Investment Joint Venture Aims to Bring More Choices to CU Market
Madison Investment Advisors Inc. and MCA have partnered to form Madison Asset Management LLC with a focus on developing competitive retirement-focused products and services, including its pension and 401(k) products, annuities, life and long-term care products.
MEMBERS Capital's mutual funds and the managed account programs will continue to be offered through CUNA Brokerage Services as well as through other approved broker-dealers, according to the company. The Ultra Series fund will continue to serve as one of the investment options that support the MEMBERS variable insurance products, including variable annuities, and within the marketed CUNA Mutual 401(k) plans.
"With our asset management staff, they will be able to manage more of the general fund, the assets of CUNA Mutual as well as retirement products for what we term as 'middle America,'" said Jim Buchheim, vice president of corporate communications at CUNA Mutual. According to its 2008 annual report, CUNA Mutual had $1.3 billion invested in cash, Treasuries and agency securities representing 18% of its general account portfolio as of Dec. 31, 2008.
Buchheim did not disclose the cost to launch Madison Asset Management. However, CUNA Mutual will reduce its expenses as a result of the new entity, he added. Twenty-three of the company's staffers will move over to the firm, which is also based in Madison, Wis.
"In many respects, there should be very little change for credit unions," Buchheim said. "The joint venture will help offer even more funds that we think are of high quality and focus on the credit union space."
Launched in 1974, MIA and its subsidiaries manage an aggregate of approximately $7.5 billion of actively managed mutual funds, fixed-income portfolios, risk-sensitive equity accounts and personalized balanced portfolios. The firm has roughly 75 full-time employees, including 42 investment professionals, in offices in Madison, Scottsdale, Ariz., and Chicago. MIA and its subsidiaries specialize in separate account management for high-net worth and institutional investors, provide asset management for insurance companies and manage the Madison Mosaic Family of Mutual Funds.
The new joint venture adds approximately $5 billion in assets under management to MIA. With more than $12 billion in assets under management, MCA is CUNA Mutual's registered investment adviser affiliate.
Discussions to launch MAM began around November 2008, said Frank Burgess, president of Madison Investment Advisors. The two companies spent several months talking about strategies and investment and due diligence processes. Burgess recalled there being an understanding that MCA would focus more on credit union products and not day-to-day operations.
"Consider the times," Burgess said about last fall. "The market was imploding. Every financial institution was deeply worried about things including us and [CUNA Mutual]. That's when we started to talk."
Ironically, even though CUNA Mutual and MIA's offices were in the same Wisconsin city less than half a mile from each other, neither had intimate knowledge of their respective operations, Burgess said, adding there was never an exchange between senior management. That has since changed. Buchheim would not say whether CUNA Mutual sought out potential relationships with other investment advisory firms. He did say linking up with a local business "was a key element."
"It's a win for our staff," Buchheim said. "If we partner with some company in Phoenix, Arizona, the opportunity to combine staff is probably not there. We have a knowledge of them and they have a knowledge of us. It's a clear alignment."
In the past, MIA managed investment portfolios at a few credit unions, Burgess said. Beyond that, the current head of the firm's fixed-income department previously worked at CUNA Mutual, he noted. The new synergy brings "a number of excellent portfolio managers" from both sides. Top management is also in the process of putting together an oversight board that will explore different strategies, Burgess said, adding "at the end of the day, they share in returns, as do we."
"We do retain a financial interest in the venture. We are very much involved in the financial success of the organization," Buchheim said.
MAM's expected close date is June 30, Buchheim said. Over the next few months, letters and proxies will go out to shareholders and investors. Those MCA employees that will transition over are scheduled to start on July 1.