Nuveen added direct real estate investments as part of the allocation in its target-date fund series, the TIAA-CREF Lifecycle Funds, according to a recent announcement.
This offering, which Nuveen says is 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.
In a recent analysis, Nuveen found that incorporating direct real estate investments into target-date funds provide the potential to enhance diversification, reduce volatility, and improve investment outcomes.
The analysis also found that a 5% allocation to direct real estate improved risk-adjusted returns and retirement accumulations in most scenarios, while also reducing risk.
TIAA Investments manages the TIAA-CREF Lifecycle Funds and their real estate investments will be made through TH Real Estate, which has more than 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 improve investment outcomes,” said John Cunniff, managing director at TIAA Investments and portfolio manager of the TIAA-CREF Lifecyle Fund series, in a statement. “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 1% and 5% of each portfolios’ assets, employing an investment style focused on institutional-quality commercial real estate investments primarily in office, industrial, retail and multi-family residential properties.
These investments seek returns primarily from rental income; asset appreciation is a secondary goal. Core assets are well-occupied properties with high-quality tenants who have long-term leases in high barrier-to-entry markets such as New York, Washington, D.C. and San Francisco.
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