Why Has TILT’s Fund Inflow Decreased this Year?
Investing in TILT: What You Should Know about Its Structure
Fundamentally based TILT and QUAL
The FlexShares Morningstar U.S. Market Factor Tilt Index Fund’s (TILT) index, the Morningstar US Market Factor Tilt Index, builds it portfolio by redefining the structure of the broader traditional market-based index covering overall US equities. TILT’s investment methodology promotes the popular CAPM anomaly, which is to say that the combined effect of a stock’s size and value stock reduces the power of its beta.
The iShares MSCI USA Quality Factor ETF (QUAL) also takes a fundamental approach to investing by using a stock selection methodology based on these fundamental measures:
a high return on equity
stable year-over-year earnings growth
low debt to equity
QUAL seeks to track the performance of the MSCI USA Sector Neutral Quality Index.
Fund inflow and volume
The above chart is a fund flow and volume analysis of TILT and QUAL. The increase in fund inflow is a sign of positive investor demand. It also gives excess cash to the fund manager, which helps performance. The volume of shares traded per day also helps identify the demand for an asset.
You can see from the above graph that TILT has undergone an adverse change in its fund inflow and its volume of shares traded compared to QUAL. While QUAL had a good run since January 2015, TILT struggled to provide good returns to its investors.
Top holdings comparison
The holdings of TILT include Apple (AAPL), J.P. Morgan Chase (JPM), and Chevron (CVX), whereas Microsoft (MSFT), Johnson & Johnson (JNJ), and Apple (AAPL) are some of the top holdings in TILT. QUAL’s top ten holdings constitute about 35.5% of its total portfolio, which is much more than TILT, whose top ten holdings represent 12.4% of its portfolio. This gap is due to the difference between QUAL and USMV’s total number of holdings.
The next part of this series offers a detailed analysis of TILT’s holdings.
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