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20/20 vision: A clearer path for growth

Global Investment Committee
Bringing together the most senior investors from across our platform of core and specialist capabilities, including all public and private markets
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Viewpoints from the Global Investment Committee

Our 2020 market and investment theme, “20/20 vision: a clearer path for growth,” was thrown for a loop in March. But we think this theme is starting to reemerge as the world recovers from the deepest (and perhaps shortest) recession in history. In the months ahead, we expect market volatility to remain elevated and portfolio construction to be more challenging, but Nuveen’s Global Investment Committee still sees value across asset classes. Regardless of outcome goal or type of investor, we remain committed to offering ideas for how to navigate today’s — and tomorrow’s — markets.

More from the Global Investment Committee

2020 Midyear Outlook: Views from the TIAA General Account

Nick Liolis,  TIAA General Account
When I spend time with clients of TIAA and Nuveen, I am often asked about the relationship between the two organizations. As the Chief Investment Officer of the TIAA General Account (GA), I have the unique privilege of being a TIAA employee while working as a client directly with portfolio managers throughout Nuveen, because the GA invests its assets in funds and accounts managed by Nuveen. In my role to oversee the investments and asset allocation of the GA, I sit in on Nuveen’s Global Investment Committee to discuss key issues such as income generation in a low yield environment directly with the investment leaders who manage the underlying GA assets.

In the coming quarters, we’ll dive deeper into topics such as asset allocation strategies, risk/return tradeoffs to meet income targets and the role of specific asset classes in the GA. But for now, I’d like to offer some perspective on the Nuveen/TIAA relationship. In short, Nuveen is the asset manager for TIAA, one of the world’s most highly rated and financially stable insurance companies that provides retirement solutions for employees in the education, research, health care and other service industries in the U.S. That means Nuveen is responsible for managing investment portfolios for a wide variety of individual and institutional investors around the world — including the TIAA General Account and its participants.

From my perspective as the GA CIO, I effectively “outsource” the underlying portfolio management of individual asset classes to the talented portfolio teams across Nuveen. My team and I set the overall asset allocation strategy, help manage TIAA’s balance sheet and look after the needs of our participants, while Nuveen’s investment teams manage our diverse portfolio of public assets (mostly fixed income instruments) and private assets (real estate, agriculture, timber and farmland equity, as well as private equity and credit). It’s a truly symbiotic relationship: The GA and I benefit from Nuveen’s deep and diverse investment insights and portfolio expertise; Nuveen, by being closely aligned with a large and financially diverse asset owner, sits on the same side of the table as clients, serving them as a like-minded partner that truly understands their goals and needs.

The underlying day-to-day nuances of how this actually works can be quite complex — and I look forward to discussing those specifics in future “Views from the GA.” At our midyear meeting, I was struck by how our clients and Nuveen’s portfolio teams were all grappling with reassessing portfolio risks, generating income in a low yield environment and the increasing need to incorporate environmental, social and governance factors into portfolios, as a way to generate alpha and manage risks. As a large institutional investor, we are dealing with the same issues.

The TIAA General Account and Nuveen have forged a connection that combines partnership and client relationship to benefit both organizations and also, critically, TIAA’s plan participants and Nuveen’s clients.

As part of his participation in Nuveen’s Global Investment Committee, Nick Liolis offers his perspective as an institutional investor and asset allocator. Neither Nick 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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Endnotes
Sources
All market and economic data from Bloomberg, FactSet and Morningstar.

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature.

Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

Glossary
Alerian MLP Index is the leading gauge of energy Master Limited Partnerships (MLPs). The float-adjusted, capitalization-weighted index, whose constituents represent approximately 85% of total float-adjusted market capitalization, is disseminated in real-time on a price-return basis (AMZ) and on a total-return basis (AMZX). Bloomberg Barclays High Yield Municipal Bond Index is an unmanaged index consisting of noninvestment-grade, unrated or below Ba1 bonds. Bloomberg Barclays Corporate High Yield 2% Issuer Capped Index measures the USD-denominated, high-yield, fixed-rate corporate bond market and limits each issuer to 2% of the index. Bloomberg Barclays Municipal Bond Index covers the USD denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and prerefunded bonds. Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency) Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Bloomberg Barclays U.S. Mortgage Backed Securities (MBS) Index tracks agency mortgage-backed pass-through securities. Bloomberg Barclays U.S. TIPS Index is an unmanaged index that includes all publicly issued, U.S. Treasury inflation-protected securities that have at least one year remaining to maturity, are rated investment grade, and have $250 million or more of outstanding face value. Cliffwater Direct Lending Index (CDLI) seeks to measure the unlevered, gross of fee performance of U.S. middle market corporate loans, as represented by the asset-weighted performance of the underlying assets of Business Development Companies. Credit Suisse Leveraged Loan Index is designed to mirror the investable universe of the $US-denominated leveraged loan market. BofA Merrill Lynch Preferred Stock Fixed Rate Index is designed to replicate the total return of a diversified group of investment-grade preferred securities. S&P Global Infrastructure Index is designed to track 75 companies from around the world chosen to represent the listed infrastructure industry while maintaining liquidity and tradability. To create diversified exposure, the index includes three distinct infrastructure clusters: energy, transportation, and utilities. JPMorgan Emerging Market Bond Index tracks the performance of bonds issued by developing countries. MSCI ACWI Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. MSCI US REIT Index is a free float-adjusted market capitalization weighted index that is comprised of Equity REIT securities. The MSCI US REIT Index includes securities with exposure to core real estate (e.g. residential and retail properties) as well as securities with exposure to other types of real estate (e.g. casinos, theaters). MSCI World High Dividend Yield Index targets companies with high dividend income and quality characteristics and includes companies that have higher than average dividend yields that are both sustainable and persistent. NCREIF Property Index is a quarterly time series composite total rate of return measure of investment performance of a very large pool of individual commercial real estate properties acquired in the private market for investment purposes only. S&P 500 Index is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. S&P U.S. Treasury Bond 1-3 Year Index is designed to measure the performance of U.S. Treasury bonds maturing in 1 to 3 years. S&P U.S. Treasury Bond 7-10 Year Index is designed to measure the performance of U.S. Treasury bonds maturing in 7 to 10 years.

A word on risk
All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time. Equity investing involves risk. Investments are also subject to political, currency and regulatory risks. These risks may be magnified in emerging markets. Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of income. Investing in municipal bonds involves risks such as interest rate risk, credit risk and market risk, including the possible loss of principal. The value of the portfolio will fluctuate based on the value of the underlying securities. There are special risks associated with investments in high yield bonds, hedging activities and the potential use of leverage. Portfolios that include lower rated municipal bonds, commonly referred to as “high yield” or “junk” bonds, which are considered to be speculative, the credit and investment risk is heightened for the portfolio. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes. Investments will be subject to risks generally associated with the ownership of real estate-related assets and foreign investing, including changes in economic conditions, currency values, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties. Socially Responsible Investments are subject to Social Criteria Risk, namely the risk that because social criteria exclude securities of certain issuers for non-financial reasons, investors may forgo some market opportunities available to those that don’t use these criteria. Investors should be aware that alternative investments including private equity and private debt are speculative, subject to substantial risks including the risks associated with limited liquidity, the use of leverage, short sales and concentrated investments and may involve complex tax structures and investment strategies. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits. Alternative investments are not suitable for all investors and should not constitute an entire investment program. Investors may lose all or substantially all of the capital invested. The historical returns achieved by alternative asset vehicles is not a prediction of future performance or a guarantee of future results, and there can be no assurance that comparable returns will be achieved by any strategy. Nuveen provides investment advisory services through its investment specialists.