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Is FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) a Strong ETF Right Now?

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.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Flexshares, and has been able to amass over $302.39 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.

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

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for TLTE are 0.59%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 3.45%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Samsung Electronics Co Ltd Common Stock Krw 100 (A005930) accounts for about 3.09% of the fund's total assets, followed by Taiwan Semiconductor Manufacturing Co Ltd Common and Tencent Holdings Ltd Common Stock Hkd 0.00002 (0700.HK).

Performance and Risk

The ETF has lost about -7.58% so far this year and is down about -9.01% in the last one year (as of 03/17/2022). In the past 52-week period, it has traded between $51.87 and $66.54.

The ETF has a beta of 0.86 and standard deviation of 22.25% for the trailing three-year period, making it a medium risk choice in the space. With about 2622 holdings, it effectively diversifies company-specific risk.

Alternatives

FlexShares Morningstar Emerging Markets Factor Tilt ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $70.93 billion in assets, Vanguard FTSE Emerging Markets ETF has $77.10 billion. IEMG has an expense ratio of 0.11% 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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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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