Jennifer Stevens

Name: Jennifer Stevens
Title: Partner 
Firm: Townsend, an Aon Company 
Assets under advisement: $126.3 billion
Number of consultants: Approximately 90 investment professionals and 120 employees
Type of clients: Corporate and public pension plans, insurance companies, government-related institutions, endowments, foundations, sovereign wealth funds, and superannuation funds

Jennifer Stevens is a California-based partner at The Townsend Group, and serves as the primary relationship manager for several of the firm’s West Coast Advisory clients investing in real assets around the world. She is also tasked with leading the firm’s efforts with respect to environmental, social, and governance (ESG) issues in real assets—an area of expertise that has served Townsend’s clients well as they look to better understand or expand their ESG footprint.  

Stevens works as the primary advisor to several of the firm’s leading clients, including the employees’ retirement systems of Sacramento County, Los Angeles County, Los Angeles City, Los Angeles Fire & Police, and San Diego City. In addition, she has worked with Australian Superannuation plans, family offices, and other plans like Kaiser Permanente.

Over her tenure in the industry, Stevens has witnessed changes in the asset class and has a view on how they’ll play out long-term, such as strategies centric to commingled funds. “Today, the execution opportunities in real assets are vast, emphasizing the importance of selection. The evolution of the commingled fund space has drastically changed since the 1990s, when many clients were executing through directly owned portfolios or a limited number of commingled fund strategies,” she tells CIO. “Today, there are over 740 closed-end equity and debt investments from which to choose. Townsend has also witnessed the evolution of the open-ended commingled space, which has grown to over 50 funds today. Townsend has played a key role in facilitating the launch of new of core and core-plus vehicles for its clients. Today, we advise on and manage client capital of over $40 billion in the US open-ended funds.”

When asked about investment vehicles, she says that investment strategies and the use of certain vehicles like separate accounts, commingled funds, or special situations is often dependent on the size of the investment staff and its resources. Stevens points out that larger pension plans with adequate staffing have continued a successful direct-investment approach with strategic partners, and that they will frequently participate in co-investment, secondaries, or recapitalizations to further drive returns.

No matter the plan, however, certain assets tend to perform differently in different stages of the economic and real estate cycle. “Good quality, well-located real estate can provide downside risk-protection, but can also perform well alongside an improving economy. Core real estate assets performed well coming out of the global financial crisis, due to the cash flow component and ultimately their rebound from the bottom of the market.” When others were focused solely on distress, Stevens’ clients performed well by taking advantage of mis-priced risk in the global core markets—taking on less risk.

“Those safe investments that generate favorable income offer investors downside protection. There are also select investment themes that are backed by some secular trends which might have a lower or higher correlation to the broader economic cycle and perform well,” Stevens adds.

Themes She’s Following

“A few themes that we prefer right now in today’s low-interest-rate environment; in the United States, we’re following evolving demographics and the trends reshaping our housing preferences. Coming out of the crisis, you saw a lot of development in class-A, 40-story apartment buildings in major cities such as Manhattan or San Francisco. However, as the cycle matures, we recognize that those assets may face an affordability issue as they struggle to achieve high water-mark rents.”

People are tending to move south and west, and so Stevens’ team has been following those trends to advise clients to invest in opportunities that don’t pose the same affordability challenges that high-profile metropolitan areas have, including multifamily properties that are not oversupplied and tend to remain resilient in a downturned economy.

Another theme that Townsend continues to follow is an opportunity that may come at the expense of the traditional retail format. “Continued supply and demand characteristics favor the industrial category. In retail, changing consumer behaviors has caused disruption, and we’ve seen the growth of companies like Amazon expand as an undisputed leader in e-commerce,” leading to a decline in traditional retail, she says.

“Retail will remain challenged in its historical format,” Stevens says. “Despite the attention being paid to [the] industrial segment, new opportunities will continue. The sector has the lowest vacancy rate across any property type today—which is no secret as a weight of capital chases that strategy.” According to Stevens, the key is finding unique strategies sponsored by vertically-integrated operators that have yet to receive such institutional attention—something her team is highly focused on achieving for its clients.

Once an investment opportunity or theme is identified, Stevens works with her team to source and identify the best method of execution. Today, Stevens prefers groups with specialized expertise (by region and/or property type), a vertically integrated structure, and strong alignment of interest between LPs and GPs. Over the coming years, Stevens believes real assets returns will moderate, making selection (and things like fee profile) more important.

Stevens cites her team’s key competitive advantages as being its global relationships—especially its strong client partnerships and access to high-quality research firms. Stevens believes that Townsend’s global network of clients and investment managers helps to inform her viewpoint and provide Townsend with its generous degree of proprietary data.

At the end of 2017, Townsend was acquired by Aon. The firms continue to work together with a key goal, according to Stevens, “to ensure that the retirement benefits and returns of Townsend’s investors are protected.” 

By Steffan Navedo-Perez