Crain News Service
CHICAGO -- Fixed-income money manager John Nuveen & Co. is in talks to buy Robertson Stephens Investment Management, sources familiar with the negotiations said.
The deal, if completed, would be a marriage of opposites, joining the conservative, buttoned-down Nuveen, which emphasizes a team approach, with the name-brand equity managers at San Francisco-based Robertson Stephens.
But it would fill an obvious product gap at Nuveen, which has made no secret of its desire to build a serious presence in equity management. Although it has rolled out several equity funds through its partnership with value manager Institutional Capital Corp. and acquisition of Rittenhouse Financial Services Inc., nearly 90% of its $12.3 billion in mutual fund assets is in bonds.
Still, a deal would entail substantial risks. Keeping Robertson Stephens' portfolio managers on board would be the first priority, and at least one of those managers is reluctant to buy in, according to one source.
What's more, some high-profile Robertson Stephens mutual funds have fallen on hard times, suffering net redemptions and investment losses. Both companies declined comment.
"There's a potential oil-and-water mixture going on here," said Andrew Guillette, a consultant at Cerulli Associates in Boston.
"You couldn't come up with two more different fund families, both their product lines and their cultures," added John Rekenthaler, research director at fund tracker Morningstar Inc. and former executive at Nuveen. "There's no overlap between Nuveen investors and Robertson Stephens investors."
While Nuveen, being a bond shop, tends to have few performance surprises, the same can't be said for Robertson Stephens' stock funds, notably its Contrarian Fund and Developing Countries Fund, which recently was folded into another fund.
And the BankAmerica Corp. unit has been hemorrhaging assets, at least in its mutual funds. Net outflows in the $2 billion complex this year were $479 million through July, according to Boston-based Financial Research Corp.
If the deal goes through, one big issue will be whether Nuveen, which sells through commissioned brokers, slaps sales loads on Robertson Stephens' direct-marketed funds.
That could help stem Robertson Stephens' outflows, since investors who have paid front-end loads are less likely to leave at the first sign of trouble.
But Mr. Rekenthaler has trouble envisioning Nuveen wholesalers, accustomed to selling conservative funds with an emphasis on downside protection, pitching the high-octane offerings of Robertson Stephens to brokers.
BankAmerica, which is merging with NationsBank Corp., announced in June it was spinning off Robertson Stephens Investment Management. The investment banking unit of Robertson Stephens was sold separately to BankBoston Corp. earlier this year.
Robertson Stephens Investment, in addition to its funds, manages more than $3 billion in private and institutional accounts, as well as hedge and venture capital funds. But only about $300 million was in U.S. institutional tax-exempt assets as of last Jan. 1. Nuveen spokesman Jeff Kratz said only a negligible amount of the firm's total $52 billion in assets is managed for pension funds.
Back in June, BankAmerica was demanding more than $50 million for the asset-management business, with Robertson Stephens principals asking for a significant equity stake besides. Officials at several prominent acquirers of money managers said last week they had not even bid on Robertson Stephens, raising questions about industry interest in the sale.
G. Randy Hecht, Robertson Stephens Investment Management chief, pursued the sale when it became clear NationsBank executives would lead the combined investment-management operations of the merging banks.
