Last December, investment manager Nuveen jointly acquired One George Street, a Grade A office. This acquisition makes it the 14th asset of Nuveen Real Estate’s Asia Pacific Cities strategy, joining a growing list of prime real estate assets Nuveen has been snapping up including those in Sydney, Tokyo and Seoul.
From the perspective of Nuveen’s Simon England-Brammer, Head of EMEA & APAC Institutional, Global Client Group, the firm has barely started in this region. Hired to build Nuveen’s operations in Asia Pacific in 2016, England-Brammer has helped grow the firm’s presence in this region from practically zero to multiple offices including Hong Kong, Singapore and Seoul.
“We are looking at more opportunities, we’re looking across all of Asia,” England-Brammer says in an interview held at Nuveen’s own office within One George Street, which overlooks Raffles Place, the key commercial heart of Singapore.
Nuveen’s growth plans in this region are strongly backed by its history and the financial muscle its parent organisation can potentially bring to bear. Before being acquired by Teachers Insurance and Annuity Association of America (TIAA) in 2014, Nuveen had already made a name for itself in the US municipal bond market.
Following the acquisition, Nuveen became the dedicated investment manager of TIAA, and its assets under management (AUM) surged from US$200 billion to US$1.3 trillion by the end of 1Q2022. Only a handful of non-sovereign wealth funds can claim a similar scale.
Around half of the AUM is Nuveen’s proprietary capital while the remaining half are funds from third parties. That makes Nuveen both an asset owner and an asset manager. More often than not, when Nuveen invests on behalf of its clients, it is investing its own funds too — ensuring significant skin in the game.
Along with a much bigger AUM base, Nuveen has significantly expanded the scope of its investment activities both in terms of markets and asset classes.
Nuveen now mainly invests in three types of alternative investments, namely real estate, real assets and private capital, with various dedicated subsidiary entities focused on each of these major asset classes.
For example, Nuveen Real Estate, with nearly US$152 billion under management as of March 2022, is now ranked as the fifth-largest real estate asset manager. Out of this amount, US$108 billion has been allocated to equity in real estate companies, with the remaining US$44 billion in real estate bonds.
In addition to real estate, it also invests in some non-real estate physical assets. Via Nuveen Real Assets, it is the world’s largest farmland asset manager, managing this type of asset across the United States, Australia, Latin America and Europe. And it also invests in infrastructure and timberland projects.
Nuveen recently jointly acquired One George Street, which is a stone’s throw from the well-recognised headquarters of two leading Singapore banks, OCBC and UOB / Photo by Samuel Isaac Chua of The Edge Singapore
Institutional and private wealth
Given the more private, long-term nature of its investments, Nuveen’s clients are mainly institutional investors ranging from sovereign wealth funds to national pension schemes. Increasingly so, at least for Asia Pacific where a lot of new wealth is being created by entrepreneurs joining the growing ranks of ultra-high net worth individuals, Nuveen has a growing pool of private wealth clients too.
Generally, these clients have a certain investment appetite and horizon and can put up with lower liquidity in return for potentially higher returns. As such, Nuveen isn’t so focused on publicly quoted equities. By doing so, Nuveen can keep a clear eye on the longer-term view and not be swayed by the “high octane, high risk” characteristics of some listed companies.
England-Brammer explains that this “vanilla” investment philosophy stems from its traditional client base: the members of TIAA are, as the name suggests, teachers and professors. “They are looking for something which is far more long term, far more sustainable, repeatable and far more conservative in nature.”
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By investing in established, tenanted real estate such as One George Street, Nuveen can help clients ride through market cycles while diversifying their risk and return profiles, while also earning a steady income from the properties, says England-Brammer.
What Nuveen might do, upon owning the assets, is to see where it can add value. This includes undertaking refurbishment work that can help the property command a higher rental than before, thereby improving the overall value of the asset.
