A smart beta exchange traded fund, the Nuveen ESG LargeCap Value ETF (NULV – Free Report) debuted 12/13/2016 and offers broad exposure in the “Style Box – Large Cap Value” category of the market.
What are smart beta ETFs?
The ETF industry has traditionally been dominated by products based on market cap weighted indices designed to reflect the market or a specific segment of the market.
Market cap weighted indices offer a cheap, convenient and transparent way to track market returns and are a good option for investors who believe in market efficiency.
But there are some investors who would rather invest in smart beta funds; These funds follow weighted, non-cap strategies and are a good option for those who prefer to pick great stocks to beat the market.
By attempting to select stocks that have a better chance of risk-reward performance, uncap-weighted indices are based on certain fundamental characteristics, or a combination of these.
The smart beta space offers investors many different options, from equal weighting, one of the simplest strategies, to more complicated ones such as fundamental and volatility/momentum based weighting. However, not all of these methods have been able to produce notable returns.
Fund Sponsor & Index
The fund is managed by Nuveen. NULV has accumulated over $1.48 billion in assets, making it one of the average-sized ETFs in the Style Box – Large Cap Value. Before fees and expenses, NULV aims to match the performance of the TIAA ESG USA Large-Cap Value Index.
The TIAA ESG USA Large-Cap Value Index includes equity securities issued by large-capitalization companies that are listed on US exchanges. It uses a rules-based methodology that aims to provide investment exposure that generally tracks large-cap value benchmarks through a portfolio of securities that adhere to predetermined ESG, controversial business holdings and low-carbon criteria.
costs and other expenses
Because cheaper funds tend to outperform more expensive funds, all other factors being equal, it’s important for investors to pay attention to an ETF’s expense ratio.
Annual operating expenses are 0.25% for this ETF, putting it on par with most peer products in this space.
The fund has a 12-month trailing dividend yield of 1.88%.
Sector exposure and top holdings
Although ETFs offer diversified exposure that minimizes the risk of individual stocks, it’s still important to research a fund’s holdings before investing. Fortunately, most ETFs are very transparent products, disclosing their holdings on a daily basis.
For NULV, it has the largest allocation to the financials sector — about 18.20% of the portfolio — while healthcare and consumer staples round out the top three.
Taking individual holdings into account, Procter & Gamble Co/the (PG – Free Report) accounts for approximately 3.14% of the fund’s total assets, followed by Coca-Cola Co/the (KO – Free report) and Pepsico Inc (PEP – free report).
NULV’s top 10 holdings account for about 23.89% of total assets under management.
performance and risk
So far this year, the NULV has lost about -14.34% and has fallen about -8.65% over the last year (as of 09/19/2022). Over the past 52 weeks, the fund has traded between $32.39 and $39.88.
NULV has a beta of 0.91 and a standard deviation of 23.38% for the last three year period. With around 104 investments, it effectively spreads the company-specific risk.
The Nuveen ESG LargeCap Value ETF is an excellent option for investors looking to outperform the Style Box – Large Cap Value segment of the market. There are other ETFs in the space that investors might want to consider as well.
IShares ESG Aware MSCI EAFE ETF (ESGD – Free Report) forms the MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU – Free Report) tracks the MSCI USA ESG Focus Index. The IShares ESG Aware MSCI EAFE ETF has $6.27 billion in assets and the iShares ESG Aware MSCI USA ETF has $21.75 billion in assets. ESGD has an expense ratio of 0.20% and ESGU fees of 0.15%.
Investors looking for cheaper, lower-risk options should consider traditional market-cap weighted ETFs that aim to match the returns of the Style Box – Large Cap Value.
To learn more about this product and other ETFs, find products that fit your investment goals, and read articles on the latest developments in the ETF investing universe, please visit the Zacks ETF Center.