FlexShares To List Factor ETFs Friday
FlexShares, the ETF unit of Chicago-based Northern Trust, is expected to launch Friday, Sept. 28, two more factor-based equities ETFs, one being an emerging markets version of a U.S. small-cap and value-tilt ETF it launched a year ago, and the other a developed-market ex-U.S. strategy.
The FlexShares Morningstar Emerging Markets Factor Tilt Index Fund (NYSEArca:TLTE) will replicate a Morningstar index that assigns more weight to small-cap and value stocks than would a traditional cap-weighted methodology. The underlying benchmark includes nearly 2,000 securities. TLTE is set to cost 0.65 percent in annual fees, the company said in its latest prospectus detailing the fund.
The FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (NYSEArca:TLTD) follows the same factor-tilt as TLTE, but focuses on developed economies excluding the U.S. Its benchmark comprises more than 3,000 stocks, and the fund will cost 0.42 percent in total expenses, according to the most recent filing the company submitted to regulators earlier this month.
Both funds would join FlexShares’ Morningstar U.S. Market Factor Tilt Index Fund (TILT), which has gathered some $116 million since it came to market a year ago, and it has kept up pace with the broad stock market rally, with gains of more than 16 percent year-to-date.
Indeed, FlexShares seems to be making a strong push into the factor-based strategies, often called smart beta or intelligent beta strategies. Such smart-beta products cherry-pick securities with certain characteristics with a view to managing risk the way an active manager might, only with rules-based indexes instead.
At this point it is still unclear what market-capitalization screens or country exposure the planned funds will have, but their benchmarks are to be rebalanced quarterly and reconstituted on a semiannual basis.
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