FlexShares US Quality Low Volatility Index Fund (QLV US) – Portfolio Construction Methodology

The underlying Northern Trust Quality Low Volatility Index targets US large-/mid-caps that, in aggregate, exhibit lower absolute volatility than the Northern Trust 1250 Index while tilting toward quality. The universe is the Northern Trust 1250; the lowest-quality quintile by Northern Trust’s composite score (profitability, management efficiency, cash-flow metrics) is ineligible. An optimizer selects and weights constituents to minimize volatility and increase the quality tilt, subject to controls: security active weight ±5% (min absolute weight 0.02%), sector ±6%, industry group ±10%, liquidity constraint capping bottom-decile names at their parent weight, style-factor neutrality except volatility, and a historical beta target of 0.70. Turnover is constrained to ~12% per rebalance. The index is reconstituted quarterly on the last business day of February, May, August, and November.

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