Nuveen stands ready to continue on M&A spree

With consensus that the tide that lifted all boats in global markets is receding, one money management CEO is ready to pick through any exposed shipwrecks.

Looking to 2023 and beyond, "you're going to see a lot of M&A activity in asset management because now you've got winners and losers, and there's no … rocket ship market to help a lot of these firms through the way the tide has come out," said Jose Minaya, CEO at Nuveen, in an interview. "And when the tide goes out, you get to see everything that's underneath."

The years ahead will be more challenging, but Mr. Minaya said he "can guarantee you one thing: We're one of the buyers in this market." When that tide does recede and expose both financial strength and instability, he said, "we will use that to our advantage."

The fighting talk from Mr. Minaya comes just ahead of his third anniversary as CEO at the $1.1 trillion firm, having stepped up from his role in January 2020 as president and CIO to replace Vijay Advani, who became executive chairman.

Under his leadership so far, Nuveen — the money management arm of TIAA-CREF — has announced two acquisitions: In October, it said it was taking a controlling stake in European private debt manager Arcmont Asset Management, and in March 2021, it bought U.K.-based clean energy infrastructure firm Glennmont Partners. Employee-owned Arcmont was founded in 2011 as the private debt business of BlueBay Asset Management LLP. It was spun out and launched as an independent firm in 2019. The firm has raised more than €23 billion ($23.9 billion) since inception and has committed €21 billion across more than 270 deals in 12 countries. The Glennmont acquisition added more than $2 billion in assets.

The Arcmont deal, expected to close in the first half of 2023, will expand Nuveen's private capital offering and presence into Europe — working alongside its North American private debt and private equity investment unit, Churchill Asset Management. The two firms will have more than $60 billion in combined committed capital. Both Arcmont and Churchill will continue to operate under their own names and brands, with no change to investment teams or processes.

The Glennmont deal gave Nuveen an investment center for clean energy infrastructure, and while the unit was integrated within Nuveen's real assets platform, it retained its independent investment process.

Those acquisitions are good examples of where Nuveen has set its sights in terms of growth ambition, he said. The firm was acquired by TIAA in 2014, and Nuveen was a "very U.S.-centric business," he noted. One goal was to diversify the business across geographies. Along with various acquisitions, Nuveen has set up offices across Europe in a bid to equalize its client base, now 75% U.S., down from about 90% almost a decade ago.

"In the last few years, we've seen significant, significant growth overseas and our goal is to get our business to be more 50-50," Mr. Minaya said. That's starting with a focus first on Europe, the Middle East and Africa, and then spreading to Asia-Pacific.

"And to me, it's really why I love doing this through the acquisitions that we've done today. One of the most important things in (building a) global business is the culture that you build," he said. It's not just about hiring good people, but also about adding people and businesses "that have been ingrained in that region. It's a lot easier for us to grow that way and maintain the right culture," Mr. Minaya said.

For Nuveen and Mr. Minaya, "acquisition is always on the agenda." He said the firm is "in a very strong financial position — we have the capital today to go out and acquire firms."

In terms of the pace of acquisitions, Mr. Minaya said "we should be able to do one to two acquisitions on a yearly basis."

And when it comes to areas still to fill, the alternatives space remains a major focus — as it is for many money managers. Nuveen, however, already has about $300 billion in alternatives AUM — across real estate, agribusiness, commodities, farmland, infrastructure and other asset classes via its many investment specialist affiliates.

Nuveen executives had three things on their docket in terms of growth ambitions: European loans, more global infrastructure and opportunistic value-add capabilities in real estate.

The Arcmont deal fulfills the European loans side of things, Mr. Minaya said. And while Glennmont's addition improved its capabilities in U.K.-based infrastructure, other regions such as Asia remain on the to-do list.

Growth on the alternatives side is a long-term play for Nuveen — and something that Mr. Minaya thinks is about to start paying off more so than before.

He describes the current investment environment as one where "the hockey puck is coming to us."

Adding capabilities over the past decade on the alternatives side was because executives thought volatility would eventually "show up (on) our shores," Mr. Minaya said.

Over the past 10 years, conversations about inflation and interest rate rises, as well as volatility, had been academic, he said. While pension fund executives had talked about increasing allocations to uncorrelated and hedging assets, such as alternatives, "what was missing … was the urgency. Because you know what? When the equity markets are going up 20% ... you have time to make these changes," he said.

"What you're seeing now is a tremendous urgency because volatility is here. And, by the way, it is here to stay — probably for the rest of my career," Mr. Minaya said.

Another narrative that has changed, and continues to, surrounds sustainability. Nuveen manages more than $40 billion in ESG-labeled products, and almost every RFP from clients or prospects has a question around sustainability included, he said.

While impact investing can be an alpha play, Mr. Minaya said, it's also important to manage risks associated with climate change and other ESG issues to protect retirement savings.

"I often say we manage money on behalf of over 5 million staff and professors and janitors and cafeteria people across universities in the U.S. (and) I have a fiduciary duty. I cannot look at that person on the cafeteria line and say, I need to take $50 from your retirement check because we're going to make the world a cleaner place. But what I can tell them is your retirement money is secure because we will make sure you're not at risk with the fact that (climate change and other ESG issues) hit your value," he said.

Also on the alpha side, Mr. Minaya cited core infrastructure. In a "normal deal," investors can expect 4% or 5% returns. But investing in renewable energy infrastructure, such as wind or solar, can garner 10% or 11% returns. "There's an excess return because it's not as defined as a sector yet," he said. "It has less access to capital."

And the biggest proof point that sustainability is here to stay is regulation and politicization.

"I always said that you'll know this is real the way everything else works in financial services: You'll know it's real when the regulators show up. And all of a sudden, they're kind of putting in rules and guidelines. You'll know it's real when the politicians wake up," Mr. Minaya said. "So, what people may look at as headwinds — this is your biggest proof point."

Diversity, equity and inclusion are also a major focus for Mr. Minaya, and he is an executive sponsor for TIAA's inclusion and diversity initiative, which works to promote a diverse and inclusive environment throughout the organization.

Again, executives in financial services understood the academic exercise of improved returns and workforces with true inclusion and diversity, but the urgency wasn't there, he said.

But as the world has become more global and interconnected, demographics have changed dramatically, he said. "So, I guess … the reason there's an urgency today (is) because now it is absolutely a bottom line," he said.

Within financial services, there needs to be a recognition that to create a more diverse workforce, "you can't keep the same process. You can't keep going into hiring at the same schools," Mr. Minaya said.

Nuveen has made changes to help make talent pools more diverse.

"If we really are intent on talent, we're not just going to hire people when there's a job. And if we're in growth mode, we should find a place for that individual," Mr. Minaya said.

That might mean hiring someone to do a job that may not seem a perfect fit — such as someone with a molecular science Ph.D for an accounting role. "I think this person is going to be smart enough to figure out a ledger," Mr. Minaya said.

The problem is, "it a lot easier to just go to Harvard, go to Cambridge — you're going to get the resumes … The reason it's been so hard to change is the old system actually works."

Going to more schools means combing through 5,000 resumes rather than 1,000 — something that's less efficient. "Moving to a place where you want to get more diverse is less efficient — it just is, and it's more work. But your outcome that you're going to get is worth it. And now it's for firms to understand that extra effort, less efficient process (will give you) a big payout at the end of it," Mr. Minaya said.