategy is designed to deliver returns that match the
Underlying ETF if Shares are bought on the day on which the Fund enters into the
FLEX Options (i.e.,
the first day of an Investment Period) and held until those FLEX Options expire
at the end of the Investment Period. In the event an investor purchases Shares
after the first day of an Investment Period or sells Shares prior to the
expiration of the
Investment
Period, the value of that investor’s investment in Shares may not be buffered
against a decline in the value of the Underlying ETF and may not participate in
a gain in the value of the Underlying ETF up to the Cap for the investor’s
investment period.
•Large-Capitalization
Investing Risk. The
Fund may invest in the securities of large-capitalization companies. As a
result, the Fund’s performance may be adversely affected if securities of
large-capitalization companies underperform securities of smaller-capitalization
companies or the market as a whole. The securities of large-capitalization
companies may be relatively mature compared to smaller companies and therefore
subject to slower growth during times of economic expansion.
▪Limited
Operating History.
The Fund is a recently organized management investment company with limited
operating history. As a result, prospective investors have a limited track
record on which to base their investment decision. An investment in the Fund may
therefore involve greater uncertainty than an investment in a fund with a more
established record of performance.
•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 manager 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.
•Market
Risk. Market
risk is the risk that a particular security, or Shares in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates, and perceived trends in securities prices. Shares could decline in value
or underperform other investments. In addition, local, regional, or global
events such as war, acts of terrorism, spread of infectious diseases or other
public health issues, recessions, or other events could have a significant
negative impact on the Fund and its investments. Such events may affect certain
geographic regions, countries, sectors, and industries more significantly than
others. Such events could adversely affect the prices and liquidity of the
Fund’s portfolio securities or other instruments and could result in disruptions
in the trading markets.
•Non-Diversification
Risk. The Fund is
considered to be non-diversified, which means that it may invest more of its
assets in the securities of a single issuer or a smaller number of issuers than
if it were a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s
performance.
•Special
Tax Risk.
The Fund intends to qualify as a “regulated Investment company” (“RIC”),
however, the federal income tax treatment of certain aspects of the proposed
operations of the Fund are not entirely clear. This includes the tax aspects of
the Fund’s options strategy, its hedging strategy, the possible application of
the “straddle” rules, and various loss limitation provisions of the Internal
Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as
a regulated investment company under the applicable tax laws, the Fund would be
taxed as an ordinary corporation. Certain options on an ETF may not qualify as
“Section 1256 contracts” under Section 1256 of the Code, and disposition of such
options will likely result in short-term or long-term capital gains or losses
depending on the holding period.
In
the event that a shareholder purchases Shares shortly before a distribution by
the Fund, the entire distribution may be taxable to the shareholder even though
a portion of the distribution effectively represents a return of the purchase
price.
•Underlying
ETF Risk.
The Fund invests in FLEX Options that reference an ETF, which subjects the Fund
to certain of the risks of owning shares of an ETFs, as well as the types of
instruments in which the Underlying ETF invests. The value of an ETF will
fluctuate over time based on fluctuations in the values of the securities held
by the ETF, which may be affected by changes in general economic conditions,
expectations for future growth and profits, interest rates and the supply and
demand for those securities. In addition, ETFs are subject to authorized
participant concentration risk, market maker risk, premium/discount risk,
tracking error risk and trading issues risk. Brokerage, tax and other expenses
may negatively impact the performance of the Underlying ETF and, in
turn, the value of the Fund’s shares. An
ETF that tracks an index may not exactly match the performance of the index due
to cash drag, differences between the portfolio of the ETF and the components of
the index, expenses, and other factors.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compare with those
of the Index and a broad measure of market performance. The Fund’s
past performance, before and after taxes, is not necessarily an indication of
how the Fund will perform in the future. Updated performance
information is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year
Total Return
During the period of time shown in the bar chart, the Fund’s
highest
quarterly return was 4.60% for the quarter ended
December 31, 2022 and
the lowest
quarterly return was -8.29% for the quarter
ended June 30,
2022.
Average
Annual Total Returns
For
the Period Ended December 31, 2022
|
|
|
|
|
|
|
|
| |
| Pacer
Swan SOS Conservative (July) ETF |
1
Year |
Since
Inception
(6/30/2021) |
|
Return
Before Taxes |
-7.35% |
-2.89% |
|
Return
After Taxes on Distributions |
-7.35% |
-2.89% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-4.35% |
-2.20% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses, or
taxes) |
-18.11% |
-5.77% |
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
Shares” may be higher than the other return figures for the same period. A
higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the investor.
After-tax
returns shown are not relevant to investors who hold their Fund 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
Swan
Global Management, LLC (“Swan” or the “Sub-Adviser”) serves as investment
sub-adviser to the Fund.
Portfolio
Manager
Chris
Hausman, CMT, CAIA, Senior Portfolio Manager and Managing Director-Risk of the
Sub-Adviser, has served as the Fund’s portfolio manager since its inception. Mr.
Hausman is responsible for the day-to-day management of the Fund.
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
individual retirement account (“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.
|
|
| |
|
Pacer
Swan SOS Conservative (October)
ETF |
Investment
Objective
The
Pacer Swan SOS Conservative (October) ETF (the “Fund”) seeks to provide
investors with returns that, before fees and expenses of the Fund, match those
of the SPDR®
S&P 500®
ETF
Trust (the “Underlying ETF”) up to a predetermined upside cap of 18.44% (before
fees and expenses of the Fund) and 17.69% (after fees and expenses of the Fund),
while providing a buffer against Underlying ETF losses between 5% and 30% over
the period from October 1, 2022 to September 30,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
|
Total
Annual Fund Operating Expenses1 |
0.75% |
1
Total Annual
Fund Operating Expenses do not correlate to the expense ratios in the Fund’s
Financial Highlights because the Financial Highlights include non-recurring
proxy expense incurred at October 31, 2022 of 0.01%.
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
0% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an
approximate
one-year period (the “Investment Period”), subject to a buffer (the “Buffer”)
against certain Underlying ETF losses and a cap (the “Cap”) as set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| October
1, 2022 |
September
30, 2023 |
5%
to 30% |
18.44% |
17.69% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 5%, the
strategy is intended for the Fund to experience such losses on a one-to-one
basis with the Underlying ETF, before fees and expenses of the Fund. For
example, if the Underlying ETF loses 4% over the Investment Period, the strategy
is designed for the Fund to lose 4%, before Fund fees and expenses.
•If
the Underlying ETF declines in value over the Investment Period by more than 5%
but less than or equal to 30%, the strategy is intended for the Fund to bear
only the first 5% of such losses (i.e.,
to buffer against Underlying ETF losses beyond 5% and up to 30%), before Fund
fees and expenses. For example, if the Underlying ETF loses 10%, 20%, or 30%
over the Investment Period, the strategy is intended for the Fund to lose 5%,
before Fund fees and expenses. As a result, the maximum effect of the Buffer is
to protect the Fund from losses of 25% if the Underlying ETF loses 30% over the
Investment Period (30% minus the first 5% of losses).
•If
the Underlying ETF has declined in value by more than 30% over the Investment
Period, the strategy is intended for the Fund to experience losses that are 25%
less than the those of the Underlying ETF. For example, if the Underlying ETF
loses 40% over the Investment Period, the strategy is designed for the Fund to
lose 15% (40% minus 25%), before Fund fees and expenses. An investor that
purchases Shares at a value reflecting losses of more than 30% from the
beginning of the Investment Period has the potential to lose his or her entire
investment and may not experience any benefit from the Buffer.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment
Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for that entire Investment Period.
Buffer
The
Fund seeks to provide a Buffer of Underlying ETF losses of between 5% and 30%
over each Investment Period. In other words, the Fund’s strategy seeks to
provide a buffer of 25% against Underlying ETF losses equal to or greater than
30%. The Fund will bear the first 5% of losses, and after the Underlying ETF has
decreased in value by more than 30%, the Fund will experience subsequent losses
on a one-to-one basis. The Buffer is before taking into account the fees and
expenses of the Fund charged to shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by an amount equal to or greater than
30% from the value of the Fund on the first day of the Investment Period (the
“Initial Fund Value”), an investor purchasing Shares at that price will have
increased gains available prior to reaching the Cap
but
may
not benefit from the Buffer
that the Fund seeks to offer for the remainder of the Investment Period. The Cap
and Buffer relative to the Initial Fund Value, however, will not change over the
Investment Period.
Conversely,
if an investor is considering purchasing Shares during the Investment Period and
the Fund has already increased in value, an investor purchasing Shares at that
price may experience losses prior to gaining the protection offered by the
Buffer (because the Fund must first decrease in value to 5% less than its
Initial Fund Value for the Investment Period before subsequent losses will be
protected by the Buffer), which is not guaranteed.
Cap
The
returns of the Fund are subject to the Cap set forth in the above table for the
Investment Period. Unlike other investment products, the potential returns an
investor can receive from the Fund are subject to a pre-determined upside return
Cap that represents the maximum percentage return an investor can achieve from
an investment in the Fund for an entire Investment Period. In the event the
Underlying ETF experiences gains over an Investment Period, the Fund seeks to
provide investment returns that match the percentage increase of the Underlying
ETF, but any percentage gains over the amount of the Cap will not be experienced
by the Fund. This
means that, if the Underlying ETF experiences gains for an Investment Period in
excess of the Cap for that Investment Period, the Fund will not benefit from
those excess gains.
Therefore,
regardless of the performance of the Underlying ETF, the Cap is the maximum
return an investor can achieve from an investment in the Fund for that
Investment Period.
The
Cap is set on the first day of each Investment Period. The defined Cap
applicable to an Investment Period will vary based on prevailing market
conditions at the time, including then-current interest rate levels, Underlying
ETF volatility, and the relationship of puts and calls on the underlying FLEX
Options. Following the close of business on the last day of the Investment
Period, the Fund will supplement its prospectus by filing and mailing to
shareholders a notice disclosing the Fund’s Cap for the next Investment Period
if such Cap is lower than the Cap for the prior Investment Period. The
information will also be available on the Fund’s website at
www.paceretfs.com/products/structured-outcome-strategies.
