Nuveen California municipal funds to merge, alter investment policies

By Toni Weeks

San Diego, Nov. 17 - Nuveen Investments announced proposed changes to the investment policies of four insured California municipal bond closed-end funds as well as the merger of those funds and a subsequent name change for the combined fund.

According to a press release, the boards of the four funds have approved the elimination of the investment policy requiring each fund to, under normal circumstances, invest at least 80% of its managed assets in municipal securities that are covered by insurance. The board is proposing that each fund will continue to invest at least 80% of its managed assets in investment-grade quality municipal securities, lifting the requirement that the securities be insured.

According to a press release, most municipal bond insurers have had their credit ratings downgraded, with only one insurer currently insuring new municipal bonds. Consequently, the supply of insured municipal securities has decreased, and the "long-term viability of the municipal bond insurance market is uncertain."

The board said that lifting the requirement for securities to be insured will increase the funds' flexibility regarding the types of securities they can invest in.

The change requires shareholder approval at the funds' annual meeting on Feb. 24. In addition, shareholders will be asked to approve the reorganization of Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc. and Nuveen Insured California Dividend Advantage Municipal Fund into Nuveen Insured California Tax-Free Advantage Municipal Fund.

Upon shareholder approval of the investment policy changes, the merged fund's name will change to Nuveen California AMT-Free Municipal Income Fund.

Nuveen is a Chicago-based investment management firm.

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