Is Nuveen ESG Small-Cap ETF (NUSC) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - Small Cap Growth category of the market, the Nuveen ESG Small-Cap ETF (NUSC) is a smart beta exchange traded fund launched on 12/13/2016.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $1.03 billion, this makes it one of the larger ETFs in the Style Box - Small Cap Growth. NUSC is managed by Nuveen. Before fees and expenses, this particular fund seeks to match the performance of the TIAA ESG Small-Cap Index.
The TIAA ESG USA Small-Cap Index comprises of equity securities issued by small-capitalization companies listed on US exchanges.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.31%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.08%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
NUSC's heaviest allocation is in the Industrials sector, which is about 19.50% of the portfolio. Its Consumer Discretionary and Financials round out the top three.
Looking at individual holdings, Service Corp International (SCI) accounts for about 0.94% of total assets, followed by Wex Inc (WEX) and Emcor Group Inc (EME).
The top 10 holdings account for about 7.25% of total assets under management.
Performance and Risk
So far this year, NUSC has added about 7.46%, and is down about -3.24% in the last one year (as of 08/16/2023). During this past 52-week period, the fund has traded between $31.96 and $39.11.
The ETF has a beta of 1.14 and standard deviation of 22.10% for the trailing three-year period. With about 538 holdings, it effectively diversifies company-specific risk.
Alternatives
Nuveen ESG Small-Cap ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
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 $7.21 billion in assets, iShares ESG Aware MSCI USA ETF has $12.76 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.
Bottom Line
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
EMCOR Group, Inc. (EME) : Free Stock Analysis Report
Service Corporation International (SCI) : Free Stock Analysis Report
WEX Inc. (WEX) : Free Stock Analysis Report
iShares ESG Aware MSCI EAFE ETF (ESGD): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