The
Cap is determined prior to taking into account annual operating expenses of the
Fund, which are disclosed above under “Fees and Expenses of the Fund,” as well
as brokerage commissions, trading fees, taxes, and any extraordinary expenses
incurred by the Fund. Such extraordinary expenses (incurred outside of the
ordinary operation of the Fund) may include, for example, unexpected litigation,
regulatory, or tax expenses.
The
Cap level is a result of the design of the Fund’s principal investment strategy.
To provide the Buffer, the Fund purchases a series of put and call FLEX Options
on the first day of an Investment Period. As the purchaser of these FLEX
Options, the Fund is obligated to pay a premium to the seller of those FLEX
Options. The portfolio manager will calculate the amount of premiums that the
Fund will owe on the put options acquired and sold to provide the Buffer and
will then go into the market and sell call options with terms that entitle the
Fund to receive premiums such that the net amount of premiums paid per unit of
the Underlying ETF is approximately equal to the price per unit of shares of the
Underlying ETF. The Cap is the strike price of those sold FLEX
Options.
The
Cap, and the Fund’s position relative to it on any given day, should be
considered before investing in the Fund. If
an investor purchases Shares during an Investment Period, and the Fund has
already increased in value above its Initial Fund Value for that Investment
Period to a level near to the Cap, an investor purchasing Shares will have
limited to no gain potential for the remainder of the Investment Period.
However, the investor will remain vulnerable to significant downside risk
because the investor will bear the losses between the price at which it
purchased its Shares and the Initial Fund Value for the Investment Period before
subsequent losses will be protected by the Buffer.
General
Information about FLEX Options
FLEX
Options are exchange-traded options contracts with uniquely customizable terms
like exercise price, style, and expiration date. The Underlying ETF is an
exchange-traded unit investment trust that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance
of the S&P 500®
Index. The Underlying ETF uses a full replication strategy, meaning it invests
in all of the component securities of the S&P 500®
Index in the same approximate proportions as in the S&P 500®
Index. See
“Additional Information About the Funds—The Underlying ETF” below for more
information.
The
FLEX Options that the Fund will hold that reference the Underlying ETF will give
the Fund the right to receive or deliver shares of the Underlying ETF on the
option expiration date at a strike price, depending on whether the option is a
put or call option and whether the Fund purchases or sells the option. The FLEX
Options held by the Fund are European-style options, which are exercisable at
the strike price only on the FLEX Option expiration date.
The
Fund will generally, under normal conditions, hold four kinds of FLEX Options
for each Investment Period. The Fund will purchase a call option (giving the
Fund the right to receive shares of the Underlying ETF) and a put option (giving
the Fund the right to deliver shares of the Underlying ETF), while
simultaneously selling (i.e.,
writing) a call option (giving the Fund the obligation to deliver shares of the
Underlying ETF) and a put option (giving the Fund the obligation to receive
shares of the Underlying ETF). The Fund intends to structure the FLEX Options so
that any amount owed by the Fund on the written FLEX Options will be covered by
payouts at expiration from the purchased FLEX Options. As a result, the FLEX
Options will be fully covered and no additional collateral will be necessary
during the life of the Fund. The Fund receives premiums in exchange for the
written FLEX Options and pays premiums in exchange for the purchased FLEX
Options. Each of the FLEX Options purchased and sold throughout the Investment
Period will have the same terms, such as strike price and expiration date, as
the FLEX Options purchased and sold on the first day of the Investment
Period.
On
the FLEX Options’ expiration date, the Fund intends to sell the FLEX Options
prior to their expiration and use the resulting proceeds to purchase new FLEX
Options for the next Investment Period.
The Fund is classified as “non-diversified”
under the Investment Company Act of 1940, as amended (the “1940
Act”).
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 Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Buffered
Loss Risk.
There can be no guarantee that the Fund will be successful in its strategy to
buffer against Underlying ETF losses. Despite
the intended Buffer, a shareholder could lose their entire
investment.
The Fund’s strategy seeks to deliver returns that match the Underlying ETF (up
to the Cap), while limiting downside losses, if Shares are bought on the day on
which the Fund enters into the FLEX Options and held until those FLEX Options
expire at the end of each Investment Period. In the event an investor purchases
Shares after the date on which the FLEX Options were entered into or sells
Shares prior to the expiration of the FLEX Options, the Buffer that the Fund
seeks to provide may not be available and the investor may not get the full
benefit of the Buffer. The Fund might not achieve its objective in certain
circumstances. The Fund does not provide principal protection and an investor
may experience significant losses on its investment, including loss of its
entire investment.
•Cap
Change Risk.
A new Cap is established at the beginning of each Investment Period and is
dependent on prevailing market conditions. As a result, the Cap may rise or fall
from one Investment Period to the next and is unlikely to remain the same for
consecutive Investment Periods.
•Capped
Upside Risk.
The Fund’s strategy seeks to provide returns that match those of the Underlying
ETF for Shares purchased on the first day of an Investment Period and held for
the entire Investment Period, subject to a pre-determined upside Cap. If an
investor does not hold its Shares for an entire Investment Period, the returns
realized by that investor may not match those the Fund seeks to achieve. If the
Underlying ETF experiences gains during an Investment Period, the Fund will not
participate in those gains beyond the Cap. In the event an investor purchases
Shares after the first day of an Investment Period and the Fund has risen in
value to a level near to the Cap, there may be little or no ability for that
investor to experience an investment gain on their Shares.
•Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The OCC acts
as guarantor and central counterparty with respect to FLEX Options. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to
meet its obligations. In the unlikely event that the OCC becomes insolvent or is
otherwise unable to meet its settlement obligations, the Fund could suffer
significant losses.
•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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund
to
recognize a capital gain that it might not have recognized if it had made a
redemption in-kind. As a result, the Fund may pay out higher annual capital gain
distributions than if the in-kind redemption process was used.
◦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.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as Cboe BZX Exchange, 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.
•FLEX
Options Correlation Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
Underlying ETF. Factors that may influence the value of the FLEX Options, other
than changes in the value of the Underlying ETF, may include interest rate
changes, changing supply and demand, decreased liquidity of the FLEX Options,
and changing volatility levels of the Underlying ETF.
•FLEX
Options Liquidity Risk.
The FLEX Options are listed on an exchange; however, no one can guarantee that a
liquid secondary trading market will exist for the FLEX Options. In the event
that trading in the FLEX Options is limited or absent, the value of the Fund’s
FLEX Options may decrease. In a less liquid market for the FLEX Options,
liquidating the FLEX Options may require the payment of a premium (for written
FLEX Options) or acceptance of a discounted price (for purchased FLEX Options)
and may take longer to complete. A less liquid trading market may adversely
impact the value of the FLEX Options and Fund shares and result in the Fund
being unable to achieve its investment objective. The trading in FLEX Options
may be less deep and liquid than the market for certain other securities. FLEX
Options may be less liquid than certain non-customized options. In a less liquid
market for the FLEX Options, the liquidation of a large number of options may
more significantly impact the price. A less liquid trading market may adversely
impact the value of the FLEX Options and the value of your
investment.
•FLEX
Options Valuation Risk.
The value of the FLEX Options will be determined based upon market quotations or
using other recognized pricing methods. The value of the FLEX Options prior to
the expiration date may vary because of related factors other than the value of
the Underlying ETF. During periods of reduced market liquidity or in the absence
of readily available market quotations for the holdings of the Fund, the ability
of the Fund to value the FLEX Options becomes more difficult and the judgment of
the Fund’s investment adviser or sub-adviser (employing the fair value
procedures adopted by the Board of Trustees of the Trust) may play a greater
role in the valuation of the Fund’s holdings due to reduced availability of
reliable objective pricing data.
•Investment
Period Risk.
The Fund’s investment strategy is designed to deliver returns that match the
Underlying ETF if Shares are bought on the day on which the Fund enters into the
FLEX Options (i.e.,
the first day of an Investment Period) and held until those FLEX Options expire
at the end of the Investment Period. In the event an investor purchases Shares
after the first day of an Investment Period or sells Shares prior to the
expiration of the
Investment
Period, the value of that investor’s investment in Shares may not be buffered
against a decline in the value of the Underlying ETF and may not participate in
a gain in the value of the Underlying ETF up to the Cap for the investor’s
investment period.
•Large-Capitalization
Investing Risk. The
Fund may invest in the securities of large-capitalization companies. As a
result, the Fund’s performance may be adversely affected if securities of
large-capitalization companies underperform securities of smaller-capitalization
companies or the market as a whole. The securities of large-capitalization
companies may be relatively mature compared to smaller companies and therefore
subject to slower growth during times of economic expansion.
▪Limited
Operating History.
The Fund is a recently organized management investment company with limited
operating history. As a result, prospective investors have a limited track
record on which to base their investment decision. An investment in the Fund may
therefore involve greater uncertainty than an investment in a fund with a more
established record of performance.
•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 manager 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.
•Market
Risk. Market
risk is the risk that a particular security, or Shares in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates, and perceived trends in securities prices. Shares could decline in value
or underperform other investments. In addition, local, regional, or global
events such as war, acts of terrorism, spread of infectious diseases or other
public health issues, recessions, or other events could have a significant
negative impact on the Fund and its investments. Such events may affect certain
geographic regions, countries, sectors, and industries more significantly than
others. Such events could adversely affect the prices and liquidity of the
Fund’s portfolio securities or other instruments and could result in disruptions
in the trading markets.
•Non-Diversification
Risk. The Fund is
considered to be non-diversified, which means that it may invest more of its
assets in the securities of a single issuer or a smaller number of issuers than
if it were a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s
performance.
•Special
Tax Risk.
The Fund intends to qualify as a “regulated Investment company” (“RIC”),
however, the federal income tax treatment of certain aspects of the proposed
operations of the Fund are not entirely clear. This includes the tax aspects of
the Fund’s options strategy, its hedging strategy, the possible application of
the “straddle” rules, and various loss limitation provisions of the Internal
Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as
a regulated investment company under the applicable tax laws, the Fund would be
taxed as an ordinary corporation. Certain options on an ETF may not qualify as
“Section 1256 contracts” under Section 1256 of the Code, and disposition of such
options will likely result in short-term or long-term capital gains or losses
depending on the holding period.
