FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (TLTD) seeks to track the Morningstar Developed Markets ex-US Factor Tilt Index, which measures international developed market stocks outside the United States while tilting toward companies with favorable quality, value, and low volatility characteristics.
How It Works
TLTD uses a passively managed, factor-weighted approach that overweights stocks scoring higher on Morningstar's quality, value, and low volatility metrics compared to traditional market-cap weighting. The fund holds approximately 800-1,000 developed market stocks from Europe, Japan, and other developed countries, excluding U.S. companies. Rebalancing occurs semi-annually to maintain factor exposures while managing turnover costs.
Key Features
- Factor tilting methodology targets quality companies with strong balance sheets, attractive valuations, and lower price volatility
- Broad international diversification across 20+ developed countries including Japan, UK, Germany, and Switzerland
- Zero expense ratio makes it one of the lowest-cost international developed market factor ETFs available
Risks
- This ETF can lose value when international developed markets underperform U.S. stocks, potentially lagging by 10-20% annually during periods of U.S. outperformance
- Currency fluctuations against the U.S. dollar can reduce returns when foreign currencies weaken, adding 5-15% annual volatility beyond stock movements
- Factor strategies may underperform broad market indexes for extended periods, particularly during growth stock rallies when value and quality factors lag
Who Should Own This
Best suited as a core international holding (15-30% of equity allocation) for long-term investors with 5+ year time horizons seeking developed market exposure with factor enhancement. Medium risk tolerance required due to international equity volatility and currency exposure. Ideal for investors wanting diversification beyond U.S. markets with a quality/value tilt.