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NEUBERGER 

BERMAN 

ANNUAL 

REVIEW 

2011

Neuberger Berman 

We are an independent, employee-controlled investment manager 

in service to our clients. We partner with institutions, advisors and 

individuals throughout the world to customize solutions that address 

their needs for income, growth and capital preservation. With more 

than 1,700 professionals focused exclusively on asset management, 

we are deeply grounded in original, fundamental research and offer 

an investment culture of independent thinking. Founded in 1939, 

Neuberger Berman today provides solutions across equities, fixed 

income and alternative investments.

George H. Walker 

Chairman and Chief Executive Officer 

Dear Friends, 

In 2011 Neuberger Berman delivered sound management and guidance to our 

clients through volatile and often challenging global markets. We are investors, first 

and foremost; for the ten-year period ending on December 31, 2011, 89% of our 

equity and fixed income assets outperformed their benchmarks. 1 During the year, 

we also turned the page on an important chapter in the growth of our firm. As the 

year concluded, we laid in place the foundation for this firm, now 73 years old, to 

operate as a private employee-controlled firm in the years ahead. 

First, a quick review of our health as a firm: In 2011, our business grew across all 

three of its client groups. Among institutional investors, we saw significant growth 

in mandates from pensions and investors around the globe including new engagements 

in Europe, Asia and the Middle East. As we invest in those relationships, we 

have located senior client professionals in new offices such as Seoul, Buenos Aires, 

Milan and Melbourne. Some of these relationships are single strategy mandates, 

others are broader partnerships awarded by sophisticated global organizations seeking 

to solve their complex income, growth and risk management requirements. Our 

intermediary business added more than 30 client-facing professionals so we may 

reach many more advisors to help them solve their clients’ needs. And among private 

wealth markets, we expanded the number of strategies and advisory resources 

available to help our clients and their families. 

Our client mix underscores a strong balance: Institutional assets now account for 

roughly 50% of our AUM, while individual client relationships account for just over 

20%. The remaining 30% is maintained through advisors where Neuberger Berman 

is a committed partner. Our wealth advisory practice and direct private asset management 

relationships, many of which span generations, are integral parts of our business. 

Our Investment Culture. Our Client Focus. 

While we take great pride in our performance in 2011 which has resulted in 

manageable growth, Neuberger Berman does not aspire to growth as a goal in itself. 

We measure our success in client returns, not assets under management. There is no 

greater honor for us than being named one of the top mutual fund families in terms 

of investment performance for 2011 by Barron’s. 2 The strength of our investment 

solutions exemplifies the heritage of the firm and helps define what attracts clients 

and inspires colleagues who come to work every day and share in the mission of 

building a firm known for its investment culture. We embrace a diversity of investment 

perspectives and strategies. Our fiduciary responsibilities are instilled in our 

employees and are reflected in our approach to client assets. We are first and foremost 

an asset manager with a single focus on partnering with our clients to achieve 

their unique objectives. 

1. As of December 31, 2011, 61% of the total firm equity and fixed income Assets Under Management (“AUM”) outperformed on a 3-year basis and 80% on a 5-year basis. 

The AUM outperformance results are based on the overall performance of each individual investment strategy against its respective strategy benchmark and results are asset 

weighted so strategies with the largest amount of assets under management have the largest impact on the results. Individual strategies may have experienced negative 

performance during certain periods of time. See Disclosures at the end of the material which are an important part of this presentation and contain additional information 

regarding AUM outperformance statistics. Unless otherwise indicated, returns reflect reinvestment of dividends and distributions. Investing entails risks, including possible loss 

of principal. Past performance is no guarantee of future results. 

2. Barron’s “Worth the Risk,” February 6, 2012 

A Message from our CEO 

page 1

A Message from our CEO 

We are frequently approached by portfolio managers and investment teams seeking to bring their 

careers to Neuberger Berman. We hire extremely few of these impressive, qualified professionals, 

preferring to add judiciously to our base of 415 investment professionals. In fact, the most recent 

senior portfolio manager whom we brought on board was Eli Salzmann, who joined the firm 

in January of 2011 after a storied career at another firm. Eli is off to a terrific start and we have 

entrusted him with additional assets and the management of one of our notable mutual funds. 

Over the course of time, we expect to add prudently to our investment lineup based on client 

needs and specific areas where we believe we can offer value. 

We are first and foremost an asset manager with a single focus on 

partnering with our clients to achieve their unique objectives. 

neuberger berman annual review 2011 

Ownership Structure 

In 2011, we took a significant step forward in aligning the ownership structure of our firm with our 

goals of investment excellence, client focus and independence. The employees of Neuberger Berman 

reached agreement allowing us to purchase the remaining portion of the firm, a phased process slated 

to begin in 2012 and conclude in 2017. I have been gratified by my colleagues’ overwhelming support 

for this process. At their first opportunity to purchase additional equity, 50 of 50 top equity holders 

elected to buy more. We have nearly 300 employee equity holders in the firm, and over a thousand 

employees who participate in a profit-sharing plan. Our people understand what we are building. 

The only thing better than a firm 100 percent owned by its active employees is one in the process 

of advancing toward 100 percent ownership. We are affirming, every day, our vision for this firm’s 

future and investing our own equity in that vision. Nothing could be a greater indication of the 

confidence Neuberger Berman’s employees have in the future. The closing of this transaction, which 

we anticipate later this year, will also allow us to execute a debt financing which will leave us with a 

smaller total obligation and lower cost financing than our current capital structure. 

These moves have further helped retain our most valuable assets, the investment management 

talent that is the firm’s foundation. Our retention of portfolio managers at the Managing Director 

level remains exceptionally high. Since our independence three years ago, we can proudly attest 

that 95% of our Managing Director and Senior Vice President investment professionals together 

with 96% of Managing Directors firm-wide have chosen to remain with the firm. Further, with 

our senior portfolio managers’ experience averaging 26 years (a full 33% higher than the industry’s 

average), it is significant to note that 90% of our clients’ assets are managed by lead portfolio 

managers with more than 20 years of industry experience, and of whom more than 80% have 

been with Neuberger Berman for more than ten years. 3 We believe stability and continuity are key 

ingredients in generating alpha. 

3. Industry averages are based on data reported to eVestment Alliance, which includes separate accounts, mutual funds, 

and commingled funds. Includes all underlying portfolio managers’ industry experience reporting to eVestment Alliance as of 

December 31, 2011. “Lead portfolio managers” are defined as those individuals who head the investment team. 

AUM BY DISTRIBUTION CHANNEL as of 12/31/2011 

49% Institutional 

30% Intermediary 

21% Individuals, Families and Their Charitable Organizations

We Are Investors 

Our bias toward individual security selection—driven by original and independent research— 

positions us at the forefront of the search for high alpha. That approach, coupled with our flat 

structure, enables the firm to work closely with clients to develop original solutions including 

multi-class strategies. Among our new initiatives this year, we launched a flexible equity strategy 

seeking to capture leading ideas from individual portfolio teams: a multi-asset class inflation-sensitive 

portfolio, a distressed debt offering in Europe, an emerging markets equity trust in Australia and 

a private markets strategy that enables investors to participate in medical royalties. As we bring 

forward these fresh approaches, we expect—and receive—a rich dialogue with our clients where 

they provide feedback on our investment ideas. While we value innovation, we do not change for 

the sake of change. We recognize that our value is most frequently gleaned from the things we have 

been doing for decades. In fact, 2011 saw historically high client flows for a number of our fixed 

income and equity strategies—particularly our high-yield and equity income portfolios—teams 

led by veteran portfolio managers with 32 and 33 years in the industry, respectively, and who have 

worked together with their teams for large portions of their careers. 

The common threads that infuse everything we do are excellence and a client-first focus, whether 

it is in our advice to clients or in our service to the communities where we live. Companies choose 

what and how they celebrate. When this firm emerged as an independent firm, we made two 

choices. First, we determined that our deferred compensation for our top 400 professionals would 

be invested alongside clients such that we are eating our own cooking. I hope more of our competitors 

will follow suit. And second, we decided that we would celebrate that independence not just 

with a party, but with a week of intense volunteer activity in the community. 

In 2011, we continued our Celebration with Service heartily engaging in projects ranging from 

preparing meals for the homeless to assisting senior citizens with arts and crafts, to providing high 

school students with career guidance. We take our responsibility seriously—whether we are managing 

client wealth or helping to improve the communities in which we work and live. This mission, 

too, contributes to our ability to attract and retain extraordinary talent who want to be part of 

something noble, something bigger than themselves. 

In this annual review, we have organized the following pages into an investor-focused folio, four 

chapters addressing four key issues that every investment organization—provider or client— 

recognizes: globalization, volatility, convergence and client commitment. 

Our goal, every day, is to do what we do, do it with pride and do it very well. It is how we got to 

where we are. And it is how we will continue along this path in 2012, and beyond. 

With 2011 behind us, I would like to thank our clients, employees and Board of Directors for 

their support. It is an honor and privilege to work with each of them. 

Sincerely, 

AUM BY CLIENT DOMICILE as of 12/31/2011 

79% U.S. 

21% Non-U.S. 

AUM BY CLASS as of 12/31/2011 

~46% Equity 

~46% Fixed Income 

~9% Alternative Investments 

page 3

TABLE OF CONTENTS 

A Message from our CEO 1 

Solving for Globalization 5 

Solving for Volatility 11 

Solving for Convergence 17 

Solving for Client Commitment 23 

Financial Highlights 31 

Board of Directors and Management 32 

KEY STATISTICS 

assets under 

management 

$193 

billion 

over 

400 41 

distinct 

investment 

professionals 

312 

employee 

owners 

investment 

teams 

number of 

employees 

1740 

Portfolio managers 

average 

26 years 

of industry experience 

A Barron’s 

Top 3 

Fund Family* 

89% 

of the firm’s equity and 

fixed income AUM 

out-performed their 

benchmarks over 10 years 

100+ 

investment 

strategies 

28 offices 

13 countries 

(As of 3/1/2012) 

* For one-year ended December 31, 2011, out of 58 Fund Families. Barron’s “Best Fund Families of 2011” measures one-year results of 58 fund families. Neuberger Berman 

was not ranked in the 5- or 10-year category by Barron’s because it previously did not have broad enough categories for this survey. To qualify for the Lipper/Barron’s Fund 

Survey, a group must have at least three funds in Lipper’s general U.S.-stock category, as well as one in world equity, which combines global and international funds. They 

also require at least one mixed-equity fund, which holds stocks and bonds. Fund shops also must have at least two taxable-bond funds and one tax-exempt offering. Each 

fund’s returns are adjusted for 12b-1 fees, which are used for marketing and distribution expenses. The funds usually add these fees back into returns. Lipper/Barron’s aim is 

to measure the manager’s skill. Fund loads, or sales charges, aren’t included in the calculation of returns, either. Each fund’s return is measured against those of all funds in 

its Lipper category, such as, say, small-cap value. That leads to a percentile ranking, with 100 the highest and 1 the lowest, which is then weighted by asset size, relative to 

the fund family’s other assets in its general classification—world equity, for instance. If a family’s biggest funds do well, that boosts its overall ranking. Poor performance in 

a big fund obviously has a big effect on the ranking. Finally, the score is multiplied by the weighting of its general classification, as determined by the entire Lipper universe 

of funds. The category weightings for the one-year results: general equity, 38.04%; world equity, 12.77%; mixed equity, 17.36%; taxable bonds, 27.43% and tax-exempt 

bonds, 4.40%. The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock market performance and includes a representative sample of 

leading companies in leading industries. 

neuberger berman annual review 2011

1. 

solving for 

Globalization 

2011 may go down in history as a year when geo-political risk 

trumped economics. Markets’ sensitivity to macro factors fueled 

the sense that headlines from Washington, D.C., European 

capitals or the latest site of political unrest or natural disaster 

could do more to drive capital markets than security selection, 

corporate earnings or interest rates. The forces driving 

globalization may not have abated. Ripples continue to be 

felt across economies, markets and investments. 

page 5

1. Solving for Globalization 

The basic source of more tightly knit asset class behavior 

may be found in higher correlations among global 

economies. For example, emerging market economies 

have grown to become almost 35% of global GDP 

compared with 20% within the last 10 years, and they 

are projected by the IMF to advance to more than 40% 

in the next five years. The correlation of emerging 

economies to advanced economies has risen to nearly 

0.8 in the past 10 years (2001–2011), compared with 

about 0.5 during the preceding decade (1991–2000). 

