Nuveen Investments, a division of TIAA Global Asset Management, launched its first ETF today under the brand NuShares.
Martin Kremenstein, an ETF veteran, has been leading the new ETF effort at Nuveen. NuShares Enhanced Yield U.S. Aggregate Bond ETF (NYSEArca: NUAG) seeks to offer enhanced yield relative to the broad, investment-grade fixed income market with comparable risk and credit quality. “This ETF allows us to serve sector of the fixed income utilizing the expertise of Nuveen fixed income expertise,” said Kremenstein. The ETF is listed on NYSE Arca.
Positioned as a distinct alternative to market-cap weighted strategies, NUAG offers diversified fixed income market exposure coupled with access to the investment expertise of TIAA.
“The fund seeks to track the investment results, before fees and expenses, of the BofA Merrill Lynch Enhanced Yield US Broad Bond Index, a rules-based index designed to enhance income potential while seeking to maintain risk and credit quality at levels similar to that of the BofA Merrill Lynch US Broad Market Index,” according to Nuveen. “NUAG may be an attractive addition to a portfolio as a diversified core fixed income allocation.”
The BofA Merrill Lynch Enhanced Yield US Broad Bond Index (Enhanced Index) is designed to broadly capture the U.S investment grade fixed income market.
Rather than weighting by capitalization, the Enhanced Index assigns component securities into a variety of categories based upon asset class, sector, credit quality, and maturity, and then uses a rules-based methodology to allocate higher weights to categories with the potential for higher yields without significantly increasing risk or decreasing credit quality.
Aggregate bond ETFs, such as the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG), which tracks the Barclays Aggregate Bond Index, are favorites among advisors and investors, but these funds are often heavily allocated to Treasuries, implying some level of vulnerability should interest rates climb. With plenty of assistance from the Federal Reserve’s refusal to raise interest rates to this point in 2016, fixed income exchange traded funds have been favored destinations for advisors and investors. Four of this year’s top 10 asset-gathering ETFs are bond funds.
Last year, Nuveen revealed plans to convert some of its commodities mutual funds to ETFs as part of its effort to reenter the ETF business.
Nuveen has not been completely absent from the ETF business. The firm partners with State Street’s (NYSE: STT) State Street Global Advisors unit on at least seven fixed income ETFs, including the SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSEArca: HYMB), SPDR Nuveen Barclays Build America Bond ETF (NYSEArca: BABS) and the SPDR Nuveen Barclays Municipal Bond ETF (NYSEArca: TFI).