Flexshares Smart Beta EM

By Bernie Thurston

September 28, 2021

Smart beta emerging markets from Northern Trust

FlexShares, a European sub-brand of Northern Trust, is launching two emerging markets ETFs that try to be both smart beta and ESG funds.

FlexShares Emerging Market High Dividend Climate ESG UCITS ETF (QDFE)
FlexShares Emerging Market Low Volatility Climate ESG UCITS ETF (QVFE)

QDFE starts out by screening companies based on quality characteristics, even though it is not mentioned in the fund name. Quality characteristics include profitability, free cash flow and management efficiency.

It then targets companies with high dividend yields that meet certain climate criteria such as having satisfactorily low carbon footprints and adequate governance standards by their sectors standards. FlexShares’ website currently says the fund holds 50% cash, meaning its either wrong or the portfolio hasn’t been fully bought.

QVFE will also start by looking at companies that meet quality characteristics too. It will then pick stocks with lower overall volatility while also keeping an eye on climate friendliness.

FlexShares has partnered with index company Qontigo, to develop the indexes the funds track.

They charge 0.35% and 0.31%, respectively.

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Bernie Thurston

Bernie loves data. Fortunately for him, London’s finance industry has been indulgent, providing him lots of benchmark data to play with and enjoy. Bernie’s journey began at Sky, where he designed the first interactive television and helped build a technical-based charity (ctt.org). He then hopped over to finance, and soon found himself at a start-up working on dividends and derivatives. Then, by nature of the fact that finance and technology have rapidly conjoined, he found himself working with Credit Suisse to build an index aggregation and distribution platform. Markit then acquired the start-up and Bernie battled his way up the greasy pole becoming the Managing Director of Markit’s equities division, with responsibility for index, ETF and Dividends. But the siren song of startups called once more. And Bernie was headhunted to rescue a failing index business. Over five years, he helped reverse the fortunes of DeltaOne Solutions, turning into a fighting force. So successful was the turn around that Markit came along and acquired this company as well. But Bernie still loved start-ups. To that end, he founded Ultumus, an ETF and benchmark data company. Ultumus aims to provide the best data in the most timely and consumable manner possible. With clients on both buy and sell side, when something happens in the index or ETF industry, Ultumus is the first to know.