In
the event that a shareholder purchases Shares shortly before a distribution by
the Fund, the entire distribution may be taxable to the shareholder even though
a portion of the distribution effectively represents a return of the purchase
price.
•Underlying
ETF Risk.
The Fund invests in FLEX Options that reference an ETF, which subjects the Fund
to certain of the risks of owning shares of an ETFs, as well as the types of
instruments in which the Underlying ETF invests. The value of an ETF will
fluctuate over time based on fluctuations in the values of the securities held
by the ETF, which may be affected by changes in general economic conditions,
expectations for future growth and profits, interest rates and the supply and
demand for those securities. In addition, ETFs are subject to authorized
participant concentration risk, market maker risk, premium/discount risk,
tracking error risk and trading issues risk. Brokerage, tax and other expenses
may negatively impact the performance of the Underlying ETF and, in
turn, the value of the Fund’s shares. An
ETF that tracks an index may not exactly match the performance of the index due
to cash drag, differences between the portfolio of the ETF and the components of
the index, expenses, and other factors.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compare with those
of the Index and a broad measure of market performance. The Fund’s
past performance, before and after taxes, is not necessarily an indication of
how the Fund will perform in the future. Updated performance
information is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year
Total Return
During the period of time shown in the bar chart, the Fund’s
highest
quarterly return was 3.99% for the quarter ended
December 31, 2022 and
the lowest
quarterly return was -6.96% for the quarter ended
June 30,
2022.
Average
Annual Total Returns
For
the Period Ended December 31, 2022
|
|
|
|
|
|
|
|
| |
| Pacer
Swan SOS Conservative (October) ETF |
1
Year |
Since
Inception
(9/30/2021) |
|
Return
Before Taxes |
-4.81% |
-1.74% |
|
Return
After Taxes on Distributions |
-4.81% |
-1.74% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-2.85% |
-1.32% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses, or
taxes) |
-18.11% |
-7.32% |
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
Shares” may be higher than the other return figures for the same period. A
higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the investor.
After-tax
returns shown are not relevant to investors who hold their Fund 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
Swan
Global Management, LLC (“Swan” or the “Sub-Adviser”) serves as investment
sub-adviser to the Fund.
Portfolio
Manager
Chris
Hausman, CMT, CAIA, Senior Portfolio Manager and Managing Director-Risk of the
Sub-Adviser, has served as the Fund’s portfolio manager since its inception. Mr.
Hausman is responsible for the day-to-day management of the Fund.
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
individual retirement account (“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.
|
|
| |
|
Pacer
Swan SOS Moderate (January)
ETF |
Investment
Objective
The
Pacer Swan SOS Moderate (January) ETF (the “Fund”) seeks to provide investors
with returns that, before fees and expenses of the Fund, match those of the
SPDR®
S&P 500®
ETF Trust (“the Underlying ETF”) up to a predetermined upside cap of 18.25%
(before fees and expenses of the Fund) and 17.50% (after fees and expenses of
the Fund), while providing a buffer against the first 15% of Underlying ETF
losses, over the period from January 3, 2023 to December 29,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
| Total
Annual Fund Operating Expenses |
0.75% |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
48% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an approximate one-year period (the
“Investment Period”), subject to a buffer (the “Buffer”) against certain
Underlying ETF losses and a cap (the “Cap”) as set forth in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| January
3, 2023 |
December
29, 2023 |
15% |
18.25% |
17.50% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 15%,
the strategy is designed to provide a flat return for the Fund (i.e.,
neither a gain nor a loss), before fees and expenses of the Fund. For example,
if the Underlying ETF loses 10% over the Investment Period, the strategy is
designed for the Fund to have a flat return of 0%, before fees and expenses of
the Fund.
•If
the Underlying ETF declines in value over the Investment Period, the strategy is
designed to protect the Fund from the first 15% of Underlying ETF losses, while
experiencing losses greater than 15% on a one-to-one basis with the Underlying
ETF, before fees and expenses of the Fund. For example, if the Underlying ETF
loses 20% over the Investment Period, the strategy is designed for the Fund to
have losses of 5% (20% less the Buffer of 15%), before Fund fees and
expenses.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for the entire Investment
Period.
Buffer
The
Fund seeks to provide a Buffer on the first 15% loss of the Underlying ETF over
each Investment Period. After the Underlying ETF has decreased in price by more
than 15%, the Fund is expected to experience subsequent losses on a one-to-one
basis (e.g.,
if the Underlying ETF loses 20%, the Fund loses 5%). The Buffer is before taking
into account the fees and expenses of the Fund charged to
shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by at least 15% since the first day of
the Investment Period (the “Initial Fund Value”), an investor purchasing Shares
at that price will have increased gains available prior to reaching the
Cap
but
may
not benefit from the Buffer
that the Fund seeks to offer for the remainder of the Investment Period. The Cap
and Buffer relative to the Initial Fund Value will not change over the
Investment Period.
Conversely,
if an investor is considering purchasing Shares during the Investment Period and
the Fund has already increased in value, then a shareholder may experience
losses prior to gaining the protection offered by the Buffer, which is not
guaranteed.
Cap
The
returns of the Fund are subject to the Cap set forth in the above table for the
Investment Period. Unlike other investment products, the potential returns an
investor can receive from the Fund are subject to a pre-determined upside return
Cap that represents the maximum percentage return an investor can achieve from
an investment in the Fund for an entire Investment Period. In the event the
Underlying ETF experiences gains over an Investment Period, the Fund seeks to
provide investment returns that match the percentage increase of the Underlying
ETF, but any percentage gains over the amount of the Cap will not be experienced
by the Fund. This
means that, if the Underlying ETF experiences gains for an Investment Period in
excess of the Cap for that Investment Period, the Fund will not benefit from
those excess gains.
Therefore,
regardless of the performance of the Underlying ETF, the Cap is the maximum
return an investor can achieve from an investment in the Fund for that
Investment Period.
The
Cap is set on the first day of each Investment Period. The defined Cap
applicable to an Investment Period will vary based on prevailing market
conditions at the time, including then-current interest rate levels, Underlying
ETF volatility, and the relationship of puts and calls on the underlying FLEX
Options. Following the close of business on the last day of the Investment
Period, the Fund will supplement its prospectus by filing and mailing to
shareholders a notice disclosing the Fund’s Cap for the next Investment Period
if such Cap is lower than the Cap for the prior Investment Period. The
information will also be available on the Fund’s website at
www.paceretfs.com/products/structured-outcome-strategies.
The
Cap is determined prior to taking into account annual operating expenses of the
Fund, which are disclosed above under “Fees and Expenses of the Fund,” as well
as brokerage commissions, trading fees, taxes, and any extraordinary expenses
incurred by the Fund. Such extraordinary expenses (incurred outside of the
ordinary operation of the Fund) may include, for example, unexpected litigation,
regulatory, or tax expenses.
The
Cap level is a result of the design of the Fund’s principal investment strategy.
To provide the Buffer, the Fund purchases a series of put and call FLEX Options
on the first day of an Investment Period. As the purchaser of these FLEX
Options, the Fund is obligated to pay a premium to the seller of those FLEX
Options. The portfolio manager will calculate the amount of premiums that the
Fund will owe on the put options acquired and sold to provide the Buffer and
will then go into the market and sell call options with terms that entitle the
Fund to receive premiums such that the net amount of premiums paid per unit of
the Underlying ETF is approximately equal to the price per unit of shares of the
Underlying ETF. The Cap is the strike price of those sold FLEX
Options.
The
Cap, and the Fund’s position relative to it on any given day, should be
considered before investing in the Fund. If
an investor purchases Shares during an Investment Period, and the Fund has
already increased in value above its Initial Fund Value for that Investment
Period to a level near to the Cap, an investor purchasing Shares will have
limited to no gain potential for the remainder of the Investment Period.
However, the investor will remain vulnerable to significant downside risk
because the investor will bear the losses between the price at which it
purchased its Shares and the Initial Fund Value for the Investment Period before
subsequent losses will be protected by the
Buffer.
General
Information about FLEX Options
FLEX
Options are exchange-traded options contracts with uniquely customizable terms
like exercise price, style, and expiration date. The Underlying ETF is an
exchange-traded unit investment trust that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance
of the S&P 500®
Index. The Underlying ETF uses a full replication strategy, meaning it invests
in all of the component securities of the S&P 500®
Index in the same approximate proportions as in the S&P 500®
Index. See
“Additional Information About the Funds—The Underlying ETF” below for more
information.
The
FLEX Options that the Fund will hold that reference the Underlying ETF will give
the Fund the right to receive or deliver shares of the Underlying ETF on the
option expiration date at a strike price, depending on whether the option is a
put or call option and whether the Fund purchases or sells the option. The FLEX
Options held by the Fund are European-style options, which are exercisable at
the strike price only on the FLEX Option expiration date.
The
Fund will generally, under normal conditions, hold four kinds of FLEX Options
for each Investment Period. The Fund will purchase a call option (giving the
Fund the right to receive shares of the Underlying ETF) and a put option (giving
the Fund the right to deliver shares of the Underlying ETF), while
simultaneously selling (i.e.,
writing) a call option (giving the Fund the obligation to deliver shares of the
Underlying ETF) and a put option (giving the Fund the obligation to receive
shares of the Underlying ETF). The Fund intends to structure the FLEX Options so
that any amount owed by the Fund on the written FLEX Options will be covered by
payouts at expiration from the purchased FLEX Options. As a result, the FLEX
Options will be fully covered and no additional collateral will be necessary
during the life of the Fund. The Fund receives premiums in exchange for the
written FLEX Options and pays premiums in exchange for the purchased FLEX
Options. Each of the FLEX Options purchased and sold throughout the Investment
Period will have the same terms, such as strike price and expiration date, as
the FLEX Options purchased and sold on the first day of the Investment
Period.