However, beyond economic correlations, markets have 

become more correlated, especially during periods of 

economic uncertainties provided by political vagueness 

or aggressive government taxation that have aggravated 

social chasms. Less polarized societies and political 

establishments eventually will provide for intra-country 

harmonies and a reduction in the homogenous behaviors 

in asset classes. Political brinksmanship seems to be 

correlated at the moment. However, leadership borne 

from these events undoubtedly will be far more lasting 

through solutions that it creates. 

The “risk-on, risk-off” environment for markets that 

has characterized recent memory may be a temporary 

phenomenon. Recent asset management industry 

difficulty in providing active returns relative to market 

benchmarks, in large part, relates to these tidal capital 

flow influences. As regional crises eventually are 

resolved, markets could return to an environment where 

higher correlations among GDPs is the principal fundamental 

factor to evaluate. A lower volatility, more normal 

environment is more practical for markets and securities 

to work, based on facts rather than sentiment. In the 

long run, we believe adherence to facts will ultimately be 

the key driver of long-term performance. 

We believe that markets will return to the sway of 

fundamental information, as the major tremors of the 

global financial crisis abate and specific fiscal inaction 

gives way to regional solutions and economic and 

sovereign stability. 


A brief look back at a tumultuous 2011 

2011 

January 14: Arab Spring begins 

in Tunisia, followed by similar 

uprisings across the Middle East January 28: Cairo streets 

taken over by protests that 

culminate in free elections 

and the ouster of dictator 

March 11: Japanese tsunami 

kills nearly 20,000 and sparks 

major nuclear accident 

May 2: Osama bin Laden 

is killed by U.S. forces 

September 17: Occupy Wall 

Street movement begins in 

New York, followed by similar 

protests around the U.S. and 

the world 

October 27: European leaders 

agree to a deal on Greek debt 

that they hope will mark a 

turning point in the sovereign 

debt crisis 

Hosni Mubarak 

April 6: Portugal becomes 

the third debt-stressed 

European country to need a 

bailout, following Ireland 

and Greece 

August 1: U.S. raises 

federal debt ceiling to avoid 

government default; S&P 

downgrades U.S. debt 

October 20: General 

Moammar Gadhafi, Libya’s 

dictator for 42 years, is killed 

by revolutionary fighters 

October 31: World population 

hits 7 billion, according to the 

United Nations 

November 21: U.S. Congressional 

supercommittee fails to agree to 

$1.2 trillion in budget cuts December 15: Ceremony at 

Baghdad airport quietly marks 

an official end to the Iraq war 

December 18: North Korean 

leader Kim Jong Il dies

Partnering with Our Clients Globally 

A discussion with Alan H. Dorsey 

Whether in Kuwait City, Beijing, Tokyo, 

Amsterdam, Sydney, Bogota or Austin, our 

clients are faced with important, sometimes 

common concerns and problems. However, 

they each seek different implementation solutions, 

bespoke for their needs. Some aspire to 

regionalize their portfolios. Some are focused 

on reducing volatility. Others want absolute 

return. Among these investors, one similar 

attribute is their increased sophistication. A 

heightened awareness of the challenges and 

possession of execution skills provides a bright 

outlook for their success. 

We begin each client engagement—whether 

with the social security administration of 

a country, a pension, an endowment or an 

individual—with a resolve to understand each 

one’s perspective, constraints and needs. 

Case Study: Solving for Global Macro Events 

THE SITUATION 

A significant Australian financial provider, 

serving retirement and annuity needs for 

700,000 retirement plan participants, 

sought the benefits of a migration to 

the broader MSCI ACWI framework in 

their investment program. Volatile global 

markets, high asset class correlations 

and the rapidly shifting opportunities 

in emerging market investing hastened 

the organization’s decision—further 

compounded by organizational changes 

and recent acquisitions. 

What was right in the past may no longer apply 

for the future, so we work to create individual 

solutions. Those solutions can be in specific 

asset classes or in multi-asset class portfolios 

that tactically shift across a number of asset 

classes, based on volatilities and correlations. 

Though our clients are geographically diverse 

and their needs and solutions are unique, 

there are a few similar threads that describe 

Neuberger Berman’s involvement in client 

portfolios. For each, we always are focused 

first on performance—preserving and growing 

assets over time. We are dedicated to customization—since 

no two investors have the same 

exact needs. And we are eager to transfer our 

knowledge—providing research, analysis and 

risk management transparency. 

THE SOLUTION 

Keenly aware of the myriad risk issues in 

global investing—credit markets, interest 

rates, counterparty, and sector, segment 

and company risk—the CIO chose 

Neuberger Berman whose investment 

approach offered equity upside potential 

with a disciplined process, which included 

strong risk management oversight. 

Working closely with the CIO and his 

team, we customized a strategy to cover 

the broader spectrum of investment 

opportunity represented by an all-country 

benchmark, while retaining the flexibility 

to recalibrate the mix of the portfolio’s 

factor sensitivities so as to be adaptive to 

changing market conditions. 

Alan H. Dorsey, CFA 

Managing Director 

Head of Investment 

Strategy and Risk 

THE PARTNERSHIP 

Simply stated, the CIO felt strongly that 

to implement a new framework, the 

program required fewer relationships but 

ones that reflected its investment 

parameters and operational requirements. 

Further, given the extreme market 

volatility at the time, the risks of being 

out of the market while transitioning 

from their previous unit trust were of 

critical concern. Neuberger Berman was 

able to solve the transition challenge 

with a flexible and responsive on-boarding 

protocol designed to maintain the 

client’s market exposure. n 

page 7


Investing Around the World: Perspectives 

CHINA’S TRANSITIONAL ECONOMY 

China is in the midst of a gradual, protracted economic 

transition, defined by factors ranging from government 

fiscal policy to regional economic disparities, with many 

other significant issues in between. As investors, one 

of the key investment risks, in our view, is whether the 

transition can be accomplished smoothly. One factor 

that gives us pause is that further government reform 

will be needed to successfully facilitate the transition. 

During the past 20 years, the Chinese government 

instituted policies that effectively supported exports, 

real estate and infrastructure construction, the main 

drivers of economic development during that time 

period. However, political reform in China tends to lag 

economic reform, so uncertainties will likely persist until 

policies take shape and solidify. The prominent role 

played by the shadow banking structures and the softening 

of China’s export economy weigh on investors’ 

considerations. Despite this, we continue to find China’s 

regional economic disparity to be encouraging. This 

unique phenomenon means that neighboring provinces 

can be in vastly different stages of economic development, 

which should help smooth some of the volatility 

should all provinces transition simultaneously. 

Yulin (Frank) Yao 


Senior Portfolio Manager, Greater China Equities 

Vice Chairman, Asia-Pacific 


‘GLOBAL VIEW’ IS A GIVEN 

Markets are more global in nature, more intertwined than 

ever. In 2011, the situation in Europe had an impact everywhere 

and in every sector, whether investment grade, high 

yield or in emerging debt. It wasn’t long ago that a U.S. 

fixed income portfolio manager could essentially ignore 

economies elsewhere. Obviously, that’s not the case 

anymore. You can’t afford to be parochial in how you 

look at markets, the economy or, for that matter, the local 

political dynamics that may influence them. Clearly, all this 

makes asset management more challenging, as 

the variables that you need to account for 

have multiplied. The flipside is that this 

complexity has created an opportunity. 

If you are skillful in analyzing and 

managing different sources of risk, 

then you have the potential to add 

value. Further, if you believe that the 

European situation will work itself 

out, however imperfectly, then the 

associated volatility will likely present 

opportunities to enhance returns. More 

strategically, we believe that risk assets 

are generally underpriced at current 

levels, and may lay the groundwork 

for alpha generation in the future. 

Andrew A. Johnson 


Chief Investment Officer, Investment Grade Fixed Income

RETURN POTENTIAL IN EMERGING MARKETS 

Within emerging markets, the most significant challenge 

we faced in 2011 was adverse liquidity—both on a local 

and global level—driven by local monetary tightening 

to tame inflation and extreme risk aversion by 

investors worldwide. These issues 

worked together to spark a broad selloff 

and a move out of emerging markets, 

resulting in a significant overall drop 

in share prices. However, we think the 

concerns were exaggerated and are 

optimistic about opportunities with 

emerging market companies that do 

business domestically—particularly 

in countries experiencing secular 

growth, such as China, India and 

Brazil. While risks remain, emerging 

market companies focused on meeting 

domestic demand have very attractive 

return potential, in our view. 

Conrad A. Saldanha, CFA 


Portfolio Manager, Global Equity Team 

Case Study: Solving for Correlations 

THE SITUATION 

Three years ago, a Japanese pension 

fund recognized the challenge inherent 

in seeking a combination of alpha 

generation, income-oriented and capital 

preservation strategies in the face of 

broad correlations among asset classes. 

Serving more than ten thousand retired 

industrial workers and active employees, 

the plan’s management sought strategies 

that could help address the needs of 

its important constituency: short-term 

benefit payments, asset growth 

potential and performance against 

agreed-upon benchmarks. 

THE SOLUTION 

The CIO of the plan’s investment committee, 

an experienced veteran investor himself, 

led the process of evaluating alternative 

strategies. He was acutely sensitive to 

implications of risk in the portfolio given 

the high correlations among traditional 

asset classes. Through dialogue with 

outside consultants and investment 

managers, he focused on new investment 

ideas that could lower correlation with 

assets held in the portfolio while addressing 

income and growth objectives. Working 

closely with the CIO, Neuberger Berman 

proposed several strategies designed to 

address the portfolio requirements. 


