Investors Are Always the Last to Know: Maillet Jumps Ship to Nuveen

The fund manager says his departure 'shouldn't even be an issue' for Van Kampen.
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Investors in

Van Kampen Funds'

closed-end floating-rate loan funds may have been surprised to learn from a full-page ad in

The Wall Street Journal

Wednesday that the funds' manager, Jeff Maillet, has moved to

John Nuveen

(JNC)

.

Is this a run-of-the-mill fund-manager move? Hardly. At Van Kampen, Maillet managed three funds -- and more than twice as many assets -- as any other manager of floating-rate loan funds.

His is the biggest name in this asset class, which consists of variable-rate loans to speculative-grade corporations.

Floating-rate loan funds have grown in popularity in recent years. On the risk spectrum, they are safer than high-yield bond funds because they don't involve interest-rate risk and because creditors are senior to bondholders in a company's capital structure. According to

Lipper

, total net assets for the group increased to $28.5 billion at the end of July from $3.4 billion in 1993.

There are two main types of floating-rate loan funds: Of the 20 funds tracked by Lipper (up from just five in 1993), four are exchange-traded and the rest are continuously offered. Continuously offered closed-end funds issue new shares as investors demand them but allow redemptions only once a quarter or once a month, depending on the fund.

Nuveen, best known for managing more closed-end muni bond fund assets than any other company, doesn't currently offer floating-rate loan funds. It plans to capitalize on the growing demand for these funds by launching some of its own, with Maillet at the helm.

At Van Kampen, Maillet managed

Van Kampen Prime Rate Income Trust

, an $8.2 billion continuously offered fund,

Van Kampen Senior Income Trust

(VVR) - Get Report

, a $1.8 billion exchange-traded fund and

Van Kampen Senior Floating Rate

, a $1.3 billion continuously offered fund.

Van Kampen says it announced Maillet's resignation in a July 22 press release, but it didn't appear to get wide circulation. A search of press release and news wires doesn't turn it up. Nuveen announced it had hired Maillet in a July 30 release, distributed on

PR Newswire

.

If Van Kampen didn't want to publicize Maillet's departure, that's understandable. Not only is he the best-known manager in the asset class, but he's also moving only across town in Chicago, where he is presumably free to recruit from his old stomping grounds. Because the world of floating-rate loans is so small, it isn't clear that Van Kampen could easily replace people who leave.

Mariana Bush, closed-end fund analyst at

Everen Securities

, said investors may want to give Van Kampen Senior Income Trust, the exchange-traded fund, "a slightly higher yield for that uncertainty, temporarily."

In an interview Wednesday morning, Maillet wouldn't say whether he's prevented from raiding his former shop. "I'm actively in the market and taking resumes from all kinds of competitors, bankers, law firms, things like that," he said, adding: "It's a great country; it's a market-driven situation."

Maillet says his departure "shouldn't even be an issue" for Van Kampen, given the depth of management at the firm and its parent

Morgan Stanley Dean Witter

(MWD)

. Van Kampen tapped Dennis McDonnell, president and trustee of the floating-rate loan funds, as its new manager.

A Morgan Stanley Dean Witter spokesman would say only that no one other than Maillet had left the department.

Maillet said Nuveen plans to launch an array of retail and institutional floating-rate loan funds. On the retail side, the firm will start out by introducing an exchange-traded fund that will use leverage and a quarterly redeeming, continuously offered fund that won't use leverage by the beginning of the fourth quarter. Maillet said he thinks floating-rate loan funds have the potential to continue to add assets at a very fast pace.