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Is Nuveen ESG Emerging Markets Equity ETF (NUEM) a Strong ETF Right Now?

Zacks Equity Research
·4 min read

Designed to provide broad exposure to the Broad Emerging Market ETFs category of the market, the Nuveen ESG Emerging Markets Equity ETF (NUEM) is a smart beta exchange traded fund launched on 06/07/2017.

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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

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However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Nuveen. NUEM has been able to amass assets over $201.40 million, making it one of the average sized ETFs in the Broad Emerging Market ETFs. NUEM seeks to match the performance of the TIAA ESG Emerging Markets Equity Index before fees and expenses.

The TIAA ESG Emerging Markets Equity Index uses a rules-based methodology to arrive at a diversified portfolio of equity securities issued by companies located in countries with emerging markets that adhere to predetermined ESG, controversial business involvement and low-carbon criteria.

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.

Operating expenses on an annual basis are 0.35% for NUEM, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.47%.

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.

Looking at individual holdings, Taiwan Semiconductor Man /twd/ accounts for about 7.58% of total assets, followed by Tencent Holdings Ltd /hkd/ and Alibaba Group Holding Lt /hkd/.

The top 10 holdings account for about 22.94% of total assets under management.

Performance and Risk

Year-to-date, the Nuveen ESG Emerging Markets Equity ETF has lost about -20.37% so far, and is down about -23.23% over the last 12 months (as of 11/16/2022). NUEM has traded between $22.51 and $34.68 in this past 52-week period.

The fund has a beta of 0.68 and standard deviation of 23.71% for the trailing three-year period. With about 219 holdings, it effectively diversifies company-specific risk.

Alternatives

Nuveen ESG Emerging Markets Equity ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs 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 $6.72 billion in assets, iShares ESG Aware MSCI USA ETF has $20.47 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 Broad Emerging Market ETFs.

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 Emerging Markets Equity ETF (NUEM): ETF Research Reports
 
iShares ESG Aware MSCI EAFE ETF (ESGD): ETF Research Reports
 
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
 
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Zacks Investment Research