The pension plan’s investment committee 

narrowed the proposal to a short 

list of solutions and ultimately selected 

two alternative strategies managed by 

Neuberger Berman, one that focuses 

on acquiring minority equity interests in 

MULTINATIONALS CAN DELIVER 

We believe the challenges of 2011 are going 

to extend into 2012 and will be centered 

significantly on continental Europe,―although 

the U.S. and Japan face many of the same 

issues. For investors with global portfolios, 

we believe a focus on companies that are less 

vulnerable to what we perceive is a low growth 

global economy holds appeal. We favor companies 

with established market share, recurring 

revenue streams and the ability to expand in 

emerging markets. As a result, we think that 

large-cap multinationals, whether based in 

Europe or North America, with an ability to 

execute have the potential to outperform. 

Benjamin E. Segal, CFA 


Portfolio Manager and Head of Global Equity Team 

hedge fund management companies and 

one that focuses on income-generating 

investments in the healthcare sector. 

These strategies were designed to address 

both their short-term income needs and to 

provide an attractive source of return from 

uncorrelated assets. 

For the pension fund, the ability to access 

uncorrelated strategies continues to be a 

priority as it seeks to diversify from highly 

correlated equity and fixed income asset 

classes. The partnership provides the plan 

with access to alternative investment 

professionals at Neuberger Berman who 

are evaluating new income-oriented ideas 

as well as other strategies. Other valueadded 

services from Neuberger Berman, 

including customized client servicing and 

reporting, help deepen the relationship. n 

page 9


What has drawn investors to risk 

parity and other non-traditional 

approaches to asset allocation? 

The global financial crisis changed many 

things in the portfolio management 

business—and asset allocation is an 

important one. In the wake of highly 

correlated, disappointing returns, many 

institutional investors found themselves 

behind the eight ball in relation to future 

liabilities. They began questioning their 

previous approaches and searching for 

alternative techniques to asset allocation 

and strategy implementation. Many have 

found merit in risk-based approaches, 

including risk parity. Actually, we believe 

they are on to something. 

What’s the appeal of risk parity? 

In traditional approaches, such as setting 

a 60/40 mix of stocks and bonds, a 

portfolio may look roughly balanced from 

a capital allocation standpoint, but 

actually experience a very imbalanced 

allocation of risk, with stocks contributing 

far more to volatility. In contrast, a risk 

parity portfolio starts with the idea that 

each asset should contribute the same 

amount of risk, with its capital weighting 

in the overall portfolio ultimately driven 

by this guide. 

We think that risk parity can help balance 

a plan’s risk/return profile tailored to 

specific future obligations. The resulting 

portfolios typically include relatively lower 

weightings in equities; fixed income 

allocations may be higher and include 

some degree of leverage, which can help 

mitigate against equity risk; finally, the 

inclusion of real assets can serve as a 

potential hedge against inflation risk. 

In a bull market, does risk parity 

have a lower return profile? 

Some investors think that risk parity by 

nature inhibits performance—an assertion 

we question. It is true that when risk 

parity is achieved, low-volatility/ 

low-return assets tend to dominate the 

portfolio. However, the outcome of an 

asset allocation model is often a function 

of its adaptability when market conditions 

change. The importance of adaptability 

pertains to two main dimensions: both 

the leverage on risk parity portfolios and 

the relative weights of assets are usually 

dynamic. Thus, an adaptive portfolio 

model has the ability to increase equity 

weightings when stocks rally and pare 

them when they decline. Of course, 

execution is also crucial, but that’s a 

topic for another discussion. 

* The Journal of Portfolio Management named the 13th Annual Bernstein Fabozzi/Jacobs Levy Awards from a 

group of 54 articles published by The Journal of Portfolio Management from Winter 2011 through Fall 2011, 

as well as a separate Real Estate issue dated September 2011. The “Best Article” and three “Outstanding 

Article” awards were determined based on subscriber voting. The awards are academic in nature and are not 

reflective of the investment management capabilities of the authors or their respective firms. 


With Wai Lee, PhD 

Managing Director, Chief Investment Officer and Director of 

Research Quantitative Investment Group 

Risk Parity and Portfolio ‘Balance’ 

In the end, investors need to look to what 

they are trying to achieve. Performance 

leadership can change rapidly and tends 

to be unsustainable, particularly when 

bull markets turn bear. More to the point, 

institutions have real liabilities ahead, and 

designing strategies that can help meet 

them is a crucial task. A risk-balanced 

approach may be just the right fit. 

Wai Lee’s “Risk-Based Asset Allocation: 

A New Answer to an Old Question?” was 

awarded “Best Article” by The Journal of 

Portfolio Management.* 

Wai Lee

2. 

solving for 

Volatility 

2011 was an unusually volatile year for global markets, 

testing the patience and fortitude of investors around the 

world. Sovereign debt issues in the eurozone rippled through 

markets worldwide. Indexing and rising correlations among 

asset classes created lock-step movements across equities 

and fixed income, leading institutions and investors to move 

cautiously. Further, the tumult caused by social and political 

uprisings throughout the Middle East, as well as the tragic 

earthquake and tsunami in Japan, compounded to leave many 

global equity and fixed income classes with flat to negative 

performance for the year. 

page 11

2. Solving for Volatility 

At first glance, stocks in the U.S. seem to have avoided 

the tumult. The Standard & Poor’s 500 Index finished 

2011 essentially where it started. But investors know that 

2011 was anything but a calm year for stocks; it was a 

year marked by steep rises and sharp selloffs. There were 

60 days in 2011 on which the S&P 500 either rose or fell 

about 2%. To compare, 

just six years ago, the S&P 

had never gained or lost 

2% in a single day—ever. 

Even with the wild swings, 

the U.S. was rather 

resilient. Investors in U.S. 

bonds and U.S. largecaps 

weathered the year 

largely in tact or perhaps 

even with slightly positive 

returns. That countered 

steep losses in Europe— 

the UK FTSE 100 declined 

5.6% and Germany’s DAX 

declined 14.7% in 2011. 

The major indices in Brazil, 

China, Japan and India 

each fell more than 17%. 

The volatility in markets 

Return 

across the globe, naturally, 

has sparked anxiety for 

many investors. Some have 

Sources: Rimes, Neuberger Berman 

looked to rethink—if not 

entirely restructure—their 

entire portfolio. Many have 

chosen to reduce or eliminate exposure to asset classes 

viewed as “risky.” Over the past three years, investors 


EKG? Seismograph? No, S&P 500 Index Volatility. 

S&P 500 Index Price Returns 

(%) 

15 

10 

5 

0 

-5 

-10 

-15 

-20 

Jan–02 

Jan–03 

Jan–04 

Jan–05 

Jan–06 

Jan–07 

have pulled almost $250 billion out of U.S. equity funds— 

even while stock prices have almost doubled from their 

2008 lows. 

Yet volatility presents opportunity for investors. 

Wide price fluctuations can provide compelling entry 

points for investors focus- 

ing on individual securities 

they believe to be undervalued 

in the marketplace; 

however, a long-term view 

is needed—a challenge in 

today’s short-term focused 

market environment. 

While volatility can seem 

unnerving, it is likely here 

to stay. Market forces such 

as high-frequency trading, 

low transaction costs and 

ETFs have created a more 

turbulent landscape. It is 

our challenge to develop 

investment strategies for 

clients that can perform in 

this type of environment. 

Whether in asset allocation, 

portfolio construction, 

individual security 

selection or broad-based 

wealth management, we 

embrace the challenge of 

working with our clients in 

this era of volatility and designing customized solutions 

for managing our clients’ assets. 

Jan–08 

Average up day boundary (+0.86%) 

Average down day boundary (-0.98%) 

Jan–09 

Jan–10 

Jan–11 

Jan–12

Investing in a Volatile Marketplace 

A discussion with Joseph V. Amato 

The past year brought to the fore many of the 

most salient and distinguishing characteristics 

of Neuberger Berman’s investment culture. We 

focus on managing assets and delivering results. 

It’s our mission and it’s been our heritage since 

1939, when the firm began managing assets 

for clients. I believe that our firm has demonstrated 

its ability to uncover alpha-generating 

opportunities in all types of markets. Our 

solutions orientation, built on a foundation 

of active management, original insight and 

research, is something we believe rings 

true with clients. 

Our investment culture defines our mission 

in all market environments. We understand 

investor psychology, the tendency of many 

to follow the crowd, the importance of 

looking beyond the immediate commotion 

to the value we are seeking to extract from 

investments over time. We are long-term in our 

thinking and independent in our judgment. 

We are broad and deep. Our size and investment 

in people and resources deliver a substantial 

range of investment solutions and choices. We 

serve clients throughout the world with equity, 

fixed income and alternative investment 

solutions. Clients look to Neuberger Berman 

for our ability to work across asset classes and 

solve income, growth and risk management 

issues that often demand multi-asset class 

Case Study: Meeting Liabilities 

THE SITUATION 

The investment committee for a utility 

company, delivering electricity and natural 

gas to key U.S. markets with nearly 

14,000 active employees, was seeking to 

enhance the funded status of its defined 

benefit plan while at the same time 

dampen the volatility of the plan’s asset 

returns. They had instituted a Liability 

Driven Investing (LDI) strategy and, given 

solutions. With more than 100 investment 

strategies and 400 investment professionals, we 

are able to work fluently across disciplines and 

innovate, create and implement new ideas. 

We are client focused. A critical ingredient to 

navigating through periods of market turbulence 

is attention to clients’ needs and goals. 

We are deeply aware of the circumstances 

of our clients—including income, liquidity 

needs, investment goals and risk tolerance— 

so that we can work with them to solve for 

their unique investment objectives. We listen 

and offer original, customized ideas. 

We are always striving to improve—whether 

in assessing our current approaches to 

investing or considering additions to our 

capabilities in response to the market 

environment or client needs. As examples, 

higher market correlations and volatility 

have increased investor interest in alternative 

strategies and multi-asset class solutions. 

Finally, we are a stable investment organization, 

deeply committed to aligning our interests with 

those of our clients. Just as important, we are 

investors—focused, experienced and independent. 

This identity forms the philosophy and 

perspective that allows us to seek opportunity 

for our clients whether in volatile or more stable 

market environments. 

the liability profile, sought to deepen the 

breadth and scope of the LDI program. 

THE SOLUTION 

Neuberger Berman’s fixed income team 

scrutinized the exposure of the firm’s 

pension assets to various risks in light of 

its liabilities. The team’s proposed solution 

was an actively managed Long Duration 

Government Credit strategy that specifically 

aligned its pension plan assets with 

its underlying liabilities. The proposed 

Joseph V. Amato 

President and 

Chief Investment Officer 

portfolio resulted in a shifting of some 

existing fixed income assets from their 

core bond allocation to long duration 

government/credit portfolios. 


Neuberger Berman was able to design 

a tailored solution based on the client’s 

unique objectives. This approach highlights 

our ability to analyze, design and 

implement a customized solution. n 

page 13

2. Solving for Volatility 

Managing Portfolios in a Volatile Market: 

Perspectives 

DISCONNECT IN DEFAULT EXPECTATIONS 

In 2011, there was a tremendous focus on macro concerns, 

including sovereign debt, which market participants worried 

could lead to a crisis along the lines of 2008. In such a 

market, fine differences at the security, sector and even 

asset levels tend to be obscured, and the key distinction is 

often only between what is considered “risky” and what 

is not. For the U.S. high yield and loans market, this was 

a trap of sorts because, despite the lower credit quality of 

our general market segment, the actual risk levels of many 

securities were relatively low due to overall financial strength 

of issuers. Although high yield recovered late in the year, 

this disconnect remains in place today. Look no further than 

default expectations: Given current fundamentals, as well 

as the fact that many issuers have already refinanced at 

low rates, our 2012 default rate outlook 

for non-investment-grade issuers is 

significantly lower than the general 

market expectations of around 

7%. Should the overall levels of 

risk aversion subside, this would 

present the potential for spread 

tightening overall, enhancing the 

potential returns from coupon income 

and security selection, which are the 

other legs of value-add for high-yield 

portfolio managers. 

