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Money Management

Impact investing, artificial intelligence on Nuveen CEO’s to-do list

Vijay Advani, CEO at Chicago-based Nuveen LLC, aims to add impact investing, expand the use of artificial intelligence and increase the number of external insurance clients at the $970 billion money management firm in the next one to three years.

"We have pretty solid capabilities in real estate, alternatives, regular stocks and bonds, but in the three areas we are strategically trying to grow, first and foremost is in impact investments," Mr. Advani said in an interview. "There's nothing on the horizon at this point, but obviously if we want to grow past $1 trillion (in AUM) and want to have a deeper footprint overseas, a deeper footprint in insurance, a deeper footprint within quant shops, I think these are areas where I think you'll see Nuveen expand."

Impact investing, Mr. Advani said, is "more nuanced" than investing based on environmental, social and governance factors, "whether it's affordable housing, climate change, financial inclusion. You want to make a commercial return, but you also want to develop an impact for society. We've been doing that for a long time through our proprietary seed money, with a little client money. We want to expand that capability."

Mr. Advani said he believes that over the next 10 to 30 years, both among millennials and retiring baby boomers, they'll "want to get a commercial return but yet leave a legacy behind where they have created an impact on society. We want to expand that."

Another goal is to expand the use of artificial intelligence at one of Nuveen's money management subsidiaries, active quantitative manager TIAA Investments in San Francisco.

"We have a strong (quant) shop in San Francisco under the legacy TIAA Asset Management, and we want to expand that capability and merge it with artificial intelligence capabilities," Mr. Advani said. "We will see within the next one to three years, not only how AI disrupts distribution but how AI disrupts portfolio management. You have the two bookends between the passive (exchange-traded funds) charging 3, 4, 5 basis points and then you have the true active high-conviction portfolio managers with concentrated stocks, and they will always get a rich fee no matter what. But there's a large space in between where AI can actually disrupt the market and also retain a fair share of fees. That's another area we're interested in."

Mr. Advani also said Nuveen's work as a general account manager for parent TIAA could be leveraged to provide insurance asset management to other insurance companies. The company currently serves more than a dozen insurance companies, a spokeswoman said.

"There are a lot of small, midsize insurance companies all over the world," he said. "We'd like to offer our capability in our own (general account) business to other insurance companies. Because we understand risk, especially the actuarial risk, we feel we are well qualified that with the insurance DNA plus with Nuveen, we can combine our capabilities and provide outsourced services for insurance companies."

Mr. Advani would not comment on specific firms that are being looked at for acquisition.

"We don't want to acquire for the sake of acquiring and become asset gatherers," Mr. Advani said. "We want to acquire where we believe we do not have a particular investment capability or want to enhance a particular investment capability. Those are what we constantly look at. "

The search for new business parallels how Mr. Advani, who joined Nuveen as CEO in January 2017 after serving as co-president of Franklin Resources Inc., looks at the company he now leads.

"I look at this as a $1 trillion startup," Mr. Advani said, referring to the integration of Nuveen with TIAA-CREF, a merger that closed in October 2014 but really moved into high gear only since he became Nuveen CEO. "A lot of basic decisions we're making is what a startup would do, like fiscal discipline, expansion, looking at opportunities, etc.

"For the first few years (after the merger), it was kind of 'leave things alone, don't make too many changes, let it follow its own course,' " Mr. Advani said. "And really, the true integration and bringing the whole business together started last year when I came on board. It's been a very tiring, very difficult, but phenomenal first year."

Along with the rebranding of the company earlier this year to Nuveen, a TIAA company, much of his efforts have been focused on centralizing distribution, data analysis, compliance and back-office infrastructure of the 12 money management subsidiaries of Nuveen, a format he referred to as "a federal and state model."

"We have affiliates with very distinct intellectual property and distinct subcultures and phenomenal talent pools," Mr. Advani said. "They're spread all over the world, from London to New York to Minneapolis, L.A., San Francisco, etc. Because they're very good at their knitting and their sub-brands are recognized for a particular investment style, we want to let them be, but at the same time, bring to the center — the federal level — distribution, marketing, data analytics, so we can leverage that across the firms."

Centralizing infrastructure brings efficiencies to Nuveen's money management units so they can focus on investing, he said.