The fund tracks an index that uses the S&P US small-cap universe as its starting pool and picks stocks with high free cash flow yields. Because cash generation, not market capitalization order, is the inclusion criterion, the composition differs markedly from a typical small-cap index.

It suits medium- to long-term investors who want to diversify across US small caps while reducing exposure to unprofitable companies and focusing on firms with proven cash generation.

It is a passive (index-tracking) ETF managed by Pacer Advisors.

From the US small-cap universe, the index excludes sectors that are hard to evaluate, such as financials, then selects stocks in descending order of free cash flow yield and assigns weights according to the size of free cash flow. It reselects every quarter to filter out stocks whose cash generation has weakened.

• A weighting method that sets weights by free cash flow size rather than market capitalization
• Quarterly reselection that automatically replaces small caps whose cash generation has weakened

Assets under management (AUM) stand at $3.8B, and the total expense ratio is 0.59% per year.

Because it holds fewer stocks than products that track a small-cap index in full, the moves of individual holdings have a larger effect on performance. Its fee is higher than that of broad core ETFs, so the cost burden should be weighed for long-term holding.

Performance tends to diverge repeatedly depending on the overall small-cap trend and on the weighting in energy and consumer discretionary. It lags relatively in large-cap-led markets and clearly tends to show strength when value and small caps gain momentum.

Small-cap fund flows swing widely with interest rates and the economic outlook. Thanks to its cash-generation-based structure, demand from investors who want quality even within small caps has been observed gathering in this product.

Its strength is the clear criterion of cash generation for screening small caps, while stock concentration and the fee burden are its weaknesses.

Products shown in the table such as SCHD, VYM, and VIG focus on large dividend stocks, so their exposure range is different, and they have the edge in fees and fund size. Broad core products such as DFAC are also comparison candidates from a cost standpoint. The large-cap version of the same free cash flow approach is COWZ, GCOW looks at dividends as well, and ICOW is the international version. For pure small-cap exposure, consider IJR, and for a small-cap value style, VBR is also worth reviewing.

These are the items to check before adding this ETF. Matching the small-cap exposure, selection rules, cost structure, and even currency effects against the other assets in your portfolio makes the decision much easier.

Given the nature of small caps, corrections grow larger during economic slowdowns and periods of rising interest rates. Because the number of selected stocks is limited, weakness in a particular industry can widen the performance gap versus the index.

This product suits investors who want to approach US small caps through a cash-generation filter. If cost is the priority, consider a broad core ETF; if you want to weigh financial strength within small caps, consider this ETF.