Ann H. Benjamin, Chief Investment Officer and 

Thomas P. O’Reilly, CFA 

Managing Directors, Portfolio Managers, 

Leveraged Asset Management 


CORPORATE STRENGTH SHINES THROUGH 

Last year was exceptionally eventful for the markets, and 

I believe that all of the negative developments reinforced 

the understandable investor underconfidence that is 

currently baked into stock prices. The problem, of course, 

is that avoiding risk doesn’t make for an attractive road 

to long-term growth. In my view, investors holding large 

cash positions should be thinking about dusting themselves 

off and seeking to redeploy those assets in a more riskjudicious 

manner. 

Currently, the Straus Group sees many reasons to 

be optimistic—with the excellent condition of many 

corporations at the forefront. Not only are U.S. corporate 

earnings at record levels, but free cash flow has been 

exceptionally strong as well. This has given companies 

the flexibility to accelerate their earnings growth and 

strengthen their finances. Many have deleveraged 

their balance sheets, raised dividends modestly and are 

aggressively buying back stock. In fact, we see share 

buybacks as a future driving force for the U.S. stock market 

and it’s one reason why large-cap stocks have recently 

outperformed smaller stocks. Finally, with both valuations 

and interest rates at low levels, we think merger and 

acquisition activity could pick up sharply in 2012—yet 

another reason to feel good about U.S. stocks, even 

with an uncertain backdrop. 

Marvin Schwartz, Managing Director, Portfolio Manager, 

The Straus Group 

The Straus Group, pictured left to right: David I. Weiner, Marvin C. Schwartz, 

Stephanie J. Stiefel, Henry Ramallo, Jeremy R. Kramer, Richard J. Glasebrook

IN SEARCH OF INCOME 

We found that income-oriented equity securities were a key 

investment theme among investors in 2011, as the demand 

for yield and de-risking increased against the backdrop of an 

extremely volatile market. The dividend-paying stocks that 

were favored included Utilities, which 

was the best performing sector in 

the S&P 500 Index last year, and 

Real Estate Investment Trusts (REITs). 

Going into 2012, however, nontraditional 

dividend-paying stocks 

may become more attractive as we 

believe valuations for Utilities and 

domestic REITs are now less appealing. 

Given our outlook for continued 

economic improvement, we are 

optimistic about the prospect for 

dividends increasing in the non-traditional, 

dividend-rich sectors. 

Sandy M. Pomeroy and Richard S. Levine 

Managing Directors, Portfolio Managers, The MLG Group 

DON’T BET AGAINST THE AMERICAN CONSUMER 

What allows us to invest in stocks of great companies at 

very attractive valuations? The simple answer is investor 

uncertainty. We are finding the highest degree of uncertainty—and, 

therefore, some of our best opportunities— 

in consumer discretionary stocks. Investors are concerned 

whether consumers in the U.S. can spend more money 

when incomes are flat, people have 

less access to credit and are increasing 

their savings. However, the 

population of high-income earners 

is growing at a faster rate than the 

general public and seems to have an 

ever-expanding appetite for luxury 

goods. So our general stance is “don’t 

bet against the American public when 

it comes to spending money.” More 

specifically, if the U.S. economy grows 

as expected in 2012, albeit slowly, we 

believe the high-end retailers should 

fare particularly well. 

Jeffrey Bolton and David R. Pedowitz 

Managing Directors, Portfolio Managers, The Bolton Group 

QUALITY, FRONT AND CENTER 

Our focus—both in our Socially Responsive and flagship 

mutual fund strategy—is on quality. It’s something that 

is always top of mind with our research and in managing 

our portfolios—but especially when the financial backdrop 

is less than hospitable. With the market volatility in 

2011, many found it was a good time to stay true to your 

discipline and to keep a long-term perspective. Overall, we 

found that the businesses of our portfolio companies performed 

better than their stocks did in 2011. We also noted 

a U.S. economy that, despite the myriad worries afflicting 

investor confidence, appeared to exit 2011 with a positive 

tone. While 2011 was a challenging year to be an active 

investor, we had no qualms about sticking with what we 

own, and continuing to maintain conviction in our portfolio 

companies heading into 2012. 

Looking ahead, the risks created by the global debt 

problem will likely continue to contribute to volatility. No 

doubt, some of the things that drove the market last year— 

avoiding cyclicals and emphasizing high-yielding stocks, for 

example—may not be the ticket moving forward. Instead, 

we think that our approach of seeking out 

quality—through healthy balance sheets, 

competitive advantages, thoughtful 

management teams and, particularly 

in this environment, the ability to 

generate organic growth and free cash 

flow—has the potential for attractive 

returns over the long-run. In the past, 

we have found that patience over the 

long-term is often rewarded. 

Ingrid Dyott and Arthur Moretti 

Managing Directors, Portfolio Managers 

Core Equity/SRI Team 

page 15

Case Study: 

Solving for Global Macro 

Market Impact 

THE SITUATION 

A west coast community college system 

was seeking to deploy new pension assets. 

Focused on its need to meet near-term 

obligations while investing for growth, the 

plan recognized the challenges of volatile, 

sensitive markets and the implicit need to 

diversify. The plan participants included 

retired educators, administrators and staff. 

The outside consultant and investment 

committee, sought to develop an investment 

program that utilizes a multi-asset 

class solution as the cornerstone of 

its approach. 

THE SOLUTION 

Working closely with the investment 

committee, Neuberger Berman developed 

a multi-strategy proposal investing across 

six strategies, including U.S. and global 

equities, fixed income and real estate 

portfolios. The investment committee 

was, from the outset, fully engaged with 

Neuberger Berman’s client management 

team in developing the strategic asset 

allocation mix and risk/reward parameters 

for the proposal. Members of the 

Neuberger Berman Investment Strategy 

and Risk department worked with the 

investment committee to help them gain 

a better understanding of the different 

asset classes and how they may impact 

the portfolio. 


The investment committee selected 

Neuberger Berman to manage the 

proposed multi-strategy solution. In 

addition Neuberger Berman serves as a 

value-added resource for global macroeconomic 

information and as a fount 

of new investment ideas. This included 

providing information that was utilized in 

the development of a socially responsive 

investment policy. Our client and portfolio 

teams meet with the investment committee 

each month to review results and 

to discuss individual strategies and the 

overarching allocation of the portfolio 

in light of the current economic and 

market environment. n 


Lessons Learned from 

2011’s Market Volatility 

What lessons did you learn from 

2011 and how are you applying 

them today to the portfolios 

you manage? 

The irony of 2011 was that, while market 

indices were more volatile than at any 

time since the Lehman bankruptcy, 

individual stocks moved in lockstep. The 

reason is clear: macroeconomic risks, 

like the insolvency of European governments 

and banks, so dwarfed the risk/ 

reward characteristics of most stocks 

that investors tended to throw the entire 

equity asset class into one of two buckets 

– more risky and less risky. When global 

risks were perceived as rising or falling, 

investors would move money from one 

bucket to the other. 

The lesson of 2011 was that even the 

most committed bottom-up stock analysts 

must consider the macroeconomic 

backdrop and admit that, under certain 

unusual conditions, the environment 

can trump the pros and cons of most 

individual stocks. We reduced risk in our 

portfolios in May of 2011, when it seemed 

clear that the market was ignoring the 

looming insolvency of European banks 

and the consequent deceleration of economic 

growth; and we reverted to a more 

normal risk profile when the European 

Central Bank instituted the Long-Term 

Refinancing Operation (LTRO), which we 

saw as the European equivalent of the 

Fed’s quantitative easing programs. 

With John J. Barker and Daniel H. Rosenblatt 

Managing Directors and Portfolio Managers 

Large Cap Disciplined Growth 

Since it appears volatility is here 

to stay, what opportunities and 

challenges do you see in the 

coming year for your disciplined 

growth investing style? 

Since late in the fourth quarter of 2011, 

the high correlations among stocks have 

declined as the U.S. economy has shown 

surprising strength and the LTRO has 

provided a respite to European banks. 

The result is that individual company 

fundamentals once again matter more 

than macro trends. This is a change that 

stockpickers like us welcome. Even in 

2011, some companies in the large-cap 

world managed to stand out and escape 

the uniform treatment accorded most 

stocks. But the lesson of 2011 remains: 

In a volatile global economy, even 

stockpickers must on occasion recognize 

the power of economic tsunamis. 

Daniel H. Rosenblatt John J. Barker

3. 

solving for 

Convergence 

Convergence—the tight correlation between stocks, currencies, 

commodities and nearly every asset class—emerged as a major 

investment theme in 2011. Typically, assets move in different 

directions within markets and across geographies. Even 

within specific asset classes there usually are outperformers 

and laggards. When there is little or no market convergence, 

investments move according to fundamental factors, such as 

earnings, cash flow and balance sheet strength. 

page 17

3. Solving for Convergence 

In 2011, convergence was at historic highs, as the performance 

of asset classes and geographies moved in lockstep, 

all but eliminating discrimination. Assets rose and fell 

almost in unison—stocks, gold, Italian bonds, Irish bank 

stocks, Chinese stocks and commodities—underscoring 

how connected the world is on an economic level. 

The more assets rise and fall in unison, the harder it is 

for investors to diversify their portfolios and identify 

those investments that have the potential to outperform 

or provide alpha. Periods of high convergence tend to 

reduce the benefits of several strategies including indexing 

and strategic and tactical allocations. The risk-reducing 

benefits of asset allocation can be overwhelmed over the 

short term by highly correlated markets. 

Yet there is another way of looking at high correlation and 

market convergence: As an opportunity to differentiate 

yourself through individual security selection. If all asset 

classes, sectors and securities respond in the same way to 

the same events, rather than reacting to fundamentals, 

gaps in valuation eventually will emerge. Broad market 

patterns might devalue certain equities and other assets. 

Those who rely on passive investments—ETFs or index 

funds—might not be able to take advantage of these 

market discrepancies. Investors deploying a bottom-up, 

fundamental research-driven approach, however, may 

have a greater ability to take advantage of the values that 

The Strategic Partnership 

A discussion with Bradley C. Tank 

emerge. We believe an ideal approach to asset allocation 

must include both macro or top-down elements as well as 

bottom-up fundamental valuation elements. 

Heightened Correlations 

Correlation among asset classes has been on an uptrend over the 

past few decades and hit an all-time high in 2011. 

Russell 3000 Index 

MSCI Emerging Markets Index 

MSCI EAFE Index 

Source: Callan Associates. Correlations of various asset classes to a 50/50 

blend of the MSCI All Country World and Barclays Capital Global Aggregate 

Bond Indices. Indices are unmanaged and are not available for direct 

investment. Investing entails risks, including possible loss of principal. Past 

performance is no guarantee of future results. 

