Launched on 06/07/2017, the Nuveen ESG Emerging Markets Equity ETF (NUEM) is a smart beta exchange traded fund offering broad exposure to the Broad Developed Market ETFs 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $214.49 million, this makes it one of the average sized ETFs in the Broad Developed Market ETFs. NUEM is managed by Nuveen. NUEM, before fees and expenses, seeks to match the performance of the TIAA ESG Emerging Markets Equity Index.
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 0.36% for NUEM, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.83%.
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.
Taking into account individual holdings, Taiwan Semiconductor Man /twd/ accounts for about 7.92% of the fund's total assets, followed by Alibaba Group Holding Lt /hkd/ and China Construction Bank- /hkd/.
Its top 10 holdings account for approximately 18.6% of NUEM's total assets under management.
Performance and Risk
So far this year, NUEM has added roughly 4.09%, and was up about 8.51% in the last one year (as of 09/25/2023). During this past 52-week period, the fund has traded between $22.51 and $29.01.
NUEM has a beta of 0.75 and standard deviation of 19.51% for the trailing three-year period. With about 249 holdings, it effectively diversifies company-specific risk.
Nuveen ESG Emerging Markets Equity ETF is a reasonable option for investors seeking to outperform the Broad Developed 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 $7.11 billion in assets, iShares ESG Aware MSCI USA ETF has $12.20 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 Developed Market ETFs.
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 key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.