Investors - APRIL 20, 2017

Nuveen enhances target-date fund offering with direct real estate allocation

by Released 4/20/17

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.

The real estate investments for the fund series will be made through TH Real Estate.

“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. 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,” said John Cunniff, managing director at TIAA Investments and portfolio manager of the TIAA-CREF Lifecyle Fund series, in a statement.

The real estate allocation of the TIAA-CREF Lifecycle Fund series will typically range between 1 percent to 5 percent of each portfolio’s assets, employing a core investment style focused on institutional-quality U.S. commercial real estate investments primarily in office, industrial, retail and multifamily 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, San Francisco and Washington, D.C.

While real estate allocations have long played an important role in the performance of defined benefit pension 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 advisers take a fresh look at their plans’ investment menus,” said Erin Donnelly, executive vice president and head of Defined Contribution Investment Only (DCIO) at Nuveen, in a statement.

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