VIDEO TRANSCRIPTS FROM ‘A Practical Alternative’ Insights and Ideas for Advisors, featuring Bob Rice, Senior Advisor to Neuberger Berman A History of Outcome-Oriented Investing Neuberger Berman is a private, employee-controlled asset management firm managing a wide range of traditional and alternative investments for individuals, advisors and global institutions. Since 1939, we have worked to help clients achieve their investment goals through a combination of independent thinking, a focus on research and ongoing innovation. 2 | A Practical Alternative Thoughtful solutions run deep here. In 1950 we were one of the first firms to offer no-load mutual funds. Combined with our more than 20 years of experience as hedge fund and private equity investors, 80 dedicated alternative investment professionals and more than $34 billion in alternative assets, we have substantial capabilities to help advisors and their clients, institutions and global funds participate in the private and alternative investment markets. Today, our combination of extensive experience managing mutual funds plus our extensive capabilities in the alternative investments space means we are uniquely positioned to help clients gain exposure to nontraditional strategies via mutual funds. In the last several years, our suite of liquid alternatives has expanded to include global solutions in equity and debt, featuring single managers as well as multi-manager strategies. Note: All opinions reflect those of Bob Rice/Rebecca Darst and are not to be construed as advice or opinion from Neuberger Berman. I n this piece, we offer excerpts from a series of video discussions featuring Bob Rice, senior advisor to Neuberger Berman and Rebecca Darst, president of Trofast Media. Their discussion of the four persistent investor challenges— income, growth, risk management and principal protection—comes to life in video. This brochure seeks to convey the essence of the conversation, namely that advisors need to understand how non-traditional (and traditional) investments can help solve investment issues. The views expressed in this document, reflecting the video on www.practicalalternative.com, do not constitute advice or necessarily represent the views and opinions of Neuberger Berman LLC. They are illustrative discussions intended for educational purposes. For more on our approach to alternatives, or to watch our series of videos on alternatives, please visit www.nb.com/practicalalternative. New Times. New Tools. W e are living in unprecedented times. We’re seeing quantitative easing on a global scale, the ultimate impact of which is unclear, the mammoth growth of worldwide debt, coexistent inflationary and deflationary forces, and terribly impactful demographics in the developed world. These broad global forces have changed the nature of the investing game in ways that we are only beginning to understand. And this is creating tremendous uncertainty for investors. ONE THING WE KNOW: The traditional asset allocation paradigm that divides a portfolio between stocks and bonds no longer works the way it used to. What hasn’t changed? Your reasons for investing. What do you want your money to do for you? In our thinking, there are four possible goals—or four challenges—that your portfolio needs to address. On the following pages are thoughts on each of the challenges and 1 For the full video selection visit www.practicalalternative.com. | VI DE O TRA NSCR IP TS how to think about portfolio construction given today’s markets. The Four Persistent Portfolio Challenges INCOME GROWTH OF CAPITAL RISK MITIGATION INFLATION MANAGEMENT 1. The Search for Income The number one question for many investors today is “How can I generate current income, given today’s incredibly low interest rates?” You’ve got junk bonds paying approximately 5%, Italian government bonds barely at a premium to U.S. Treasuries. And it’s not just that the yields are so low, they come with interest rate and duration risk. S 2 | A Practical Alternative o what can investors do? As I see it, there are two pieces of the puzzle. First, you want to try to find income-generating investments that can increase their payout year over year—that can alleviate some interest rate risk. MLPs can fall into that category and are broadly available. Royalty trusts, farmland, timber, pools of certain kinds of private debt—these are all investments that can provide increasing payments year after year, cutting down on inflation risk. Additionally, you can do what the pros call “shorten your duration,” which means limiting the amount of time that your bonds are outstanding, because the longer the maturity date is, the greater their risk of losing value if interest rates rise. One example: Shorten the maturity of loans you hold. Catastrophe bonds, also known as CAT bonds, have shorter durations, as do peer-to-peer loans, which are popular with high net worth investors today. Emerging market debt is a less exotic option. With each of these, you want to invest with an active manager with significant experience in the area. “The goals haven’t changed—income, growth, mitigating risk, protecting principal—but the toolkit has expanded significantly, and as such, provides advisors with a broader suite of solutions.” 