In the largest transaction in the asset management business since 2006, ideas over branding remain divided.
Some commentators note that TIAA-CREF's recent decision to buy Nuveen Investments and maintain it as a separate entity would be a good thing for branding - as each firm has separately worked hard to gain name recognition. Others say that decision would result in lost leverage that comes from a unified marketing approach.
Providers and fund managers voice key takeaways of the deal with regard to distribution, marketing and the trend of consolidation in the fund servicing industry.
DISTRIBUTION
TIAA's-CREF's acquisition of Nuveen would create a combined company ranking in the top 20 largest U.S. mutual fund firms. While TIAA-CREF focuses primarily on academic and not-for-profit retirement plans, Nuveen has a more extensive retail presence. The acquisition, therefore, would allow both firms to broaden their distribution networks, industry sources say.
"TIAA-CREF has been very successful in recent past - since 2008/2009 - in the direct to consumer and retail space as opposed to the intermediary space," says industry consultant Geoffrey Bobroff. "They haven't had any access to the broker-dealer market in a meaningful way but Nuveen will bring greater access to that," he says.
The acquisition strengthens TIAA-CREF's investment expertise and distribution capabilities in the advisor-sold market for mutual funds, Bobroff explains, given Nuveen's relationships with broker-dealers and financial planners. In addition to TIAA-CREF's $73 billion open-end mutual fund business, its Individual Advisory Services division says in 2013 that it aims to hire 200 financial advisors by the end of this year.
The deal will also allow TIAA-CREF to gain access to Nuveen's international product offering and focus on the municipal bond market. Over the past six years, Nuveen has grown through hires and acquisitions, adding equity products and bringing on Robert Doll as chief equity strategist after he retired from BlackRock in 2012, for example.
Nuveen's AUM in munis and closed end funds, therefore, help TIAA-CREF diversify its product base and build relationships with advisors who generally have assets that stay in funds for the long haul, says Morningstar's Steven Pikelny.
The $6.25 billion deal includes $4.6 billion of outstanding debt on Nuveen's part. TIAA-CREF intends to deleverage the firm, which is an overall positive for Nuveen in terms of financial stability, managers say.
MARKETING
TIAA-CREF's acquisition of Nuveen also has takeaways for mutual fund and ETF providers when it comes to their marketing and branding strategies.
"The plan is to keep Nuveen as a separate entity overall - Nuveen has created a brand in the closed-end fund world and it wouldn't make sense to eliminate that brand," says Pikelny.
Nuveen will operate as a separate subsidiary within TIAA-CREF's asset management business. John Amboian will remain CEO of Nuveen, and the rest of the company's leadership will stay in place as well. TIAA-CREF is not planning on firing managers, changing the operating structure, or rebranding at all. Funds will still be called Nuveen, says Morningstar's Pikelny.
Fees of Nuveen funds will also remain intact. "It is not unusual to have different fees when you have autonomous investment boutiques, each with their own style, strategy and management team. ... Look at BNY Mellon as an example," says Deborah Fuhr, managing partner ETFGI independent research and consulting.
Others, however, note that maintaining separate brands may lead to lost leverage by not having a common identity and possibly a single marketing effort. "This may be where they see a real cultural challenge - there are some organizations that try to maintain multiple brands but it is expensive and they finally need to throw in the towel and move to a single brand," Bobroff explains.
CONSOLIDATION
Scale and size are certainly top trends in the mutual fund business. The percentage of mutual fund assets managed by the top 10 firms was 44% in 2000 and has risen to 53% in 2013, ICI shows.
"There are and will likely be fewer larger players so it makes sense for TIAA-CREF to gather assets when the opportunity arises," says Lipper's Barry Fennell, indicating that future expense ratios on funds are likely going to be pressured when competing with Vanguard, Blackrock and ETF alternatives. "You need a bigger asset base to spread costs around," he says.
