A sound investment process and strong management team underpin Nuveen Enhanced Yield US Aggt Bd ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in A rated bonds and debt with seven- to 10-year maturities compared with category peers. The team managing the passive product drives the strategy's Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Nuveen Enhanced Yield US Aggt Bd ETF earns a High Process Pillar rating.    The main contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Strong risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.1 stars, influences the rating as well.

 Compared with other funds in the Intermediate Core Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the average strategy in the category, the managers have been meaningfully underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, there's been a bias away from debt with seven- to 10-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with seven- to 10-year maturities than peers. Finally, during the past few years, the fund leaned away from securitized debt. In recent months, the strategy also had less exposure to securitized debt compared to its peers.

 This strategy's 12-month yield is 4.1%, higher than its average peer's 3.6%. In addition, it has a 4.8% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, higher yields come at the cost of higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

High

Process

Nuveen’s team earns an Above Average People Pillar rating. The main contributor to the rating is its parent firm's five-year success ratio of 51%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. A low cost, with fees that rank in its category's least expensive fifth, also strengthens the rating. A higher expense ratio reduces net returns, so low costs give this team an advantage. Lastly, the rating is limited by the turnover of its management team. The fund last saw a manager change 11 months ago, which suggests that it could do more to retain its portfolio managers.

Above Average

People

Nuveen has accomplished years of refinement, but a handful of areas keep it from landing among the industry’s best. It retains an Average Parent rating.
Nuveen is the asset-management arm of TIAA. TIAA purchased Nuveen in October 2014 and in January 2017 announced that Nuveen would become the umbrella brand for all its asset-management capabilities, including the legacy Nuveen and TIAA investment teams and their affiliates. 
Since then, a dramatic transformation has taken place. This includes merging all but one affiliated investment team into centralized equity and fixed-income groups, which are now among the industry’s largest. All operations, technology, and sales functions were centralized and modernized; in 2019, the firm rolled out a comprehensive long-term incentive plan that has helped attract and retain talent, and the previously expansive investment lineup has been mostly cleaned up.
Nuveen’s investment strengths are predominantly in fixed income and real assets. While its municipal team is among the industry’s more ubiquitous, its aggressive approach has been a sticking point for several years. Its experienced equity team hasn’t distinguished its performance from peers’. Finally, CEO Jose Minaya has built a robust management team, but several of them are recent outside hires and so it will take time to see how they integrate with Minaya’s modernized vision for the firm.

Average

Parent

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