Brian Nick

Nuveen, one of the world’s largest investment managers, is urging local institutional investors to maintain long-term investment perspectives, despite the global market instability caused by the coronavirus health and economic crisis.

Markets have been thrown into turmoil and investors globally are grappling with positioning their portfolios to minimise damage and take advantage of eventual recovery. To help clients continue their long-term investment journeys, Nuveen’s Global Investment Committee (GIC) and Multi-Asset Investment Team have offered perspective on the state of global markets, suggesting five portfolio construction themes.

Brian Nick, Nuveen Chief Investment Strategist, said fiscal stimulus and intervention by central banks had helped markets return to relative normal but emphasised volatility would likely continue.

“Volatility will likely remain elevated for some time, albeit lower than in March, but financial markets seem to be moving out of emergency crisis mode.”

Mr Nick described the economic outlook as “murky”, explaining that the depth of the crisis and  related countermeasures would determine the severity and duration of the downturn, while the extent of economic damage and policy response would determine the shape and trajectory of the recovery.

“At this point, a V-shaped recovery is too much to hope for, mainly because the downturn has been virtually instantaneous, and the recovery will not be. But there is still reason to hope for a relatively rapid recovery beginning in the second half of this year.”

Mr Nick said it was a tough environment to structure portfolios, with the global investor encouraging investors to stick with their long-term investment plans.

“As long as investors and institutions can meet their immediate-term funding, spending and liquidity needs, this is a time to stay fully invested, though holding some cash for opportunistic buying also makes sense.”

Illiquid investments an important consideration

As a global diversified investment firm, with $1 trillion of assets under management, Nuveen’s multi-affiliate boutique model offers investors access to a wide range of traditional liquid assets as well as illiquid alternative strategies such as real estate, real assets (farmland, timber, infrastructure), private equity and debt.

Nuveen has a strong real estate and farmland presence in Australia through Nuveen Real Estate and Westchester and globally is one of the top five managers of real estate and the number one manager of farmland assets worldwide*. Nuveen’s affiliate Churchill Asset Management, has also gained interest among Australian investors, offering access to U.S middle market private debt as an alternative investment strategy.

With Nuveen’s outlook encouraging investors to consider more illiquidity risk, Mike Sales, CEO of Nuveen Real Assets and Real Estate, said most investors were under-allocated to alternatives and illiquid investments in particular.

“We think long-term investments in private equity, private credit as well as private real assets, such as farmland and agriculture, can play a role in most portfolios, especially during times of market turmoil.

“As with most of our investment positioning, we think an overall defensive stance in private investments is sensible. We also think a focus on essential areas such as agriculture – especially sustainable agriculture – makes sense in today’s environment. Crisis or calm, the world must eat.”

Investing for the future

Looking ahead, Mr Nick said while forecasting remains tricky, Nuveen has identified several key considerations for investing into the future, including ongoing elevated volatility as well as less correlation across and within asset classes.

“We are living in unprecedented times. Never outside of wartime have so many governments, businesses and individuals rapidly changed their daily behaviours. We have also seen unprecedented liquidity shocks, rapid market movements and unparalleled central bank and government responses. These events will have unpredictable and far-reaching effects.

“All of this speaks to the importance of active management to help investors lean into those industries, sectors, geographies and asset classes that could see relative benefits and avoid those that could experience semi-permanent impairment.”

Nuveen is well positioned to support investors through this time, Mr Nick added, with the business’ parent company TIAA a steward of long-term capital, with 100+ years of navigating market cycles.

The five portfolio constructions outlined in the Nuveen Q2 2020 Outlook are:

1. Stay invested and rebalance portfolios – Nuveen believes a rebalancing strategy should be part of every long-term investment plan. Nuveen also encourages investors to consider additional rebalancing considerations, including liquidity and changes in valuations between asset classes
2. Focus on relative value between and within asset classes – From a broad portfolio perspective, Nuveen maintains a relatively defensive positioning
3. Take on more illiquidity risk – Nuveen believes long-term investments in private equity, private credit, as well as private real assets can play a role in most portfolios, particularly during times of market turmoil
4. Selectively take on risk in anticipation of recovery – Nuveen expects near-term stress and selloffs across financial markets, but notes value is also being created
5. Stick with long–term plans and investment horizons – Nuveen is discouraging clients from changing their long-term approaches unless their goals have changed. This is also an opportune time to re-evaluate long-term plans to ensure investors understand risks.

Download a copy of the report.

The post Time to stay invested: Nuveen encourages long-term investment perspective despite COVID-19 challenges appeared first on AdviserVoice.