TIAA-CREF Asset Management manages a wide range of assets spanning a variety of portfolios. Learn more about how we implement our innovative investment strategies through these short case studies from around the globe.
WITH LISA FERRARO, MANAGING DIRECTOR, ENERGY AND INFRASTRUCTURE PORTFOLIO MANAGEMENT
Daily oil usage is expected to rise to over 100 million barrels of oil equivalent (BOE) by 20301; therefore, the market for oil, coal, natural gas, and alternative energy sources is steadily increasing. Although the United States is rapidly executing processes to develop alternative energy sources, most of the oil usage in the world is coming from developing countries that are using oil to build their infrastructure.
TIAA-CREF is actively investing in oil and natural gas; the organization understands natural gas is one of the main sources of clean energy and the recent fuel of choice for building new power plants. As the United States and the rest of the world continue to move toward more alternative energy projects, natural gas will be the bridge fuel used to advance toward a renewable energy solution.
“Natural gas is one of the major fuels that’s used in the United States to produce electricity and heat our homes. It’s a very important commodity,” explained Managing Director for Energy and Infrastructure, Lisa Ferraro.
TIAA-CREF’s standard for long-term investing is a strategic position to have for fuel investments. The organization has considerable utility portfolio tenure—a 20-year history of investing in alternative energy power projects. TIAA-CREF believes owning the hard asset over a long period of time will continue to build value for the organization; TIAA-CREF aims to meet economic goals, as well as provide for the greater good.
“Regardless of the marketplace, you can have oil and gas in the ground in the form of reserves and then bring them out when the time is right. We tried to build a portfolio to balance what kinds of fuels we’re pulling out of the ground at the time based on the prices in the marketplace,” added Ferraro.
Investing in the energy sector now should help position the organization to capture potential demand and price increases in the future. Long-term, diverse energy portfolio investing is intended to assist the portfolio in weathering the volatility of the energy market by diminishing the severity of periodic lows. However, regardless of the current prices, over time the demand and usage of oil and natural gas is expected to continue to rise and TIAA-CREF plans to be well positioned in order to benefit from that rise.
In 2009, TIAA-CREF solidified its position in the energy sector with the purchase of a hard asset in the oil and gas space: Polar Star Canadian Oil and Gas. After searching the marketplace for an entry point into oil and gas reserve ownership, TIAA-CREF jumped at the opportunity to acquire a company in the public market that was trading below the value of its reserves. TIAA purchased 100 percent of the company and structured it as a private company with the name Polar Star Canadian Oil and Gas.
Polar Star is an oil and gas company that produces about 5,000 BOE a day. TIAA-CREF sits on the board of directors at Polar Star. TIAA-CREF’s main roles as sole owner are to oversee all policies and procedures, especially in such a highly regulated industry as Canadian oil and gas; make budgeting, property purchases, and capital expenditure decisions; and direct general management of Polar Star and its production.
“For anybody in the oil and natural gas business it is exceptionally important to be concerned about environmental issues and to make sure you are doing things to encourage sustainable practices… It’s very important to us,” said Ferraro.
TIAA-CREF’s energy and infrastructure team has ambitious plans for Polar Star Canadian Oil and Gas. The analysts and consultants are working together to build on existing reserves and acquire additional reserves so Polar Star can store fuels inexpensively until the market is ripe—hopefully increasing the company from 5,000 BOE to 20,000 BOE a day. To diversify and stabilize the portfolio, TIAA-CREF also plans to add resources in locations around the world. By building a larger company and bringing in more capital, TIAA-CREF seeks to expand the energy-efficient operations and drilling processes—in an effort to increase capital and advance TIAA-CREF’s sustainability and environmental initiatives.
The long-term view TIAA-CREF and Polar Star Canadian Oil and Gas have in regards to energy assets should place them in good standing over time as commodities become sparse. And the energy efficient and environmentally sustainable practices they apply by strategically holding or pulling fuel assets from the ground should help preserve the valuable resources that will keep the world operating for generations to come.
1 Sources: History: U.S. Energy Information Administration (EIA), Office of Energy Markets and End Use. Projections: EIA, Generate World Oil Balance Model (2010).
This material is prepared by TIAA-CREF Asset Management. The views expressed may change in response to changing economic and market conditions. Past performance is not indicative of future results. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons, and the components described are not features of every product.
TIAA’s Oil & Gas investments are just one of many investments of TIAA’s General Account, an account solely owned by TIAA that is not available to individual investors and whose performance is not directly allocated to any specific contract or obligation. TIAA’s General Account invests in a broad range of diversified investments to support TIAA’s contractual guarantees and business operations.
While world food, stock feed and bio-fuel demand is increasing, the global supply of arable land is shrinking.* This imbalance underscores the investment logic of TIAA-CREF’s strategic acquisition and responsible management of prime agricultural land around the globe.
Anticipating the economic momentum of sustainable food production, TIAA-CREF has established a portfolio of strategic agricultural assets in some of the world’s most productive areas. The organization has acquired more than 400 farms located across the U.S., Australia, Brazil, and Eastern Europe.
In the TIAA-CREF agriculture portfolio, social responsibility goes hand-in-hand with global investing. The organization’s analysts recognize the value of international investing in socially-responsible and environmentally-friendly ways. This idea pervades many of the organization’s investment decisions.
© 2012 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund, New York, NY 10017
Past performance is not indicative of future results. The information on this website should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
TIAA-CREF Asset Management provides investment advice and portfolio management services for the TIAA-CREF group of companies through our investment advisers including Teachers Advisors, Inc., a registered investment adviser and wholly-owned indirect subsidiary of Teachers Insurance and Annuity Association (TIAA). TIAA® personnel in its investment management area provide investment advice and portfolio management services through the following entities: Teachers Advisors, Inc., TIAA-CREF Investment Management, LLC, and Teachers Insurance and Annuity Association® (TIAA®). TIAA, TIAA-CREF, Teachers Insurance and Annuity Association, and TIAA-CREF Asset Management are registered trademarks of Teachers Insurance and Annuity Association.