US asset manager Pacer ETFs has seen slow asset gathering since launching UCITS versions of its flagship cash cows range earlier this year, however, the firm said the opportunity presented by US offshore investors still remains.
The firm’s cash cows ETF suite endured a slow start to life in the US, too, though substantial inflows in recent years sees the range house around $40bn in assets under management (AUM).
The cash cows range includes both a value and a growth series. The former screens for stocks with high free cash flow yields, determined by dividing a company’s free cash flow by its enterprise value, while the latter screens for companies with high free cash flow margins.
In May, Pacer launched three of its value series in UCITS form in a bid to target US offshore investors. The ETFs are:
The Pacer US Cash Cows 100 UCITS ETF (COWZ)
The Pacer Developed Markets International Cash Cows 100 UCITS ETF (ICOW)
The Pacer Global Cash Cows Dividend UCITS ETF (GCOW)
The UCITS structure, if domiciled in Ireland, is attractive to offshore US investors due to the favourable tax treatment of US dividends.
Relative to ’40-Act’ ETFs in the US, Irish-domiciled UCITS vehicles have lower withholding tax rates on distributions from US companies presenting a tax advantage to US offshore investors.
The products have so far struggled to gain traction, however, and the three ETFs have gathered just $25m in AUM, according to data from ETFbook.
That said, the firm is confident that there is sufficient demand for the products.
Sean O’Hara (pictured), told ETF Stream US offshore is “a pretty sizeable market and based on the amount of meetings we do in the US, it is clear there is sufficient opportunity for us.”
While US offshore investors are the focus for Pacer’s UCITS cash cows range, the firm may look to distribute in Europe in the future.
However, the European market is “fragmented” so the firm may look to find a partner with a distribution footprint, but “we are some way off that,” O’Hara said.
