Nuveen, an operating division of TIAA Global Asset Management, has premiered its NuShares exchange-traded fund platform with the launch of the NuShares Enhanced Yield US Aggregate Bond ETF (NYSE: NUAG).
Martin Kremenstein, Managing Director and Head of ETFs at Nuveen.
The fund tracks the BofA Merrill Lynch Enhanced Yield US Broad Bond Index. While maintaining comparable risk and credit quality characteristics as the broad US investment grade fixed income market, the index increases weights to securities and sectors that, according to a rules-based process, have the potential for higher return.
The index includes a variety of fixed income securities including US government bonds, US corporate debt, residential and commercial mortgage-backed securities, asset-based securities and US dollar-denominated debt securities issued by non-US governments and corporations.
It is well diversified with over 8,000 holdings and consists primarily of AAA-rated securities, making up 60.7% of the composition, while securities on the cusp of junk status, rated BBB, also play a significant role with a 33.4% allocation. The largest sectors are corporate debt (37.0%), securitized loans (31.5%) and US Treasury securities (22.9%). The index’s effective duration is 6.2 years. (Data as of 31 August 2016).
Martin Kremenstein, Managing Director and Head of ETFs at Nuveen, commented: “We are pleased to bring this new offering to the market, as we have worked diligently to create a product which improves the way to access a core asset class. The launch of the fund showcases the strengths of Nuveen and TIAA by combining the skill set and expertise of our market-leading taxable fixed income franchise with the product development, delivery and distribution capabilities of Nuveen.”
The fund has a total expense ratio (TER) of 0.20%.
The fund will compete with the WisdomTree Barclays US Aggregate Bond Enhanced Yield Fund (NYSE: AGGY). It has $108m in assets under management and a TER of 0.12%. Compared to the NuShares ETF, the fund has a greater percentage allocated to AAA-rated securities at 48.8%, while those rated A (26.3%) and those rated BBB (20.5%) also have significant allocations. Corporate bonds (49.3%) play a greater role in the fund, followed by mortgage backed securities (26.9%) and Treasury Notes (16.6%). It has a slightly higher effective duration of 6.7 years.