Making its debut on 09/25/2012, smart beta exchange traded fund FlexShares Morningstar Emerging Markets Factor Tilt ETF (TLTE) provides investors broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Flexshares, and has been able to amass over $254.84 million, which makes it one of the average sized ETFs in the Broad Emerging Market ETFs. TLTE, before fees and expenses, 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.
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.
Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.43%.
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.
Taking into account individual holdings, Taiwan Semiconductor Manufacturing Co Ltd Common accounts for about 4.07% 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 15.68% of total assets under management.
Performance and Risk
Year-to-date, the FlexShares Morningstar Emerging Markets Factor Tilt ETF has added about 8.85% so far, and it's up approximately 5.83% over the last 12 months (as of 05/22/2025). TLTE has traded between $46.89 and $58.58 in this past 52-week period.
TLTE has a beta of 0.63 and standard deviation of 15.99% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 2954 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.
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 $86.60 billion in assets, iShares Core MSCI Emerging Markets ETF has $88.56 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.
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 ReportsThis article originally published on Zacks Investment Research (zacks.com).
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