Alternative assets like office buildings, farmland and loans to midsized businesses will help investors meet their goals as interest rates stay low, said Jose Minaya, CEO of Nuveen, the $1.1 trillion asset management arm of TIAA.
Roughly a quarter of Nuveen’s investments are in so-called alternative options, which Minaya said can pay returns well above typical stock or bond investments over time, especially with a dovish U.S. Federal Reserve.
“If you stick to a traditional portfolio, hitting your targeted returns over the next five or 10 years is highly unlikely,” said Minaya in an interview on Wednesday for the Reuters Global Investment Outlook Summit 2021.
While investors didn’t need alternatives for the last decade, he said, now “we’re living in this environment where finding income and finding diversification is growing ever more challenging.”
Nuveen has Global Cities REIT, a non-listed product sold through brokers that invests in assets in cities likely to benefit from trends such as urbanization, technology and aging populations. In addition to big capital cities these include places like Philadelphia, Pennsylvania, Osaka in Japan and Lyon in France.
Holdings include industrial real estate, which is in demand especially for logistics operations as companies like Amazon.com Inc boost home-delivery sales, Minaya said.
“The infrastructure is having a really hard time keeping up, which is why returns have been so great,” he said. Multifamily housing and home rentals in some areas are also attractive, he said.
Nuveen also owns several shopping malls in China including in Wuhan, the city where the coronavirus first spread widely. Shopper numbers have been strong as lockdowns eased, Minaya said. “The sales and the foot traffic were exponential. People were ready to go back, they were ready to spend,” he said.
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