LLaunched on 9/16/2011, the FlexShares Morningstar US Market Factor Tilt ETF (TILT) is a smart beta exchange-traded index fund offering broad exposure to the Style Box – All Cap Blend category of the market.
What are Smart Beta ETFs?
Market-cap-weighted index products, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market-cap-weighted indices are ideal for investors who believe in market efficiency. They offer an inexpensive, convenient and transparent way to replicate market returns.
If you’re the kind of investor who prefers to try and beat the market through good stock selection, then smart beta funds are your best bet; this fund category is known to follow non-cap-weighted strategies.
These indices attempt to select stocks that have a better chance of risk-return performance, based on certain fundamental characteristics or a combination of these characteristics.
This area offers many different investment choices, such as the simplest equal weighting, fundamental weighting, and volatility/momentum based weighting methodologies; however, not all of these strategies can yield superior results.
Fund Sponsor and Index
TILT is managed by Flexshares, and this fund has raised over $1.45 billion, making it one of the largest ETFs in the Style Box – All Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Morningstar US Market Factor Tilt Index.
The Morningstar US Market Factor Tilt Index measures the performance of US equity markets with increased exposure to small cap and value stocks.
Cost and other expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will perform better than higher cost ones, assuming all other metrics remain the same.
The annual operating expense of this ETF is 0.25%, putting it on par with most peer products on the market.
The fund has a 12-month dividend yield of 1.39%.
Sector exposure and main holdings
Although ETFs provide diversified exposure that minimizes single-stock risk, it’s still important to review a fund’s holdings before investing. Fortunately, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has the largest allocation to the information technology sector – approximately 21.30% of the portfolio. Finance and health complete the top three.
Looking at individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL) represents approximately 4.27% of the fund’s total assets, followed by Microsoft Corp Common Stock Usd 0.00000625 (MSFT) and Amazon.com Inc Common Stock Usd 0.01 (AMZN).
Its top 10 holdings represent approximately 17.84% of TILT’s total assets under management.
Performance and risks
The ETF has lost around -15.56% so far this year and is down around -6.06% over the past year (as of 05/26/2022). In the last 52-week period, it traded between $151.18 and $184.34.
The fund has a beta of 1.09 and a standard deviation of 24.64% for the three-year period, making TILT a medium-risk pick in this particular space. With approximately 2,439 holdings, it effectively diversifies company-specific risks.
FlexShares Morningstar US Market Factor Tilt ETF is a great option for investors looking to outperform the Style Box – All Cap Blend segment of the market. There are other ETFs in the space that investors might also consider.
The iShares Core S&P Total US Stock Market ETF (ITOT) tracks the S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks the CRSP US Total Market Index. IShares Core S&P Total US Stock Market ETF has $39.18 billion in assets, Vanguard Total Stock Market ETF has $255.33 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.
Investors looking for cheaper, lower-risk options should consider traditional market-cap-weighted ETFs that aim to match the returns of the Style Box – All Cap Blend.
To learn more about this product and other ETFs, find products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.
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FlexShares Morningstar US Market Factor Tilt ETF (TILT): ETF Research Reports
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Apple Inc. (AAPL): Free Inventory Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total US Stock Market ETF (ITOT): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.