This content is from: Portfolio

Nuveen’s New CIO Isn’t Letting the Fed Scare Her Away From Fixed Income

The $1.2 trillion asset manager expects a period of normalization, rather than a massive recession.

When Saira Malik was named Nuveen’s chief investment officer in January, the investment world was coming off the high from 2021’s record-breaking returns.  

Since Malik took on the role, which also involves leading the $1.2 trillion asset manager’s Global Investment Committee, market sentiment has shifted radically. The committee recently met to update its outlook for the second half of the year, details of which are expected to be released on Wednesday.  

In Nuveen’s view, things might not be as bad this time around. The organization believes that the markets are going through a period of normalization, or even a mild recession, rather than a massive downturn.  

Malik has been through times like this before — she’s been investing since she was a teenager, weathering both the dot-com crash and the Global Financial Crisis.   

She got into the field with the encouragement of her mother, an immigrant from Pakistan by way of England. Although Malik’s mom worked as a doctor, she was far more passionate about the markets. One summer, when Malik was still in high school, her mother sent her to live for a few weeks with famed stock picker Al Frank, who wrote The Prudent Spectator, a newsletter about investing.  

“He sat down with me and taught me everything about the stock market,” she said. “I said, ‘I’m going to be the next Al Frank.’” 

At age 19, as a student at California Polytechnic State University, Malik started her own investing newsletter. She also became a bona fide stockbroker, passing the Series 7 and 63 exams required to trade on behalf of others while still in school.  

Today, she and her team are writing investment reports on a much larger scale. As CIO, Malik started sending weekly commentary to investors, not only to keep them abreast of macro issues, but to share thoughts on how they can implement those views into their portfolios.  

The Global Investment Committee is also now creating reports, which include heat maps based on their desire to invest in certain strategies. The latest report, published Wednesday, showed that Nuveen’s global investment committee believes that fixed-income sectors, including private credit, are more attractive investments today than equities. “I think there’s a lot of risk around equity going forward,” Malik said.  

While impending interest rate hikes tend to deter investors from the asset class, Nuveen’s outlook is that the projected interest rate hikes by the Federal Reserve have already been priced into the market. The team is starting to see “cracks” in inflation data, too. Malik noted that the University of Michigan’s latest Survey of Consumers report, which was released on Friday, showed slightly better data than expected.  

On Friday, markets rallied slightly, in part due to the report’s release. But Malik and her team don’t believe that the market has hit rock bottom yet. “For it to be a market bottom, we need to see consistently weaker inflation data,” she said. “You’re not seeing consistently lower inflation data. I think we’re going to see that at the same time [the] Fed does.” Still, Nuveen’s team thinks the downturn is likely to be a soft landing or a brief recession, rather than a financial crisis like the one in 2008.  

Within fixed income, Nuveen is placing a special focus on municipal bonds, which the firm believes have been hit unduly hard by interest rate concerns. “Our question is, how much of the pain has been priced in?” Malik said. “You’re looking at the fundamentals and comparing that to what’s priced in. There’s a lot of pain that’s been priced [into] municipal bonds.” 

Outside of fixed income, Nuveen thinks that real assets, particularly farmland, will outperform. Malik noted that farmland prices rise along with the cost of food. Combined with that are predictable cash flows and contracts that take inflation into account, which in her view make the investment attractive.  

Nuveen is also playing in certain pockets of both growth and value equities, with a larger focus on public investments than on privates. “In equities, what we like is U.S. large-cap growth stocks,” Malik said. “Valuations have had a significant decline.” But she stressed that being selective is important. Salesforce is one of the firm’s top growth picks right now.  

Malik added that Nuveen expects the energy supply to remain tight while demand picks up. “We like energy on the value side,” Malik said. 

Regardless of the asset class, Malik is hyper-focused on ensuring that the risks Nuveen takes are worth it. “I keep saying, where are you getting paid to take risk?” Malik said. “You have to be careful about how you’re taking risk in the portfolio.” 

Related Content