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TIAA's $929 Billion Nuveen Arm Explores Illiquid-Asset ETFs

Nuveen wants to put alternative assets such as agriculture, commodities and timber into ETF wrappers.

By Ruth Liew and Adam Haigh

(Bloomberg) --TIAA’s $929 billion asset manager, Nuveen, is considering ways to create exchange-traded funds that feature illiquid assets, betting the securities will overtake mutual funds as investment vehicles of choice among investors.

The New York-based firm, which oversees about $200 billion in alternative assets such as agriculture, commodities and timber, is exploring how it can repackage some of its less liquid investment strategies into ETFs, said Margo Cook, President of Nuveen Advisory Services. The idea is part of a wider push to deepen the firm’s offerings across income-generating assets, responsible investing and alternatives, she said.

“Everything we’re doing today we’re looking through the lens of these three pillars,” Cook said in an interview in Sydney. “You’ll start to see us take our capabilities and begin to slowly put them through the ETF wrapper where it makes sense.”

While alternative ETFs may be harder to pass regulatory muster amid strict guidelines around liquidity requirements, Nuveen is prepared to “take some time on that effort,” according to Cook.

ETF providers have been some of the biggest winners from the flight to passive investing, with firms such as BlackRock Inc. and Vanguard Group Inc. netting billions of dollars this year in fund flows across the $4.5 trillion global industry. The ETF sector outside the U.S. has doubled in size to about $1.4 trillion from $726 billion in three years as investors hunt for cheaper investments amid a market hampered by depressed interest rates and bond yields, according to Bloomberg Intelligence analysis.

Downward pressure on investment fees is here to stay, while the thirst for more ETFs will spearhead providers’ efforts to introduce more alternative funds as the sector matures, according to Cook. “Traditional strategies that are sitting inside mutual funds today will start to migrate into ETFs,” she said.

Nuveen’s views on investment opportunities in Australia:

  • Sees scope for partnerships with local pension funds to buy agricultural land Down Under
  • Views Australia as a “key market” for investment expansion, according to Jose Minaya, president, global investments at Nuveen
  • Also sees investment opportunities in Australian real estate; views the nation as an avenue for exposure to Asia, particularly China, according to Minaya
  • Says Australian agriculture investments “provides Southern Hemisphere exposure” to firm

On rise of cryptocurrencies such as bitcoins:

  • Blockchain technology has “some real usefulness and potential in the market” although “it’s very early on” in its development, according to Minaya
  • Sees similarity in the rise of cryptocurrencies with the development of robo-advice; there is “change coming” in the way people want to transact currency, Cook said
  • NOTE: The value of bitcoin has surged almost 50 percent this year to above $5,600 for each unit

--With assistance from Garfield Reynolds.To contact the reporters on this story: Ruth Liew in Sydney at [email protected] ;Adam Haigh in Sydney at [email protected] To contact the editors responsible for this story: Andrew Monahan at [email protected] Ken McCallum, Andreea Papuc

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