Nuveen enhances target-date fund offering with direct real estate allocation
Nuveen has added direct real estate investments as part of the allocation in its target-date fund series, the TIAA-CREF Lifecycle Funds.
This offering, the first in its kind to provide direct access to commercial real estate in target-date mutual funds, is designed to further diversify the portfolios, reduce risk and better position investors to meet their long term investment goals.
TIAA Investments, one of the largest managers of target-date fund assets in the industry, manages the TIAA-CREF Lifecycle Funds and received the 2017 Lipper Best Mixed Assets Large Fund Group Award for the second year in a row. The real estate investments for the fund series will be made through TH Real Estate which has over 70 years of experience managing real estate investments for institutional investors.
“The opportunity to include direct real estate as part of our TIAA-CREF Lifecycle Fund series allocation provides us with the ability to further diversify, reduce volatility and potentially improve investment outcomes,” says John Cunniff, managing director at TIAA Investments and portfolio manager of the TIAA-CREF Lifecyle Fund series. “We believe exposure to direct real estate alongside investments in equity and fixed income is central to building a well-diversified, long-term portfolio for investors.”
The real estate allocation of the TIAA-CREF Lifecycle Fund series will typically range between one to five per cent of each portfolios’ assets employing a core investment style focused on institutional-quality US commercial real estate investments primarily in office, industrial, retail and multi-family residential properties that seek to generate returns primarily from rental income with asset appreciation as a secondary goal. Core real estate assets are well-occupied properties with high-quality tenants with long-term leases often located in high barrier-to-entry markets such as New York, Washington DC and San Francisco.
While real estate allocations have long played an important role in the performance of defined benefit plan portfolios, they have been less accessible to defined contribution plan investors until now.
“More than a decade after regulations spurred the proliferation of target-date funds as the predominant investment vehicle in defined contribution plans, we’re now seeing plan sponsors and plan advisors take a fresh look at their plans’ investment menus,” says Erin Donnelly (pictured), executive vice president and head of Defined Contribution Investment Only (DCIO) at Nuveen. “With nearly 100 years of experience managing retirement assets, we’re thrilled to continue that legacy by leveraging the expertise of our specialised investment teams to deliver a target-date fund enhancement that allows plan participants to benefit from the unique investment advantages that direct real estate has to offer.”