Is FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) a Strong ETF Right Now?
Launched on 09/25/2012, the FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) is a smart beta exchange traded fund offering broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Flexshares. TLTE has been able to amass assets over $253.43 million, making it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund seeks to match the performance of the Morningstar Emerging Markets Factor Tilt Index before fees and expenses.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.59%.
It's 12-month trailing dividend yield comes in at 3.66%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
When you look at individual holdings, Samsung Electronics Co Ltd Common Stock Krw 100 (A005930) accounts for about 3.27% of the fund's total assets, followed by Taiwan Semiconductor Manufacturing Co Ltd Common and Tencent Holdings Ltd Common Stock Hkd 0.00002 (0700.HK).
TLTE's top 10 holdings account for about 14.15% of its total assets under management.
Performance and Risk
So far this year, TLTE has lost about -14.65%, and is down about -16.93% in the last one year (as of 05/19/2022). During this past 52-week period, the fund has traded between $49.58 and $66.54.
The ETF has a beta of 0.83 and standard deviation of 22.35% for the trailing three-year period, making it a medium risk choice in the space. With about 2688 holdings, it effectively diversifies company-specific risk.
Alternatives
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 $66.35 billion in assets, Vanguard FTSE Emerging Markets ETF has $70.92 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.
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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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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