2. The Hunt for Uncommon Growth Historically, investors have looked to stocks to generate growth in their portfolios. By many standards, today’s stock market is expensive and the amount you can reasonably expect to make at these P/E multiples is lower than when the market is cheap. This is one important reason to look outside equities for growth, but there are others. That’s not to say that investors should avoid stocks. Certain strategies can be more effective in a more fully valued market. One of the best examples is activist investing, in which managers take an active stake in directing the future of a company, whether it’s through a merger or other corporate event. We’re hitting record levels of mergers and acquisitions. Finding managers who can take advantage of those kinds of events is an attractive option right now, and it is widely accessible through various funds. For the full video selection visit www.practicalalternative.com. | VI DE O TRA NSCR IP TS their infrastructures and create growth opportunities. These regions can be accessed through more than equities. There is emerging markets debt and private investments, which can offer some insulation from the immature and potentially volatile stock markets in these countries. 3 F or example, everyone’s familiar with the renaissance in the U.S. energy industry. Much of that value is not accessible to investors through traditional public stocks, but you can get it through MLPs. And there are emerging markets like China and other parts of Asia and Latin America. Many emerging markets have burgeoning populations and a growing middle class. Advanced technologies are enabling these countries to update “What should investors do under these circumstances? Fortunately, there’s a range of investment tools available, considerably more than simply traditional stocks and bonds.” 3. Risk Gets Relevant Stocks and bonds have done well over the past few years. So why mess with success? Precisely because you have done so well. Back in 2007 and 2008, the stock market was at historic lows. It was historically cheap to buy. Now the market is getting progressively more expensive and becoming riskier, and your need for downside protection is becoming greater. L 4 | A Practical Alternative ife insurance provides a good analogy. You wouldn’t conclude that, just because you’ve been paying life insurance premiums every year and you haven’t died, you don’t need that protection any longer, right? As you get older, you need more insurance. It’s the same with the markets. Let me give you three quick equity market valuation examples. The Tobin’s Q indicator, which measures the replacement value of the S&P 500, is significantly above its long-term average. The Buffet Indicator, a GDP-to-market cap ratio, is two standard deviations above its long-term average. And the Schiller P/E is about two thirds above its long-term average. Bonds valuations are similarly high. What should investors do under these circumstances? Fortunately, there’s a range of investment tools available to investors today that historically were used by institutional investors: pensions, endowments, foundations—the smartest money in the world. Take a look at long-short equity—a classic hedge strategy. This can be a wonderful way of being in the market while having cushion on the downside because the short position can help protect you if the market falls. Many opportunities like these are now available to average investors in mutual fund formats with high-caliber managers. For the full video selection visit www.practicalalternative.com. We know that inflation, the stealthiest thief of wealth, is a long-term risk for investors looking to hold onto the assets they’ve accumulated. In today’s market the twin forces of inflation and deflation coexist. I liken them to tectonic plates in the earth that are pressing together. They’re both incredibly powerful, but they’re deadlocked right now and neither is moving. The problem is, just like tectonic plates, if one slips, you could experience a rapid change, and either one could overwhelm the other. D eflation is a new but important topic for investors to consider. Different assets perform well in inflationary versus deflationary environments. We’re looking at a different set of dynamics, and it’s important to do your homework and think about how to construct your portfolio. One possible solution is to invest in real assets that are also drawing off current income. The reason: The income component can offer protection in a deflationary environment, while the real asset itself should increase in value in an inflationary environment. Timber and farmland are two particularly good examples. If you can’t invest in these assets directly, there are funds that focus on these areas A classic asset class for this type of environment is Treasury Inflation Protected Securities, also known as TIPS. They work as advertised in an inflationary environment and, because the amount of the principal never adjusts below par, they also work well in a deflationary environment. Some institutional investors call them “real assets,” even though they’re clearly not, simply because they behave like some income-producing real assets in an inflationary or deflationary environment. It used to be that stocks took care of two of the challenges: growth and inflation management. Bonds were responsible for income and risk mitigation. But those assets don’t behave as they used to, so it makes sense to augment the portfolio with some alternatives—some that have been around for a long time and others that are newly available to the average investor. 5 4. Defying Value Erosion | VI DE O TRA NSCR IP TS Non-Traditional Solutions for Life’s Persistent Portfolio Challenges K now what you own, and why you own it. Ask questions about that which you don’t understand. Understand the fundamentals before venturing out into the fray of investment strategies. What follows are excerpts culled from the many “Language of Investing” video shoots that Bob Rice and Rebecca Darst recorded and are available on www.nb.com/practicalalternative. The Language of Investing Alpha A lpha is the Holy Grail for money managers, but what is it exactly? Simply put, alpha is the extra return that a manager can deliver to investors in a fund, if the manager doesn’t take any additional risk to deliver that return. If, for example, the S&P 500, is up 6% in a given year, and a portfolio manager has delivered 8% in the same year without additional risk over the average of the S&P 500, that’s 2% of alpha. Generating alpha is difficult to do on a sustained basis over a period of years, particularly in a long-only portfolio. Other types of strategies, like long/short equity or private equity and venture capital, for example, which require a high degree of skill and a unique set of resources, are set up better to deliver alpha. Over the last few years, active managers have had difficulty generating alpha, leading many investors to question whether passive strategies are a better option. I think we’re going to see more volatility and less correlation between stocks going forward, which could create a better environment for stock pickers. 