On
the FLEX Options’ expiration date, the Fund intends to sell the FLEX Options
prior to their expiration and use the resulting proceeds to purchase new FLEX
Options for the next Investment Period.
The
Fund is classified as “non-diversified” under the Investment Company Act of
1940, as amended (the “1940 Act”).
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 Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Buffered
Loss Risk.
There can be no guarantee that the Fund will be successful in its strategy to
buffer against Underlying ETF losses. Despite
the intended Buffer, a shareholder could lose their entire
investment.
The Fund’s strategy seeks to deliver returns that match the Underlying ETF (up
to the Cap), while limiting downside losses, if Shares are bought on the day on
which the Fund enters into the FLEX Options and held until those FLEX Options
expire at the end of each Investment Period. In the event an investor purchases
Shares after the date on which the FLEX Options were entered into or sells
Shares prior to the expiration of the FLEX Options, the Buffer that the Fund
seeks to provide may not be available and the investor may not get the full
benefit of the Buffer. The Fund might not achieve its objective in certain
circumstances. The Fund does not provide principal protection and an investor
may experience significant losses on its investment, including loss of its
entire investment.
•Cap
Change Risk.
A new Cap is established at the beginning of each Investment Period and is
dependent on prevailing market conditions. As a result, the Cap may rise or fall
from one Investment Period to the next and is unlikely to remain the same for
consecutive Investment Periods.
•Capped
Upside Risk.
The Fund’s strategy seeks to provide returns that match those of the Underlying
ETF for Shares purchased on the first day of an Investment Period and held for
the entire Investment Period, subject to a pre-determined upside Cap. If an
investor does not hold its Shares for an entire Investment Period, the returns
realized by that investor may not match those the Fund seeks to achieve. If the
Underlying ETF experiences gains during an Investment Period, the Fund will not
participate in those gains beyond the Cap. In the event an investor purchases
Shares after the first day of an Investment Period and the Fund has risen in
value to a level near to the Cap, there may be little or no ability for that
investor to experience an investment gain on their Shares.
•Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The OCC acts
as guarantor and central counterparty with respect to FLEX Options. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to
meet its obligations. In the unlikely event that the OCC becomes insolvent or is
otherwise unable to meet its settlement obligations, the Fund could suffer
significant losses.
•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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦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.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as Cboe BZX Exchange, 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.
•FLEX
Options Correlation Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
Underlying ETF. Factors that may influence the value of the FLEX Options, other
than changes in the value of the Underlying ETF, may include interest rate
changes, changing supply and demand, decreased liquidity of the FLEX Options,
and changing volatility levels of the Underlying ETF.
•FLEX
Options Liquidity Risk.
The FLEX Options are listed on an exchange; however, no one can guarantee that a
liquid secondary trading market will exist for the FLEX Options. In the event
that trading in the FLEX Options is limited or absent, the value of the Fund’s
FLEX Options may decrease. In a less liquid market for the FLEX Options,
liquidating the FLEX Options may require the payment of a premium (for written
FLEX Options) or acceptance of a discounted price (for purchased FLEX Options)
and may take longer to complete. A less liquid trading market may adversely
impact the value of the FLEX Options and Fund shares and result in the Fund
being unable to achieve its investment objective. The trading in FLEX Options
may be less deep and liquid than the market for certain other securities. FLEX
Options may be less liquid than certain non-customized options. In a less liquid
market for the FLEX Options, the liquidation of a large number of options may
more significantly impact the price. A less liquid trading market may adversely
impact the value of the FLEX Options and the value of your
investment.
•FLEX
Options Valuation Risk.
The value of the FLEX Options will be determined based upon market quotations or
using other recognized pricing methods. The value of the FLEX Options prior to
the expiration date may vary because of related factors other than the value of
the Underlying ETF. During periods of reduced market liquidity or in the absence
of readily available market quotations for the holdings of the Fund, the ability
of the Fund to value the FLEX Options becomes more difficult and the judgment of
the Fund’s investment adviser or sub-adviser (employing the fair value
procedures adopted by the Board of Trustees of the Trust) may play a greater
role in the valuation of the Fund’s holdings due to reduced availability of
reliable objective pricing data.
•Investment
Period Risk.
The Fund’s investment strategy is designed to deliver returns that match the
Underlying ETF if Shares are bought on the day on which the Fund enters into the
FLEX Options (i.e.,
the first day of an Investment Period) and held until those FLEX Options expire
at the end of the Investment Period. In the event an investor purchases Shares
after the first day of an Investment Period or sells Shares prior to the
expiration of the Investment Period, the value of that investor’s investment in
Shares may not be buffered against a decline in the value of the Underlying ETF
and may not participate in a gain in the value of the Underlying ETF up to the
Cap for the investor’s investment period.
•Large-Capitalization
Investing Risk. The
Fund may invest in the securities of large-capitalization companies. As a
result, the Fund’s performance may be adversely affected if securities of
large-capitalization companies underperform securities of smaller-capitalization
companies or the market as a whole. The securities of large-capitalization
companies may be relatively mature compared to smaller companies and therefore
subject to slower growth during times of economic expansion.
▪Limited
Operating History.
The Fund is a recently organized management investment company with limited
operating history. As a result, prospective investors have a limited track
record on which to base their investment decision. An investment in the Fund may
therefore involve greater uncertainty than an investment in a fund with a more
established record of performance.
•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 manager 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.
•Market
Risk. Market
risk is the risk that a particular security, or Shares in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates, and perceived trends in securities prices. Shares could decline in value
or underperform other investments. In addition, local, regional, or global
events such as war, acts of terrorism,
spread
of infectious diseases or other public health issues, recessions, or other
events could have a significant negative impact on the Fund and its investments.
Such events may affect certain geographic regions, countries, sectors, and
industries more significantly than others. Such events could adversely affect
the prices and liquidity of the Fund’s portfolio securities or other instruments
and could result in disruptions in the trading markets.
•Non-Diversification
Risk. The Fund is
considered to be non-diversified, which means that it may invest more of its
assets in the securities of a single issuer or a smaller number of issuers than
if it were a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s
performance.
•Special
Tax Risk.
The Fund intends to qualify as a “regulated Investment company” (“RIC”),
however, the federal income tax treatment of certain aspects of the proposed
operations of the Fund are not entirely clear. This includes the tax aspects of
the Fund’s options strategy, its hedging strategy, the possible application of
the “straddle” rules, and various loss limitation provisions of the Internal
Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as
a regulated investment company under the applicable tax laws, the Fund would be
taxed as an ordinary corporation. Certain options on an ETF may not qualify as
“Section 1256 contracts” under Section 1256 of the Code, and disposition of such
options will likely result in short-term or long-term capital gains or losses
depending on the holding period.
In
the event that a shareholder purchases Shares shortly before a distribution by
the Fund, the entire distribution may be taxable to the shareholder even though
a portion of the distribution effectively represents a return of the purchase
price.
•Underlying
ETF Risk. The Fund invests in FLEX Options that
reference an ETF, which subjects the Fund to certain of the risks of owning
shares of an ETFs, as well as the types of instruments in which the Underlying
ETF invests. The value of an ETF will fluctuate over time based on fluctuations
in the values of the securities held by the ETF, which may be affected by
changes in general economic conditions, expectations for future growth and
profits, interest rates and the supply and demand for those securities. In
addition, ETFs are subject to authorized participant concentration risk, market
maker risk, premium/discount risk, tracking error risk and trading issues risk.
Brokerage, tax and other expenses may negatively impact the performance of the
Underlying ETF and, in turn, the value of the Fund’s shares. An ETF that tracks
an index may not exactly match the performance of the index due to cash drag,
differences between the portfolio of the ETF and the components of the index,
expenses, and other factors.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compare with those
of the Index and a broad measure of market performance. The Fund’s
past performance, before and after taxes, is not necessarily an indication of
how the Fund will perform in the future. Updated performance
information is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year
Total Return
During the period of time shown in the bar chart, the Fund’s
highest
quarterly return was 7.42% for the quarter ended
December 31, 2022 and
the lowest
quarterly return was -7.61% for the quarter
ended June 30,
2022.
Average
Annual Total Returns
For
the Period Ended December 31, 2022
|
|
|
|
|
|
|
|
| |
| Pacer
Swan SOS Moderate (January) ETF |
1
Year |
Since
Inception
(12/22/2020) |
|
Return
Before Taxes |
-3.98% |
3.69% |
|
Return
After Taxes on Distributions |
-3.98% |
3.59% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-2.36% |
2.78% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses, or
taxes) |
-18.11% |
3.59% |
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
Shares” may be higher than the other return figures for the same period. A
higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the investor.
After-tax
returns shown are not relevant to investors who hold their Fund 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
Swan
Global Management, LLC (“Swan” or the “Sub-Adviser”) serves as investment
sub-adviser to the Fund.
Portfolio
Manager
Chris
Hausman, CMT, CAIA, Senior Portfolio Manager and Managing Director-Risk of the
Sub-Adviser, has served as the Fund’s portfolio manager since its inception. Mr.
Hausman is responsible for the day-to-day management of the Fund.
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
individual retirement account (“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.
|
|
| |
| Pacer
Swan SOS Moderate (April)
ETF |
Investment
Objective
The
Pacer Swan SOS Moderate (April) ETF (the “Fund”) seeks to provide investors with
returns that, before fees and expenses of the Fund, match those of the
SPDR®
S&P 500®
ETF Trust (“the Underlying ETF”) up to a predetermined upside cap of 11.31%
(before fees and expenses of the Fund) and 10.56% (after fees and expenses of
the Fund), while providing a buffer against the first 15% of Underlying ETF
losses, over the period from April 1, 2022 to March 31,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
|
Total
Annual Fund Operating Expenses1 |
0.75% |
1
Total Annual
Fund Operating Expenses do not correlate to the expense ratios in the Fund’s
Financial Highlights because the Financial Highlights include non-recurring
proxy expense incurred at October 31, 2022 of 0.01%.
