Designed to provide broad exposure to the Broad Emerging Market ETFs category of the market, the FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) is a smart beta exchange traded fund launched on 09/25/2012.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $267.20 million, this makes it one of the average sized ETFs in the Broad Emerging Market ETFs. TLTE is managed by Flexshares. Before fees and expenses, this particular fund seeks to match the performance of the Morningstar Emerging Markets Factor Tilt Index.
The Morningstar Emerging Markets Factor Tilt Index reflects the performance of a selection of equity securities designed to provide broad exposure to the global emerging equities markets, with increased exposure to small-capitalization stocks and value stocks.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for TLTE are 0.57%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.77%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Taiwan Semiconductor Manufacturing Co Ltd Common accounts for about 5.17% of the fund's total assets, followed by Alibaba Group Holding Ltd Common Stock Hkd (9988.HK) and Tencent Holdings Ltd Common Stock Hkd 0.00002 (0700.HK).
The top 10 holdings account for about 15.97% of total assets under management.
Performance and Risk
The ETF return is roughly 5.25% so far this year and it's up approximately 14.07% in the last one year (as of 11/14/2024). In the past 52-week period, it has traded between $48.60 and $58.58.
The ETF has a beta of 0.78 and standard deviation of 16.38% for the trailing three-year period, making it a medium risk choice in the space. With about 3006 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 $80.28 billion in assets, Vanguard FTSE Emerging Markets ETF has $81.06 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.
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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Get it free >>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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
