The dust has begun to settle. Nuveen’s $13.5B “bailout” deal for Schroeder’s will create huge headwinds for TIAA & Nuveen in the near. First, Nuveen (aka TIAA) overpaid by 35%. Second, there will have to be major debt issuance to pay for the deal. Then, Schroder’s is in Europe-not necessarily the free market capital of the world & subject to heavy regulation & taxes. Then, you still have Blackrock, Vanguard & Fidelity stateside who are the 800 pound guerillas. Overall, this move seems to be made in a panic & forced & not thought through all the way. Some very questionnable moves going on driven by lost clients, lost wealth management teams, the Denver/Jacksonville/Frisco & Accenture disasters. I could be 100% wrong but how does everyone else see this deal ?
14 replies (most recent on top)
@OP What a absolutely stu-pid transaction ! Consider this:
Nuveen (TIAA) could invest the $13B+ billion it wants to pay for Scro.tums, in an S&P 500 Index fund & they could made a boat load more money. Look at this simple illustration. I’m sure Bill Huffman, TBD, and the Boards never ran this back of the envelope calculation:
$13B at 10% annual return, $2B/yr withdrawal starting year 10
• Years 1–9: Pure compounding, no withdrawals → grows from $13B to $30.65B
• Year 10 on: 10% growth applied, then $2B withdrawn each year-end
• Year 10: $31.72B
• Year 15: $38.87B
• Year 20: $50.40B
• Year 25: $68.95B
Bottom line: The $2B annual draw never depletes the fund. Once the balance clears ~$20B, 10% annual growth (~$2B+) outpaces the withdrawal, so the balance keeps compounding upward rather than shrinking — it would only decline if the balance fell below roughly $20B.
D.umb Ph.uckers
Perhaps a baseball analogy is in order. Blackrock, Vanguard & Fidelity are like the Dodgers, Yankees, Red Sox or the Giants, they don't always win but there almost always in the hunt. TIAA on the other hand is like the single A farm team for perennial loser the Colorado Rockies.
@qx Larry Fink from Blackrock was on CNBC today with Jensen Huang from NVIDIA and it is clear Larry & Blackrock will be going after external assets with based on the use of AI. The spread that Blackrock makes is like 2.5% ! Incredible. Blackrock is a well oiled machine & that machine is getting more efficient & it will take TIAA & Nuveen over 10 yrs to unwind the old, KKLunKy, and outdated ways of “Old, high tax-high regulation Europe.”
@OP AI is going to massively flatten the playing field and this is an old style deal devoid of what the next 10 years will bring to Wealth and Asset Management. This is not a transformational or future looking deal at all.
@OP After the deal was announced, nearly $9B flew out of the Schroeders coffers right away by a large institutional investor. Net outflows will start to accelerate as people fear change. We are hearing that Blackrock, who has a large European presence, is going to be a big benefactor of the Nuveen deal. Vanguard & other firms like DWS, Amundi, & Legal/General will make a strong bid to win over assets during the vaccum period. The deal is not even going to break even for Nuveen until year 10. Shelling out $13B to get your hands on a net income stream of roughly $1.2b per year, is a high risk deal. Of all places, Europe won’t be the center of growth. This was a panic buy & Nuveen should have remained US centered by picking up smaller firms & spending $6B & not $13B.
I feel this is a very good deal for Nuveen. It will compliment Nuveen and add a massive European customer base.
@cv d-mb b/c it states the obvious or the oblivious ?
@OP the only people truly celebrating with this deal are the Schroeder Family. Think about it this was. If your bill at a restaurant was $100 and the service was cr-ppy & you were drinking, and you gave a tip for $35. The waiter would be dancing in the streets and when you became sober again and looked at your credit card bill and saw the $135 charge, you’d be saying: “WTF was I thinking.” Same thing gonna happen to TBD, TIAA, Nuveen.
@OP TIAA (Nuveen) would have been better to gobble up 15-20 smaller private firms in the US who specialize in private equity, placing business such as some strategic brokers; wealth management firms to better diversify. These could add to the bottom line right away and not be a drag on financials for 7-10 yrs.
Nuveen may have got Schroeders to break out and be back on their own and offload the dumpster fire that is TIAA... I mean they have all the mutual funds and CITs so they don't need Traditional or CREF and the archaic systems and processes...
The Schroeders acquisition has become a bigger head scratcher by the day, especially as the "post" due diligence is being done and seeing what we actually have. And I agree, we overpaid by a ridiculous amount for it.
@OP yeah those 800 pound "guerrillas" are incredible. They can still ambush you without you even knowing it. Truly remarkable.
Clown.
Moody's shared this exact same sentiment. They basically shared that it would cash strap the company. And you're right, even with this deal, how will this move the needle to compete with a Blackrock or Vanguard. It seems risky to me. Hopefully, it works out for our participants and for employees.
I think this is one of the d-mbest posts I’ve ever read