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Is Nuveen ESG SmallCap ETF (NUSC) a Strong ETF Right Now?

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The Nuveen ESG SmallCap ETF (NUSC - Free Report) 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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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

Because the fund has amassed over $1.08 billion, this makes it one of the larger ETFs in the Style Box - Small Cap Growth. NUSC is managed by Nuveen. NUSC, 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 0.30%, which makes it on par with most peer products in the space.

NUSC's 12-month trailing dividend yield is 7.22%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 17.10% of the portfolio. Information Technology and Consumer Discretionary round out the top three.

Taking into account individual holdings, Darling Ingredients Inc (DAR - Free Report) accounts for about 0.97% of the fund's total assets, followed by Siteone Landscape Supply Inc (SITE - Free Report) and First Horizon Corporation (FHN - Free Report) .

The top 10 holdings account for about 6.85% of total assets under management.

Performance and Risk

So far this year, NUSC has lost about -3.23%, and is up roughly 9.51% in the last one year (as of 01/11/2022). During this past 52-week period, the fund has traded between $39.82 and $47.48.

NUSC has a beta of 1.16 and standard deviation of 27.46% for the trailing three-year period. With about 645 holdings, it effectively diversifies company-specific risk.


Nuveen ESG SmallCap 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 - Free Report) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $7.54 billion in assets, iShares ESG Aware MSCI USA ETF has $25.52 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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