Highly correlated markets are a strong reminder of why our firm hasn’t been driven by a 

pure top-down, asset class allocation perspective. It’s not the way our firm has grown and 

partnered with clients seeking unique, customized solutions. Our view is that effective 

asset allocation is necessarily multidimensional with fundamental valuation, macro and 

quantitative elements all playing a role and a key element being a keen sensitivity to unique 

client goals and risk tolerances. In 2011, with so many markets and assets trading in lockstep, 

we were privileged to work with several global institutional clients who were seeking 

portfolio solutions that necessitated multi-class strategic investments. We are flexible. We 

listen to what our clients are saying, recognizing their view of the world and then working 

closely with them to help solve for their objectives. Even during times when it seemed that 

worldwide markets forgot how to discriminate between good investments and bad ones, our 

multi-class strategies used innovative risk management and valuation screens to canvass an 

array of investments, from stocks and corporate bonds to agency and bank debt, as well as 

commodities. We have the fluency in both private market and public markets to deliver 

diversified strategies in a single engagement, with a goal of adding alpha, managing volatility 

and diversifying opportunities. 


(%) 

1.0 

0.8 

0.6 

0.4 

0.2 

0.0 

-0.2 

-0.4 

-0.6 

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Jan–94 

Jan–95 

Jan–96 

Jan–97 

Jan–98 

Jan–99 

Jan–00 

Jan–01 

Jan–02 

Jan–03 

Jan–04 

Jan–05 

Jan–06 

Jan–07 

Jan–08 

Jan–09 

Jan–10 

Jan–11 

BC High Yield Credit Index 

Bradley C. Tank 



Fixed Income

The Opportunity 

in Private Equity 

A discussion with Anthony D. Tutrone 

Private and public markets behave differently and 

reveal their unique characteristics throughout 

changing market environments. Private equity seeks 

to identify opportunities for excess returns, especially 

when public markets are not adequately discriminating 

between companies with different prospects and 

are treating industry sectors like a single investment. 

Public investments can experience unwarranted 

volatility in tightly correlated markets due to 

exogenous short-term factors or poor performance 

of a peer company. 

These conditions provide excellent opportunities for 

investors, such as private equity managers, who typically 

concentrate on the underlying long-term fundamentals of 

individual companies. While private equity portfolios are 

generally less liquid than public market investments, at 

Neuberger Berman, we can point to more than 20 years of 

experience in the asset class and our significant long-term 

outperformance when compared to public markets. 

Firms backed by private equity companies can, in our view, 

focus solely on building long-term, sustainable value for their 

shareholders. Private equity managers seek to invest in private 

companies that have sustainable competitive advantages and can 

benefit from not being distracted by spurious movements in their 

stock price or by having to meet short-term earnings targets. 

What this means in practical terms is that the private equity 

investors at Neuberger Berman are able to focus on investing 

in businesses with detailed strategic and operating plans that 

focus on creating value over a three- to six-year holding period. 

Strategic planning, as well as the oversight of financial and 

human resources, is done with longer time horizons in place 

and with recognition of the stress that broad economic events 

can have over the planned investment period. 

This has been our focus for decades. Our network and sourcing 

capability is extensive and time-tested. Today, our team of over 

60 private equity investment professionals is working with 

clients and scouring the globe for new ideas, differentiated 

strategies and attractive investment opportunities in the private 

equity sector. To identify these investment opportunities for 

our clients, we use many of the same risk management and 

asset valuation techniques as we do for public investments— 

but often find unique opportunities that can only be accessed 

through investing in private equity funds or directly into 

private equity-backed companies. 

Anthony D. Tutrone 

Managing Director and Global Head of Alternatives 

Managing Amid 

Convergence: 

Perspectives 

ADAPTING TO THE CURRENT CLIMATE 

2011’s difficult capital markets environment saw 

reduced liquidity, high correlations and volatility, 

and a general absence of fundamentally driven 

price movements. This influenced the relative 

attractiveness of the various hedge fund strategies, 

and the relative attractiveness across 

managers within strategies. In 

2012, we believe that general 

uncertainty will persist, suggesting 

to us that, in the near term, 

it is more appealing to emphasize 

managers focused on taking 

advantage of pricing dislocations 

in and between securities so that 

they have the potential to profit 

regardless of future market 

direction. Such an approach 

may not offer the potential 

for the highest returns in 2012 

but does reflect a key function 

of hedge funds that is often 

obscured—to provide uncorrelated 

returns that are favorable 

on a risk-adjusted basis. 

Eric Weinstein 



Fund of Hedge Funds 

Continued 

page 19


WITH UNCERTAIN BACKDROP, WE SEE ‘DISCONNECTS’ 

Much of the U.S. market turbulence we saw in 2011 was 

due to concerns that the European debt crisis could curb 

economic growth in the U.S. and elsewhere. However, 

while we concede that global economies are becoming 

increasingly interlinked, it is possible that the degree of 

interconnectedness may be overestimated. In fact, as we 

get deeper into 2012, it seems that despite mounting 

economic weakness in Europe, the U.S. economy is gaining 

some momentum. An example of this can be found among 

U.S. financials; while European banks aren’t lending much 

given their concerns about capital, liquidity constraints 

and the risks of lending in a soft economy, U.S. banks 

in contrast are in better shape now then they 

have been in the recent past, and they have the 

capacity to lend in Europe—setting the stage 

for potentially sizable gains in market share. 

More vigorous banks also have the ability 

to increase American lending, which could 

boost the economy at home. Still, a great 

deal of macro uncertainty remains and we 

expect market volatility may remain high as 

investors react to continual bursts of news 

from key regions of the world. The lesson 

then, to me, is to remain focused on finding 

valuation discrepancies among individual 

stocks given that, for better or worse, 

overall market conditions can change at 

the drop of a hat. 

Eli M. Salzmann 

Managing Director, Portfolio Manager, Large Cap Value Team 


WATCH OUT FOR POLITICAL RISKS 

Fear, then relief, then fear again have driven 

a cycle of severe volatility as many investors 

sought safety, then return, then safety again. 

Since the April 2011 market highs, risk 

aversion has dominated investor behavior, 

hurting small-cap stocks in particular. As 

a result, we believe the hunting ground 

for finding quality small-cap companies at 

near historic low prices is compelling. So 

while we are optimistic for 2012, we are 

quite concerned about political risks and 

poor policy emanating from Washington 

that can create a difficult business environment. 

We view that as a primary challenge 

to our portfolios. We like the business 

environment, but are apprehensive about 

the political environment. 

Benjamin H. Nahum 

Managing Director, Portfolio Manager 

The Greene Group 

DECLINING CORRELATIONS ARE SOMETHING TO 

CHEER ABOUT 

Elevated correlations were a major challenge for active 

managers in 2011. Significant macro events and related 

market moves led to historic levels of momentum-oriented 

volatility. Stocks, sectors and the broad market tend to 

move in tandem during these periods of high 

correlation. In 2012, we see improving economic 

data combined with high-quality corporate 

earnings leading to early signs of improving 

investor sentiment. We believe reality may 

start to overcome fear, which could cause 

stock correlations to decline. We believe 

a low-correlation environment provides 

the potential for attractive alpha generation 

driven by fundamental research. 

Compelling valuations and strong cash 

flow generation at the company level are 

providing an attractive backdrop for equity 

investing. We believe this year could be a 

stock picker’s market where stock selection 

becomes the key driver of portfolio returns. 

Richard S. Nackenson 

Managing Director, Senior Portfolio Manager 

The Nackenson Group

CASH AS A TACTICAL CHOICE 

In 2011, stock price volatility was unprecedented and global 

in nature and, more than ever, markets and asset classes 

were moving together in reaction to the same issues— 

European debt, U.S. political missteps and fears about the 

Chinese economy, to name a few. For a good part of last 

year, we “de-risked” our stock portfolios out of concern 

about such problems, moving to sizable cash positions and 

generally defensive positioning. Now, cash levels are down, 

but we continue to believe in the use of cash as a tactical 

instrument in managing risk and differentiating returns. 

Don’t misunderstand—we believe in the long-term 

potential of stocks, especially compared with fixed income. 

But the underlying structure of the market has changed— 

due to ETFs, high-frequency trading, information flow and 

technology—so it can be very valuable to employ tactical 

measures like increased cash positions (or fixed income 

as an alternative, where appropriate) to help mitigate 

downside risk. After all, a dollar you avoid losing on the 

downside is one that you don’t have to make up when 

markets recover. 

Gerald P. Kaminsky and Michael J. Kaminsky 

Managing Directors, Portfolio Managers, Team Kaminsky 

Team Kaminsky, pictured left to right: Richard M. Werman, Gerald P. Kaminsky, 

Michael J. Kaminsky, Mindy Schwartzapfel, David G. Mizrachi, James Gartland 

MUNICIPALS: SMART PICKS WILL MATTER 

As doomsday scenarios relating to the credit quality of 

U.S. state and local governments failed to materialize in 

2011, the municipal market rallied sharply from oversold 

conditions. And while economic and credit challenges 

remain, we hold a constructive view on the 

municipal market for 2012. Moreover, we think 

security selection will be more of a driving factor on 

returns than sector selection. Why? We anticipate 

that economic strains will continue to cause isolated 

defaults in more speculative issuers and credit rating 

volatility will remain elevated in small pockets of the 

marketplace. As a result, we think individual security 

selection will be a key factor in identifying attractive 

income-generating opportunities. In working with 

institutional and financial professionals everyday, 

we emphasize the importance of our credit review 

process, the need to have a thorough understanding 

of individual municipal credits as the key to making 

informed relative value decisions. 

Jamie L. Iselin 

Managing Director, Head of Municipal Fixed Income 

INVEST IN SKEPTICISM 

During times of uncertainty, a wall of investor skepticism 

builds. Entering 2012, there are many unanswered 

questions—about Europe’s financial crisis, its impact on 

global growth, China’s potential for a “hard” or 

“soft” landing and the pace of the U.S. economy. 

These and other uncertainties have heightened 

market volatility. Traditionally, investors have 

understood the risk/return profile, knowing 

that market unpredictability and volatility 

went along with the search for attractive, 

long-term, risk-adjusted returns. However, 

investors must deal in the here and now and, 

in 2011, many investors experienced minimal 

returns in the face of extreme volatility. This 

has contributed to a highly skeptical view of 

the markets that continues to weigh on stock 

prices—even for “best-in-class” companies. 

With very modest growth expectations, many 

such names are trading at attractive valuations. 

As a result, we are optimistic about the 

potential for attractive equity market returns 

for 2012 and the long-term. 

Charles C. Kantor 

Managing Director, Senior Portfolio Manager 

The Kantor Group 

page 21


Case Study: 

Seeking Diversification in a 

Highly Correlated World 

THE SITUATION 

A large public educational endowment 

was seeking diversification as traditional 

asset classes became more correlated. 

Evaluating private versus public markets, 

the endowment chose to add its first 

private equity investments to its strategic 

asset allocation, and initiated a competitive 

process to select a portfolio manager. 

