By Jose Minaya, CEO of Nuveen
In a world that seems to reinvent itself faster than ever, it’s the words of an ancient Greek philosopher that still ring true today. It’s also how we at Nuveen see the economy unfolding for the foreseeable future. Uncertainty and volatility are likely here to stay, fuelled by tensions between Russia and Ukraine, rate fluctuations, inflation pressures and supply chain challenges. But as the pandemic continues to evolve, we don’t believe we’re entering another “new normal” – just more of what Heraclitus would recognize as life’s only constant. And helping investors manage their portfolios through continuous change is what shapes our approach to investing.
We invest to create an enduring impact on our world, and as the asset manager for our parent company, TIAA, we’re responsible for the performance of a wide range of portfolios, including those of a third of all financial advisors in the U.S., 15,000 institutions around the world and sovereign pensions in 24 countries, along with the retirement outcomes of five million people working in higher education, healthcare and civil service. But we’re also asset owners, investing alongside our clients to ensure that our goals and objectives are aligned with theirs. As a result, we’re always engaging with clients to understand their perspectives so we can create solutions that tackle the issues and challenges that are important to them, and often shared by us.
Those engagements typically start with a discussion around income. We know what clients want: stable income flows with minimal levels of risk to meet their long-term portfolio goals. With more than 120 years of experience in managing assets designed for that purpose we understand the criticality and complexity of that ask. Persistent low yields have opened the door in recent years to alternative sources of income, including real estate, real assets, private markets and private credit. And because of our scale and the expertise of our investment teams, we get to work with large institutions around the world to help our investors gain access to these harder-to-reach asset classes. To manage portfolios through periods of rapid change, our solution is to diversify, an aspect of investing where we believe we truly excel.
It is our belief that expanding investment choices across asset classes can help investors achieve higher yields while at the same time lowering portfolio risk, and data from a survey we conducted of 700 global institutional investors found that almost 60% of them employ a multi-asset strategy for that very reason. But nowadays diversification goes way beyond a traditional 60/40 split between equities and fixed income: it’s about finding the right mix of public, private, traditional and alternative investments. At Nuveen we’ve expanded our considerations to include munis for tax optimization, private assets to mitigate volatility, real estate and real assets to hedge against inflation, private and floating rate credit to combat rising interest rates and ESG factors to address climate change risks.
Not long ago, discussing the importance of diversification would have taken up most of our conversation with clients, but now they’re asking us for something more: help in aligning their capital to their values without giving up returns. Responsible Investing, and ESG in particular, occupies a more prominent role today in our engagements with clients and companies. But whenever I’m asked how many basis points I’m willing to sacrifice for ESG factors, my answer is “zero.” Over the last five years sustainable funds have done well in both up and down markets relative to their more conventional peers, with Morningstar reporting that 88% of the ESG indices it has tracked since 2016 have outperformed their broad market equivalents. That’s in part because governance factors appear to be well in hand, and institutional investors are long-practiced at proxy voting and engaging with company boards and management. Environmental factors, including climate change and renewable energy transitions, are in sharp focus now, and in the wake of COP26 we’re beginning to see that governments that want to limit global warming, and corporations with mandates and pledges to do so, are considering multiple options. And social factors are beginning to deliver compelling risk-adjusted returns for portfolios. We believe that Responsible Investing will continue to gain momentum as clients look to further mitigate risk from material ESG issues while also seeking new growth opportunities across a wide range of public and private asset classes.
Growth in support of our clients is the name of the game for all of us at Nuveen this year. To support channels moving at an even faster pace toward alternative assets, we’re building teams to find new opportunities. To better meet the needs of our clients in a fluid global market, we’re expanding our presence internationally and leveraging technology to connect our employees around the world to create scale and seek alpha in more places. And to enhance the client experience, we’re working hard to bring innovative capabilities to market in a variety of areas, including ESG customization, all while we continue to monitor the impacts and changes brought on by COVID-19.
I became the CEO of Nuveen right at the start of the pandemic, and I’ve learned that in some ways this crisis has brought us closer than ever before, supported by technology and innovation. We leveraged things like video calls and virtual conferences to stay in touch with each other, maintain efficiency and productivity, and even accelerate our business plans. But two years later, we now know that working remotely has made it far more difficult to maintain at least one crucial aspect of this firm: our culture. Building a collective culture is critical to the way we develop talent and engage with clients and stakeholders. And I strongly believe that spending more time together, in whatever way we can do so safely, is the right way to drive the development and engagement we need in order to grow and serve our clients and each other in the turbulence ahead.
In times of uncertainty and volatility it’s easy to lose sight of what’s important, but we know that on every continent there are people from all walks of life depending on us to grow and protect their retirement plans and financial futures. We thank them for their continued trust and confidence in our ability to do that, and our commitment to them remains steadfast: no matter how much the world changes, serving our clients will always be our most important responsibility. That is the one constant in life that we at Nuveen can guarantee.