(FAF ADVISORS (TM) LOGO)
800 Nicollet Mall RICHARD J. ERTEL
BC-MN-HO4N COUNSEL
Minneapolis, MN 55402 Direct line: (612) 303-7987
Fax: (612) 303-4223
August 12, 2008
Ms. Kimberly Browning VIA EDGAR
Office of Disclosure and Review
Division of Investment Management
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: First American Investment Funds, Inc.
SEC File Nos. 033-16905 and 811-05309
Response to Staff Comments on Preliminary Proxy Statement (Form PRE 14A)
Filed with the Commission on July 25, 2008
Dear Ms. Browning:
The purpose of this letter is to respond to the comments that you transmitted by
telephone on August 6, 2008 regarding the preliminary proxy statement for the
above-listed registrant (the "Registrant"), related to International Fund (the
"Fund"), a series of the Registrant. Following is our response to your comments,
which appear in bold-face type below.
1. REVIEW YOUR DISCUSSION OF THE MANAGER-OF-MANAGERS AUTHORITY THROUGHOUT THE
DIFFERENT SECTIONS OF THE FILING (E.G., QUESTION & ANSWER SECTION, PROXY
STATEMENT, ETC.) TO ENSURE THAT YOUR DISCLOSURES ARE CONSISTENT AND
COMPLETE IN DESCRIBING THE AUTHORITY GRANTED TO, AND LIMITATIONS ON, THE
ADVISOR UNDER SUCH AUTHORITY. FOR EXAMPLE, NOTE THAT MANAGER-OF-MANAGERS
WILL ALLOW THE ADVISOR TO CHANGE SUB-ADVISORS WITHOUT HAVING TO OBTAIN
SHAREHOLDER APPROVAL OF SUCH A CHANGE. ALSO, MAKE IT CLEAR THAT THIS
AUTHORITY EXTENDS ONLY TO THE HIRING OF UNAFFILIATED SUB-ADVISORS.
We made the following changes in response to this comment:
- In the letter to shareholders from the president of the Fund, we have
clarified that manager-of-managers authority would allow FAF Advisors,
Inc. (the "Advisor") to make changes to sub-advisors and change the
terms of the sub-advisory agreements "without having to seek
shareholder approval."
- In that same letter, we have also added the following sentence
regarding the hiring of affiliated sub-advisors under the
manager-of-managers authority:
"The Advisor may not enter into a sub-advisory agreement with any
affiliated sub-advisor without that agreement being approved by
the Fund's shareholders."
(FAF ADVISORS (TM) LOGO)
- In the "Important Information" question and answer section, under
"What is a manager-of-managers structure?" we changed "and the terms
of sub-advisory agreements without holding a shareholder meeting" to
read as follows:
". . . or materially amend existing sub-advisory agreements
without having to seek shareholder approval."
2. MAKE IT CLEAR WHO (E.G., J.P. MORGAN) WILL BE RESPONSIBLE FOR THE
DAY-TO-DAY MANAGEMENT OF THE FUND BETWEEN THE TIME THE PROXY IS FILED WITH
THE COMMISSION AND THE ANTICIPATED SWITCH FROM J.P. MORGAN TO ALTRINSIC AND
HGI.
In the proxy statement, in the last paragraph under "Background" of both
Proposal 1 and Proposal 2, we have added the following sentence in relation
to the expected effective date (i.e., November 1, 2008) of the change in
sub-advisors:
"Until that time, JPMorgan is expected to continue in its role as
sub-advisor to the Fund."
3. CONFIRM THAT ALL MATERIAL DIFFERENCES BETWEEN THE J.P. MORGAN AGREEMENT AND
THE PROPOSED AGREEMENTS WITH ALTRINSIC AND HGI HAVE BEEN DISCLOSED. IN THE
Q&A DISCUSSION OF THE SUB-ADVISORY FEE INCREASE ASSOCIATED WITH THE CHANGE
TO THE NEW SUB-ADVISORS, IT STATES THAT THE "INCREASE IN FEES WILL BE BORNE
ENTIRELY BY THE ADVISOR." IS THIS A CONTRACTUAL OBLIGATION ARISING FROM THE
ADVISORY AGREEMENT BETWEEN THE FUND AND THE ADVISOR? IF SO, PLEASE MAKE
REFERENCE TO THAT AGREEMENT.
We can confirm that all material differences between the J.P. Morgan
Agreement and the proposed Altrinsic and HGI agreements have been disclosed
in the proxy statement.
We have added the following underlined language to the Q&A discussion of
the increase in fees to clarify that the Advisor is contractually obligated
to pay all sub-advisory fees:
"This increase in fees will be borne entirely by the Advisor and
paid by the Advisor out of the investment advisory fees it
receives from the Fund, pursuant to the terms of the Investment
Advisory Agreement between FAIF and the Advisor."
4. CONSIDER INCLUDING A DISCUSSION OF THE CHANGE IN INVESTMENT STRATEGY OF THE
FUND IN THE PROXY STATEMENT, IN ADDITION TO THE DISCUSSION FOUND IN THE
QUESTION & ANSWER SECTION OF THE FILING. WE SUGGEST THAT YOU RESTATE THE
FUND'S INVESTMENT OBJECTIVE AND NOTE THAT IT WILL NOT CHANGE UPON THE
CHANGE IN SUB-ADVISORS AND STRATEGIES. ALSO CONSIDER MOVING THE DISCLOSURE
OF THE NEW PORTFOLIO MANAGERS INTO THIS SAME DISCUSSION WITHIN THE PROXY
STATEMENT AND CONSIDER GIVING IT MORE PROMINENCE WITHIN THE PROXY
STATEMENT.
