Is Pacer US Small Cap Cash Cows ETF (CALF) a Strong ETF Right Now?

The Pacer US Small Cap Cash Cows ETF (CALF), a smart beta fund tracking small-cap U.S. companies with high free cash flow yields, manages over $4.06 billion but carries a relatively high expense ratio of 0.59%. While the fund has gained 0.42% YTD, it recorded a -5.52% loss over the last year, with its largest sector allocation in Consumer Discretionary at 22.7%. Its higher cost stands out against comparable alternatives like iShares Russell 2000 Value ETF (IWN) at 0.24% and Vanguard Small-Cap Value ETF (VBR) at 0.07%, which offer significantly lower expense ratios for similar market segments.

Analysis

The Pacer US Small Cap Cash Cows ETF (CALF) is a smart beta fund offering exposure to the small-cap value segment by targeting companies with high free cash flow yields. Despite amassing over $4.06 billion in assets, making it a significant player, its performance has been lackluster, with a gain of only 0.42% year-to-date and a loss of 5.52% over the last year as of September 22, 2025. The fund's risk profile is elevated, demonstrated by a beta of 1.10 and a three-year standard deviation of 22.56%. A key drawback is its high annual operating expense ratio of 0.59%, which stands in stark contrast to much cheaper and larger alternatives in the same category, such as the iShares Russell 2000 Value ETF (IWN) at 0.24% and the Vanguard Small-Cap Value ETF (VBR) at 0.07%. While CALF is diversified across approximately 202 holdings, it has a notable concentration with 22.7% of its portfolio in the Consumer Discretionary sector and its top 10 holdings accounting for 19.75% of total assets.

Key Decisions for Investors

• Investors should critically evaluate whether CALF's high free cash flow yield strategy justifies its 0.59% expense ratio, which represents a significant cost drag compared to much cheaper competitors like IWN and VBR.
• Given the fund's recent underperformance and a beta of 1.10 indicating higher-than-market volatility, it may be prudent to monitor the fund for a consistent track record of alpha generation before committing capital.
• The fund's 22.7% allocation to the Consumer Discretionary sector should be considered a key risk factor, as its performance is heavily dependent on the outlook for that specific industry within the small-cap space.