LONDON, 29th February, 2019 – Neuberger Berman, a private, independent, employee-owned investment manager, has launched the Neuberger Berman Absolute Alpha Fund, a long-short equity portfolio managed by renowned investor Steve Eisman and his team.
The strategy launches as a sub-fund of the firm’s Irish-domiciled UCITS umbrella as well as the first launch in a new UK fund range.
The Neuberger Berman Absolute Alpha Fund is a fundamentally-driven long/short equity strategy, with the management team seeking to generate alpha on both the long and short side of the portfolio.
Alongside co-managers Michael Cohen and Dana Cohen, Eisman’s team will seek to exploit opportunities – both positive and negative – created by sector, company or management disruption and change. The team also employs a four-step analytical and portfolio construction process. This is headlined by a financial system overlay, evaluating key metrics such as credit spreads and credit quality, which the team believes is integral in identifying early indicators of broad economic stress.
The Neuberger Berman Absolute Alpha Fund does not aim to be consistently market neutral and can take on a positive or negative directional bias through its net exposure. This is expected to be between 65% net long to -20% net short.
The fund is based on an existing equity long/short strategy managed by Eisman, which was launched on 1 November 2016. Since inception to end-December 2018, the strategy delivered a net return of 11.42%, in USD terms, against just 1.27% for the HFRX Equity Hedge Index.*
As described in Michael Lewis’ bestseller The Big Short, Eisman was famously on the right side of the market meltdown more than a decade ago, and says the financial crisis was caused by four interlocking trends – excessive leverage, a blow-up in sub-prime mortgages, sizable ownership of sub-prime securitisations by systemically-important organisations, as well as derivatives. While these issues are not evident in the system today, Eisman does believe there are lessons to be learned.
“The first lesson to remember is that paradigms can last a long time, even when they are wrong. Wall Street thought it knew how to manage its own risk and therefore increased leverage continuously. It took a crisis to prove the paradigm was wrong,” Eisman explains.
“Secondly, incentives trump ethics almost every time. Mortgage originators and securitisation departments were all incentivised on volume, not quality. They kept originating until credit quality imploded. Finally, Regulation matters and changes in regulation can matter even more.”
“How do we apply these lessons to today? We believe it is important to reassess compensation structures, with a focus on long-term return-on-equity over volume. It is also crucial to understand underlying risks.”
In addition to the wealth of expertise on the team, the portfolio managers leverage the insights and resources of
Neuberger Berman’s global equity research department, which consists of 41 investment professionals. This experienced department, which undertakes upwards of 2000 company meetings per year, has a broad and extensive coverage universe, helping provide the portfolio managers with a diverse range of ideas to be utilised within the strategy.
Dik van Lomwel, Head of EMEA and Latin America at Neuberger Berman, comments: “The launch of the new Neuberger Berman Absolute Alpha Fund is clear evidence of our unique approach and our commitment to providing innovative investment thinking and differentiated proposition to our clients. We are extremely pleased to have investors of the calibre of Steve at Neuberger Berman and are thrilled to be able to offer his unique proposition to our client base in Europe, UK, Asia and Latin America.”
* As at 31/12/2018. Please note: past performance is not a reliable indicator of future results.
About Neuberger Berman
Neuberger Berman Europe Limited is authorised and regulated by the Financial Conduct Authority and is registered in England and Wales at Lansdowne House, 57 Berkeley Square, London, W1J 6ER.
This fund is a sub-fund of Neuberger Berman Investment Funds PLC, authorised by the Central Bank of Ireland pursuant to the European Communities (Undertaking for Collective Investment in Transferable Securities) Regulations 2011, as amended. The information in this document does not constitute investment advice or an investment recommendation and is only a brief summary of certain key aspects of the fund. Investors should read the prospectus and the key investor information document (KIID) which are available on our website: www.nb.com/europe/literature. Investment objectives, risk information, fees and expenses and other important information about the fund can be found in the prospectus.
This information is presented solely for information purposes and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security.
We do not represent that this information, including any third party information, is complete and it should not be relied upon as such.
No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Each recipient of this information should make such investigations as it deems necessary to arrive at an independent evaluation of any investment, and should consult its own legal counsel and financial, actuarial, accounting, regulatory and tax advisers to evaluate any such investment.
It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable.
Any views or opinions expressed may not reflect those of the firm as a whole.
All information is current as of the date of this material and is subject to change without notice.
The fund described herein may only be offered for sale or sold in jurisdictions in which or to persons to which such an offer or sale is permitted. The fund can only be promoted if such promotion is made in compliance with the applicable jurisdictional rules and regulations. The information contained therein may not be distributed in the US.
Indices are unmanaged and not available for direct investment.
An investment in the fund involves risks, with the potential for above average risk, and is only suitable for people who are in a position to take such risks. For more information please read the prospectus which can be found on our website at: www.nb.com/uk/oeic.
Past performance is not a reliable indicator of current or future results. The value of investments may go down as well as up and investors may not get back any of the amount invested. The performance data does not take account of the commissions and costs incurred on the issue and redemption of units.
The value of investments designated in another currency may rise and fall due to exchange rate fluctuations in respect of the relevant currencies. Adverse movements in currency exchange rates can result in a decrease in return and a loss of capital.
Tax treatment depends on the individual circumstances of each investor and may be subject to change, investors are therefore recommended to seek independent tax advice.
Investment in the fund should not constitute a substantial proportion of an investor’s portfolio and may not be appropriate for all investors. Diversification and asset class allocation do not guarantee profit or protect against loss.
No part of this information may be reproduced in any manner without prior written permission of Neuberger Berman Europe Limited.
The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.
©2019 Neuberger Berman Group LLC. All rights reserved.