Making its debut on 12/13/2016, smart beta exchange traded fund Nuveen ESG Small-Cap ETF (NUSC) provides investors broad exposure to the Style Box – Small Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $917.63 million, this makes it one of the larger ETFs in the Style Box – Small Cap Growth. NUSC is managed by Nuveen. This particular fund seeks to match the performance of the TIAA ESG Small-Cap Index before fees and expenses.
The TIAA ESG USA Small-Cap Index comprises of equity securities issued by small-capitalization companies listed on US exchanges.
Cost & Other Expenses
When considering an ETF’s total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.30%, making it on par with most peer products in the space.
It’s 12-month trailing dividend yield comes in at 1.16%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For NUSC, it has heaviest allocation in the Industrials sector –about 21.60% of the portfolio –while Consumer Discretionary and Financials round out the top three.
When you look at individual holdings, Toro Co (TTC) accounts for about 1.05% of the fund’s total assets, followed by Willscot Mobile Mini Holding and Axon Enterprise Inc (AXON).
The top 10 holdings account for about 6.24% of total assets under management.
Performance and Risk
So far this year, NUSC return is roughly 0.18%, and is down about -13.30% in the last one year (as of 03/28/2023). During this past 52-week period, the fund has traded between $31.50 and $40.97.
The fund has a beta of 1.14 and standard deviation of 25.23% for the trailing three-year period. With about 568 holdings, it effectively diversifies company-specific risk.
Nuveen ESG Small-Cap ETF is a reasonable option for investors seeking to outperform the Style Box – Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI EAFE ETF (ESGD) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $7 billion in assets, iShares ESG Aware MSCI USA ETF has $13.96 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box – Small Cap Growth.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Nuveen ESG Small-Cap ETF (NUSC): ETF Research Reports
Toro Company (The) (TTC) : Free Stock Analysis Report
Axon Enterprise, Inc (AXON) : Free Stock Analysis Report
iShares ESG Aware MSCI EAFE ETF (ESGD): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.