Nuveen to Buy First American Funds’ Long-Term Asset Business

Nuveen Investments announced plans Thursday to purchase First American Funds’ long-term asset business as part of a strategy to offer a more diverse suite of products to investors.

In exchange for the acquired businesses, Nuveen Investments will give FAF Advisors’ owner, U.S. Bancorp, $80 million in cash plus a 9.5% stake in Nuveen.

A stake in Nuveen has no observable market value because the company is privately owned.

Based in Minneapolis, FAF manages $98 billion in mutual funds, money market funds, separately managed accounts, and other strategies.

Nuveen is acquiring about $25 billion of the total, which is virtually everything but the money market funds.

The acquired businesses include 11 municipal bond mutual funds with $2.6 billion in assets. The biggest acquired muni fund is the Intermediate Tax-Free Fund, which has $775.6 million in assets. FAF runs state-specific funds for California, Minnesota, Missouri, Colorado, Ohio, Nebraska, and Oregon.

FAF also manages three municipal closed-end funds with about $160 million in net assets.

In a conference call, Glen Richter, chief operating officer at Nuveen, said the management teams at the FAF funds will see “little to no impact” from this deal.

Nuveen currently manages $150 billion, about half of which is municipals. After adding the FAF businesses, Nuveen will manage $175 billion.

The deal is expected to close by the end of the year.

Bill Huffman, co-head of Nuveen Asset Management, said this acquisition was a way for Nuveen to offer more types of products to investors.

The company talks to a lot of financial advisers who are looking for an array of products for their clients, Huffman said. Nuveen wanted to be able to present a great diversity of options to these advisers to meet their asset allocation needs, he said.

“It broadens out our product array so we can provide further investment end-solutions to our clients,” Huffman said.

He stressed that branching out into other businesses was not a reflection of a negative stance on the municipal product. It was just a way to offer clients a better variety of options, he said.

Barron’s Magazine named FAF the fourth-best mutual fund complex in 2009, and Nuveen the fifth best.

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