A longtime ETF distribution ally just launched its own products.
| Sean O'Hara|
On Friday Pacer Financial released
the Pacer Trendpilot 750 ETF
(PTLC), the Pacer Trendpilot 450 ETF
(PTMC), and the Pacer Trendpilot 100 ETF
(PTNQ), all on the BATS Exchange
. U.S. Bank
handles custody, transfer agency, and tax analysis for the new offerings, while KCG
(formerly Knight Capital) is the lead market maker. Watch for Pacer to launch three or four more ETFs this year.
, director of Pacer ETFs, confirms that the Pacer team is "absolutely ... going to launch other ETFs," with a focus on what they call "strategy-based ETFs."
PLANCO co-founder Joe Thomson founded
Paoli, Pennsylvania-based (outside Philadelphia) Pacer in 2004. Since then, Pacer has helped ETF shops and others with sales, marketing, and distribution through financial advisors.
O'Hara describes Pacer's first three ETFs as successor products to RBS' Trendpilot
exchange-traded notes (ETNs). In 2010 Pacer teamed up with RBS as the exclusive sales and marketing partner for the ETNs, which have since risen to about $700 million in assets.
"RBS developed a trend-following ETN strategy," O'Hara tells MFWire
Now RBS is exiting the U.S. ETN business, O'Hara says.
A spokeswoman for RBS referred MFWire
to public disclosures by RBS, which point
to June 30, 2015 as the target date for RBS redeeming its U.S. ETNs.
"We worked with [RBS] to acquire some of their IP ... It was a chance for us to provide a solution for those people who owned the RBS Trendpilot ETNs," O'Hara says. "It's the first packaged product where we are essentially the manufacturer, the distributor, the advisor, and sales and marketing all in one."
We like the fact that it's our product. We're the sponsor. We're the asset manager. We're the distributor. We own the intellectual property. We're in control. We like all that.
O'Hara confirms that Pacer will continue to do sales, marketing, and distribution work for others. And as far as the ETF business, O'Hara sees a bright future and a growing marketplace.
"We intend to grow this business," O'Hara says.
We're not going to be low-cost beta. I don't think we can compete in that space. We're not going to be smart beta. We can continue to grow and develop a line of strategy-based ETFs.
O'Hara sees advantage in the shift to '40 Act ETFs, away from credit-based ETNs. Unlike ETNs, ETFs aren't directly exposed to interest rates. Pacer's new ETFs will cost 60 to 65 basis points, compared to an average of 85 bps for the ETNs. And Pacer, which already does some indexing work for big pension plans, also made some tweaks to the indexes piloting the products.
On the service provider side, O'Hara praises U.S. Bank and KCG alike as great to work with.
"They're just fantastic," O'Hara says.
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