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

Making its debut on 09/16/2011, smart beta exchange traded fund FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT) provides investors 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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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

TILT is managed by Flexshares, and this fund has amassed over $1.44 billion, which makes it one of the larger ETFs in the Style Box - All Cap Blend. 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.

Operating expenses on an annual basis are 0.25% for TILT, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.47%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

For TILT, it has heaviest allocation in the Information Technology sector --about 23% of the portfolio --while Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL) accounts for about 4.54% of total assets, followed by Microsoft Corp Common Stock Usd 0.00000625 (MSFT) and Inc Common Stock Usd 0.01 (AMZN).

TILT's top 10 holdings account for about 18.05% of its total assets under management.

Performance and Risk

So far this year, TILT return is roughly 9.42%, and was up about 1.54% in the last one year (as of 06/05/2023). During this past 52-week period, the fund has traded between $138.28 and $166.90.

The fund has a beta of 1.08 and standard deviation of 19.59% for the trailing three-year period, which makes TILT a medium risk choice in this particular space. With about 2123 holdings, it effectively diversifies company-specific risk.


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 $43.09 billion in assets, Vanguard Total Stock Market ETF has $294.43 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT): ETF Research Reports, Inc. (AMZN) : Free Stock Analysis Report

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

Vanguard Total Stock Market ETF (VTI): ETF Research Reports

iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports

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Zacks Investment Research