Building Durable Income for Today’s Markets | ETF Trends

Unprecedented policy responses to combat the COVID-19 crisis have resulted in bond yields near historic lows. In this uncertain environment, how can advisors still deliver sustainable income for their clients?

In the upcoming webcast, Building Durable Income for Today’s Markets, Margaret Leung, Head of Specialist Distribution, Nuveen, and Brian Griggs, Vice President, Solutions Specialist, Nuveen, will focus on income and its importance as part of a well-diversified investment portfolio in an evolving market environment.

For example, the Nuveen Enhanced Yield 1-5 Year U.S. Aggregate Bond ETF (NYSEArca: NUSA) and the Nuveen Enhanced Yield U.S. Aggregate Bond ETF (NYSEArca: NUAG) may help fixed-income investors take an alternative approach to bond investing.

The Nuveen 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.

Similarly, NUAG seeks to offer enhanced yield relative to the broad, investment-grade fixed income market with comparable risk and credit quality by reflecting the BofA Merrill Lynch Enhanced Yield US Broad Bond Index (Enhanced Index), which is designed to capture the U.S investment grade fixed income market broadly.

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.

There is also an option for fixed-income investors who are interested in socially responsible investments. For example, the Nuveen ESG U.S. Aggregate Bond ETF (NYSEArca: NUBD) and the Nuveen ESG High Yield Corporate Bond ETF (NUHY) helps fixed-income investors pair their bond investment needs with environmental, social, and governance, or ESG, principles.

At Nuveen, the money manager employs several other ESG criteria to better target companies that exhibit socially responsible characteristics. For example, Nuveen employs an ESG rating to capture an issuer’s performance on key ESG risks relative to peers, a controversy score that captures an issuer’s exposure and response to event-driven controversies, a controversial business investment component that captures an issuer’s activity in industries that may cause significant social harm and low-carbon criteria that captures the carbon intensity of an issuer based on involvement in specific industries.

Financial advisors who are interested in learning more about fixed-income strategies can register for the Thursday, October 1, webcast here.