Northern Trust Launches FlexShares

September 27, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs)

Northern Trust rejoined the ETF provider list with its September 22 introduction of four new ETFs under the FlexShares brand.  Northern Trust had closed and liquidated its 17-fund NETS lineup in February 2009.  The prior brand consisted mainly of funds tracking major foreign market indexes.  The firm also serves as subadvisor to the MAXIS Nikkei 225 Index Fund (NKY).

Two of the new Flexshares ETFs are based on Morningstar equity indexes while the other two follow Markit iBoxx fixed income indexes.  The press release suggests plans for additional funds, but provides no timetable.  The first four products in the new FlexShares product line are:

FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR) emphasizes the “upstream” portion of the global natural resources supply chain.  GUNR will cover the energy, metals, and agriculture sectors, while maintaining a core exposure to timberlands and water resources.  Sector allocations include Materials 57%, Energy 30%, Consumer Staples 7%, and Others 6%.  The fund’s expense ratio is capped at 0.48%, and it has 108 holdings.  Additional information is contained in the GUNR summary, fact sheet (pdf), prospectus (pdf), and The Case for Investing in the Upstream Supply Chain (pdf).

FlexShares Morningstar U.S. Market Factor Tilt Index Fund (TILT) is designed to replace traditional market-weighted equity products by tilting to smaller cap and value stocks using a multi-factor modeling approach.  TILT allocates to Large Caps at about 44%, Mid Caps 9%, Small Caps 39%, and Micro Caps 8%.  Growth and Value allocations are not available.  The fund’s expense ratio is capped at 0.27%, and it has 2,494 holdings.  Additional information is contained in the TILT summary, fact sheet (pdf), prospectus (pdf), and The Case for Tilted Indexing (pdf).

FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (TDTT) holds inflation-protected U.S. Treasury paper (“TIPS”) with a target modified adjusted duration of three years and specific maturity dates ranging from 1-10 years.  Yield data is not provided but should be minimal.  The fund’s expense ratio is capped at 0.20%, and it has 14 holdings.  Additional information is contained in the TDTT summary, fact sheet (pdf), prospectus (pdf), and The Case for Precise Targeting of TIPS Durations (pdf).

FlexShares iBoxx 5-Year Target Duration TIPS Index Fund (TDTF) holds inflation-protected U.S. Treasury securities  (“TIPS”) with a target modified adjusted duration of five years and specific maturity dates of 3-20 years.  Yield data is not provided but is expected to be less than half a percent.  The fund’s expense ratio is capped at 0.20%, and it has 16 holdings.  Additional information is contained in the expense ratio capped at 0.20%, and it has 108 holdings.  Additional information is contained in the TDTF summary, fact sheet (pdf), and prospectus (pdf).

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

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