Risk-Managed Equity Exposure III

Valuation-sensitive tactical asset allocation

September 2025. Reading Time: 10 Minutes. Author: Nicolas Rabener.

SUMMARY

• TAA strategies can reduce risk, but also underperform significantly
• Typically these are tailored for bear markets, not for crashes
• Using valuations for risk management is ineffective

INTRODUCTION

Pacer’s Trendpilot US Large Cap ETF (PTLC) is arguably one of the simplest tactical asset allocation (“TAA”) funds in the market. The strategy invests 100% in U.S. large-cap stocks under normal conditions, but adjusts exposure based on a trend-following rule tied to the S&P 500’s 200-day moving average. Specifically:

• If the index closes above its 200-day moving average for five consecutive business days, the fund allocates a 100% to equities
• If the index closes below its 200-day moving average for five consecutive business days, the fund shifts to a 50/50 allocation between equities and U.S. T-Bills
• If the 200-day moving average is below its value from five days earlier, the fund moves entirely into U.S. T-Bills

Despite the crowded “graveyard” of liquidated tactical allocation products and the high 0.60% management fee, Pacer has successfully grown PTLC to more than $3 billion in assets under management (read Tactical ETFs: Tactfully No, Thank You? & Defining Tactical Asset Allocation).