It's been four years since the management team at Neuberger Berman decided to spend $922 million in order to acquire a majority interest in their firm and the fixed income and alternative asset management businesses of Lehman Brothers' Investment Management Division in the wake of Lehman's collapse.
Fast forward to November 2011: Lehman Brothers Holdings Inc. decides to sell the rest of its equity stake in Neuberger to the investment-management affiliate for $1.5 billion and puts the firm on the path to independence. And two weeks ago, the Advisor Solutions Group at Neuberger added 11 senior regional directors in 10 new regions to grow its mutual funds business among wirehouses and regional broker dealers.
Money Management Executive recently spoke to Jason Ainsworth, managing director and head of the Advisor Solutions Group, about the firm's growth plans in the advisor market and how it plans to move up from 43rd place on the mutual fund depth chart.
So you guys are really making a push into the advisor space with a slate of new wholesaler hires. What prompted the moves?
We really launched our advisor-sold share class funds in this marketplace in 2008. If you go back to 2008, we were primarily a separately managed accounts and unified managed accounts player. We did have some no-load funds but only on a few of the advisory platforms. But they weren't significant in terms of their size.
We've seen dramatic growth between 2008 and now. We specialized our sales channels back in July 2010 so coming out of the Lehman situation, we had 15 generalist wholesalers. We went to channelization in July 2010 where we had a team dedicated to the regional independent firms. We're adding to our growth there because we're seeing significant growth in the mutual funds in that space.
How big is your advisor sales force?
We have 35 externals and 25 internals dedicated to wires, regionals and independents.
Our goal is to help advisors grow and service their practices and as we're doing that, we see sales results where we have suitable products and we will continue to add to staff where appropriate. I would anticipate in the future that we will continue to grow if our business continues to grow as it has.
What are the firm's long-term growth plans?
We use some of the industry ranking in order to think where we'd like to be. If you look at some of the Strategic Insights results that are out there, I think we sit at 43rd in terms of assets. Our long-term plan, I think, we would definitely like to be in the top 30, if not the top 20 depending on the timeframe.
And in order to do that we're going to have to grow our market share relative to our peers. Neuberger is a large manufacturing organization and we have a lot of capabilities that we offer to a lot of different marketplaces. In the broker-dealer community, we've got about 25 different products that are out there. We'd like to grow that. We've got 42 investment management teams at the firm and we're constantly trying to find a spot for them in the advisor-sold space where it is appropriate.
Describe your current and future product lineup.
We've launched a long/short fund and we're in the process of launching a multi-strat hedge fund in a '40 Act vehicle. We're planning to have as many as 12 different strategies in the multi-strat fund.
One of the great things we got from Lehman Brothers Asset Management as part of the transition in 2008 was we bought unbelievable private equity, hedge fund capabilities, and trying to find that liquid alternative '40 Act vehicle that's appropriate for the advisor space is something that we've been endeavoring towards. Quite frankly, this is something we're being asked by the wirehouses and the regional broker-dealers to do.
Some fund firms are trying to get into the defined contribution space via retirement income products. What is your position on this market?
When it comes to retirement, we're trying to develop retirement-income oriented solutions, things that will help clients have a managed distribution as they grow into retirement. One of the things we're focused on, whether it be in an IRA or IRA rollover or in a defined contribution plan, is how do you find those solutions that will help clients do that.
Some of the funds we've had success with last year, the biggest one for us was equity income, is a vehicle that can help do that. It's got convertibles, preferred securities and REITs. Last year, clients and their advisors were struggling with finding a way to help them with their overall asset allocation and doing that with an income stream in mind. So our equity income fund was a hybrid retirement income solution to help with IRAs and IRA rollovers.
The reason why we have more wholesaling staff out there is because one of our biggest jobs to help educate advisors on the appropriateness and suitability of these types of vehicles to their clients.
The adoption rate for retirement income products has not been high enough and we need to continue to improve with our marketing teams and value-added teams to develop capabilities to educate not only the financial advisors but their clients of the appropriateness of those investments.