At TIAA-CREF, portfolio managers take a bottom-up approach to investing. Sector analysts identify and adopt the best possible approach for generating above-average investment returns within each industry sector.
For example, within the natural resources sector, TIAA-CREF’s investment philosophy is to take a global view of the drivers of commodity demand and supply. Another investment strategy is to take a long-term view of industry dynamics, ignoring the noise created by day-to-day commodity price fluctuations, and instead, trying to identify the fundamental structural issues in global commodity markets that offer the opportunity to generate significant value for TIAA-CREF.
“Sector analysts identify and adopt the best possible approach for generating above-average investment returns within each industry sector,” said Managing Director, Navaneel Ray.
Managing Director and Research Analyst, Navaneel Ray, focuses on global mining and energy equities. This involves traveling to every corner of the world to locate the natural resources, understand the people involved, and the trends that could potentially have an impact on commodity demand, supply, and prices. For example, while studying the platinum market, visits to jewelry stores in China uncovered a significant increase in demand for platinum goods. Then, investigating the supply side, visits to deep underground platinum mines in South Africa and Russia and meetings with South African government officials provided important capacity, regulatory, and distribution inputs to help determine which mining companies were best positioned to meet and profit from the increased demand. A similar hands-on analysis was applied to the global steel industry with plant visits in China, Europe, and the U.S., along with inspections of iron ore mines in Brazil and coking coal producers in Australia. From remote oilfields in Siberia to copper mines in Mongolia, TIAA-CREF has identified a globally interrelated framework for investing in the commodity sector. This provides a unique competitive advantage by ensuring that all relevant factors are identified and analyzed before and after an investment is made.
One of the advantages of having a successful international framework for investing in the commodity sector is that it allows TIAA-CREF to quickly understand the impact of global events on the portfolio. This is what drives informed decision-making.
An example of informed decision-making occurred In August 2009, when there was a massive explosion at one of Russia’s largest hydroelectric dams, located in Siberia, which shut down the power supply to some of the largest aluminum smelters in the world.
When the news came out about the accident, aluminum prices began to spike as the market feared a sizeable impact to long-term aluminum supply, since production of the metal is very power-intensive. But TIAA-CREF Managing Director, Navaneel Ray, had actually visited the Sayano-Shushenskaya dam and the neighboring aluminum smelters the previous year. Because of first-hand knowledge of the local infrastructure, the analyst quickly ascertained this incident would not have any meaningful impact on long-term supply of aluminum from the region. There was spare capacity at the hydroelectric plant itself because the explosion had not damaged all the turbines and there was unutilized spare power capacity in the area that had not been impacted. As the market spiked in anticipation of sharply rising aluminum prices, TIAA-CREF used the opportunity to reposition itself in the aluminum sector.
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Read the 2012 update to Socially Responsible Investing at TIAA-CREF (PDF)