We have inserted the following paragraph as the third paragraph of the
definitive proxy statement:
"Should shareholders approve the sub-advisory agreements with
Altrinsic and HGI, the Fund's investment strategy will change
from that employed by the
(FAF ADVISORS (TM) LOGO)
Fund's current sub-advisor, J.P. Morgan Investment Management
Inc. ('JPMorgan'). Altrinsic and HGI will each be responsible for
separately managing a portion of the Fund's assets, as assigned
by the Advisor. The Advisor will be responsible for allocating
the Fund's assets between Altrinsic and HGI and the Advisor will
manage the portion of the Fund's assets not allocated to a
sub-advisor. Teams of portfolio managers at both Altrinsic and
HGI will use their own investment strategies when managing their
respective portion of the Fund's assets, which will differ from
the investment strategy currently used by JPMorgan. Altrinsic
will take a 'value' style approach to investing its portion of
Fund assets, similar to JPMorgan; however, Altrinsic looks for
value opportunities across a broader range of market
capitalizations. HGI will employ a 'growth' style to investing
its portion of the Fund's assets. The investment strategies
utilized by Altrinsic and HGI, along with information on their
respective portfolio management teams, are further described
below under 'Additional Information about Altrinsic' and
'Additional Information about HGI,' respectively. The Fund's
investment objective of 'long-term growth of capital' will remain
the same."
We believe adding this discussion near the beginning of the proxy
statement, with references back to additional information on the specific
strategies employed by the proposed sub-advisors, as well as their
portfolio management teams, appropriately emphasizes the shift in strategy
without detracting from the discussion of the proposals that shareholders
are being asked to consider.
5. ONE OF THE FACTORS THE BOARD CONSIDERED IN CHANGING SUB-ADVISORS WAS THE
"ECONOMIES OF SCALE" THAT WOULD BE REALIZED THROUGH THE HIRING OF BOTH
ALTRINSIC AND HGI. PLEASE EXPLAIN THIS FURTHER IN THE PROXY STATEMENT.
The factor has been revised as follows for both Altrinsic and HGI:
"economies of scale that might result from the growth in the
Fund's assets and from [Altrinsic's][HGI's] management of both
the Fund and International Select Fund and any other benefit that
[Altrinsic][HGI] may derive from its relationship with the Fund."
6. YOU REFERENCE THAT FAIF AND THE ADVISOR HAVE RECEIVED A MANAGER-OF-MANAGERS
EXEMPTIVE ORDER FROM THE SEC. PLEASE INCLUDE THE DATE OF THE ORDER IN THE
PROXY STATEMENT.
In the discussion of Proposal 3 in the proxy statement, specifically in the
second paragraph under "Background," we added a reference to the date of
the exemptive order, which was May 30, 2007.
7. IN FOOTNOTE 1 TO THE TABLE REGARDING FUNDS FOR WHICH HGI ACTS AS INVESTMENT
ADVISOR OR SUB-ADVISOR THAT HAVE SIMILAR INVESTMENT OBJECTIVES TO THAT OF
THE FUND, PLEASE CONFIRM WHETHER HGI HAS THE ABILITY TO RECOUP ANY OF THE
WAIVED FEES. IF THEY ARE ALLOWED TO RECOUP ALL OR A PORTION OF THE WAIVED
AMOUNTS, THE DISCLOSURE SHOULD STATE AS SUCH AND HGI CANNOT CLAIM THAT IT
HAS CONTRACTUALLY AGREED TO WAIVE FEES.
(FAF ADVISORS (TM) LOGO)
HGI does have the ability to recoup the fees within one year of the waiver,
under certain conditions. That being the case, the footnote has been
revised as follows to describe both the voluntary nature of the waiver and
the ability of HGI to recoup the fees:
"HGI has provided a letter agreement to Hansberger International
Series ("HIS") under which HGI will voluntarily waive a portion
of its management fee (and, to the extent necessary, bear other
expenses) if total expenses, not including brokerage, interest,
taxes, deferred organizational and extraordinary expenses, exceed
1.00% and 1.15% (1.25% and 1.40% for the Emerging Markets Fund)
for the Institutional and Advisor Class shares of each HIS Fund,
respectively. HGI may recoup the waived fees within one year
following the waiver."
In connection with the review of the above-referenced filing by the staff of the
Securities and Exchange Commission (the "Commission"), the Registrant hereby
acknowledges that:
1. The Registrant is responsible for the adequacy and accuracy of the
disclosure in the filing.
2. Staff comments or changes to disclosure in response to staff comments
in the filing reviewed by the staff do not foreclose the Commission
from taking any action with respect to the filing.
3. The Registrant may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
If you need anything further, please contact me at your earliest convenience at
612-303-7987. Thank you for your help.
Sincerely,
/s/ Richard J. Ertel
----------------------------------------
Richard J. Ertel
Assistant Secretary to the Registrant