A smart beta exchange traded fund, Nuveen ESG Mid-Cap Growth ETF (NUMG) debuted on 12/13/2016, and offers broad exposure to the market’s Style Box – Mid Cap Growth category.
Products that are based on market cap weighted indices, which are strategies designed to reflect a specific market segment or the entire market, have traditionally dominated the ETF industry.
Market cap weighted indices work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way to mimic market returns.
But, there are some investors who would prefer to invest in smart beta funds; These funds track non-cap weighted strategies, and are a strong choice for those who like to pick good stocks to beat the market.
Non-cap weighted indices attempt to select stocks that have a superior potential for risk-return performance, based on specific fundamental characteristics, or a mix of other such characteristics.
Methods like equal weighting, simple one, fundamental weighting, and volatility/momentum based weighting are all options offered to investors in this area, but not all of them may give better returns.
The fund is managed by Nuveen, and has been able to raise over $345.44 million, making it one of the average-sized ETFs in the Style Box – Mid Cap Growth. NUMG seeks to match the performance of the TIAA ESG USA Mid-Cap Growth Index, before fees and expenses.
The Nuveen ESG USA Mid-Cap Growth Index is composed of equity securities issued by mid-capitalization companies listed on US exchanges.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain the same, it is important for investors to pay attention to the expense ratio of an ETF.
The annual operating expenses for this ETF are 0.31%, making it on par with most peer products in the sector.
The fund’s 12-month trailing dividend yield is 0.01%.
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also provide diversified exposure, which reduces single stock risk, although it is still important for investors to research a fund’s holdings.
This ETF has the heaviest allocation to the information technology sector – about 26.8% of the portfolio. Industrials and healthcare are in the top three.
Considering individual holdings, Quanta Services Inc. (PWR) accounts for about 5.7% of the fund’s total assets, followed by Grainger WW Inc. (GWW) and Comfort Systems USA Inc. (FIX).