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
0% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an
approximate
one-year period (the “Investment Period”), subject to a buffer (the “Buffer”)
against certain Underlying ETF losses and a cap (the “Cap”) as set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| April
1, 2022 |
March
31, 2023 |
15% |
11.31% |
10.56% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 15%,
the strategy is designed to provide a flat return for the Fund (i.e.,
neither a gain nor a loss), before fees and expenses of the Fund. For example,
if the Underlying ETF loses 10% over the Investment Period, the strategy is
designed for the Fund to have a flat return of 0%, before fees and expenses of
the Fund.
•If
the Underlying ETF declines in value over the Investment Period, the strategy is
designed to protect the Fund from the first 15% of Underlying ETF losses, while
experiencing losses greater than 15% on a one-to-one basis with the Underlying
ETF, before fees and expenses of the Fund. For example, if the Underlying ETF
loses 20% over the Investment Period, the strategy is designed for the Fund to
have losses of 5% (20% less the Buffer of 15%), before Fund fees and
expenses.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for the entire Investment
Period.
Buffer
The
Fund seeks to provide a Buffer on the first 15% loss of the Underlying ETF over
each Investment Period. After the Underlying ETF has decreased in price by more
than 15%, the Fund is expected to experience subsequent losses on a one-to-one
basis (e.g.,
if the Underlying ETF loses 20%, the Fund loses 5%). The Buffer is before taking
into account the fees and expenses of the Fund charged to
shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by at least 15% since the first day of
the Investment Period (the “Initial Fund Value”), an investor purchasing Shares
at that price will have increased gains available prior to reaching the
Cap
but
may
not benefit from the Buffer
that the Fund seeks to offer for the remainder of the Investment Period. The Cap
and Buffer relative to the Initial Fund Value will not change over the
Investment Period.
Conversely,
if an investor is considering purchasing Shares during the Investment Period and
the Fund has already increased in value, then a shareholder may experience
losses prior to gaining the protection offered by the Buffer, which is not
guaranteed.
Cap
The
returns of the Fund are subject to the Cap set forth in the above table for the
Investment Period. Unlike other investment products, the potential returns an
investor can receive from the Fund are subject to a pre-determined upside return
Cap that represents the maximum percentage return an investor can achieve from
an investment in the Fund for an entire Investment Period. In the event the
Underlying ETF experiences gains over an Investment Period, the Fund seeks to
provide investment returns that match the percentage increase of the Underlying
ETF, but any percentage gains over the amount of the Cap will not be experienced
by the Fund. This
means that, if the Underlying ETF experiences gains for an Investment Period in
excess of the Cap for that Investment Period, the Fund will not benefit from
those excess gains.
Therefore,
regardless of the performance of the Underlying ETF, the Cap is the maximum
return an investor can achieve from an investment in the Fund for that
Investment Period.
The
Cap is set on the first day of each Investment Period. The defined Cap
applicable to an Investment Period will vary based on prevailing market
conditions at the time, including then-current interest rate levels, Underlying
ETF volatility, and the relationship of puts and calls on the underlying FLEX
Options. Following the close of business on the last day of the Investment
Period, the Fund will supplement its prospectus by filing and mailing to
shareholders a notice disclosing the Fund’s Cap for the next Investment Period
if such Cap is lower than the Cap for the prior Investment Period. The
information will also be available on the Fund’s website at
www.paceretfs.com/products/structured-outcome-strategies.
The
Cap is determined prior to taking into account annual operating expenses of the
Fund, which are disclosed above under “Fees and Expenses of the Fund,” as well
as brokerage commissions, trading fees, taxes, and any extraordinary expenses
incurred by the Fund. Such extraordinary expenses (incurred outside of the
ordinary operation of the Fund) may include, for example, unexpected litigation,
regulatory, or tax expenses.
The
Cap level is a result of the design of the Fund’s principal investment strategy.
To provide the Buffer, the Fund purchases a series of put and call FLEX Options
on the first day of an Investment Period. As the purchaser of these FLEX
Options, the Fund is obligated to pay a premium to the seller of those FLEX
Options. The portfolio manager will calculate the amount of premiums that the
Fund will owe on the put options acquired and sold to provide the Buffer and
will then go into the market and sell call options with terms that entitle the
Fund to receive premiums such that the net amount of premiums paid per unit of
the Underlying ETF is approximately equal to the price per unit of shares of the
Underlying ETF. The Cap is the strike price of those sold FLEX
Options.
The
Cap, and the Fund’s position relative to it on any given day, should be
considered before investing in the Fund. If
an investor purchases Shares during an Investment Period, and the Fund has
already increased in value above its Initial Fund Value for that Investment
Period to a level near to the Cap, an investor purchasing Shares will have
limited to no gain potential for the remainder of the Investment Period.
However, the investor will remain vulnerable to significant downside risk
because the investor will bear the losses between the price at which it
purchased its Shares and the Initial Fund Value for the Investment Period before
subsequent losses will be protected by the
Buffer.
General
Information about FLEX Options
FLEX
Options are exchange-traded options contracts with uniquely customizable terms
like exercise price, style, and expiration date. The Underlying ETF is an
exchange-traded unit investment trust that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance
of the S&P 500®
Index. The Underlying ETF uses a full replication strategy, meaning it invests
in all of the component securities of the S&P 500®
Index in the same approximate proportions as in the S&P 500®
Index. See
“Additional Information About the Funds—The Underlying ETF” below for more
information.
The
FLEX Options that the Fund will hold that reference the Underlying ETF will give
the Fund the right to receive or deliver shares of the Underlying ETF on the
option expiration date at a strike price, depending on whether the option is a
put or call option and whether the Fund purchases or sells the option. The FLEX
Options held by the Fund are European-style options, which are exercisable at
the strike price only on the FLEX Option expiration date.
The
Fund will generally, under normal conditions, hold four kinds of FLEX Options
for each Investment Period. The Fund will purchase a call option (giving the
Fund the right to receive shares of the Underlying ETF) and a put option (giving
the Fund the right to deliver shares of the Underlying ETF), while
simultaneously selling (i.e.,
writing) a call option (giving the Fund the obligation to deliver shares of the
Underlying ETF) and a put option (giving the Fund the obligation to receive
shares of the Underlying ETF). The Fund intends to structure the FLEX Options so
that any amount owed by the Fund on the written FLEX Options will be covered by
payouts at expiration from the purchased FLEX Options. As a result, the FLEX
Options will be fully covered and no additional collateral will be necessary
during the life of the Fund. The Fund receives premiums in exchange for the
written FLEX Options and pays premiums in exchange for the purchased FLEX
Options. Each of the FLEX Options purchased and sold throughout the Investment
Period will have the same terms, such as strike price and expiration date, as
the FLEX Options purchased and sold on the first day of the Investment
Period.
On
the FLEX Options’ expiration date, the Fund intends to sell the FLEX Options
prior to their expiration and use the resulting proceeds to purchase new FLEX
Options for the next Investment Period.
The
Fund is classified as “non-diversified” under the Investment Company Act of
1940, as amended (the “1940 Act”).
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 Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Buffered
Loss Risk.
There can be no guarantee that the Fund will be successful in its strategy to
buffer against Underlying ETF losses. Despite
the intended Buffer, a shareholder could lose their entire
investment.
The Fund’s strategy seeks to deliver returns that match the Underlying ETF (up
to the Cap), while limiting downside losses, if Shares are bought on the day on
which the Fund enters into the FLEX Options and held until those FLEX Options
expire at the end of each Investment Period. In the event an investor purchases
Shares after the date on which the FLEX Options were entered into or sells
Shares prior to the expiration of the FLEX Options, the Buffer that the Fund
seeks to provide may not be available and the investor may not get the full
benefit of the Buffer. The Fund might not achieve its objective in certain
circumstances. The Fund does not provide principal protection and an investor
may experience significant losses on its investment, including loss of its
entire investment.
•Cap
Change Risk.
A new Cap is established at the beginning of each Investment Period and is
dependent on prevailing market conditions. As a result, the Cap may rise or fall
from one Investment Period to the next and is unlikely to remain the same for
consecutive Investment Periods.
•Capped
Upside Risk.
The Fund’s strategy seeks to provide returns that match those of the Underlying
ETF for Shares purchased on the first day of an Investment Period and held for
the entire Investment Period, subject to a pre-determined upside Cap. If an
investor does not hold its Shares for an entire Investment Period, the returns
realized by that investor may not match those the Fund seeks to achieve. If the
Underlying ETF experiences gains during an Investment Period, the Fund will not
participate in those gains beyond the Cap. In the event an investor purchases
Shares after the first day of an Investment Period and the Fund has risen in
value to a level near to the Cap, there may be little or no ability for that
investor to experience an investment gain on their Shares.
•Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The OCC acts
as guarantor and central counterparty with respect to FLEX Options. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to
meet its obligations. In the unlikely event that the OCC becomes insolvent or is
otherwise unable to meet its settlement obligations, the Fund could suffer
significant losses.
•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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦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.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as Cboe BZX Exchange, 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.
•FLEX
Options Correlation Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
Underlying ETF. Factors that may influence the value of the FLEX Options, other
than changes in the value of the Underlying ETF, may include interest rate
changes, changing supply and demand, decreased liquidity of the FLEX Options,
and changing volatility levels of the Underlying ETF.
•FLEX
Options Liquidity Risk.
The FLEX Options are listed on an exchange; however, no one can guarantee that a
liquid secondary trading market will exist for the FLEX Options. In the event
that trading in the FLEX Options is limited or absent, the value of the Fund’s
FLEX Options may decrease. In a less liquid market for the FLEX Options,
liquidating the FLEX Options may require the payment of a premium (for written
FLEX Options) or acceptance of a discounted price (for purchased FLEX Options)
and may take longer to complete. A less liquid trading market may adversely
impact the value of the FLEX Options and Fund shares and result in the Fund
being unable to achieve its investment objective. The trading in FLEX Options
may be less deep and liquid than the market for certain other securities. FLEX
Options may be less liquid than certain non-customized options. In a less liquid
market for the FLEX Options, the liquidation of a large number of options may
more significantly impact the price. A less liquid trading market may adversely
impact the value of the FLEX Options and the value of your
investment.