THE SOLUTION 

Evaluating private equity opportunities 

introduced the endowment to a range 

of strategies and regional investments. 

Neuberger Berman developed a 

customized, global private equity fund 

with exposures in North America, 

Europe, Asia and South America. The 

program consisted of small- to mediumsized 

funds with an emphasis on buyout, 

growth equity, venture capital and special 

situations. In developing the solution, 

Neuberger Berman performed advanced 

financial modeling, including net cash 

flow analysis and NAV development, 

and integrated our established financial 

reporting, including Web-based access 

to underlying portfolio data. 


Beyond developing a customized solution, 

Neuberger Berman continues to partner 

with the client—our staffs work closely 

together on systems and support projects. 

Further, Neuberger Berman regularly 

communicates with the client regarding 

potential opportunities and solutions, not 

only within private equity but also across 

the broad investment universe. n 


How has heightened market 

volatility affected investors’ 

time horizons? 

Time horizons appear to be compressing 

to unimaginable nanosecond lengths 

in a world of high-frequency trading, 

increasingly influential hedge fund 

participants and heightened interest 

in exchange traded funds (ETFs). In 

particular, the explosive growth in 

ETFs over the last few years reflects 

investors’ proclivity toward “risk-on, 

risk-off” trading. This phenomenon has 

increasingly characterized the U.S. equity 

market through the last decade, as global 

macroeconomic concerns have taken 

center stage. The combination of recent 

market trends continues to drive equity 

correlations to levels well above historical 

norms across the market capitalization 

spectrum. Moreover, the same period has 

been distinguished by high volatility and 

relatively low equity returns. 

Has this “convergence” across 

asset classes and correlations 

changed the way you approach 

the markets? 

One would think that the preferred 

investment approach in this environment 

must be to seek outperformance by 

With Judith M. Vale and Robert W. D’Alelio 

Managing Directors and Portfolio Managers 

Small Cap Value Team 

Does a Long-Only, Buy-and-Hold 

Approach Still Make Sense in 

Today’s Market? 

trading more aggressively. Certainly 

there is no shortage of market pundits 

recommending this very strategy. The 

Small Cap Value Team has a different 

perspective, having found that a longterm, 

buy-and-hold approach that invests 

in high-quality businesses at reasonable 

valuations can generate attractive 

long-term returns with lower volatility 

than the broader market. Ironically, 

rising stock correlations in the inherently 

heterogeneous small-cap market would 

seem to favor our style of investing, 

particularly as it appears volatility is here 

to stay for the foreseeable future. 

Judith M. Vale Robert W. D’Alelio

4. 

solving for 

Client Commitment 

Clients’ investment needs today are complex and, in response, 

investment management firms must be more dimensional 

and nuanced than ever. An intricate investment environment 

means institutions and advisors today are necessarily deeply 

experienced, forward-looking and demanding. Across the 

globe, the companies with whom we work are increasingly 

sophisticated and alert to market conditions, balancing the 

perspectives from multiple constituents with a stake in short- 

and long-term outcomes. 

page 23

4. Solving for Client Commitment 

For Neuberger Berman, working closely with clients— 

whether institutional, advisory or individual—helping 

all parties grasp the range of issues and concerns is 

paramount to our mission. Our role in this relationship 

is clear; with access to reams of data and analytics, 

peer group analyses and economic perspectives, 

the conversation 

between our clients 

and us is about 

making the complex 

accessible, grounded 

and particular 

to their very 

individual needs. 

The investment 

industry is global 

in many ways. 

Investment leadership 

from boards 

to executives to 

research analysts 

think globally and 

seek opportunities 

that span asset 

classes and cross 

borders. Country exposures, benchmarks and sector and 

segment strategies have evolved rapidly so that there 

are seldom static investment solutions. More often, 

the investment discussion travels toward unique, highly 

individualized proposals. Addressing capital preservation, 

income, growth, risk management, inflation and interest 

rate hedging, and currency exposure are common 

elements of most conversations. 

And, of course, performance is essential. In an 

environment of correlated asset classes and indexwrought 

parity, we strive to bring forward new 


Where the Markets Are Taking Us 

Percentage of MSCI ACWI Market Capitalizations 

investment ideas, new perspectives and approaches 

for developing customized portfolio solutions that 

can solve for our clients’ unique objectives. 

Part of the answer is working as one firm, being flexible 

and innovative, and being focused on our areas of 

expertise. More 

and more clients 

want multi-asset 

class solutions. They 

want to discuss 

opportunities related 

to direct investment 

in private businesses 

and off-the-beaten 

track markets. 

We believe it’s 

essential to listen 

to their needs and 

understand their 

circumstances, 

investment goals 

and risk tolerances. 

Clearly, the ability 

to listen well, to 

recognize the client’s 

needs, to adjust and adapt, to introduce solutions that 

are designed for the situation rather than one’s own 

“house view,” these are all critical ingredients. 

The last several years have been unprecedented in their 

challenges, and the resulting portfolio volatility has 

led clients to reassess what they seek in an investment 

partner, and, appropriately, demand a higher level of 

service across the board. Those investment firms that 

can adapt to this changing environment may be the 

ones that thrive in the coming decade.

Deepening the Engagement 

A discussion with Andrew S. Komaroff 

At Neuberger Berman, we exist to perform for 

our clients. If we are not delivering outcomes 

that advance the specific goals of our clients, we 

have failed. As a 73 year-old firm, we measure 

the health of our client franchise by the quality 

of our relationships over years, not quarters. We 

are fortunate that our professionals have long 

tenured relationships that facilitate in-depth 

understanding of investment needs and the 

ability to modulate and adapt strategies as client 

circumstances evolve. 

We have a deep and broad set of investment 

capabilities, enabling a robust and continuous 

dialogue with our clients and, in some cases, 

their advisors. While our client relationship 

professionals have very diverse backgrounds 

that complement their specific client segments, 

they share the fundamental belief that 

investing the time and resources to articulate a 

client’s concrete goals is a necessary precursor 

to recommending any given investment 

strategy. With direct access to our firm’s 400 

THE SITUATION 

In 2010, a Venezuelan couple living in 

Florida found that their ability to pursue 

their life’s work—advocacy and fundraising 

for a foundation begun in memory of 

their young son—was taking a back seat 

to the complex undertaking of managing 

their family wealth. The family’s assets 

were scattered across many entities at 

several financial firms in different countries. 

They needed a cohesive plan that 

would centralize their wealth management 

and bring their assets onshore for legacy 

and tax-planning purposes. 

investment professionals, our client team can 

draw upon this vast reservoir of investment 

talent in delivering tailored solutions. 

Clients justifiably demand more from us as 

they navigate dynamic markets. In response, 

we have added to our experienced team 

of relationship managers and deepened 

the resources dedicated to specific client 

channels and geographies. Our approach 

is to find individuals who are as equally 

passionate about clients as they are about 

markets. We are in the privileged position 

to recruit seasoned professionals attracted 

to the client-centric, investment oriented 

culture at Neuberger Berman. Our client 

coverage team now stands approximately 

300 professionals strong, spread across our 

Wealth Management, Institutional, Financial 

Advisory, Retirement and Sub-Advisory 

channels, and North America, Europe, 

Middle East, Latin America, East Asia and 

Asia-Pacific client centers. 

Case Study: Setting Life Priorities. Managing Family Wealth. 

THE SOLUTION 

A Neuberger Berman Wealth Advisor, 

working in tandem with our Investment 

Strategy Group and Trust Company, presented 

a comprehensive recommendation. 

The proposed solution included strategic 

and tactical asset allocation advice as 

well as a manager proposal for their 

personal and foundation assets. The plan 

also called for consolidating the family’s 

widespread assets in an irrevocable trust 

located in the U.S. 

Andrew S. Komaroff 


Chief Operating Officer 


The couple selected Neuberger Berman to 

help them consolidate the management of 

their assets. We provided a multi-strategy 

solution designed to improve the family’s 

overall risk and return profile, as well as 

address income needs. The plan also set 

the stage for an eventual smooth transfer 

of assets between generations. Perhaps 

most importantly, the new wealth plan 

was designed to enable the couple to 

devote more of their time to achieving 

their foundation’s mission of improving 

health care for children in their community 

and at a national level. n 

page 25


Working Together: Perspectives 

SUPPORTING CONSULTANTS 

Institutions have been taking a fresh look at their investment 

approaches, reflecting the challenge of ongoing volatility, 

the need to meet future liabilities, the complexity of the 

marketplace and the increasing array of strategies available. 

Whether for pension plans, foundations, retirement funds 

or other organizations, consultants play a vital role in 

screening, evaluating and selecting investments. They are 

increasingly being tapped for strategic advice and for service 

as fiduciaries on behalf of clients. We understand the 

importance of engaging with consultants and supporting 

them in this process, and have worked hard 

to become an ongoing resource of market 

information and strategic investment ideas. 

By expanding our consultant team, we 

were able to increase outreach and more 

than double our consultant meetings from 

2009 to 2011. Where such interactions 

have led to investment mandates, they 

have been extremely varied, reflecting the 

strength of Neuberger Berman’s offerings. 

Indeed, the firm’s extensive capabilities 

allow us to be product-agnostic—so the 

needs of consultants and their clients are 

always the focal point of our discussions. 

Alison B. Delgado 


Head of Consultant Relations 


UNDERSTANDING CLIENTS 

Within the intermediary space, the needs of clients are 

very specific to the dynamics of their marketplaces and 

regulatory frameworks. To serve them well and customize 

effective solutions, you need client facing professionals 

with a deep understanding of the capital markets and 

capital allocation theory. 

Our clients navigate myriad issues and opportunities—be 

they ERISA and other regulatory concerns, the incorporation 

of alternative strategies into an allocation framework 

or helping insurance companies assess portfolio risk. 

Our team needs to be able to actively connect the dots 

between client priorities and our firm’s investment 

expertise. One promising area involves the introduction 

of multi-manager strategies that provide access 

to Neuberger Berman’s high tracking-error 

managers as a potential retirement 

solution for plan sponsors and target 

date providers. 

We are also looking at how to 

effectively harness alternative 

strategies in a retirement framework. 

Whatever the specifics might 

be, the critical factor is to keep 

evaluating our clients’ needs and 

assessing how we can make a 

meaningful difference. 

Scott Kilgallen 


Head of Intermediary Distribution for Retirement Services, 

Sub-Advisory, RIAs and Private Banks

LOCALIZATION 

Staying close to our clients means frequent meetings, 

sharing investment ideas and “real time” updates on what 

portfolio managers are thinking. It also means getting 

to know the full range of issues our clients are facing 

and what they’re addressing as pension 

managers and as investors. We call this 

localization, catering to the specific markets 

in which they operate, and fostering direct 

dialogue with our portfolio managers. We 

opened our dedicated office in Seoul in 

2011. That illustrates the commitment and 

desire to be close to our clients. Beyond 

our private equity annual meetings in New 

York, we held eight investment conferences 

in Japan and Korea in 2011, and our 

managers conducted more than 20 road 

shows in the region. Delivering timely, 

relevant information is, of course, vital to 

serving clients, so we translate many of our 

reports into local languages and strive to 

respond promptly to all client inquiries. 

