Today's listings

USA

Nuveen goes for ESG bond fund, with exceptions

Nuveen has listed a new ESG bond ETF to add to its growing range of ESG funds, the ESG US Aggregate Bond ETF (NUBD).

NUBD uses an interesting method. It starts with the MSCI US Aggregate ESG Select Index as its "base index", according to its prospectus, and then selects debts from the base index that match its ESG criteria.

Companies involved in "controversial businesses" are excluded under its ESG rules. Controversial businesses include the usual suspects like tobacco and weapons, but also less controversial ones like alcohol and nuclear power. Companies that fail to publish ESG information are also ruled out.

Beyond these exclusions, NUBD's ESG criteria are unspecific, ranging from how companies treat their employees, to their natural resource use, to their "governance practices and business ethics." The prospectus does not say whose data will be used to assess ESG performance.

Curiously, mortgage-backed and asset-backed securities get special treatment. They can be plucked up "without reference to ESG criteria," the prospectus says.

Today's news from around the web

As political conditions change, active managers will win

Opinion piece. As governments unwind the interventions they made during the 2008 financial crisis, the gap between best and worst performing companies will grow. As it does, active managers will have the edge as their research tells them which companies will outperform. Index tracking funds cannot do this because they don't do any research.

Collapsing stock correlations and lower fees improve mutual funds performance

For the first time in at least 15 years, the majority of active funds beat their benchmarks. It's a refreshing change, as for the past 10 years less than 15 percent have done so. Why the sudden change? Record low stock correlations may be one explanation. But ETFs forcing active managers to cut their fees is a better one.

Don't be afraid of market capped indexes

Some investors fear market capped indexes. They think market capping promotes herd behaviour and sends dumb money after big companies. The point is correct, but a strawman. Traders police marginal prices. If stocks get inflated they can move in and arbitrage, correcting the market. But passive investing depends on traders, who they tend to follow.