Tactical factor exposure to developed markets outside of the United States can be had with the FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (TLTD).
TLTD seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Morningstar® Developed Markets ex-US Factor Tilt Index. The index reflects the performance of a selection of companies that, in aggregate, possess greater exposure to size and value factors relative to the Morningstar Developed Markets ex-US Index, a float-adjusted market-capitalization weighted index of companies incorporated in developed-market countries, excluding the U.S.
With a number of opportunities to be had in developed markets, TLTD scours the globe for opportunities in various sectors and market capitalization sizes.
“The index starts with a broad universe of international stocks that trade on a qualified exchange in one of 23 developed markets ex-U.S. countries,” the FlexShares website noted. “Stocks are then defined and divided by current market capitalization when Morningstar applies a multi-metric valuation analysis to determine appropriate style categorization.”
“Morningstar then constitutes the index with an intentional tilt toward small-cap and value stocks,” the website explained further. “For example, the index will reduce weight in the large-cap growth and large-cap core boxes to increase weight across the smaller and value portions of the index.”
A Dynamic Solution to Value
Different economies often have different factors working for them simultaneously. Developed markets can also serve as a tactical diversification tool and hedge to a U.S.-skewed portfolio.
“The result of this methodology is ETFs covering US, developed, and emerging markets that offer prolonged factor exposure for a core allocation—without introducing the risk and complexity of timing factor performance,” the blog post said further.
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