Before Thursday, Nuveen was hardly a household name in the City of London despite a local workforce of nearly 500. But then it swooped for Schroders, one of the Square Mile’s most historic names, in a move that will reshape the top tier of active fund management.
The takeover will almost double the size of the US-focused group, making it one of the largest active fund managers in the world with assets of $2.5tn.
“This is a massive transformational step for both of our organisations,” Nuveen chief executive William Huffman told the FT.
Planning for a deal like this has been years in the making. When the Teachers Insurance and Annuity Association of America, one of the biggest and oldest US retirement providers, bought Nuveen in 2014, it had bold ambitions for expanding the business.
Huffman said the “heritages” of the Nuveen and Schroder families made the deal a “perfect match” in terms of strategy and culture. “One plus one equals five for the future,” he said.
The deal comes as the rise of low-cost passive investing has redrawn the asset management industry, squeezing fees and forcing smaller groups to cut jobs and consolidate.
A number of active managers have been diversifying into private markets to try to offset outflows from listed equity funds.
One person close to the deal said a crucial factor was the industry’s need for scale to support growth and offset mounting costs. “You need to be a global business because asset management is global and in active management you need to be in the $2tn club.”
Huffman agreed this aspect was crucial. “You need scale, scale allows you to drive better investment performance, drive better financial returns and allows you to grow.”
He added the two businesses were complementary: while Nuveen is focused on the US and has a sizeable private markets business, Schroders provides global distribution channels and assets outside the US.
The person close to the deal said the UK group’s lack of scale in the US was another factor. “Schroders is a great brand, has great distribution, but it was never going to have a proper footprint in the US . . . I think the Schroder family concluded that it was better to sell at £10bn now than wait five years and sell for £5bn as most [traditional asset managers] are struggling.” The family owns a 42 per cent stake in the business, which has £824bn in assets.
Nuveen was founded in Chicago in 1898 as an investment bank focused on selling municipal bonds to fund public infrastructure projects before branching out into the investment industry.
After a brief listing on the New York Stock Exchange in the early 2000s and a period under private equity ownership, TIAA bought Nuveen more than a decade ago, which now accounts for most of its assets.
TIAA was set up by Scottish-American industrialist Andrew Carnegie in 1918 to provide retirement income for university professors. It has grown into a Fortune 500 company providing pensions for millions of people at thousands of institutions.
Its business today is largely focused on annuities, sold through its retirement platform and designed to provide fixed or variable future payments to investors. These annuities are a vital source of stable capital for many large asset managers because they generally remain invested for 10 years or more.
That has invited intense competition in annuity sales from groups such as Apollo-backed Athene and KKR-owned Global Atlantic, which funnel the proceeds from annuity sales into their private investment businesses.
While it is less well known outside the US, Nuveen is a top-20 global asset manager with total assets of $1.4tn — including about a third in fixed income, slightly less in equities, $139bn in real estate and $138bn in private capital.
Of Nuveen’s total assets, roughly $560mn are managed for third-party non-retirement clients, $300bn for TIAA’s general account and the remainder for TIAA’s retirement clients such as universities and hospitals.
Nuveen has made acquisitions before to expand outside the US, buying the European-focused private debt lender Arcmont Asset Management in 2023.
Huffman said this latest deal would give clients “access to new markets, bolstered product offerings and deeper pools of investment talent”.
He said the differences between the two groups, with Nuveen focused on alternatives and fixed income with a US distribution, while Schroders has expertise in public markets and a client base in the UK and Asia, meant there was “very little overlap”.
Nuveen has said the Schroders brand will remain. The combined group, which will have some 9,600 employees, will “maintain Schroders’ existing investment and client teams across both asset and wealth management”, while Schroders chief executive Richard Oldfield will stay in his role and join Nuveen’s executive management team.
How the company chooses to integrate Schroders will be closely watched in an industry undergoing rapid consolidation. Rivals have taken different approaches to maintaining separate brands and operating structures. Some industry executives have warned siloed business units can limit opportunities for cross-selling and be a drag on growth.
Franklin Templeton has begun merging its private investment businesses under the Alternatives by Franklin Templeton brand, while BlackRock’s Larry Fink last year said the world’s largest asset manager was “intentionally organising to bring clients under one unified firm, not a collection of enterprises” after its acquisitions of private investment firms Global Infrastructure Partners and HPS Investment Partners.
Although the deal means Schroders will delist from the London Stock Exchange, Nuveen said it was committed to the UK and that the combined group’s non-US headquarters would be in London.
It also said that if it did consider an initial public offering of Schroders or the combined group, it would “intend to list on the London Stock Exchange as one of the dual listing venues”.
