Nuveen has an unusual multibillion-dollar inflation hedge. CEO Jose

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There are traditional ways to hedge against inflation — things like gold and TIPS (Treasury inflation-protected securities). There are newer approaches; crypto advocates say bitcoin falls into that camp. But perhaps an unexpected way to hedge against inflation and volatility is investing in farmland. 

Jose Minaya is the CEO of Nuveen, a division of TIAA, and he’s hoping to harvest gains from investing in agriculture assets. Here he is, in conversation with Leslie Picker. 

(The content below has been edited for length & clarity)

Leslie Picker: We’ve seen some pretty scary inflation readings lately. How does farmland play into that?

Jose Minaya: You know, this is kind of part of the key reason we invested in the asset class. I think when we started looking at natural resources, the idea was, well, how do we provide better diversification for our own portfolio, looking to get better exposure to volatility or protect ourselves against volatility, and then inflation was a key part of just assuming, at some point in the future, we will be experiencing higher levels of inflation. How is our portfolio protected against that? And farmland is an asset class that we felt does both on the volatility side and the inflation side, because what attracted us to farmland and what drives the correlation characteristics is that both demand side is inelastic in terms of people need to eat and the supply side is inelastic in that they’re not making any more land around the world. And if anything, we have a reduction in land given what’s happening from an environmental perspective. And it’s a commodity that is producing at the end of the day, which is highly correlated to inflation.

Picker: Taking a look at the returns on a risk-return basis, farmland has outperformed many other asset classes, most other asset classes really, including indexes like the S&P and gold and Treasurys over the last 50 years or so. If that’s the case, why aren’t there more funds and more assets behind this? It’s my understanding that only about 80% of farmland has been institutionalized at this point. What do you think are some of the key hurdles?

Minaya: Well, if you think about farmland on a worldwide basis, I would say well over 90% of it is still in the hands of individuals and families. So it’s an asset class that is still very nascent in terms of its access to capital markets. I always compare it to real estate – we’re a large real estate investor as well – you go back 100 years, it was largely in the hands of private investors, right? And you built a building or you built real estate because you need to put people in it. Today, it’s got a lot more access to capital markets, you can get public exposure to real estate. This is kind of where I believe the path is going for farmland. That institutional ownership has increased, I think significantly over the last decade, yet it is still pretty much in private hands. So a…