This site has been created for exclusive use by institutional investors only and does not take into account investment objectives, financial situation or specific needs of any individual investor. Information should not be the sole basis for any investment decision.
If you are not an institutional client, consultant or financial professional and are looking for more information about mutual funds and other products at Nuveen, please visit our site at www.nuveen.com.
Past performance is not a guarantee of future performance. All investments involve some degree of risk including loss of principal. Investment objectives may not be met.
By agreeing you are confirming you are being truthful, acknowledging you have read the information above and accept the terms and conditions set out with this site and meeting the intended audience requirement for this site. Not all content on this site is appropriate or applicable for the general public and we cannot guarantee consequences with the use of this information by unauthorized or unintended users. Content on this site may not be redistributed and is for informational purposes only and does not constitute investment advice or provide a solicitation of an offer to buy any security.
Managing the threat of low rates: build a resilient portfolio
My team and I have to find new ways to create a sustainable retirement experience for our plan participants. Investments like traditional bond funds that used to provide solid single-digit annual returns now struggle to provide a long-term return above zero. And that’s an issue that all investors grapple with.
It’s not just about more yieldCritically, the answer is not just about finding more yield. First, we all need to change our mindset and approach. As conditions get tighter, we must increase our discipline and carefully catalogue our risk profiles. It’s more important than ever to focus on the risks we’re comfortable taking as we look to generate more income. Furthermore, we need to work as hard as we can to diversify those sources of income, knowing that the risks we are concerned with today may be different than those that impact us tomorrow. This is an important consideration for long-term investing.
Which leads us to a phrase I’ve been using a lot lately: Now is the time to build a resilient investment portfolio. Proper long-term investing is not about taking outsized risks, hoping to time the markets correctly. Rather, it’s about taking a long-term view and finding investments that can succeed in a variety of economic scenarios.
Taking on more liquidity riskSo what are we doing? We carefully analyzed our risk profile in the General Account and are deliberately taking on more illiquidity risk, through allocations to assets such as middle market loans and a host of real assets. Industrial real estate and farmland are examples. They offer yield premiums in exchange for less liquidity while also providing some protection against inflation. We’re also taking on different kinds of credit risk by shifting into areas like private commercial mortgages.
These sorts of shifts may be specific to the needs and advantages of the General Account, but the themes can be applied to almost all institutional and individual investors: Think long-term, diversify your sources of income, identify your specific investment advantages, be deliberate about what risks you are willing to take and focus on portfolio resiliency.
Choose your partners wiselyOne final point: Today is also the time for investors to think about who they trust to help manage their assets. I firmly believe in the advantages of partnering with investment managers and plan providers who have the financial strength and ability to socialize risks across broad asset pools, who have proven track records of finding income opportunities and significant experience in creating sustainable and resilient portfolios.
The lower-for-longer interest rate environment is an enormous risk. In fact, it can be considered an existential threat for some investors.