A sound investment process and strong management team underpin Nuveen ESG 1-5 Year US Aggt Bd ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in AA rated bonds and debt with over 30-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

Nuveen ESG 1-5 Year US Aggt Bd ETF earns an Above Average Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. The largest contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.1 stars, also contributes to the process. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 50%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is: 

The investment seeks to track the investment results, before fees and expenses, of the Bloomberg MSCI 1-5 Year Aggregate ESG Select Index (the "index").  The index utilizes certain environmental, social, and governance (“ESG”) criteria to select from the securities included in a modified version of the Bloomberg 1-5 Year U.S. Aggregate Index, which is designed to broadly capture the 1-5 year U.S. investment grade, taxable fixed income market. Under normal market conditions, and the fund invests at least 80% of the sum of its net assets and the amount of any borrowings for investment purposes in component securities of the index.  

 This strategy's 12-month yield is 3.6%, which mirrors its average peer. Plus, it has a 4.3% 30-day SEC yield (a measure similar to yield-to-maturity). The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A. In terms of long-term interest-rate risk, this strategy is on par with peers. The longer a strategy's duration, the more sensitive it is to shifts in interest rates. This fund, with a 2.7-year duration, is expected to gain 2.7% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

Above Average

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 outperformed their respective category's median return for the period. A low cost, with fees that rank in its category's least costly 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.

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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