Is FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT) a Strong ETF Right Now?

The FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT) made its debut on 09/16/2011, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend 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.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Because the fund has amassed over $1.66 billion, this makes it one of the larger ETFs in the Style Box - All Cap Blend. TILT is managed by Flexshares. This particular fund, before fees and expenses, seeks to match the performance of the Morningstar U.S. Market Factor Tilt Index.

The Morningstar U.S. Market Factor Tilt Index measures the performance of U.S. equity markets with increased exposure toward small-capitalization and value stocks.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.25%.

The fund has a 12-month trailing dividend yield of 1.26%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For TILT, it has heaviest allocation in the Information Technology sector --about 24.20% of the portfolio --while Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, Microsoft Corp Common Stock Usd 0.00000625 (MSFT) accounts for about 4.47% of the fund's total assets, followed by Apple Inc Common Stock Usd 0.00001 (AAPL) and Nvidia Corp Common Stock Usd 0.001 (NVDA).

The top 10 holdings account for about 23.05% of total assets under management.

Performance and Risk

The ETF has lost about -1.60% and is up about 8.40% so far this year and in the past one year (as of 05/23/2025), respectively. TILT has traded between $181.13 and $227.39 during this last 52-week period.

The ETF has a beta of 1.04 and standard deviation of 18.30% for the trailing three-year period, making it a medium risk choice in the space. With about 1954 holdings, it effectively diversifies company-specific risk.

Alternatives

FlexShares Morningstar U.S. Market Factor Tilt ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $66.79 billion in assets, Vanguard Total Stock Market ETF has $467.57 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

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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This article originally published on Zacks Investment Research (zacks.com).

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