However, England-Brammer again stresses that Nuveen, as an investor, is a conservative one. As such, even with such asset enhancement activities, it is not about targeting a 100% return, but more of a steady incremental income, which is the driving factor behind Nuveen’s investment decisions.
Similarly for real estate, Nuveen’s approach to investing in infrastructure assets is one where the firm takes a longer-term view. According to England-Brammer, Nuveen tends to concentrate on assets such as wind farms and solar farms and the broader “clean tech” sector in general. Again, just like real estate, Nuveen goes for “existing platforms” that can start to generate a consistent level of income, which is the key, he says.
ESG: almost a prerequisite
Of course, investing in assets like wind and solar farms fit just right with an overall push toward business activities with a bigger ESG focus. According to research conducted by Nuveen, over two-thirds of institutional investors are planning to increase allocation to infrastructure, natural resources investments and other alternative assets, as they seek to reduce climate-related financial risk exposure and align portfolios with the transition to a sustainable low-carbon economy.
To be sure, Nuveen is no novice in this field of ESG. For five decades and counting, Nuveen has been championing responsible investing and building a better world. Nuveen received an A+ or A rating from UN PRI across all reported modules in 2020, and US$48 billion of its investment focus are on responsible investing strategies.
The way England-Brammer sees it, ESG has by now become “almost a prerequisite” and “integral” in almost everything done by Nuveen. ESG is also part of a broader group of investment themes such as diversity and inclusion, and responsible investing, that are in demand in certain markets.
“As the acronym ESG indicates, it is around the environment; it’s about social structures and governance, as well; it ranges from what are we doing from a carbon footprint perspective to how we manage our investments to whether the boards of companies we invest in are all men,” he says.
England-Brammer is also confident that the focus on ESG will not come at a cost of returns. He calls this belief a misnomer, as there’s already more than enough evidence to prove that companies doing better on ESG will outperform those that are not.
Protection from inflation
Investors today are facing pressure from a well-known yet unfamiliar front. For the better part of the year, governments, businesses and the investment community and consumers have all been trying to deal with growing inflationary pressures. Central banks are thus compelled to raise rates, thereby causing implications for investment returns and investment decisions.
England-Brammer believes Nuveen’s clients are well-positioned to deal with these externalities. “We are dealing with large institutions that have very well-diversified portfolios, which should give them some form of protection when it comes to interest rate movements and inflation cycles.”
He explains that the income Nuveen can expect to make from its real estate and infrastructure investments are inflation-linked, where revisions to the rent collected are linked to corresponding changes in inflation, forming a natural inflation hedge. For institutional investors, such asset classes can provide comfort and protection.
Now, with the fighting between Russia and Ukraine still ongoing, investors, naturally, have gotten more concerned about geopolitics, as well. However, that won’t necessarily change how Nuveen’s investors invest, says England-Brammer.
What may change is where they allocate their investment. As an example, they are still keen on real estate. Instead of investing in Eastern Europe, they would then look at potential real estate investments in Paris, Frankfurt, Berlin or London. “They’re not reducing their real estate exposure. They’re just shifting where it’s actually been allocated to. They’re not suddenly saying, ‘We don’t want real estate anymore, or we don’t want infrastructure anymore.’ It’s more about the geographic position,” explains England-Brammer.
As Nuveen takes a long-term view on investments, it is also mindful to promptly put capital entrusted by its investors to work instead of leaving the funds idle. The firm constantly taps its global network and its professionals help identify the assets Nuveen can promptly invest in. In a sense, Nuveen has the experience, the size and the speed. “We have a lot of funds, but we also pride ourselves on being able to actually put that to work relatively quickly,” says England-Brammer.
ESG integration is the consideration of financially material ESG factors in support of portfolio management for actively managed strategies. Financial materiality of ESG factors varies by asset class and investment strategy. Applicability of ESG factors may differ across investment strategies. ESG factors are among many factors considered in evaluating an investment decision, and unless otherwise stated in the relevant offering memorandum or prospectus, do not alter the investment guidelines, strategy or objectives. Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well