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Is Nuveen ESG Small-Cap ETF (NUSC) a Strong ETF Right Now?

The Nuveen ESG Small-Cap ETF (NUSC) made its debut on 12/13/2016, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Growth category of the market.

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.

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.

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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 sponsored by Nuveen. It has amassed assets over $958.55 million, making it one of the larger ETFs in the Style Box - Small Cap Growth. This particular fund, before fees and expenses, 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for NUSC are 0.31%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.14%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 18.80% of the portfolio. Consumer Discretionary and Financials round out the top three.

Looking at individual holdings, Willscot Mobile Mini Holding accounts for about 1.05% of total assets, followed by Fti Consulting Inc (FCN) and Universal Display Corp (OLED).

Its top 10 holdings account for approximately 8.02% of NUSC's total assets under management.

Performance and Risk

The ETF has added about 1.61% and is down about -1.83% so far this year and in the past one year (as of 05/29/2023), respectively. NUSC has traded between $31.50 and $39.11 during this last 52-week period.

The fund has a beta of 1.13 and standard deviation of 23.10% for the trailing three-year period. With about 561 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 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 $7.27 billion in assets, iShares ESG Aware MSCI USA ETF has $13.56 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Nuveen ESG Small-Cap ETF (NUSC): ETF Research Reports

FTI Consulting, Inc. (FCN) : Free Stock Analysis Report

Universal Display Corporation (OLED) : 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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Zacks Investment Research