FlexShares ESG & Clmt Em Mkts Cr’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and an overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. FlexShares ESG & Clmt Em Mkts Cr earns a High Process Pillar rating. The main driver of the rating is the parent firm's five-year risk-adjusted success ratio of 78%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. This fund tracks an index, which also increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, influences the rating as well.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust ESG & Climate Emerging Markets Core IndexSM.  The index is designed to reflect the performance of a selection of companies that exhibit certain ESG characteristics, while also seeking to provide broad-market, and core exposure to publicly traded equity securities issued by companies domiciled in emerging market countries. The fund will invest at least 80% of its total assets in the securities of the index and in ADRs and GDRs based on the securities in the index. It is non-diversified. 

 The portfolio is overweight in communication services by 3.4 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and consumer defensive; however, the allocations are similar to the category. The portfolio has 275 holdings and is about as top-heavy as the category average, with 24.5% of assets in the top 10 holdings. And finally, in terms of portfolio turnover, on a year-over-year basis, 36% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Flexshares’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There are two managers listed on the fund: Robert Anstine, Alan Aung. Though they do not manage other products together, managers may manage them individually.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

Northern Trust Asset Management, or NTAM, has a solid plan for improvement, but it will take time to assess execution under new leadership. The firm maintains an Average Parent rating.

NTAM President Daniel Gamba took over in April 2023 and promised to double down on the asset manager's strengths. That means fortifying relationships with Northern Trust Wealth Managements' ultra-high-net-worth and institutional clientele, whom NTAM was built to serve. NTAM will aim to strengthen the money market and index funds those clients favor, then nurture the rest of the firm's lineup and potentially expand it.

Change has trickled through the investment organization as well. For instance, in his two-year tenure, CIO Angelo Manioudakis has seen significant leadership turnover in the fixed-income organization. He also converted the municipal-bond team from a generalist model to a specialized one. That was probably overdue but still requires personnel change and time to acclimate.

Despite the shakeups, NTAM does a lot right. The quantitative strategies team, formed under now equity CIO Mike Hunstad, is a deep unit that lends expertise to systematic and discretionary active offerings. The firm has shown discipline in developing new products and rarely closes existing ones. NTAM isn't a cost leader, but it prices funds competitively and recently cut fees on several mutual funds.

Parent

FlexShares ESG & Climate Emerging Markets Core Index Fund

FEEM tracks a principles-based index of large-cap companies in emerging markets that exhibit positive environmental, social, and corporate governance (ESG) characteristics. A proprietary ESG scoring system is used to select and weight holdings.

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Sustainable investing offers another opportunity for advisors to have deeper, more meaningful relationships with their clients. ESG investing — or “sustainable investing” — continues to gain awareness, acceptance, and assets, but skepticism among advisors is still common, according to a FlexShares insight based on The Flexible Advisor podcast.

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Combining the ongoing upside of environmental, social and governance (ESG) with the growth potential of emerging markets (EM) could make for stellar returns. This is exactly what the FlexShares ESG & Climate Emerging Markets Core Index Fund (FEEM) can do for investors.

Get Exposure to the Growth of ESG and Emerging Markets in One ETF

FlexShares Exchange Traded Funds has launched a new ESG ETF focused on climate with exposure to emerging markets. This is an area with limited product offerings to date.

FlexShares Launches FEEM: Offering ESG Exposure to Emerging Markets

CHICAGO--(BUSINESS WIRE)--Northern Trust Asset Management's FlexShares® Exchange Traded Funds announced today the launch of a new Environmental, Social and Governance (ESG)* ETF focused on climate with exposure to emerging markets: the FlexShares ESG & Climate Emerging Markets Core Index Fund (NYSE: FEEM). This fund builds on FlexShares' existing climate suite introduced in September 2021, which currently includes US large cap equities, developed markets ex-US equities, and two fixed-income

News for FlexShares ESG & Climate Emerging Markets Core Index Fund ETF (FEEM)