FlexShares are designed to help investors pursue specific investment goals, by blending intelligent portfolio construction principles (to pursue targeted outcomes), with passive management (to contain costs). But how, exactly, does this work?

collapse/expand Designing an Index

The true work of portfolio engineering occurs before establishing a FlexShares ETF and its underlying benchmark index. After a desired universe of securities is identified, the index is adjusted to address investor objectives ranging from liquidity to tax consequences, then stress-tested. Rules are established to standardize when the portfolio is rebalanced, how the index is adjusted and how to address extraordinary situations such as a market crisis.

Three investor-focused concerns drove FlexShares development:
• Investors’ recognition that traditional indexing options often hold biases that may not fit their goals or risk preferences.
• Shifting sentiments by investors away from active asset management in recent years.
• Investors’ increasing desire for customized investment solutions to meet their goals, such as:

  • Better performance,
  • Pursuing yield,
  • Limiting risk,
  • Flexibility to adjust portfolios for unique needs, or
  • Any combination of the above.

Though FlexShares ETFs are intended to help investors target such goals, there is no guarantee of achieving them.

collapse/expand Developing an Appropriate Strategy

In modern investing parlance, the performance of the market is known as beta. Beta is a statistical measure of the volatility, or sensitivity, of rates of return on a portfolio or security compared to a market index. Investors aiming to match the market’s beta face headwinds including trading costs, tracking error, possible tax liabilities and the presence of competing beta – that is, one index may fall, but a different, yet similar, index may rise at the same time. Investors striving to beat beta (that is, achieve alpha) also face the reality that pursuing alpha in traditional investing means carrying more risk.

The challenge is to survey the spectrum of investment options and determine which beta is appropriate for an individual investor’s investment goals, risk tolerance, diversification needs, tax management, yield profile and more – all of which is inherent in developing an appropriate portfolio strategy.

collapse/expand An Intelligent Approach

By combining intelligent portfolio construction with the efficiencies of indexing, FlexShares strategies seek to avoid both the challenges of active management (including costs, risk and portfolio turnover), and the limitations of indexing (whereby allocations may not meet investors' aims).

collapse/expand New to ETF Investing?

The links to the left provide access to information to help investors who are new to ETFs. It’s important to consult with your financial professional about how ETFs can fit into your portfolio strategy.

 
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Carefully consider the FlexShares Funds’ investment objectives, risk factors and charges and expenses before investing. This and other information can be found in the prospectus, which may be obtained by calling 1-855-353-9383 (1-855 FlexETF) or by downloading a Prospectus. Read the prospectus carefully before investing; investing involves risk, including possible loss of principal.

Investment Products and Services are:
Not FDIC insured | May lose value | No bank guarantee

An investment in FlexShares is subject to investment risk, including the possible loss of principal amount invested. Fund returns may not match the return of its respective index. The Funds may invest in emerging and foreign markets, derivatives and concentrated sectors. In addition, the Funds may be subject to asset class risk, small cap stock risk, value investing risk, non-diversification risk, fluctuation of yield, income risk, interest rate/maturity risk, currency risk, passive investment risk, inflation protected security risk, market risk and manager risk. For a complete description of risks associated with each Fund, please refer to the prospectus.

Shares of FlexShares may be sold throughout the day on the exchange through any brokerage account. However, shares may only be redeemed directly from the Fund by Authorized Participants, in very large creation/redemption units. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.

All registered investment companies, including FlexShares, are obliged to distribute portfolio gains to shareholders at year-end regardless of performance. Trading FlexShares Funds will also generate tax consequences and transaction expenses. The information provided is not intended to be tax advice. Tax consequences of dividend distributions may vary by individual taxpayer.

The FlexShares Funds, registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 (“Funds”) are distributed by Foreside Fund Services, LLC , not affiliated with Northern Trust.

© Northern Trust 2013