Nuveen has expanded its line of NuShares exchange traded funds with another fixed-income offering, helping bond investors gain core exposure to the short-end of the yield curve with a smart beta twist.
Nuveen recently launched the NuShares Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF (NYSEArac: NUSA). NUSA comes with a 0.20% expense ratio.
The NuShares Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF tries to reflect the performance of the BofA Merrill Lynch Enhanced Yield 1-5 Year US Broad Bond Index, which is represented by a modified version of the more widely observed BofA Merrill Lynch 1-5 Year US Broad Market Index.
The Enhanced Index does not weight components by market capitalization, instead opting to assign components into a variety of categories based upon asset class, sector, credit quality and maturity. The smart beta indexing methodology then utilizes a rules-based process to include higher weights to categories with higher yields while maintaining risk and credit quality at levels similar to the Base Index.
The smart beta bond ETF will largely include U.S. dollar-denominated investment-grade taxable debt securities with remaining term to final maturity of less than five years and at least one year until final maturity.
NUSA will help provide investors with “enhanced yield potential relative to the short-term, taxable investment grade fixed income market with comparable risk, a diversified core allocation in an income portfolio and exchange-traded liquidity and transparency,” according to Nuveen.
Current sector allocations include corporate debt 50.2%, securitized debt 27.0% and U.S. Treasury 22.8%.
Credit quality breakdown includes 46.8% AAA-rated, 6.3% AA, 17.9% A and 29.0% BBB.
NUSA’s underlying index shows a 2.13% yield to worst and an effective duration of 2.88 years.
The new short-term, smart-beta ETF will also complement Nuveen’s recently launched ETF alternative to the benchmark Barclays U.S. Aggregate Bond Index, the NuShares Enhanced Yield U.S. Aggregate Bond ETF (NYSEArca: NUAG).
For more information on new fund products, visit our new ETFs category.