Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT) is a smart beta exchange traded fund launched on 09/16/2011.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

Because the fund has amassed over $1.64 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

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.

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 1.07%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

TILT's heaviest allocation is in the Information Technology sector, which is about 22.90% of the portfolio. Its Financials and Consumer Discretionary round out the top three.

Story Continues

Taking into account individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL) accounts for about 4.75% of the fund's total assets, followed by Microsoft Corp Common Stock Usd 0.00000625 (MSFT) and Nvidia Corp Common Stock Usd 0.001 (NVDA).

Its top 10 holdings account for approximately 22.91% of TILT's total assets under management.

Performance and Risk

The ETF has lost about -3.30% so far this year and was up about 9.06% in the last one year (as of 03/20/2025). In the past 52-week period, it has traded between $186.32 and $227.39.

The ETF has a beta of 1.09 and standard deviation of 17.35% for the trailing three-year period, making it a medium risk choice in the space. With about 1973 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 $62.67 billion in assets, Vanguard Total Stock Market ETF has $447.90 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

Apple Inc. (AAPL):Free Stock Analysis Report

Microsoft Corporation (MSFT):Free Stock Analysis Report

NVIDIA Corporation (NVDA):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

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

Zacks Investment Research

View Comments