Looking to Avoid China Exposure? Try TLTE | ETF Trends

Not too long ago, investing in China as an economic powerhouse represented a plethora of growth opportunities, but all that has changed, making funds like the FlexShares Morningstar Emerging Markets Factor Tilt Index Fund (TLTE) a more viable option.

This is especially the case nowadays, as China has investors baffled by its latest regulatory moves.

“The Chinese government’s crackdown on privately owned companies and entrepreneurs has captured the world’s attention and dismayed many portfolio investors,” a Financial Times article explained. “Beijing is compounding investors’ concerns by also putting a new emphasis on a longstanding political slogan — known as ‘common prosperity’ — to focus attention on the country’s deep inequality, and put some socialism back into the term ‘socialism with Chinese characteristics.'”

TLTE seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Morningstar® Emerging Markets Factor Tilt Index. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to size and value factors relative to the Morningstar Emerging Markets Index, a float-adjusted market capitalization-weighted index of companies incorporated in emerging-market countries.

The fund will invest at least 80% of its total assets in the securities of the index and in ADRs and GDRs based on the securities in the index. At the heart of the fund lies the factor tilt process incorporated within its strategy.

Assigning a Value Score

After categorizing companies based on market cap, TLTE assigns a value score based on price/book ratio, price/earnings ratio, price/cash flow ratio, price/sales ratio, and dividend yield. Selected securities are then divided by thirds into the following categories: value, core, and growth — all applied to large-cap, mid-cap, and small-cap allocations.

“The FlexShares Morningstar Emerging Markets Factor Tilt ETF takes a unique approach to emerging markets. The fund holds 2,459 stocks,” a U.S. News article said, noting eight emerging market ETFs that have limited exposure to China. “While it holds many of the same stocks as other emerging-market ETFs, the TLTE fund overweights small-cap stocks and value stocks and underweights large-cap stocks and growth stocks.”

For more news, information, and strategy, visit the Multi-Asset Channel.