John Miller, who managed the municipal-bond market’s largest junk mutual fund at Nuveen until earlier this year, will join First Eagle Investments in January to build a muni department from the ground up.
(Bloomberg) — John Miller, who managed the municipal-bond market’s largest junk mutual fund at Nuveen until earlier this year, will join First Eagle Investments in January to build a muni department from the ground up.
When he joins the $131 billion money manager in the new year, Miller says he’ll focus on what has defined his career — the riskiest corners of the municipal market.
“I wouldn’t rule out investment grade,” he said in an interview. “But we’ll start with high-yield. That is where my value-add is.”
Miller, 56, spent nearly three decades at Nuveen and oversaw about $188 billion, including a high-yield muni fund that at its peak had assets of around $25 billion.
His departure was announced in April along with Nuveen’s settlement of a years-long legal battle with Preston Hollow Community Capital, a lender that accused Miller of seeking to blackball it on Wall Street to head off a competitive threat. As part of the settlement, Nuveen became a “significant minority investor” in Preston Hollow.
Miller built his career on navigating the convoluted credits that make up the high-yield muni market, like speculative real estate developments and factories looking to recycle trash into fuel. He also guided his fund through some historically perilous moments, such as in early 2020, when investors yanked billions of dollars from junk munis when the pandemic roiled markets.
He said he chose First Eagle in part because of its emphasis on active management and individual security selection.
First Eagle, which caters to institutions and financial advisers for wealthy individuals, has tiptoed into munis in the past, but has never had a dedicated division, said Mehdi Mahmud, the firm’s chief executive officer.
Since joining the money manager seven years ago, Mahmud said he’s focused on expanding the firm’s investment capabilities beyond its flagship global value fund, which had about $49 billion of assets as of mid-year, much of it in stocks.
The company has been moving into alternative credit strategies, agreeing last year to buy Napier Park Global Capital, a manager of collateral loan obligations, opportunistic credit and real assets. And now, high-yield munis and munis in general fit into that strategy of expansion, he said.
Read more: First Eagle to Buy Napier Park in Latest CLO Business Merger
“We’ve wanted to be in the muni business and we want to be in the muni business with the right person in the leadership role and the right team,” he said. “And I just couldn’t get there before John became available.”
First Eagle also said in a statement that Carl Katerndahl, a former colleague of Miller’s, will join as of Oct. 2 as the high-yield muni team’s chief operating officer. He spent 20 years at Nuveen before leaving in 2019, and was most recently at Winnick & Co.
During his time at Nuveen, Miller established an unusually high profile in munis because of his big bets on risky credits, which generated outsize returns and drew billions to his flagship fund.
Under his direction, the Nuveen High Yield Municipal Bond Fund grew from $50 million in seed capital to roughly $17 billion of assets today.
He’ll be encouraged to take a similar management approach at First Eagle, Mahmud said.
“We’d like to stand out, we’d like to be the alpha player in the group and to do that you have to do things differently,” he said.
First Eagle’s plan for munis is to build a team of investment professionals, starting with roughly nine to 11 people and expanding from there, Mahmud said.
Since leaving the firm, Miller said he’s been splitting time between his Chicago-area home, New York City and a vacation property in Costa Rica, and buying munis for his personal accounts. He said in the last several months he’s purchased securities offered by Chicago O’Hare International Airport and the Brightline passenger train in Florida.
And despite spending decades as a muni analyst and investor, Miller said he’s simply not ready to retire.
“I’m too young to do that,” he said. “I find the market to be so interesting and I feel that I still can provide value to investors and colleagues and I’m motivated to keep doing that.”
(Adds hiring of Carl Katerndahl in 12th paragraph.)
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