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Continuity amid change
Views from the TIAA General Account
In January, Emilia Wiener was named CIO of the TIAA General Account after six years serving as the head of fixed income. We spoke with her about the lessons she learned during this transition and how the General Account is positioned in the current macro environment.
How different is being a CIO from head of fixed income?
I think it's a bit like the difference between being the first violinist and being the conductor. The first violinist’s focus is on the performance of the violin section. The conductor’s focus needs to be broader. Their goal is to get all sections of the orchestra – woodwind, percussion, brass – to play cohesively and bring out the virtuosity in each of the musicians. They all need to work together to produce the right sound.
As CIO, not only am I operating in service of my immediate team, I am also part of a broader leadership team making a unique contribution given my specific expertise and experience. I’ve been able to gain insights and perspectives about the entire enterprise, its strategic direction, the challenges to be met and business initiatives to be pursued and bring along my immediate team in service of this larger remit. It’s humbling and exciting all at the same time.
As a new CIO, what advice can you give other investors when there’s a change in CIO at an external manager?
In our case, the CIO change occurred at the institutional investor level rather than at an external manager. However, there are many common considerations in either case.
The first is a well-constructed succession plan that can be implemented as designed. This ensures continuity and stability, which are key. At the General Account (GA), we took advantage of a relatively deep bench despite being a small team. Promoting from within created opportunities for personal and professional growth across the team and limited disruption given our well-established team dynamics and relationships with our business partners across the enterprise.
The second is from the investment process perspective. Investment strategies and objectives need to be clear, and the investment process should proceed seamlessly through a well-established asset allocation approach. There should be no abrupt change in investment philosophy. For the GA, TIAA’s mission is fully integrated in how we operate as a team and so our approach remains consistent.
How did you begin your investment career?
I started right out of college as a junior analyst in the private placement investment department of a small mutual insurance company called Mutual of New York. They supported me as I earned my MBA in Finance at NYU going to school at night. I worked with them through the demutualization process and helped to create its wholly owned asset manager subsidiary, MONY Capital Management. Shortly thereafter the company was acquired and so began my journey going deeper and broader into the investment field.
What’s different – good and bad – since you began?
I don't see things in terms of good or bad relative to when I started. The world changes continually and what I have learned is to appreciate the importance of evolving and not being stuck in what once was.
What motivates you?
One of the attractions for me joining TIAA when I did was the opportunity to help build out the GA office and flesh out the role of head of fixed income. To tackle something new, that was exciting and motivating to me.
I bring this genuine curiosity into all of my roles – as a team member, as a business partner, as a leader. I observe and ask a lot of questions, get input from everyone with the specific intent to gain perspective and deeper understanding to be proactive and make well-grounded decisions that help us move forward.
Can you give us an example?
The body of work that has been undertaken to address climate-related risks in the portfolio. As a business, we coalesced around the view that climate risk presented investment risk that we needed to manage.
I was part of the cross-functional team that charted a path for the General Account to begin reducing carbon intensity in our fixed income portfolio and in our directly owned real estate holdings. We did this knowing that there will be much more work ahead with many twists and turns along the way, but we understood the need to be thought leaders and remain agile as we adopt new tools and put our new knowledge into practice. It’s hard to learn and gain experience in a new field like this if you’re sitting on the sidelines. You have to get it first-hand.
How have rising rates affected the portfolio?
Rising interest rates actually benefit the GA as we are able to reinvest new participant flows and portfolio turnover at higher interest rates, all for the ultimate benefit of our participants.
That said, rising rates do have an impact on many of our non-fixed income investments that are carried at market value and, indirectly, on credit risk in the portfolio. Although we carry our fixed income investments at amortized cost, we review quarterly the market value of all holdings. In the event that an individual holding’s decline in market value is deemed to be other than interest rate related (i.e, driven by credit deterioration) such that the ability to recover full principal and interest per contract terms is questionable, the investment is written down and carried at the lower of cost or market value going forward. So far, impairment activity has been within our expectations.
Even though TIAA’s portfolio is global, highly diversified and comprised predominantly of investment grade fixed income bonds without significant credit concerns, we work closely with Nuveen to detect early signs of credit stress and take appropriate defensive actions.
And what are your and your team’s views on private vs publics in this environment?
The recent tilt towards private credit actually works well in this environment. Private credit is intensively underwritten and monitored by dedicated specialists at Nuveen and structured with protective covenants that can create opportunities to reset the risk/reward relationship in stress situations. If well-structured it can be a defensive strategy and we are clearly leaders in the space having engaged in investment grade private credit for over 40 years.
Public credit, on the other hand, has an important core role to play offering more immediate flexibility to reshape exposures, tap liquidity if needed and capture value during periods of dislocation and mis-pricing.
Alternatives, real estate and private equity are strategies that add diversification and make possible non-correlated returns through long-term capital value creation for the GA. These strategies have been important contributors to our overall investment performance and our ability to return value to participants. Our 2023 program continues to favor private credit and alternatives.
Rising interest rates actually benefit the GA as we are able to reinvest at higher rates, all for the ultimate benefit of our participants.
As part of her participation in Nuveen’s Global Investment Committee, Emilia Wiener offers her perspective as an institutional investor and asset allocator. Neither Emilia nor any other member of the TIAA General Account team are involved in portfolio management decisions for any third-party Nuveen strategies.
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