•FLEX
Options Valuation Risk.
The value of the FLEX Options will be determined based upon market quotations or
using other recognized pricing methods. The value of the FLEX Options prior to
the expiration date may vary because of related factors other than the value of
the Underlying ETF. During periods of reduced market liquidity or in the absence
of readily available market quotations for the holdings of the Fund, the ability
of the Fund to value the FLEX Options becomes more difficult and the judgment of
the Fund’s investment adviser or sub-adviser (employing the fair value
procedures adopted by the Board of Trustees of the Trust) may play a greater
role in the valuation of the Fund’s holdings due to reduced availability of
reliable objective pricing data.
•Investment
Period Risk.
The Fund’s investment strategy is designed to deliver returns that match the
Underlying ETF if Shares are bought on the day on which the Fund enters into the
FLEX Options (i.e.,
the first day of an Investment Period) and held until those FLEX Options expire
at the end of the Investment Period. In the event an investor purchases Shares
after the first day of an Investment Period or sells Shares prior to the
expiration of the Investment Period, the value of that investor’s investment in
Shares may not be buffered against a decline in the value of the Underlying ETF
and may not participate in a gain in the value of the Underlying ETF up to the
Cap for the investor’s investment period.
•Large-Capitalization
Investing Risk. The
Fund may invest in the securities of large-capitalization companies. As a
result, the Fund’s performance may be adversely affected if securities of
large-capitalization companies underperform securities of smaller-capitalization
companies or the market as a whole. The securities of large-capitalization
companies may be relatively mature compared to smaller companies and therefore
subject to slower growth during times of economic expansion.
▪Limited
Operating History.
The Fund is a recently organized management investment company with limited
operating history. As a result, prospective investors have a limited track
record on which to base their investment decision. An investment in the Fund may
therefore involve greater uncertainty than an investment in a fund with a more
established record of performance.
•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 manager 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.
•Market
Risk. Market
risk is the risk that a particular security, or Shares in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates, and perceived trends in securities prices. Shares could decline in value
or underperform other investments. In addition, local, regional, or global
events such as war, acts of terrorism,
spread
of infectious diseases or other public health issues, recessions, or other
events could have a significant negative impact on the Fund and its investments.
Such events may affect certain geographic regions, countries, sectors, and
industries more significantly than others. Such events could adversely affect
the prices and liquidity of the Fund’s portfolio securities or other instruments
and could result in disruptions in the trading markets.
•Non-Diversification
Risk. The Fund is
considered to be non-diversified, which means that it may invest more of its
assets in the securities of a single issuer or a smaller number of issuers than
if it were a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s
performance.
•Special
Tax Risk.
The Fund intends to qualify as a “regulated Investment company” (“RIC”),
however, the federal income tax treatment of certain aspects of the proposed
operations of the Fund are not entirely clear. This includes the tax aspects of
the Fund’s options strategy, its hedging strategy, the possible application of
the “straddle” rules, and various loss limitation provisions of the Internal
Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as
a regulated investment company under the applicable tax laws, the Fund would be
taxed as an ordinary corporation. Certain options on an ETF may not qualify as
“Section 1256 contracts” under Section 1256 of the Code, and disposition of such
options will likely result in short-term or long-term capital gains or losses
depending on the holding period.
In
the event that a shareholder purchases Shares shortly before a distribution by
the Fund, the entire distribution may be taxable to the shareholder even though
a portion of the distribution effectively represents a return of the purchase
price.
•Underlying
ETF Risk. The Fund invests in FLEX Options that
reference an ETF, which subjects the Fund to certain of the risks of owning
shares of an ETFs, as well as the types of instruments in which the Underlying
ETF invests. The value of an ETF will fluctuate over time based on fluctuations
in the values of the securities held by the ETF, which may be affected by
changes in general economic conditions, expectations for future growth and
profits, interest rates and the supply and demand for those securities. In
addition, ETFs are subject to authorized participant concentration risk, market
maker risk, premium/discount risk, tracking error risk and trading issues risk.
Brokerage, tax and other expenses may negatively impact the performance of the
Underlying ETF and, in turn, the value of the Fund’s shares. An ETF that tracks
an index may not exactly match the performance of the index due to cash drag,
differences between the portfolio of the ETF and the components of the index,
expenses, and other factors.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compare with those
of the Index and a broad measure of market performance. The Fund’s
past performance, before and after taxes, is not necessarily an indication of
how the Fund will perform in the future. Updated performance
information is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year
Total Return
During the period of time shown in the bar chart, the Fund’s
highest
quarterly return was 5.82% for the quarter ended
December 31, 2022 and
the lowest
quarterly return was -8.39% for the quarter
ended June 30,
2022.
Average
Annual Total Returns
For
the Period Ended December 31, 2022
|
|
|
|
|
|
|
|
| |
| Pacer
Swan SOS Moderate (April) ETF |
1
Year |
Since
Inception
3/31/2021) |
|
Return
Before Taxes |
-3.85% |
2.10% |
|
Return
After Taxes on Distributions |
-3.85% |
2.10% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-2.28% |
1.60% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses, or
taxes) |
-18.11% |
-0.42% |
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
Shares” may be higher than the other return figures for the same period. A
higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the investor.
After-tax
returns shown are not relevant to investors who hold their Fund 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
Swan
Global Management, LLC (“Swan” or the “Sub-Adviser”) serves as investment
sub-adviser to the Fund.
Portfolio
Manager
Chris
Hausman, CMT, CAIA, Senior Portfolio Manager and Managing Director-Risk of the
Sub-Adviser, has served as the Fund’s portfolio manager since its inception. Mr.
Hausman is responsible for the day-to-day management of the Fund.
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
individual retirement account (“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.
|
|
| |
|
Pacer
Swan SOS Moderate (July)
ETF |
Investment
Objective
The
Pacer Swan SOS Moderate (July) ETF (the “Fund”) seeks to provide investors with
returns that, before fees and expenses of the Fund, match those of the
SPDR®
S&P 500®
ETF Trust (“the Underlying ETF”) up to a predetermined upside cap of 17.10%
(before fees and expenses of the Fund) and 16.35% (after fees and expenses of
the Fund), while providing a buffer against the first 15% of Underlying ETF
losses, over the period from July 1, 2022 to June 30,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
|
Total
Annual Fund Operating Expenses1 |
0.75% |
1
Total Annual
Fund Operating Expenses do not correlate to the expense ratios in the Fund’s
Financial Highlights because the Financial Highlights include non-recurring
proxy expense incurred at October 31, 2022 of 0.01%.
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
0% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an
approximate
one-year period (the “Investment Period”), subject to a buffer (the “Buffer”)
against certain Underlying ETF losses and a cap (the “Cap”) as set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| July
1, 2022 |
June
30, 2023 |
15% |
17.10% |
16.35% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 15%,
the strategy is designed to provide a flat return for the Fund (i.e.,
neither a gain nor a loss), before fees and expenses of the Fund. For example,
if the Underlying ETF loses 10% over the Investment Period, the strategy is
designed for the Fund to have a flat return of 0%, before fees and expenses of
the Fund.
•If
the Underlying ETF declines in value over the Investment Period, the strategy is
designed to protect the Fund from the first 15% of Underlying ETF losses, while
experiencing losses greater than 15% on a one-to-one basis with the Underlying
ETF, before fees and expenses of the Fund. For example, if the Underlying ETF
loses 20% over the Investment Period, the strategy is designed for the Fund to
have losses of 5% (20% less the Buffer of 15%), before Fund fees and
expenses.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for the entire Investment
Period.
Buffer
The
Fund seeks to provide a Buffer on the first 15% loss of the Underlying ETF over
each Investment Period. After the Underlying ETF has decreased in price by more
than 15%, the Fund is expected to experience subsequent losses on a one-to-one
basis (e.g.,
if the Underlying ETF loses 20%, the Fund loses 5%). The Buffer is before taking
into account the fees and expenses of the Fund charged to
shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by at least 15% since the first day of
the Investment Period (the “Initial Fund Value”), an investor purchasing Shares
at that price will have increased gains available prior to reaching the
Cap
but
may
not benefit from the Buffer
that the Fund seeks to offer for the remainder of the Investment Period. The Cap
and Buffer relative to the Initial Fund Value will not change over the
Investment Period.
Conversely,
if an investor is considering purchasing Shares during the Investment Period and
the Fund has already increased in value, then a shareholder may experience
losses prior to gaining the protection offered by the Buffer, which is not
guaranteed.
Cap
The
returns of the Fund are subject to the Cap set forth in the above table for the
Investment Period. Unlike other investment products, the potential returns an
investor can receive from the Fund are subject to a pre-determined upside return
Cap that represents the maximum percentage return an investor can achieve from
an investment in the Fund for an entire Investment Period. In the event the
Underlying ETF experiences gains over an Investment Period, the Fund seeks to
provide investment returns that match the percentage increase of the Underlying
ETF, but any percentage gains over the amount of the Cap will not be experienced
by the Fund. This
means that, if the Underlying ETF experiences gains for an Investment Period in
excess of the Cap for that Investment Period, the Fund will not benefit from
those excess gains.
Therefore,
regardless of the performance of the Underlying ETF, the Cap is the maximum
return an investor can achieve from an investment in the Fund for that
Investment Period.
The
Cap is set on the first day of each Investment Period. The defined Cap
applicable to an Investment Period will vary based on prevailing market
conditions at the time, including then-current interest rate levels, Underlying
ETF volatility, and the relationship of puts and calls on the underlying FLEX
Options. Following the close of business on the last day of the Investment
Period, the Fund will supplement its prospectus by filing and mailing to
shareholders a notice disclosing the Fund’s Cap for the next Investment Period
if such Cap is lower than the Cap for the prior Investment Period. The
information will also be available on the Fund’s website at
www.paceretfs.com/products/structured-outcome-strategies.
