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FlexShares Cements Up-and-Comer Status


As industry observers well know, the exchange traded funds business is top heavy with three players –BlackRock’s (BLK) iShares, State Street’s (STT) State Street Global Advisors and Vanguard – combining to hold a massive percentage of assets allocated to U.S.-listed ETFs.

That does not mean there is not there is not room for multiple, credible, up-and-coming ETF issuers to make their mark. Continued asset growth proves investors, both professional and retail, are embracing ETF offerings from more than just the “Big Three.” That includes Northern Trust’s (NTRS) FlexShares unit.

FlexShares had over $8.4 billion in ETF assets under management as of Oct. 7, making it a top-15 ETF issuer in the U.S. That is up from $1 billion in September 2012. Big drivers of FlexShares’ growth are four of the firm’s earliest offerings, which recently celebrated their third anniversary. [The Rise of FlexShares ETFs]

That includes the FlexShares Morningstar Global Upstream Natural Resource Index Fund (GUNR) . GUNR turned three in mid-September and it has been a banner run for the ETF in terms of asset-gathering.

GUNR tries to reflect the performance of the Morningstar Global Upstream Natural Resource Index, which holds companies that have upstream operations in agriculture, energy, metals, timber and water. Now nearly a $2.9 billion ETF, GUNR has added $283 million in new assets this year.

The FlexShares Morningstar U.S. Market Factor Tilt Index ETF (TILT) debuted on the same day as GUNR, making TILT a relatively early entry into the now booming world of factor-based ETFs.

TILT, which can be used as an alternative to plain vanilla broad market ETFs, such as S&P 500 funds, has gained 77.3% since coming to market, topping the S&P 500 by nearly 1,600 basis points over the same period. TILT now has $693.1 million in assets and the fund proved so successful so rapidly that it spurred the introduction of the developed and emerging markets equivalents, the FlexShares Morningstar Emerging Market Factor Tilt Index ETF (TLTE) and the FlexShares Morningstar Developed Markets ex-US Factor Tilt Index (TLTD) .

“Three years ago we launched FlexShares with a simple yet compelling mission, to deliver thoughtfully designed products that meet targeted investment objectives,” said Shundrawn Thomas, executive vice president and head of Northern Trusts’ Funds and Managed Accounts Group, in a statement.  “The rapid growth in assets and positive response from investors affirms that our investor-centric approach fills a tremendous need in the marketplace.”

Chicago-based FlexShares has also made its presence felt in the fixed income space. The FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (TDTT) and the FlexShares iBoxx 5-Year Target Duration TIPS Index Fund Profile (TDTF) also celebrated their third anniversaries last month. Buoyed by a flight to lower duration bond ETFs, TDTT, with a modified adjusted duration of 3.12 years, has $2.2 billion in AUM. TDTF has $307.2 million in assets. [Nifty Bond ETFs]

FlexShares Morningstar US Market Factor Tilt Index Fund