Designed to provide broad exposure to the Style Box – Small Cap Growth category of the market, the Nuveen ESG Small-Cap ETF (NUSC – Free Report) is a smart beta exchange traded fund launched on 12/13/2016.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
NUSC is managed by Nuveen, and this fund has amassed over $1.22 billion, which makes it one of the average sized ETFs in the Style Box – Small Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the TIAA ESG Small-Cap Index.
The Nuveen ESG USA Small-Cap Index composed of equity securities issued by small-capitalization companies listed on U.S. 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.
Operating expenses on an annual basis are 0.31% for NUSC, making it on par with most peer products in the space.
It’s 12-month trailing dividend yield comes in at 1.15%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 18.40% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, East West Bancorp Inc (EWBC – Free Report) accounts for about 1.01% of total assets, followed by Murphy Usd Inc (MUSA – Free Report) and Rexford Industrial Realty (REXR – Free Report) .
Its top 10 holdings account for approximately 8.01% of NUSC’s total assets under management.
Performance and Risk
Year-to-date, the Nuveen ESG Small-Cap ETF has lost about -0.03% so far, and was up about 8.87% over the last 12 months (as of 01/03/2025). NUSC has traded between $37.34 and $46.20 in this past 52-week period.
The fund has a beta of 1.15 and standard deviation of 21.63% for the trailing three-year period. With about 506 holdings, it effectively diversifies company-specific risk.
Alternatives
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 USA ETF (ESGU – Free Report) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ – Free Report) tracks —————————————-. IShares ESG Aware MSCI USA ETF has $13.17 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $20.52 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.
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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