The
Cap is determined prior to taking into account annual operating expenses of the
Fund, which are disclosed above under “Fees and Expenses of the Fund,” as well
as brokerage commissions, trading fees, taxes, and any extraordinary expenses
incurred by the Fund. Such extraordinary expenses (incurred outside of the
ordinary operation of the Fund) may include, for example, unexpected litigation,
regulatory, or tax expenses.
The
Cap level is a result of the design of the Fund’s principal investment strategy.
To provide the Buffer, the Fund purchases a series of put and call FLEX Options
on the first day of an Investment Period. As the purchaser of these FLEX
Options, the Fund is obligated to pay a premium to the seller of those FLEX
Options. The portfolio manager will calculate the amount of premiums that the
Fund will owe on the put options acquired and sold to provide the Buffer and
will then go into the market and sell call options with terms that entitle the
Fund to receive premiums such that the net amount of premiums paid per unit of
the Underlying ETF is approximately equal to the price per unit of shares of the
Underlying ETF. The Cap is the strike price of those sold FLEX
Options.
The
Cap, and the Fund’s position relative to it on any given day, should be
considered before investing in the Fund. If
an investor purchases Shares during an Investment Period, and the Fund has
already increased in value above its Initial Fund Value for that Investment
Period to a level near to the Cap, an investor purchasing Shares will have
limited to no gain potential for the remainder of the Investment Period.
However, the investor will remain vulnerable to significant downside risk
because the investor will bear the losses between the price at which it
purchased its Shares and the Initial Fund Value for the Investment Period before
subsequent losses will be protected by the
Buffer.
General
Information about FLEX Options
FLEX
Options are exchange-traded options contracts with uniquely customizable terms
like exercise price, style, and expiration date. The Underlying ETF is an
exchange-traded unit investment trust that seeks to provide investment results
that, before expenses, correspond generally to the price and yield performance
of the S&P 500®
Index. The Underlying ETF uses a full replication strategy, meaning it invests
in all of the component securities of the S&P 500®
Index in the same approximate proportions as in the S&P 500®
Index. See
“Additional Information About the Funds—The Underlying ETF” below for more
information.
The
FLEX Options that the Fund will hold that reference the Underlying ETF will give
the Fund the right to receive or deliver shares of the Underlying ETF on the
option expiration date at a strike price, depending on whether the option is a
put or call option and whether the Fund purchases or sells the option. The FLEX
Options held by the Fund are European-style options, which are exercisable at
the strike price only on the FLEX Option expiration date.
The
Fund will generally, under normal conditions, hold four kinds of FLEX Options
for each Investment Period. The Fund will purchase a call option (giving the
Fund the right to receive shares of the Underlying ETF) and a put option (giving
the Fund the right to deliver shares of the Underlying ETF), while
simultaneously selling (i.e.,
writing) a call option (giving the Fund the obligation to deliver shares of the
Underlying ETF) and a put option (giving the Fund the obligation to receive
shares of the Underlying ETF). The Fund intends to structure the FLEX Options so
that any amount owed by the Fund on the written FLEX Options will be covered by
payouts at expiration from the purchased FLEX Options. As a result, the FLEX
Options will be fully covered and no additional collateral will be necessary
during the life of the Fund. The Fund receives premiums in exchange for the
written FLEX Options and pays premiums in exchange for the purchased FLEX
Options. Each of the FLEX Options purchased and sold throughout the Investment
Period will have the same terms, such as strike price and expiration date, as
the FLEX Options purchased and sold on the first day of the Investment
Period.
On
the FLEX Options’ expiration date, the Fund intends to sell the FLEX Options
prior to their expiration and use the resulting proceeds to purchase new FLEX
Options for the next Investment Period.
The
Fund is classified as “non-diversified” under the Investment Company Act of
1940, as amended (the “1940 Act”).
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 Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Buffered
Loss Risk.
There can be no guarantee that the Fund will be successful in its strategy to
buffer against Underlying ETF losses. Despite
the intended Buffer, a shareholder could lose their entire
investment.
The Fund’s strategy seeks to deliver returns that match the Underlying ETF (up
to the Cap), while limiting downside losses, if Shares are bought on the day on
which the Fund enters into the FLEX Options and held until those FLEX Options
expire at the end of each Investment Period. In the event an investor purchases
Shares after the date on which the FLEX Options were entered into or sells
Shares prior to the expiration of the FLEX Options, the Buffer that the Fund
seeks to provide may not be available and the investor may not get the full
benefit of the Buffer. The Fund might not achieve its objective in certain
circumstances. The Fund does not provide principal protection and an investor
may experience significant losses on its investment, including loss of its
entire investment.
•Cap
Change Risk.
A new Cap is established at the beginning of each Investment Period and is
dependent on prevailing market conditions. As a result, the Cap may rise or fall
from one Investment Period to the next and is unlikely to remain the same for
consecutive Investment Periods.
•Capped
Upside Risk.
The Fund’s strategy seeks to provide returns that match those of the Underlying
ETF for Shares purchased on the first day of an Investment Period and held for
the entire Investment Period, subject to a pre-determined upside Cap. If an
investor does not hold its Shares for an entire Investment Period, the returns
realized by that investor may not match those the Fund seeks to achieve. If the
Underlying ETF experiences gains during an Investment Period, the Fund will not
participate in those gains beyond the Cap. In the event an investor purchases
Shares after the first day of an Investment Period and the Fund has risen in
value to a level near to the Cap, there may be little or no ability for that
investor to experience an investment gain on their Shares.
•Counterparty
Risk.
Fund transactions involving a counterparty are subject to the risk that the
counterparty will not fulfill its obligation to the Fund. Counterparty risk may
arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The OCC acts
as guarantor and central counterparty with respect to FLEX Options. As a result,
the ability of the Fund to meet its objective depends on the OCC being able to
meet its obligations. In the unlikely event that the OCC becomes insolvent or is
otherwise unable to meet its settlement obligations, the Fund could suffer
significant losses.
•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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦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.
◦Trading.
Although shares of the Fund are listed for trading on a national securities
exchange, such as Cboe BZX Exchange, 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.
•FLEX
Options Correlation Risk. The
FLEX Options held by the Fund will be exercisable at the strike price only on
their expiration date. Prior to the expiration date, the value of the FLEX
Options will be determined based upon market quotations or using other
recognized pricing methods. The value of the FLEX Options prior to the
expiration date may vary because of related factors other than the value of the
Underlying ETF. Factors that may influence the value of the FLEX Options, other
than changes in the value of the Underlying ETF, may include interest rate
changes, changing supply and demand, decreased liquidity of the FLEX Options,
and changing volatility levels of the Underlying ETF.
•FLEX
Options Liquidity Risk.
The FLEX Options are listed on an exchange; however, no one can guarantee that a
liquid secondary trading market will exist for the FLEX Options. In the event
that trading in the FLEX Options is limited or absent, the value of the Fund’s
FLEX Options may decrease. In a less liquid market for the FLEX Options,
liquidating the FLEX Options may require the payment of a premium (for written
FLEX Options) or acceptance of a discounted price (for purchased FLEX Options)
and may take longer to complete. A less liquid trading market may adversely
impact the value of the FLEX Options and Fund shares and result in the Fund
being unable to achieve its investment objective. The trading in FLEX Options
may be less deep and liquid than the market for certain other securities. FLEX
Options may be less liquid than certain non-customized options. In a less liquid
market for the FLEX Options, the liquidation of a large number of options may
more significantly impact the price. A less liquid trading market may adversely
impact the value of the FLEX Options and the value of your
investment.
•FLEX
Options Valuation Risk.
The value of the FLEX Options will be determined based upon market quotations or
using other recognized pricing methods. The value of the FLEX Options prior to
the expiration date may vary because of related factors other than the value of
the Underlying ETF. During periods of reduced market liquidity or in the absence
of readily available market quotations for the holdings of the Fund, the ability
of the Fund to value the FLEX Options becomes more difficult and the judgment of
the Fund’s investment adviser or sub-adviser (employing the fair value
procedures adopted by the Board of Trustees of the Trust) may play a greater
role in the valuation of the Fund’s holdings due to reduced availability of
reliable objective pricing data.
•Investment
Period Risk.
The Fund’s investment strategy is designed to deliver returns that match the
Underlying ETF if Shares are bought on the day on which the Fund enters into the
FLEX Options (i.e.,
the first day of an Investment Period) and held until those FLEX Options expire
at the end of the Investment Period. In the event an investor purchases Shares
after the first day of an Investment Period or sells Shares prior to the
expiration of the Investment Period, the value of that investor’s investment in
Shares may not be buffered against a decline in the value of the Underlying ETF
and may not participate in a gain in the value of the Underlying ETF up to the
Cap for the investor’s investment period.
•Large-Capitalization
Investing Risk. The
Fund may invest in the securities of large-capitalization companies. As a
result, the Fund’s performance may be adversely affected if securities of
large-capitalization companies underperform securities of smaller-capitalization
companies or the market as a whole. The securities of large-capitalization
companies may be relatively mature compared to smaller companies and therefore
subject to slower growth during times of economic expansion.
▪Limited
Operating History.
The Fund is a recently organized management investment company with limited
operating history. As a result, prospective investors have a limited track
record on which to base their investment decision. An investment in the Fund may
therefore involve greater uncertainty than an investment in a fund with a more
established record of performance.
•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 manager 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.
•Market
Risk. Market
risk is the risk that a particular security, or Shares in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates, and perceived trends in securities prices. Shares could decline in value
or underperform other investments. In addition, local, regional, or global
events such as war, acts of terrorism,
spread
of infectious diseases or other public health issues, recessions, or other
events could have a significant negative impact on the Fund and its investments.
Such events may affect certain geographic regions, countries, sectors, and
industries more significantly than others. Such events could adversely affect
the prices and liquidity of the Fund’s portfolio securities or other instruments
and could result in disruptions in the trading markets.
•Non-Diversification
Risk. The Fund is
considered to be non-diversified, which means that it may invest more of its
assets in the securities of a single issuer or a smaller number of issuers than
if it were a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s
performance.
•Special
Tax Risk.
