Launched on 09/25/2012, the FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) is a smart beta exchange traded fund offering broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Flexshares, and has been able to amass over $332.76 million, which makes it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund seeks to match the performance of the Morningstar Emerging Markets Factor Tilt Index before fees and expenses.
This Index measures the performance of stocks located in emerging countries across the world with increased exposure to small-capitalization and value stocks. Stocks that are deemed to be small-capitalization or small-value have an overweighting in the index compared to their weight in a corresponding market-capitalization-weighted index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Operating expenses on an annual basis are 0.59% for this ETF, which makes it on par with most peer products in the space.
TLTE’s 12-month trailing dividend yield is 1.76%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Taking into account individual holdings, Samsung Electronics Co Ltd Common Stock Krw 100 (A005930) accounts for about 3.61% of the fund’s total assets, followed by Tencent Holdings Ltd Common Stock Hkd 0.00002 (0700.HK) and Taiwan Semiconductor Manufacturing Co Ltd Common.
TLTE’s top 10 holdings account for about 15.1% of its total assets under management.
Performance and Risk
The ETF has gained about 7.68% so far this year and is up roughly 32.70% in the last one year (as of 07/23/2021). In the past 52-week period, it has traded between $46.42 and $66.54.
TLTE has a beta of 0.91 and standard deviation of 22.47% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 2525 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares Morningstar Emerging Markets Factor Tilt ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $81.26 billion in assets, Vanguard FTSE Emerging Markets ETF has $81.83 billion. IEMG has an expense ratio of 0.11% and VWO charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE): ETF Research Reports
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
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