Bond Fund Manager Expands with Stock Investment Funds Move Signals Shift in Management Strategy

By Edward Wyatt N. Y. Times News Service | THE JOURNAL RECORD, May 17, 1996 | Go to article overview

Bond Fund Manager Expands with Stock Investment Funds Move Signals Shift in Management Strategy


Edward Wyatt N. Y. Times News Service, THE JOURNAL RECORD


Five years after the start of one of the hottest bull markets in history, and a similar stretch into the biggest mutual fund boom of all time, John Nuveen & Co. has decided to start selling mutual funds that invest in stocks.

For some institutional investors, who have watched Nuveen's stock price severely trail its peers, the move comes not a moment too soon.

Nuveen is no stranger to mutual funds, only the equity kind. The company, based in Chicago, manages $50 billion in funds and unit investment trusts, but virtually all that money is invested in municipal bonds, the investment sector that has been Nuveen's specialty since 1898.

While the municipal-bond market grew rapidly in the early part of the decade, new issues of muni bonds slowed drastically last year. That sharply cut Nuveen's growth rate and caused the company's stock to lag far behind its peers, many of which have been continuing to grow through the sale of equity funds.

An investment in Nuveen's class A shares, which climbed 62.5 cents, to $25 Tuesday, has grown at an annual rate of 10 percent since the company went public in May 1992, including reinvested dividends.

In contrast, shares of T. Rowe Price have gained 34.1 percent annually in that time, and the Standard & Poor's 500-stock index has risen 15.1 percent annually.

Now aiming to diversify its offerings, Nuveen said that later this year it would begin offering new funds that invest in stocks alone or in a combination of stocks and taxable bonds or stocks and tax-free municipal securities.

To manage the stock investments, Nuveen hired Institutional Capital Corp., a Chicago institutional money manager that oversees $5 billion in assets, including two funds sold to small-company retirement plans and wealthy individuals.

Nuveen also said it had bought the equivalent of 20 percent of Institutional Capital, which is privately held, for an undisclosed sum.

Institutional Capital's stock-market expertise could make the new Nuveen funds attractive to individual investors. The company's two ICAP mutual funds gained 35.2 percent and 38.8 percent last year, respectively, compared with the 37.5 percent gain in the S&P 500, with reinvested dividends. In addition, in the last 10 years, institutional accounts managed by Institutional Capital have outperformed the S&P 500 by about two percentage points annually.

That kind of performance would rank far better than Nuveen's long- term record in municipal funds. …

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