The Fund intends to qualify as a “regulated Investment company” (“RIC”),
however, the federal income tax treatment of certain aspects of the proposed
operations of the Fund are not entirely clear. This includes the tax aspects of
the Fund’s options strategy, its hedging strategy, the possible application of
the “straddle” rules, and various loss limitation provisions of the Internal
Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as
a regulated investment company under the applicable tax laws, the Fund would be
taxed as an ordinary corporation. Certain options on an ETF may not qualify as
“Section 1256 contracts” under Section 1256 of the Code, and disposition of such
options will likely result in short-term or long-term capital gains or losses
depending on the holding period.
In
the event that a shareholder purchases Shares shortly before a distribution by
the Fund, the entire distribution may be taxable to the shareholder even though
a portion of the distribution effectively represents a return of the purchase
price.
•Underlying
ETF Risk. The Fund invests in FLEX Options that
reference an ETF, which subjects the Fund to certain of the risks of owning
shares of an ETFs, as well as the types of instruments in which the Underlying
ETF invests. The value of an ETF will fluctuate over time based on fluctuations
in the values of the securities held by the ETF, which may be affected by
changes in general economic conditions, expectations for future growth and
profits, interest rates and the supply and demand for those securities. In
addition, ETFs are subject to authorized participant concentration risk, market
maker risk, premium/discount risk, tracking error risk and trading issues risk.
Brokerage, tax and other expenses may negatively impact the performance of the
Underlying ETF and, in turn, the value of the Fund’s shares. An ETF that tracks
an index may not exactly match the performance of the index due to cash drag,
differences between the portfolio of the ETF and the components of the index,
expenses, and other factors.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compare with those
of the Index and a broad measure of market performance. The Fund’s
past performance, before and after taxes, is not necessarily an indication of
how the Fund will perform in the future. Updated performance
information is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year
Total Return
During the period of time shown in the bar chart, the Fund’s
highest
quarterly return was 5.60% for the quarter ended
December 31, 2022 and
the lowest
quarterly return was -4.28% for the quarter ended
June 30,
2022.
Average
Annual Total Returns
For
the Period Ended December 31, 2022
|
|
|
|
|
|
|
|
| |
| Pacer
Swan SOS Moderate (July) ETF |
1
Year |
Since
Inception
(6/30/2021) |
|
Return
Before Taxes |
-2.23% |
1.08% |
|
Return
After Taxes on Distributions |
-2.23% |
1.07% |
|
Return
After Taxes on Distributions and Sale of
Shares |
-1.32% |
0.82% |
|
S&P
500®
Index
(reflects
no deduction for fees, expenses, or
taxes) |
-18.11% |
-5.77% |
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
Shares” may be higher than the other return figures for the same period. A
higher after-tax return results when a capital loss occurs upon redemption and
provides an assumed tax deduction that benefits the investor.
After-tax
returns shown are not relevant to investors who hold their Fund 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
Swan
Global Management, LLC (“Swan” or the “Sub-Adviser”) serves as investment
sub-adviser to the Fund.
Portfolio
Manager
Chris
Hausman, CMT, CAIA, Senior Portfolio Manager and Managing Director-Risk of the
Sub-Adviser, has served as the Fund’s portfolio manager since its inception. Mr.
Hausman is responsible for the day-to-day management of the Fund.
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
individual retirement account (“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.
|
|
| |
|
Pacer
Swan SOS Moderate (October)
ETF |
Investment
Objective
The
Pacer Swan SOS Moderate (October) ETF (the “Fund”) seeks to provide investors
with returns that, before fees and expenses of the Fund, match those of the
SPDR®
S&P 500®
ETF Trust (“the Underlying ETF”) up to a predetermined upside cap of 20.60%
(before fees and expenses of the Fund) and 19.85% (after fees and expenses of
the Fund), while providing a buffer against the first 15% of Underlying ETF
losses, over the period from October 1, 2022 to September 30,
2023.
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”). 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.
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
| Management
Fees |
0.75% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
| Total
Annual Fund Operating Expenses |
0.75% |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
|
| |
| 1
Year |
3
Years |
5
Years |
10
Years |
| $77 |
$240 |
$417 |
$930 |
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. This rate excludes the value of securities, including options,
whose expiration dates at the time of acquisition were one year or less. For the
fiscal year ended October 31, 2022, the Fund’s portfolio turnover rate was
0% of the average value of its
portfolio.
Principal
Investment Strategies of the Fund
The
Fund is an actively managed exchange-traded fund (“ETF”) that, under normal
market conditions, invests substantially all of its assets in FLexible
EXchange®
Options
(“FLEX Options”) that reference the market price of the SPDR®
S&P 500®
ETF Trust (the “Underlying ETF”). Due to the unique mechanics of the Fund’s
strategy, the return an investor can expect to receive from an investment in the
Fund has characteristics that are distinct from many other investment
vehicles.
It is important that an investor understand these characteristics before making
an investment in the Fund.
The
Fund uses FLEX Options to employ a “structured outcome strategy.” Structured
outcome strategies seek to produce pre-determined target investment outcomes
based upon the performance of an underlying security or index. The
pre-determined outcomes sought by the Fund are intended to reflect the
performance of the Underlying ETF over an approximate one-year period (the
“Investment Period”), subject to a buffer (the “Buffer”) against certain
Underlying ETF losses and a cap (the “Cap”) as set forth in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Investment
Period Start |
Investment
Period End |
Buffer |
Cap
(before Fund
fees and expenses) |
Cap
(after Fund
fees and expenses) |
| October
1, 2022 |
September
30, 2023 |
15% |
20.60% |
19.85% |
In
general, the structured outcomes the Fund seeks for investors that hold Fund
shares for an entire Investment Period are as follows, though there can be no
guarantee these results will be achieved:
•If
the Underlying ETF appreciates over the Investment Period, the strategy is
intended to provide upside participation that matches the returns of the
Underlying ETF, up to the Cap that is determined at the start of the Investment
Period.
•If
the Underlying ETF declines in value over the Investment Period by up to 15%,
the strategy is designed to provide a flat return for the Fund (i.e.,
neither a gain nor a loss), before fees and expenses of the Fund. For example,
if the Underlying ETF loses 10% over the Investment Period, the strategy is
designed for the Fund to have a flat return of 0%, before fees and expenses of
the Fund.
•If
the Underlying ETF declines in value over the Investment Period, the strategy is
designed to protect the Fund from the first 15% of Underlying ETF losses, while
experiencing losses greater than 15% on a one-to-one basis with the Underlying
ETF, before fees and expenses of the Fund. For example, if the Underlying ETF
loses 20% over the Investment Period, the strategy is designed for the Fund to
have losses of 5% (20% less the Buffer of 15%), before Fund fees and
expenses.
The
following charts illustrate the hypothetical returns that the FLEX Options seek
to provide with respect to the performance of the Underlying ETF in certain
illustrative scenarios over the course of the Investment Period. These charts do
not take into account payment by the Fund of fees and expenses. There
is no guarantee that the Fund will be successful in providing these investment
outcomes for any Investment Period.
Investors
purchasing Shares during an Investment Period will experience different results.
The Fund’s website, www.paceretfs.com/products/structured-outcome-strategies,
provides information relating to the possible outcomes for an investor of an
investment in the Fund on a daily basis, including the Fund’s position relative
to the Cap and Buffer. Before purchasing Shares, an investor should visit the
Fund’s website to review this information and understand the possible outcomes
of an investment in Shares on a particular day.
Subsequent
Investment Periods will begin on the day the prior Investment Period ends and
will end on the approximate one-year anniversary of that new Investment Period.
On the first day of each new Investment Period, the Fund resets by investing in
a new set of FLEX Options that will provide a new Cap for the new Investment
Period. This means that the Cap will change for each Investment Period based
upon prevailing market conditions at the beginning of each Investment Period.
The
Cap and Buffer, and the Fund’s position relative to each, should be considered
before investing in the Fund. The
Fund will be perpetually offered and not terminate after the current or any
subsequent Investment Period.
Purchases
During an Investment Period
An
investor that purchases Shares other than on the first day of an Investment
Period and/or sells Shares prior to the end of an Investment Period may
experience results that are very different from the outcomes sought by the Fund
for that Investment Period.
Both
the Cap and Buffer are fixed levels that are calculated in relation to the
Underlying ETF’s market price and the Fund’s net asset value (“NAV”) at the
start of an Investment Period. While the Cap and Buffer reference the
performance of the Underlying ETF over the Investment Period, the Fund expects
its NAV to experience the same general price movement, Cap, and Buffer as a
percentage gain or loss by the Underlying ETF over the Investment Period, before
fees and expenses of the Fund.
Because
the Underlying ETF’s market price and the Fund’s NAV change over the Investment
Period, an investor acquiring Shares after the start of the Investment Period
will likely have a different return potential than an investor who purchased
Shares at the start of the Investment Period. This
is because, while the Cap and Buffer for the Investment Period are fixed levels
that remain constant throughout the Investment Period, an investor purchasing
Shares at market value during the Investment Period likely purchased Shares at a
price that is different from the Fund’s NAV at the start of the Investment
Period (i.e.,
the NAV that the Cap and Buffer reference). In addition, the price of the
Underlying ETF during the Investment Period is likely to be different from the
price of the Underlying ETF at the start of the Investment Period. To
achieve the structured outcomes sought by the Fund for an Investment Period, an
investor must hold Shares for the entire Investment
Period.
Buffer
The
Fund seeks to provide a Buffer on the first 15% loss of the Underlying ETF over
each Investment Period. After the Underlying ETF has decreased in price by more
than 15%, the Fund is expected to experience subsequent losses on a one-to-one
basis (e.g.,
if the Underlying ETF loses 20%, the Fund loses 5%). The Buffer is before taking
into account the fees and expenses of the Fund charged to
shareholders.
If
an investor is considering purchasing Shares during the Investment Period and
the Fund has already decreased in value by at least 15% since the first day of
the Investment Period (the “Initial Fund Value”), an investor purchasing Shares
at that price will have increased gains available prior to reaching the
Cap
but
