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Is Nuveen ESG LargeCap Growth ETF (NULG) a Strong ETF Right Now?

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A smart beta exchange traded fund, the Nuveen ESG LargeCap Growth ETF (NULG - Free Report) debuted on 12/13/2016, and offers broad exposure to the Style Box - Large Cap Growth category of the market.

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.

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

NULG is managed by Nuveen, and this fund has amassed over $795.64 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Growth. Before fees and expenses, this particular fund seeks to match the performance of the TIAA ESG USA Large-Cap Growth Index.

The TIAA ESG USA Large-Cap Growth Index is comprised of equity securities of large capitalization companies listed on US exchanges & meet ESG criteria & exhibit overall growth style characteristics based on long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate, long-term historical EPS growth trend & long-term historical sales per share growth trend.

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 NULG are 0.25%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.28%.

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.

For NULG, it has heaviest allocation in the Information Technology sector --about 42.80% of the portfolio --while Healthcare and Consumer Discretionary round out the top three.

When you look at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 12.11% of the fund's total assets, followed by Tesla Inc (TSLA - Free Report) and Nvidia Corp (NVDA - Free Report) .

The top 10 holdings account for about 36.54% of total assets under management.

Performance and Risk

The ETF has lost about -26.96% and is down about -22.17% so far this year and in the past one year (as of 09/20/2022), respectively. NULG has traded between $46.26 and $74.13 during this last 52-week period.

NULG has a beta of 1.11 and standard deviation of 27.08% for the trailing three-year period. With about 97 holdings, it effectively diversifies company-specific risk.

Alternatives

Nuveen ESG LargeCap Growth ETF is a reasonable option for investors seeking to outperform the Style Box - Large 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 $6.29 billion in assets, iShares ESG Aware MSCI USA ETF has $21.94 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 - Large 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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