Is FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) a Strong ETF Right Now?
Smart Beta ETF report for TLTE
The FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) was launched on 09/25/2012, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
The fund is managed by Flexshares. TLTE has been able to amass assets over $329.01 million, making it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Morningstar Emerging Markets Factor Tilt Index.
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.
Annual operating expenses for TLTE are 0.59%, which makes it on par with most peer products in the space.
TLTE's 12-month trailing dividend yield is 1.95%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Samsung Electronics Co Ltd Common Stock Krw 100 (A005930) accounts for about 3.61% of total assets, followed by Tencent Holdings Ltd Common Stock Hkd 0.00002 (0700.HK) and Taiwan Semiconductor Manufacturing Co Ltd Common.
The top 10 holdings account for about 15.1% of total assets under management.
Performance and Risk
The ETF return is roughly 3.49% and it's up approximately 28.18% so far this year and in the past one year (as of 10/05/2021), respectively. TLTE has traded between $47.79 and $66.54 during this last 52-week period.
The fund has a beta of 0.89 and standard deviation of 22.45% for the trailing three-year period, which makes TLTE a medium risk choice in this particular space. With about 2525 holdings, it effectively diversifies company-specific risk.
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 $77.40 billion in assets, Vanguard FTSE Emerging Markets ETF has $77.44 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.
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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