6 | A Practical Alternative Alpha is the extra return that a manager can deliver to investors in a fund, if the manager doesn’t take any additional risk to deliver that return. “Strategies like unconstrained bond funds and emerging markets debt can help reduce your exposure to interest rate and duration risk while diversifying your income solutions.” Some people will say that it doesn’t matter because they plan to hold bonds to maturity and they’ll get their money back. But there are two big issues. First, a lot of people invest in bond funds which don’t have maturity dates, so the loss of value is permanent. The second problem is that, by time a bond reaches maturity, inflation may have eroded the value of the initial investment. Strategies like unconstrained bond funds and emerging markets debt can help reduce your exposure to interest rate and duration risk. Other strategies, like master limited partnerships, which tend to pay out more each year, can also limit duration risk. F or investors in alternative strategies, performance dispersion is one of the more important concepts to understand. In the long-only investment world, the difference between the best and worst managers may not be all that dramatic, particularly when correlations are high. In the alternative world, where there are more factors at play, it can be 10X or 20X. The industry is coming out with new tools to help investors make comparisons between managers more easily. Wilshire, for example, has released a set of liquid alternative indices. This is particularly important because alternative strategies come with extra fees and it’s important to make sure the managers you invest with are worth those extra fees. For the full video selection visit www.practicalalternative.com. | VI DE O TRA NSCR IP TS O ne of the most basic ideas in the investment world is that investment grade bonds are safe investments. But even with U.S. Treasury bonds, there are real risks these days. You’ll get repaid, but you have interest rate and duration risk. First, interest rate risk. Simply put, if interest rates rise, the value of bonds purchased at lower rates will decline. Duration risk is also impacted by interest rates, but is related to the maturity date of the bonds. The longer the duration of the bond, the longer you have to wait until the repayment date, and the greater the loss of value will be when rates rise. The lower the interest rate on the bond is to begin with, the greater the loss of value will be when rates rise. This is a problem today given historic low rates. 7 Interest Rate and Duration Risk Performance Dispersion 8 | A Practical Alternative “In essence, absolute return funds give you the opportunity to do well, or relatively well, in a choppy or down stock or bond market. The idea, in principle, is to generate returns in any market environment. To do this investors need to give something up. In general, you sacrifice some upside when the stock market is on a tear.” Hedge Funds O ne of the classic questions today is “just exactly what is a hedge fund?” And funny thing is, it’s hard to answer, because it simply refers to a legal structure that goes around an investment pool. If you ask me what hedge funds typically have in common, I would say there are three things: 1) they invest in relatively liquid securities, 2) they use leverage to amplify returns and 3) they use short selling to try to mitigate downside risk. We know Benjamin Graham as the father of value investing. In the “roaring ‘20s,” he was concerned about the frothy stock market. He wanted to stay invested but with limited risk and limited downside. That’s why he evolved long/short funds, the mother of all hedge strategies. By using shorts, he was giving himself the chance to do better than the market in a downturn. The majority of hedge funds are not trying to hit home runs. Indeed, the vast majority of hedge funds aren’t even designed to beat the stock market when it’s on an absolute tear. The key to understanding what hedge funds seek to do is that they’re using short-selling to mitigate risk. If you’ve got assets allocated to the short side, it’s basically an insurance premium. There are, of course, some hedge funds that are risk-seeking. They shoot for the highest conceivable returns, and so they take big positions in risky things. Sometimes that turns out very well. George Soros famously broke the Bank of England doing that and set the reputation of hedge fund managers. Some hedge fund managers did very well betting that the subprime bubble would burst, and they were right. But many, if not most, hedge fund managers aren’t trying to take those kinds of risks, and most institutional investors—the “smart money”—have over a trillion dollars in the less risky strategies. As they say, they are investing to stay rich, not to get rich. They’re investing to limit the downside. In essence, absolute return funds give you the opportunity to do well, or relatively well, in a choppy or down stock or bond market. The idea, in principle, is to generate returns in any market environment. To do this, investors need to give something up. In general, you sacrifice some upside