Is Nuveen ESG Small-Cap ETF (NUSC) a Strong ETF Right Now?

The Nuveen ESG Small-Cap ETF (NUSC) made its debut on 12/13/2016, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Growth category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Nuveen, and has been able to amass over $1.08 billion, which makes it one of the average sized ETFs in the Style Box - Small Cap Growth. Before fees and expenses, NUSC seeks to match the performance of the TIAA ESG Small-Cap Index.

The Nuveen ESG USA Small-Cap Index composed of equity securities issued by small-capitalization companies listed on U.S. exchanges.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for NUSC are 0.31%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.26%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

NUSC's heaviest allocation is in the Financials sector, which is about 18.90% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.

Taking into account individual holdings, East West Bancorp Inc (EWBC) accounts for about 1.02% of the fund's total assets, followed by Gamestop Corp.(new) Cl. A (GME) and Technipfmc Plc (FTI).

Its top 10 holdings account for approximately 8.73% of NUSC's total assets under management.

Performance and Risk

The ETF has lost about -8.96% and is down about -3.40% so far this year and in the past one year (as of 05/07/2025), respectively. NUSC has traded between $33.38 and $46.20 during this last 52-week period.

NUSC has a beta of 1.08 and standard deviation of 22.11% for the trailing three-year period. With about 471 holdings, it effectively diversifies company-specific risk.

Alternatives

Nuveen ESG Small-Cap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

IShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) tracks ----------------------------------------. IShares ESG Aware MSCI USA ETF has $12.67 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $24.45 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Growth.

Bottom Line

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.

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This article originally published on Zacks Investment Research (zacks.com).

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