Can an equity firm run a mutual fund?

The news that Nuveen was purchased by private equity firm Madison Dearborn Partners is yet another example of how private equity funds are increasingly going after financial services funds. Nuveen, a highly recognizable brand, says this will allow them to attract and retain talent and accelerate their product and service development plans. It will also make some people very wealthy. But you have to wonder if there's a lot of synergy between a private equity firm and mutual fund company. Madison Dearborn was willing to pay a big 20 percent premium. So it sees something. But what? The company will be loaded up with additional debt, and you have to wonder if the target will really have the wherewithal to finance the major expansion people are hoping for. It may be that mutual fund returns won't be good enough for a private equity company. But we'll see.

Our take on this news: This will be one of Madison Dearborns few mistakes. Excellent equity firm with excellent returns but this will turn out to be a blunder for them and its investors.