From the July 2008 issue of Research Magazine • Subscribe!

July 1, 2008

Nuveen's Alan Brown Speaks Out on Portfolio Construction, Relationships

Alan Brown, executive vice president and co-head of Nuveen Investments Global Private-Client Group, has been with the Chicago-based firm since 2001. Before this, he served as Amazon.com's chief marketing officer.

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Nuveen's Advisor OutreachThe Wealth Management Services Group offers financial advisors a variety of education and consulting services/programs, based on these four broad themes:o Family wealth issueso Wealth planningo Investment consultingo Advisor practice development

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Nuveen's total AUM is $164.3 billion today, with $37.9 billion in pure institutional assets, $74.1 billion in Global Private Client assets (comprised of $19.2 billion in mutual funds and $54.9 billion in managed accounts), and $52.3 billion in the Global Structured Products group.

Brown spoke recently with Research about Nuveen's growth strategies and advisor relations.

How is your business holding up, given challenges related to the auction-rate preferred securities issued by some of Nuveen's closed-end funds, as well as broader market issues? Fortunately, our mutual fund business has not been adversely affected by the auction-rate preferred securities, or ARPs, issues. Overall, our mutual fund business is actually doing quite well. In the last four years, we've only had two negative months of flows. We've historically been very strong in separately managed accounts, and have $55 billion in assets under management in SMAs.

How do you view your relationship with the financial-advisor community?We have a very strong relationship with advisors who look to us for our consultative approach to portfolio construction for their clients. Our goal in putting more emphasis on the mutual-fund business has been to replicate that experience and to go back to advisors who have been strong supporters of our consultative approach.

Our premise has been: if you like our long-term growth, long-term value, international or other offerings in the SMA format, there would be instances where you would want to access that expertise using a mutual fund.

We embarked on this program about three years ago and have seen 50 percent growth in the past three years, from 2004 to 2007 -- from $12 billion in AUM to more than $19 billion, and from 39 funds to 61.

What guided this growth strategy?Our real goal in getting started was to be sure we had really good offerings across the spectrum of asset classes to allow advisors to build well-constructed portfolios.

We have not had to rely on that one "hero" fund or a "star" growth or value mutual fund. We've seen assets flow into our value, growth, international, taxable, fixed-income and municipal offerings. Like a well-constructed portfolio, this approach has really smoothed out the bumps and bruises that the market can give you.

What's been the outcome of this strategy?We've had a number of key successes, and each area or segment has had its moment in the sun. Last year, for instance, our municipal high-yield fund went to over $4 billion in AUM. We had an international fund that went above $1 billion. And this year, a domestic all-cap fund is moving from $350 million to $750 million, and it could reach $1 billion. In addition, the Nuveen High Yield Taxable Bond Fund recently hit $100 million in assets.

We find that with each of our managers, they've all had some success in the marketplace over the past three years.

Can you summarize where you stand with financial advisors? At Nuveen, we have 135,000 individuals in our database of financial advisors with whom we've had relationships over the years. Today, some 70,000 have assets with us. At the high end, 30,000 advisors have at least $100,000 each in assets with us. We are probably more heavily skewed towards the wirehouses, private banks and other high-net-worth advisors.

We launched an RIA-channel effort several years ago and are particularly focused on advisors working with high-net-worth clients. We have a dedicated team of 10-plus people focused on the RIA channel. It's a different process with the RIA channel; it's like the high-end, wealthy boutique financial market. So we made sure that out interaction was focused more around portfolio construction and serving high-net-worth investors than about any specific product. We emphasized our range and suite of solutions to RIAs, and we now stand at more than $6 billion in assets through this channel.

Nuveen's overall distribution force is comprised of more than 100 people, including internal and external sales staff.

Are there any new developments in your strategy and/or growth plans?The good news here is that we feel we've been ahead of the curve for a number of years with out value-added programs featuring our Wealth Management Services team, headed by John Nersesian. John and his team go out and work closely with advisors on a number of issues that are important to their clients and their business.

Educationally, we offer a pre-CIMA [Certified Investment Management Analyst exam] course. We have had over 1,000 advisors come through here in the past year before taking CIMA to work with John and his team. That team is also out there talking about specific planning and philanthropic issues, how to talk to children about wealth, etc.

John and his group have been hard at work on this for more than five years. They've done an excellent job, and that's something we are proud of.

Why are you upbeat about the business? We've been fortunate in terms of the past six to nine months of financial-market dislocation. We have not deviated from our strategy and have continued to test and to innovate new products, and to build up our product suite. This is because we believe that if the firm looks like a well-constructed portfolio, the business will perform like a well-constructed portfolio.

No matter what market is out there, we have products and portfolio strategies that are appealing. This has helped us over the past four years, which is why we've only had two months of negative flows during that time.

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Janet Levaux, MBA/MA., is the managing editor of Research; reach her at jlevaux@researchmag.com.

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