FORTUNE — When you’re enjoying a glass of wine at the office holiday party this month you may, indirectly, have your old college econ professor or elementary school nurse to thank. That’s because the surprising owner of a huge swath of wine-producing agriculture is TIAA-CREF, the asset management giant that serves teachers, medical professionals, government workers, and others.
New York-based TIAA-CREF (the initials stand for Teachers Insurance and Annuity Association and College Retirement Equities Fund) owns more than 20,000 acres of vineyards, which in turn produce grapes for more than 190 vintners, including Stag’s Leap, Cakebread Cellars, Robert Mondavi, Sutter Home, and others.
The asset manager is now the country’s fifth-largest grower of wine grapes by acreage, according to the website Growing Produce, behind Gallo Vineyards and Bronco Wine Co. but ahead of Beringer Vineyards and Ste. Michelle Wine Estates, among others.
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TIAA-CREF, which has $542 billion under management, began investing in cropland in 2007 as part of an effort to diversify and, well, grow its assets and achieve good yields.
Heather Davis, head of global private markets at TIAA-CREF, says farmland fits nicely with the institution’s overall investment philosophy: Its goal is to provide its customers (that econ prof, nurse, or other service professional) with retirement income decades into the future, and it acquires land, like vineyards, with a 20-to-30 year time horizon. It is a philosophy that dates back to TIAA-CREF’s founding in 1918 by Andrew Carnegie’s Carnegie Corporation of New York and Carnegie Foundation. The industrialist wanted to find a way to improve financial security for retired college professors.
Today TIAA-CREF has about $4 billion in agriculture investments, by land value, and $1 billion or so invested in vineyards. Other ag investments include grains and sugarcane and fruits and nuts, assets that are linked to longevity and good health — good products for a retirement-focused fund to be associated with.
But there’s little question TIAA-CREF is having a little fun as an owner of vineyards and as an actual maker of wine, through one of its wholly owned entitites. (More on that in a moment.) “We drink a lot more wine than we used to, and we’re a lot pickier than we used to be,” Davis says with a laugh. “We try to drive demand by going into restaurants and only drinking our own wine.”
Of course, wine also happens to be a good business, Davis says. Wine consumption worldwide is on the rise, especially in newly affluent countries such as China. TIAA-CREF provides grapes primarily for bottles that retail in the $10 to $20 range, though it also supplies grapes to bottles across the spectrum of prices.
It also turns out vineyards are somewhat malleable; if consumer tastes start to change, new varietal vines can be grafted onto other vines, allowing the grower to meet demand for trendier fruit.
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The wine business has also evolved. Winemakers source their grapes from different growers, and growers are looking for ways to maximize profits in years when the grape prices are low. TIAA-CREF manages much of its wine operations through Silverado Premium Properties, a Napa, Calif.-based investment and management company it owns that purchases and plans the development of vineyards and seeks to maximize the revenue it can extract from its harvests.
Mark Couchman, president of Silverado (no relation to Silverado Vineyards), says the firm spends a lot of time talking to its customers — he says they include the top 10 to 20 wineries in Califorina — to make sure Silverado is planting the right varieties and making sure the big vintners are happy. “I have two people who do nothing but deal with the wineries,” Couchman says. They can be demanding customers, who want to make sure they are getting the quality of product they signed up to buy. “We had a half an inch of rain here in Napa and Sonoma, and we were in the middle of harvest,” Couchman recalls. “They all want to come back out and assess where were were, and retest the sugars in the vineyards.”
Silverado has also developed a strategy for using the grapes it does not sell to vineyards: It makes its own wine, too. A few years ago it formed Plata Wine Partners and hired Alison Crowe as director of winemaking. Crowe likens Plata to a peach farmer who sells whole fruit and homemade preserves at farmers markets. The main business is to sell the perishable fruit, but Plata also allows Silverado to preserve grapes in a non-perishable format, and maybe even reach new audiences. She estimates that Plata crushes about 5% to 10% of Silverado’s overall grape crop.
Crowe makes wines for private label customers of all sizes. (She’s also the winemaker at Garnet Vineyards.) She says her mission as a winemaker is “to make delivious wine and have happy clients.” She also is keenly aware of the corporate parent’s mission: “We wouldn’t do any of this unless it was adding value back up the value chain to TIAA-CREF,” she says.
And so most tipplers, TIAA-CREF customers included, may not realize they are consuming wines made with grapes grown on the fund’s land — or even a wine a TIAA-CREF unit produced. But knowing that they could be drinking the fruits of their labors might make faculty parties a little more interesting.
