These ETFs Dodged The Kraft Heinz Massacre

Shares of packaged foods giant Kraft Heinz Co. KHC are down 30.6 percent over the past week and as has been reported, the impact of the company's $15.4 billion in non-cash writedowns, slashed quarterly dividend and other negative news was felt by some exchange traded funds.

What Happened

More than 160 U.S.-listed ETFs have some exposure to Kraft Heinz shares. Those funds run the gamut of traditional plain vanilla funds to dividend ETFs to smart beta and multi-factor strategies to value plays.

Count the NuShares ESG Large-Cap Value ETF NULV and the NuShares ESG Large-Cap Growth ETF NULG among the ETF that didn't own shares of Kraft Heinz prior to the stock's recent slide.

Why It's Important

Kraft's tumbling shares “underscore in ETF investing that premise that sometimes 'what you don't own' is as important of 'what you own' in any given ETF/Index strategy,” said Paul Weisbruch, head of ETF sales and trading at Dallas-based Esposito Securities, in a recent note.

As Weisbruch points out, neither NULV and NULG “KHC into the recent debacle because the company simply did not meet the funds' governing standards.”

Fourteen value ETFs own shares of Kraft Heinz and NULV is not one. As the names of both NULG and NULV imply, these are environmental, social and governance (ESG) funds.

NULV follows the TIAA ESG USA Large-Cap Value Index, which features “a portfolio of securities that adhere to predetermined ESG, controversial business involvement and low-carbon screening criteria,” according to Nuveen.

NULG, the growth fund, follows a similar index allocated to growth stocks that uses the same methodology and screening criteria as NULV's benchmark.

What's Next

“NULV is the fourth largest fund in the Nuveen suite having debuted at the same time as the aforementioned NULG in December of 2016,” said Weisbruch. “Like its name suggests, the fund is structured just like NULG in terms of its ESG mandate and standards.”

NULG is a growth ETF, so its weight to consumer staples is light at just 3.6 percent, meaning it's not surprising that Kraft Heinz does not dwell in that fund. On the other hand, NULV, the value ETF, has a 12.64 weight to the consumer staples sector.

NULV is up 3.31 percent over the past 12 months while the S&P 500 Value Index is lower by 1 percent over that period.

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