A strong management team and sound investment process underpin Nuveen ESG Small-Cap ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and has an overweight in volatility exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. 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

EMCOR Group

Service Corp

Murphy USA

US Foods Holding

SiteOne Landscape Supply

Advanced Drainage Systems

ChampionX

H&R Block

East West Bancorp

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Nuveen ESG Small-Cap ETF earns an Above Average Process Pillar rating. The main driver of 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. Excellent risk-adjusted performance also contributes to the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. 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 outperformed 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 TIAA ESG USA Small-Cap Index (the "index").  Under normal market conditions, 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. The index is comprised of equity securities issued by small-capitalization companies listed on U.S. exchanges that meet certain environmental, social, and and governance ("ESG") criteria. 

 The portfolio has allocations in its top two sectors, consumer cyclical and real estate, that are similar to the category. The sectors with low exposure compared to category peers are financial services and energy; however, the allocations are similar to the category. The portfolio is composed of 517 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 8.5% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 23.9%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 62% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Nuveen’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are two managers listed on the fund: Lei Liao, Philip Campagna. Experience on the team is abundant, with 14 years of average portfolio management experience. Together, they manage a total of 10 strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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

Nuveen ESG Small-Cap ETF

NUSC tracks a multi-factor-weighted index of small-cap companies listed on US exchanges. Holdings are screened for environmental, social, and governance (ESG) criteria.

Designed to provide broad exposure to the Style Box - Small Cap Growth category of the market, the Nuveen ESG Small-Cap ETF (NUSC) is a smart beta exchange traded fund launched on 12/13/2016.

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