Northern Trust’s FlexShares introduces developed and emerging market ‘TILT’ ETFs

Oct 5th, 2012 | By | Category: Equities

FlexShares, a US suite of exchange-traded funds (ETFs) sponsored and managed by Northern Trust, introduced two new ETFs earlier this week that complement its existing US ‘tilt’ fund, the FlexShares Morningstar US Market Factor Tilt Index ETF (TILT).

Northern Trust's FlexShares introduces developed and emerging market ‘TILT’ ETFs

Shundrawn Thomas, head of Northern Trust’s ETF Group.

The two new funds, the FlexShares Morningstar Developed Markets ex-US Factor Tilt Index ETF (TLTD) and the FlexShares Morningstar Emerging Market Factor Tilt Index ETF (TLTE), focus on developed markets outside the US and emerging markets, respectively.

All three ’tilt’ funds seek to counterbalance the inherent bias towards large-growth companies embedded in market-weighted strategies by applying a nuanced ‘tilt’ methodology toward the long-term growth potential of small cap and value stocks.

The ‘tilt’ works by increasing exposure to small-capitalisation and value factors, and reducing exposure to large-cap and growth factors. Essentially, stocks that are deemed to be small-capitalisation or small-value have an overweighting in the index compared to their weight in a corresponding market-capitalisation-weighted index. Like­wise, stocks designated as large or growth stocks have underweighting compared to a standard market-capitalization weighting.

Unlike many alternatively weighted approaches, FlexShares’ tilted funds seek a consistent level of risk exposure to size and style providing total market coverage – including large cap and growth.

“Coming just after our one-year anniversary, this announcement gives us the opportunity to note the progress we’ve made in our first year,” said Shundrawn Thomas, head of Northern Trust’s Exchange Traded Funds Group. “We continue to provide investors with distinctive, yet practical solutions. Now, with our two additional tilted index funds, investors have the ability to apply the strategy to investments across the globe.”

FlexShares entered the ETF market in September 2011 and has accumulated assets of more than $1.5 billion.

The three funds are listed on the NYSE. Their net expense ratios vary from 0.67% for the emerging market fund down to 0.27% for the US fund.

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