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Is FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT) a Strong ETF Right Now?

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Launched on 09/16/2011, the FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Blend 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.

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.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

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

Managed by Flexshares, TILT has amassed assets over $1.70 billion, making it one of the larger ETFs in the Style Box - All Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Morningstar U.S. Market Factor Tilt Index.

The Morningstar U.S. Market Factor Tilt Index measures the performance of U.S. equity markets with increased exposure toward small-capitalization and value stocks.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Operating expenses on an annual basis are 0.25% for TILT, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.24%.

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.

This ETF has heaviest allocation in the Information Technology sector - about 24.40% of the portfolio. Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL - Free Report) accounts for about 4.43% of the fund's total assets, followed by Nvidia Corp Common Stock Usd 0.001 (NVDA - Free Report) and Microsoft Corp Common Stock Usd 0.00000625 (MSFT - Free Report) .

The top 10 holdings account for about 23.14% of total assets under management.

Performance and Risk

So far this year, TILT has lost about -0.89%, and it's up approximately 19.29% in the last one year (as of 01/13/2025). During this past 52-week period, the fund has traded between $178.77 and $227.39.

TILT has a beta of 1.09 and standard deviation of 17.84% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1907 holdings, it effectively diversifies company-specific risk.

Alternatives

FlexShares Morningstar U.S. Market Factor Tilt ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $63.63 billion in assets, Vanguard Total Stock Market ETF has $452.61 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

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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