Making its debut on 09/25/2012, smart beta exchange traded fund FlexShares Morningstar Emerging Markets Factor Tilt ETF (
TLTE Quick Quote TLTE - Free Report) provides investors broad exposure to the Broad Emerging Market ETFs category of the market. What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader 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.
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 sponsored by Flexshares. It has amassed assets over $237.70 million, making it one of the average sized ETFs in the Broad Emerging Market ETFs. Before fees and expenses, TLTE 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for TLTE are 0.59%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 4.14%.
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.
Taking into account individual holdings, Samsung Electronics Co Ltd Common Stock Krw 100 (A005930) accounts for about 2.83% of the fund's total assets, followed by Alibaba Group Holding Ltd Common Stock Hkd (9988.HK) and Taiwan Semiconductor Manufacturing Co Ltd Common.
Performance and Risk
The ETF return is roughly 3.69% so far this year and is down about -9.40% in the last one year (as of 03/29/2023). In the past 52-week period, it has traded between $41.69 and $57.38.
The fund has a beta of 0.79 and standard deviation of 18.56% for the trailing three-year period, which makes TLTE a medium risk choice in this particular space. With about 2723 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 Quick Quote IEMG - Free Report) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF ( VWO Quick Quote VWO - Free Report) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $69.02 billion in assets, Vanguard FTSE Emerging Markets ETF has $71.08 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.
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.