Transforming the GP-LP relationship with a focus on service, not funds
With the ultra-long term in mind, Nuveen Real Estate is turning the GP-LP relationship on its head by focusing not only on the product but, instead, on service.
Flexibility and scalability are the name of the game as Nuveen looks to innovation in other industries of products and services for inspiration. By creating a synchronized series of sector- and region-specific open-ended funds across Europe, Asia-Pacific and the U.S., investors are put into the driver’s seat for selecting the product mix and allocation weighting which meets their specific needs.
“We now have an architecture that enables us to focus on investor needs,” said Austin Mitchell, Head of Global Product and Solutions at Nuveen Real Estate. “Instead of creating one fund, we’ve created six.”
Nuveen’s goal is to show clients they can have the same customization, confidence and comfort in using the firm’s investment services across multiple strategies, akin to Apple consumers familiar of the technology company’s design and systems and who rely on the firm’s broader product range to fulfill additional needs as they evolve.
“When we meet clients it is much less about talking about what we have to sell. Now, it is much more about listening and consulting about what an investor needs and that, far and away, is the biggest fundamental change.” Austin Mitchell, Head of Global Product and Solutions.
In the three years since Nuveen introduced its strategies, the four sector-specific funds in the U.S., and two diversified strategies spanning Europe and Asia Pacific respectively, have garnered $2.3 billion in commitments. With U.S. Multifamily and Retail strategies already up and running, the U.S. Office and Industrial ‘sleeves’ are slated to be launched this year
“Our version is using analysis of an investor’s existing portfolio to recommend regional and sector allocations that will optimize an investor’s ability to achieve its objectives, taking into consideration their exposure today,” explains Mitchell.
With the goal of becoming a global manager with local presence offering potentially perpetual life equity and debt products, the firm’s real estate offering centers around three product “Series”: the Resilient Series focuses on diversification, income and capital growth; the Enhanced Series sits on the core-plus to opportunistic spectrum; and the Debt Series is designed for secure, income-focused returns with downside protection.
At the heart of Nuveen’s strategy is the belief that over the long term, specialists will outperform generalists.
The firm undertook a rigorous analysis of over 4,000 global cities to identify the top 2 percent of markets that they believe are best positioned to benefit from global megatrends, such as the rise of urbanization, technology and the aging population, ending up with an investable universe of approximately 90 cities globally. Of the final selection, 35 cities are located in the US, 40 in Europe and the remainder in Asia.
Mitchell adds: “Taking into account where we are in market cycles and localized supply and demand dynamics, the Portfolio Managers may choose to further restrict their focus within that list.”
For this strategy to work requires operational capability and local expertise across every global region. Each sector has a dedicated global head, supported by regional heads.
“We’ve harmonized our investment approach through our top-down cities methodology. We’ve also aligned the terms, structure and governance of all the investment vehicles,” says Shawn Lese, Managing Director and Head of Americas Product & Solutions for Nuveen Real Estate.
“The same arrangements are made around pricing and liquidity, which means that you can combine the different regional products or sector-specific products in the US, to deliver what is important to the investor in terms of their outcomes and they can adjust what they have in their portfolio today,” adds Mitchell. For investors, this means they can seamlessly add other ‘sleeves’ without undergoing the entire underwriting process from scratch.
The approach also benefits Nuveen in being able to look at an investor’s existing portfolio to recommend allocations that provide the greatest diversification benefits. “We can provide a service and, if that ultimately leads to some commitments to our vehicles, that’s great, but we don’t need to start with a particular objective,” says Mitchell.
The most important part of the changes happening at Nuveen these days is not the recent rebrand from TH Real Estate or the sector-specific open-ended funds – it is the simple plan to listen.
“Today, when we meet clients it is much less about talking about what we have to sell,” says Mitchell. “Now, it is much more about listening and consulting about what an investor needs and that, far and away, is the biggest fundamental change.”← Best Practices in Creating a Strong Culture RE Data Strategies – don’t let IT own the plan →