FlexShares offers real asset exposure with new ETF launch

Dec 1st, 2015 | By | Category: Alternatives / Multi-Asset

FlexShares, the exchange-traded fund arm of Northern Trust, has unveiled their latest fund offering, the FlexShares Real Asset Allocation Index Fund (Nasdaq: ASET). The ETF invests in three FlexShares ETFs that together provide exposure to equities focused on real assets: infrastructure, real estate and natural resources.

FlexShares offers real asset exposure with new ETF launch

Shundrawn Thomas, head of Northern Trust’s ETF Group

Shundrawn Thomas, head of Northern Trust’s Funds and Managed Accounts Group, commented: “Institutional investors and independent advisors are increasingly turning to real assets such as natural resources, real estate and infrastructure for portfolio diversification and risk management. The FlexShares Real Asset Index Fund delivers an optimized mix of innovative real asset strategies in a simple index-based solution.”

Real assets have historically provided investors with an inflation hedge while also supplying a regular income stream especially through exposure to real estate investment trusts.

The fund tracks the Northern Trust Real Assets Allocation Index which uses a proprietary rules-based methodology to optimise the weights on the three constituent ETFs in an effort to reduce the fund’s volatility of returns. Constraints on allocations to sector and constituent ETF allocations are also applied to ensure suitable diversification.

As of 27 November 2015, the fund is invested in the FlexShares STOXX Global Broad Infrastructure Fund (50.1%), the FlexShares Trust Global Quality Real Estate Fund (40.2%), and the FlexShares Global Upstream Natural Resources Fund (9.7%).

This weighting has tilted the exposure to the financials (39.5%), industrials (17.2%), utilities (14.2%) and telecommunications (11.3%) sectors. The largest country weighting is in the US (44.2%), followed by the UK (10.1%), Japan (9.4%), Canada (7.0%) and Hong Kong (6.5%). The fund is tilted towards large-cap exposure (66.2%), followed by mid-cap (22.3%) and small-cap (11.2%). The ETF carries a total expense ratio of 0.57%.

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