Small-Cap Growth Without Dividends: What NUSC's 1.4 Beta Really Costs Investors

"Small-cap stocks have historically rewarded patient investors willing to endure volatility in exchange for growth potential. But what if you want that exposure while filtering for companies meeting environmental, social, and governance standards? That's the exact niche the Nuveen ESG Small-Cap ETF (NASDAQ:NUSC) attempts to fill, screening the small-cap universe for ESG compliance while maintaining broad diversification. NUSC tracks the TIAA ESG Small-Cap Index across roughly 500 companies, creating broad diversification within the ESG-screened universe."

"The portfolio's heavy concentration in Industrials and Financials creates a cyclical tilt that amplifies economic swings-when the economy expands, these sectors typically lead gains, but they also face steeper declines during downturns. This sector positioning reflects the fund's strategy of capturing small-cap growth while maintaining ESG compliance. The fund's 0.31% expense ratio positions it in the middle range for ESG ETFs, reflecting the additional research required for ESG screening."

"NUSC's recent performance tells a mixed story about ESG screening's impact. The fund lagged the Russell 2000 by over 5 percentage points in the past year, suggesting ESG exclusions may have filtered out some recent winners. However, the five-year view shows NUSC ahead by roughly 5 percentage points, indicating the screening hasn't consistently hindered returns. Since its 2016 launch, the broader small-cap market has captured more total upside, though both have delivered strong long-term gains for patient investors."

The Nuveen ESG Small-Cap ETF (NUSC) tracks the TIAA ESG Small-Cap Index and holds roughly 500 companies to provide broad ESG-screened small-cap exposure. The portfolio is concentrated in Industrials and Financials, producing a cyclical tilt that magnifies gains and losses with economic cycles. The fund charges a 0.31% expense ratio and emphasizes growth with minimal dividend income, suiting investors focused on capital appreciation. Recent performance lagged the Russell 2000 by over five percentage points in the past year, while a five-year view shows outperformance by about five points. Top holdings include Exact Sciences and Moderna alongside regional banks and specialty firms.

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