Ryo Ohira 


Head of East Asia 

Case Study: True Partnership on an Advisor Platform 

THE SITUATION 

For years, one of the nation’s largest 

broker-dealers has looked to its business 

partners for added value across products, 

services and business enhancement. With 

upwards of 15,000 financial advisors in 

the U.S. alone, this firm has been at the 

vanguard of changes on the financial landscape. 

Their challenge has been, and will 

continue to be, how to deliver a relevant, 

robust investment platform while evolving 

their offerings and service model as business 

dynamics, market demographics and 

the investment markets change. 

THE SOLUTION 

In 1986, Neuberger Berman entered the 

advisory business, offering separately managed 

accounts (SMAs) designed to address 

fixed income needs. Based on mutually 

reciprocal attention to exacting service 

and quality standards, the relationship 

thrived. Today, Neuberger Berman offers 

a significantly expanded roster of equity 

and alternatives strategies—more than 

30 in total. Moreover, the relationship has 

grown beyond the original SMA presence 

to include multiple vehicles: mutual fund 

share classes for advisors, unified management 

accounts and UCITS shares for sale 

in certain non-U.S. markets. Together, 

Neuberger Berman is able to provide 

the client’s advisors with a full range of 

investments to solve for a wide range of 

investment objectives. As a consultative 

business partner, Neuberger Berman’s 

field representatives define a high level of 

experience and knowledge, and are able 

to deliver resources and ideas on practice 

management and value-added services. 


Partnerships deepen when each party 

embraces the other’s strategic goals and 

TACTICAL ALLOCATIONS TO MANAGE RISK 

Throughout 2011, we had many conversations with investors 

who, given ongoing market turbulence and heightened 

asset correlations, found increased appeal in the private equity 

asset class, which has historically provided return and correlation 

benefits to diversified portfolios. In 2011, questionable 

economies around the world increased our focus on areas 

that provided more balance between risk consciousness and 

aspirations for excess return. Looking across five continents, 

we found plenty of opportunities along these lines—including 

smaller buyout funds and co-investments that utilize conservative 

leverage, funds investing in smaller-capitalization private 

credits, income-generating investments with returns enhanced 

by dislocations in the relevant capital market, secondary investments 

where we had unique insights into the underlying 

portfolio, and funds investing in growing economies. 

In light of shifting economic sands, we sought to enhance 

investment flexibility through shorter investment durations. 

With interest rates remaining low and public securities carrying 

higher volatility, we believe the 2012 outlook for private 

equity is attractive. Available credit should foster both liquidity 

and new investments for the asset class. 

Brien P. Smith, CPA and John P. Buser 

Managing Directors, Private Equity 

works together. When this client sought 

to migrate to a UMA model, Neuberger 

Berman fully engaged, working out the 

details to assure the continued availability 

of our strategies and efficiency within the 

new approach. More recently, we rolled 

up our sleeves alongside our partner 

proactively, introducing new products 

and increasing the flexibility of our offerings. 

Understanding the importance of 

strategic insights, we have also developed 

comprehensive “due diligence” events 

to bring together our portfolio managers 

and the client’s advisors, and we regularly 

offer investment perspectives in papers 

and videos on important market developments. 

Today, we are able to bring our 

broad investment capabilities, along with 

responsive and experienced sales professionals, 

to deliver for our partner and 

their clients. n 

page 27


REACHING HIGHER GROUND THROUGH PARTNERSHIP 

For our Europe, Middle East and Latin America team, 2011 

was about building on the foundations set in 2010. We 

expanded our distribution footprint, adding, amongst 

other dedicated client service personnel, to our Amsterdam 

and Zurich offices. We applied for branch status in Zurich 

and opened local representative offices in Buenos Aires 

and Milan. This allowed us to engage clients more actively 

and understand their unique needs. Our closed-end 

Bank Loans fund was a good example. This unique fund 

launch provided our clients with exposure 

to a growing asset category not available 

in regular pooled vehicle form. We also 

won several large specialist mandates 

from some of the region’s most 

sophisticated investors. 

All of our relationships—whether new 

or long established—derive from an 

ability to present investment solutions 

that are developed in partnership 

with our clients. Our plan for 2012 is 

simple—continue to stay close to our 

clients and continue to be passionate 

about what we do. 

Dik van Lomwel 


Head of EMEA and Latam 


COMMITMENT TO ASIA-PACIFIC 

The Asia-Pacific region is a growth engine for the world 

economy and central to our mission as a global asset 

manager. Our commitment here reflects where our clients 

are. Investment management is a global business and we 

believe the client engagement must be close, continuous 

and able to evolve as needs and objectives evolve. This 

has translated into new offices—from Hong Kong to 

Melbourne—adding to our relationship management and 

client service teams, introducing regional websites and 

maintaining an aggressive schedule of visits from our 

portfolio managers to meet with investors. 

Service to sovereign wealth funds has been a key part 

of our efforts; we have become a strategic partner to a 

number of sovereign wealth funds; for example, providing 

analysis of private equity investments for a fund with 

a strong interest in the asset class. 

We believe this is meaningful for our 

clients—our willingness to address 

their specific needs, and the array of 

investment strategies we can bring 

to their organizations. While we 

spend considerable time introducing 

investors in the area to our U.S. 

and European portfolio managers, 

our regionally based Greater China 

Equity team continues to expand its 

presence in the region, underscoring 

Neuberger Berman’s presence as a 

trusted partner worldwide. 

Nick J. Hoar 


Head of Asia-Pacific

PLANNING FOR THE INDIVIDUAL 

2011 was especially volatile in the markets and, to a 

large degree, our people were focused on guiding 

clients through that challenging environment, providing 

frequent perspectives on the markets and updates on their 

portfolios. I think our efforts were fruitful and not just 

because of our proactive approach—another key element 

was the groundwork that we created at the start of our 

client relationships. Specifically, we approach every 

private client with the understanding that they are 

unique, in terms of their financial situation, risk 

tolerance and goals. So it is the job of our advisors 

at the outset to ask the right questions and above 

all else, listen carefully. This results in a thorough 

assessment of each client’s financial picture, 

from which we can develop an appropriate 

recommendation on asset allocation and 

investments—what we call our Asset Advisory 

Program. This framework is designed to present 

customized, long-term investment solutions. 

Once a portfolio is in place, we provide on-going 

interaction, including regular monitoring and 

reporting as well as client meetings to update 

and reassess as needed. Further, our clients have 

broad access to our firm’s thought capital and 

market insights. It’s a team effort. We leverage our 

Asset Allocation Committee’s viewpoints on the capital 

markets and utilize our Investment Strategy Group to 

provide strategic and tactical input on client wealth plans. 

Looking ahead, the economic, political and market situation 

appears to be becoming more—not less—complex. A 

comprehensive approach and the role of skilled, thoughtful 

advisors couldn’t be more important in such 

an environment. 

Kenneth G. Rende 


Head of Wealth Management 

FACING OFF WITH THE ‘RISK-OFF’ MINDSET 

The issues faced by advisors have become 

increasingly varied—and challenging. Whether 

extreme market volatility, higher correlations, 

low income yields or shifting regulations—to 

name a few—current conditions can make 

once viable ideas incomplete and require new 

thinking. This is where true partnership and 

engagement really come into play. 

One concern puzzling advisors is how to address 

the risk-off mentality among clients who are 

re-allocating towards cash and low-yielding 

income solutions without regard to the impact 

of this reactive mentality on long-term investment goals, 

allocation targets or inflation considerations. Our response 

has been to educate advisors and their clients about 

strategies that may be appealing in a volatile, low-yielding 

environment and that can help mitigate risk through low 

correlation to traditional equities and fixed income. Such 

strategies would typically focus on income from asset 

categories outside of traditional fixed income, such as 

REITs, utility securities and convertibles, but also provide 

the potential for capital appreciation. 

Alternative investment strategies come up in these 

conversations because of their potential to create alpha 

and dampen volatility. With a growing line-up of registered 

mutual fund offerings, the discussions are fuller as advisors 

recognize that they really have a wide array of strategies 

available to address client needs. We are excited about 

expanding our breadth of solutions with daily liquidity that 

can be accessed on advisory platforms. 

More generally, we have brought our investment 

perspectives—both in print and digital form—to a place 

where we can complement our partners’ efforts and be a 

go-to resource as issues rise on the investment landscape. 

From solving for income and managing volatility to 

addressing inflation or flexibility in portfolios, we make 

our resources available. 

This reflects our focus on education. As a firm, our strategies 

have always reflected a thoughtful and independent approach 

to solving client investment challenges. In that vein, we place 

tremendous importance on providing meaningful education 

and insight to our partners so that they can help solve their 

clients’ objectives. 

Jason R. Ainsworth 


Head of Advisor Solutions Group 

page 29


Much is said of the firm’s 

heritage, but how have you 

reinforced your culture in 

the “here and now”? 

We’ve been through it all in the past 

15 years...moving from a partnership to 

a public company, being acquired, our 

former parent’s bankruptcy and finally 

our reemergence as an independent firm. 

Through each of these events, some 

traumatic, the firm has persevered in large 

part due to our culture. We have a 73-yearold 

legacy to protect and we take that 

responsibility very seriously. We never walk 

with an abundance of swagger nor do we 

rest on our laurels—we’ve learned that the 

tides are always changing. 

We speak up and listen. At Neuberger 

Berman, if you see a better way to do 

something, you raise your hand. And, 

when your colleagues are talking—you 

listen and respect what they have to 

say. Sometimes those voices lead to a 

changed point of view or simply reinforce 

our convictions. But you need to keep 

channels open and foster dialogue— 

whether in investing, client service or 

in our operating platform. 

Risk management is at our core, but 

it’s more than just having formalized 

processes in place. It’s internalizing a 

sense of responsibility and giving people 

the confidence and knowledge to make 

the right decisions. So you plan for the 

worst. Even if you aren’t in a particular 

function, you ask how it works. You’re 

vigilant. You get involved. You may not 

always be your colleague’s best friend, 

but you try to be the client’s. 


With Heather P. Zuckerman 


Chief Administrative Officer 

Making Our Culture Work 

Attracting and retaining talent is key. It 

takes a certain type of individual who 

can flourish in this environment. When 

Roy Neuberger was building the firm, he 

surrounded himself with the smartest 

people he could find—who would take 

responsibility and have the courage to 

disagree with him. 

We continue this philosophy in our 

recruiting today and work hard—and 

successfully—to retain employees. I should 

note that in the depths of the 2008 crisis, 

of our lead portfolio managers, we lost 

only one who happened to be from one 

of our smaller teams—and over 250 of 

our key employees renewed their longterm 

commitment to the firm through 

new restricted employment contracts. This 

success has continued ever since. What’s 

our approach? Engage, empower, reward. 

Engage. We recognize the value of providing 

employees an intellectually stimulating 

work environment. Through our cross 

business representation on committees, 

our volunteer activities and our training 

events, we build personal ties that lead to 

better teams, a better company. Whether 

it be our distinguished contemporary 

art collection or our robust philanthropy 

efforts, our employees appreciate that 

Neuberger Berman acknowledges the 

world beyond our core business. Of all the 

ways we could celebrate the anniversary 

of our independence, our employees chose 

to engage in an annual Celebration with 

Service—when the majority of our global 

employee base dedicates its valuable time 

to giving back to our communities. 

