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.
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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.
Managed by Flexshares, TLTE has amassed assets over $254.46 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.
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.
Operating expenses on an annual basis are 0.57% for this ETF, which makes it on par with most peer products in the space.
TLTE's 12-month trailing dividend yield is 3.51%.
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Taiwan Semiconductor Manufacturing Co Ltd Common accounts for about 4.37% of the fund's total assets, followed by Alibaba Group Holding Ltd Common Stock Hkd (9988.HK) and Tencent Holdings Ltd Common Stock Hkd 0.00002 (0700.HK).
The top 10 holdings account for about 15.59% of total assets under management.
Year-to-date, the FlexShares Morningstar Emerging Markets Factor Tilt ETF has added roughly 6.26% so far, and was up about 10.09% over the last 12 months (as of 03/19/2025). TLTE has traded between $49.54 and $58.58 in this past 52-week period.
TLTE has a beta of 0.76 and standard deviation of 15.66% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 2948 holdings, it effectively diversifies company-specific risk.
FlexShares Morningstar Emerging Markets Factor Tilt ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $84.18 billion in assets, iShares Core MSCI Emerging Markets ETF has $85.31 billion. VWO has an expense ratio of 0.07% and IEMG charges 0.09%.
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.
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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
This article originally published on Zacks Investment Research (zacks.com).
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