John Nuveen & Co., the investment bank and mutual fund company, is farming out its investment research to clients.
The first taker is the Illinois Educational Facilities Authority, which recently selected Nuveen as its new financial adviser.
This will be the first time that Nuveen's research staff supports the firm's financial advisory services, said Keith J. Morgan, vice president of Nuveen's municipal securities division.
With investment banks and mutual fund companies finding profits hard to come by, the arrangement demonstrates Nuveen's willingness to package and market all segments of its business.
Nuveen's decision to couple its research and financial advisory services "was a very important part of our decision," said John P. Conley, executive director of the Illinois Educational Facilities Authority.
The authority recently revamped and expanded the mandatory requirements of the role its financial adviser will perform. The new program gives the authority's constituents the option of using its financial adviser to structure bond transactions or else hiring an outside firm.
More than 40 firms responded to the education authority's request for proposals. Then a dozen firms submitted formal proposals, Conley said.
The authority's previous financial adviser, Ponder & Co., decided it didn't want to submit a proposal under the authority's revised adviser guidelines, Conley said.
Under the arrangement, investment bankers in Nuveen's educational group will perform financial advisory services for the authority, including input on structuring deals and pricing.
In addition, Nuveen's research department will give the authority credit opinions on its constituent members, evaluating the borrowing institution and the transaction it seeks to perform.
Constituents also can use Nuveen for additional financial advisory services on structuring their deals if they wish, Conley said.
The education authority is a state agency that provides financial assistance to not-for-profit educational and cultural institutions in Illinois. The authority provides loans at federal tax-exempt interest rates for construction, remodeling, or refinancing of facilities and equipment. Since its creation in 1969, the authority has issued approximately $2.25 billion of bonds for the benefit of its constituents.
"We developed this idea to submit to them," Nuveen's Morgan said. He added that Nuveen had been looking for a way to market the knowledge and expertise of its research staff.
"We're going to market this to other authorities" and conduit issuers, specifically health and educational authorities, he added.
However, Nuveen is precluded from providing its financial advisory and research services to issuers for which it does investment banking work.
Nuveen's research staff, considered one of the largest devoted to municipal research, consists of 27 researchers and analysts. The firm has a one-year, renewable contract to provide services for the Illinois authority.