Nuveen has launched a trio of semi-transparent US equity ETFs that replicate the strategies of three existing mutual funds – funds which collectively house more than $7.5bn in assets – already offered by the New York-based asset manager.
Jordan Farris, Managing Director, Head of ETF Product at Nuveen.
The ETFs have been listed on NYSE Arca and represent Nuveen’s first foray into the active ETF segment.
They are the Nuveen Small Cap Select ETF (NSCS US), the Nuveen Dividend Growth ETF (NDVG US), and the Nuveen Winslow Large-Cap Growth ESG ETF (NWLG US).
The ETFs utilize the NYSE’s active ETF structure, known as the NYSE AMS (Actively Managed Solution), which enables managers to avoid disclosing daily portfolio holdings while maintaining the tax efficiency, liquidity, and lower costs typically associated with regular ETFs.
The NYSE AMS model uses a proxy portfolio that closely tracks an ETF’s performance but has a different composition and weighting to the ETF’s actual holdings.
The proxy portfolio reflects the economic exposures and risk characteristics of an ETF’s actual portfolio and closely replicates intraday performance. It is thus able to provide market makers with enough information to offer competitive bids and asks on the ETF while mitigating the risk of front-running.
The ETFs
The Nuveen Small Cap Select ETF is managed by portfolio manager Greg J. Ryan and replicates the strategy behind the $150m Nuveen Small Cap Select Fund. The strategy seeks long-term capital appreciation by investing in US-listed small-cap equities that are trading at a discount to intrinsic value and where a positive catalyst for change is present. Quality companies with the potential to grow are emphasized. The ETF is benchmarked to the Russell 2000 Index and comes with an expense ratio of 0.85%.
The Nuveen Dividend Growth ETF is managed by David Park and David Chalupnik, co-Heads of Santa Barbara Asset Management, a Nuveen subsidiary specializing in high-conviction equities investing. Chalupnik also serves as Head of Active US Equity Portfolio Management at Nuveen. The ETF replicates the strategy powering the $6.6bn Nuveen Santa Barbara Dividend Growth Fund – the strategy seeks both income and capital appreciation by investing in high-quality companies with sustainable dividend growth. US-listed stocks from across the market capitalization spectrum are eligible for inclusion, while up to 25% of the portfolio may be allocated to non-US-based companies, including American Depository Receipts. The ETF is benchmarked to the S&P 500 and comes with an expense ratio of 0.64%.
The Nuveen Winslow Large-Cap Growth ESG ETF is managed by Justin H. Kelly, CEO and CIO of Winslow Capital Management, another subsidiary of Nuveen that focuses on growth investing. The ETF replicates the strategy behind the $880m Nuveen Winslow Large-Cap Growth ESG Fund – the strategy seeks long-term capital appreciation by investing in quality, large-cap companies with above-average earnings growth and robust environmental, social, and governance (ESG) characteristics. The ETF is benchmarked to the Russell 1000 Growth Index and comes with an expense ratio of 0.64%.
Jordan Farris, Managing Director, Head of ETF Product at Nuveen, said: “Delivering Nuveen’s best thinking in an active ETF format is an intuitive evolution of our proud tradition of active management. These proven equity strategies incorporate our unique combination of expertise in stock selection, analytics, and portfolio modeling with product structuring capabilities across the scale of our $1.2 trillion platform. We are committed to providing choice to clients within their preferred wrapper and the opportunity to build portfolios across our range of products, including mutual funds, closed-end funds, and both index and active ETF options.”
The funds complement Nuveen’s line-up of 13 passively managed ETFs.