Empower. When we emerged as an 

independent firm, we worked to foster 

a structure—and environment—that 

would create a sense of ownership and 

responsibility for everyone. Employees 

across business functions sit on committees 

evaluating the work of their colleagues. 

Where speaking up and striving for “best in 

class” is rewarded, there are no excuses for 

sitting in the sidelines. 

Reward. Finally our firm is a meritocracy. 

While we hold people accountable, we also 

recognize people for their achievements. 

We take our reward systems seriously 

and tie them to long-term performance, 

service—and cooperation. Our reward 

systems, most importantly, are aligned with 

client performance in a number of ways, 

perhaps most directly through returns 

of actual client portfolios being a major 

portion of our contingent compensation. 

We have always been a client-focused 

investment partnership and keeping that 

ethos is crucial. 

Heather P. Zuckerman

FINANCIAL HIGHLIGHTS 

($ in millions) Neuberger Berman Operating Entities 

Summary Financial Information Dec 2011 Dec 2010 

Cash and Cash Equivalents $539 $398 

Investments 164 119 

Receivables 172 126 

Goodwill and other intangibles 590 599 

Other assets 53 51 

Total Assets 1,518 1,294 

Accrued Comp and Benefits 261 196 

Payables and Other Liabilities 194 129 

Total Liabilities 455 325 

Preferred Equity 850 841 

Common Equity 213 128 

Total Liabilities and Equity $1,518 $1,294 

AUM By Asset Class ($ in billions) 

Equity $88 $90 

Fixed Income 88 83 

Alternatives 17 17 

Total $193 $190 

AUM By Client Domicile ($ in billions) 

U.S. $153 $158 

Non-U.S. 40 32 

Total $193 $190 

AUM By Distribution Channel ($ in billions) 

HNW $40 $41 

Institutional 94 90 

Intermediary 59 59 

Total $193 $190 

Headcount 1,740 1,681 

Operating Revenue ($ in millions) 

2011 $1,124 

2010 

$985 

page 31


President of Neuberger Berman 

Group LLC; Chief Investment 

Officer, Equities 


Chairman of the Board of 

Directors; Chief Executive 

Officer of Neuberger Berman 

Group LLC 


Board of Directors 

Robert W. D’Alelio 

Portfolio Manager, 

Small Cap Value 

As of March 3, 2012 

Lawrence Zicklin 

Former Managing Partner 

and Non-executive Chairman 

of Neuberger Berman; 

Clinical Professor at the 

Stern School at New York 

University; Senior Fellow at 

The Wharton School at the 

University of Pennsylvania; 

Chairman of the Rand 

Center for Corporate Ethics 

and Governance 

Richard B. Worley 

Former CEO and CIO 

of Morgan Stanley 

Dean Witter Investment 

Management; Former 

Chairman of Miller 

Anderson & Sherrerd 

William J. Fox 

Joseph F. Berardino 

Managing Director, 

Alvarez & Marsal; 

Former CEO of 

Andersen Worldwide 

Managing Director, Alvarez 

& Marsal; Executive Vice 

President and Global CFO 

of LBHI; Former Senior 

Executive Vice President, 

CFO, Director and President 

of Strategic and Corporate 

Development, Revlon Inc.


John J. Barker Ann H. Benjamin Jeffrey Bolton Robert W. D’Alelio Alan H. Dorsey 

Michael N. Emmerman Richard J. Glasebrook Andrew A. Johnson Gerald P. Kaminsky Michael J. Kaminsky 

Richard S. Levine Thomas P. O’Reilly David R. Pedowitz Daniel H. Rosenblatt Marvin C. Schwartz 

Anthony D. Tutrone Judith M. Vale 

Partnership Committee 


The Partnership Committee is comprised of selected leaders of Neuberger Berman, 

including numerous senior portfolio managers. It serves as an advisory board for 

senior management on material decisions and the strategic direction of the firm. 

page 33


Jason R. Ainsworth Joseph V. Amato Robert Arancio William A. Arnold Robert Conti 

Timothy Creedon Alan H. Dorsey Robert Eason David Eckert Margaret E. Gattuso 

Kevin Handwerker Joseph K. Herlihy Nick J. Hoar Scott Kilgallen Andrew S. Komaroff 

Ryo Ohira Kenneth G. Rende Neil S. Siegel Bradley C. Tank Anthony D. Tutrone 

Dik van Lomwel George H. Walker Heather P. Zuckerman 


Operating Committee 

The Operating Committee is comprised of senior management representing each 

major operating unit. It is engaged in day-to-day management of the firm.

Jason R. Ainsworth 


Bradley M. Anderson 

Robert Arancio 

William A. Arnold 

Sherrell J. Aston 

James C. Baker 

Athanassios Bardas 

John J. Barker 

Ann H. Benjamin 

Jeffrey Bolton 

Vivek Bommi 

Michael L. Bowyer 

Leo Bretter 

David M. Brown 

Jeffry P. Brown 

Brian S. Bruman 

David H. Burshtan 

John P. Buser 

Vasantha Butchibabu 

Stephen Casey 

Fabio Castrovillari 

Brad E. Cetron 

Dana Eisman Cohen 

Michael E. Cohen 

Robert Conti 

Jonathan S. Cook 

Richard S. Couch 

William Russ Covode 

Timothy Creedon 

Robert T. Croke 

Bruce A. Crystal 

Robert W. D’Alelio 

Daniel R. Darst 

Alison B. Delgado 

John D. DeStefano 

Teresa M. Donahue 

John A. Dorogoff 

Alan H. Dorsey 

Ingrid Dyott 

Robert Eason 

David Eckert 

Elliott H. Eisman 

Lillian Eisman 

Michael N. Emmerman 

Ethan Falkove 

Seth J. Finkel 

Daniel J. Fletcher 

Managing Directors 

Patrick H. Flynn 

Drew D. Fox 

Kristina C. Fox 

Francis L. Fraenkel 

Gregory P. Francfort 

Gordon K. Froeb 

Kenneth G. Fuller 

James Gartland 

Margaret E. Gattuso 

Maxine L. Gerson 

Amy S. Gilfenbaum 

Michelle A. Giordano 

Theodore P. Giuliano 

Richard J. Glasebrook 

Anthony M. Gleason 

Terrence Glomski 

Carolyn S. Golub 

Alan I. Greene 

Michael C. Greene 

Neill Groom 

Virginia M. Guy 

Brian E. Hahn 

Kevin Handwerker 

Aisha Haque 

Joseph K. Herlihy 

Nick J. Hoar 

Edward P. Hobbie 

Lorraine L. Holland 

Michael J. Holmberg 

Frederick Roy Ingham 

James L. Iselin 

Andrew A. Johnson 

Edward Jones 

Kenneth M. Kahn 

Michael W. Kamen 

Gerald P. Kaminsky 

Michael J. Kaminsky 

Charles C. Kantor 

John A. Kauffmann 

Judith Ann Kenney 

Scott Kilgallen 

Francine S. Kittredge 

Andrew S. Komaroff 

Cary A. Koplin 

Jeremy R. Kramer 

Michael S. Kramer 

David G. Kupperman 

Sajjad S. Ladiwala 


Ugo Lancioni 

Diane Lederman 

Wai Lee 

Richard S. Levine 

Melinda L. Lloyd 

Elisabeth Lonsdale 

Linda J. Ludwig 

James A. Lyman 

Joseph Lynch 

Jeffrey A. Majit 

Joseph A. Malick 

Thomas Marthaler 

Martin E. Messinger 

Paul Metzger 

Stephen Miller 

Arthur Moretti 

David H. Morse 

Martin Mulroe 

Richard S. Nackenson 

John D. Nadell 

Benjamin H. Nahum 

Holly Newman Kroft 

Kevin J. O’Friel 

Ryo Ohira 

Thomas P. O’Reilly 

Daniel P. Paduano 

Maria Pappas 

Robert H. Pearlman 

David R. Pedowitz 

Tristram Perkins 

Cas Peters 

Peter B. Phelan 

Alexandra M. Pomeroy 

David S. Portny 

Anthony Pullano 

Joseph F. Quirk 

Douglas A. Rachlin 

Henry Ramallo 

Elizabeth Reagan Teasdale 

Michael D. Rees 

Brett S. Reiner 

Kenneth G. Rende 

Carter P. Reynolds 

F. Christian Reynolds 

Joana Palhava Rocha Scaff 

Daniel H. Rosenblatt 

David Ross 

Conrad A. Saldanha 

Eli M. Salzmann 

Martin A. Sankey 

Robert Schlichting 

Henri A. Schupf 

Marvin C. Schwartz 

Benjamin E. Segal 

Saurin D. Shah 

Monica Sherer 

Steve S. Shigekawa 

Jonathan D. Shofet 

Neil S. Siegel 

Ronald B. Silvestri 

Laura Sloate 

Brien P. Smith 

Thomas A. Sontag 

Joseph Stein 

Michelle B. Stein 

Stephanie J. Stiefel 

David S. Stonberg 

Richard J. Szelc 

Brian Talbot 

Lihui Tang 

Bradley C. Tank 

Anthony J. Taranto 

Barbara A. Tarmy 

Lee J. Tawil 

Howard T. Taylor 

Alfredo Tenaglia 

Terri L. Towers 

Kenneth J. Turek 

Carlton R. Turner 

Yolanda R. Turocy 

Anthony D. Tutrone 

Judith M. Vale 


Peter von Lehe 


David I. Weiner 

Eric D. Weinstein 

Richard M. Werman 

Obadiah J. Wilford 

David A. Wilson 

Yulin (Frank) Yao 

Patricia Miller Zollar 

Heather P. Zuckerman 

page 35

This material is provided for informational purposes only. Nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold 

a security. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is 

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and services may not be available in all jurisdictions or to all client types. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than 

more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for 

direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results. 

All information is as of December 31, 2011, unless otherwise indicated and is subject to change without notice. Firm data, including employee and assets under management 

figures, reflects collective data for the various affiliated investment advisers that are subsidiaries of Neuberger Berman Group LLC (the “firm”), including, but not limited 

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Equity and Fixed Income AUM Outperformance Note: Firm equity and fixed income Assets Under Management (“AUM”) outperformance figures are based upon the aggregate 

assets for all Neuberger Berman LLC and Neuberger Berman Fixed Income LLC traditional equity and fixed income strategies that are included in each firm’s institutional separate 

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(PAM, ISA and MAG combined) assets reflected, and eight strategies accounted for approximately 71% of the total firm fixed income (PAM, ISA and MAG combined) assets 

reflected. The performance of the individual PAM equity teams/strategies is generally shown as a supplemental exhibit to the PAM Equity Composite. The respective ISA, MAG 

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negative performance during certain periods of time. Hedge fund, private equity and other private investment vehicle assets are not reflected in the AUM and product 

outperformance results shown. AUM outperformance for ISA and MAG strategies is based on gross of fee returns. Gross of fee returns do not reflect the deduction of investment 

advisory fees and other expenses. If such fees and expense were reflected, AUM and products outperformance results would be lower. Investing entails risk including possible 

loss of principal. Past performance is no guarantee of future results. 

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