when the stock market is on a tear. On the other hand, if the stock market is choppy or down, then an absolute return fund should, in principle, outperform. These strategies can sit within an equity allocation or they could be used as a bond replacement, depending on your situation. Because absolute return funds make use of many strategies and asset classes, it’s challenging for a single individual to manage alone. It takes significant investment acumen to excel in one area, let alone the several that may be covered in a single absolute return fund. For that reason, many portfolio managers will hire subadvisors that have expertise in a particular area. In that way, the fund is managed by a constellation of portfolio managers who cover different styles or asset classes. L Long-Short Equity ong-short equity is a classic hedging strategy that we’re seeing in a number of liquid alternative mutual funds today. For a quick refresher, how does shorting work? It’s a big mystery to most people. The idea is simple: Let’s say I borrow shares of Apple from you today that are valued at $100 a share. I then turn around and sell those shares in the marketplace and keep the $100 per share. But I still owe you those shares. My hypothesis is that the shares will fall in value so I can buy the shares back for less than $100 (for example, $90 each), give them to you and realize the $10 per share profit. Generally, the longs and shorts don’t cancel each other out. In other words, managers won’t evenly match their portfolio’s long exposure with short exposure. There’s something called net exposure. If you’re 60 percent long and 40 percent short, then your net exposure to the stock market will be 20%. Net exposure can be all over the map from fund to fund. Some managers will use leverage to increase their long exposure—up to 150% for example. The lower the net exposure, the lower the total portfolio risk. If a manager has low net exposure and is able to deliver solid performance with some consistency, then you’ve found a good manager. The other interesting thing about low net exposure is that it tends to deliver steady-Eddy returns. Some people look at low net exposure long/short funds as an income replacement strategy, in place of a bond fund but without the interest rate or duration risk. It’s important to perform proper due diligence when choosing a manager. Net exposure is critical as is the manager’s personal track record managing long-short strategies. You tend to see a greater difference between the best and worst long/ short managers than between the best and worst long-only managers. For the full video selection visit www.practicalalternative.com. | VI DE O TRA NSCR IP TS T hroughout history, investment management has used specific benchmarks to measure success: the S&P 500, the NASDAQ, the Bar-Ag, among others. Performance versus a benchmark represents relative returns. Absolute return funds are different. They’re not tied to a specific benchmark, asset class or investment style. As a result, investors in absolute return funds have the advantage of spreading their investments across different styles and asset classes. “These strategies can sit within an equity allocation or they could be used as a bond replacement fund, depending on your situation.” 9 Absolute Return I Beta n some respects, beta is the opposite of alpha. It’s the portion of a manager’s performance that is due to the overall movement of the stock market, while alpha is the portion by which the manager outperforms the market. A portfolio that moves in tandem with the market has a beta of one, while one that has no correlation to the market has a beta of zero and one that moves in the opposite direction has a negative beta. Beta is the directional movement in both up and down markets. For example, if stocks move exactly the same as the market, both up and down, the beta is one. If they move twice as far as the market then they have a beta of two. They’re still correlated to the market, because they’re moving in the same direction, but farther, and on both sides, up and down. 10 | A Practical Alternative High beta stocks are more volatile. So if you’re worried about the market, you may want to find a fund or an investment that shows lower beta. Further, if you’re looking at an investment with a beta of one, you might want to consider whether it’s worth paying a big management fee. Risk-Adjusted Returns G oing into an investment, people seem to understand clearly that there’s a relationship between risk and reward. Higher-risk investments tend to have higher returns. But in hindsight, people tend to forget that relationship and instead look only at the absolute returns and say, “I wish I had been in that asset class, because it paid more.” Then they’ll chase the one that delivered better returns last year. That’s a mistake on numerous levels. Most importantly, it tends to ignore how much risk a manager took on to achieve the return. That’s what the risk-adjusted return means. You might well say that a conservative manager who generated a five percent return is actually a better manager than one who got a seven percent return but was investing in very risky stocks all along. How do you measure risk? Academics tend to equate risk and volatility, and it’s an important relationship to understand. Other valuable traditional return metrics include Sharpe and Sortino ratios (described below). T Sharpe and Sortino Ratios here are a number of ways to measure risk-adjusted returns that can be invaluable to investors looking to evaluate alternative portfolio managers. The most common is the Sharpe ratio, which takes a manager’s returns and divides it by the risk that he or she took to get those returns. The lower the risk, the lower the denominator, so a higher Sharpe ratio generally equates to a better-quality manager. Of course, consistency isn’t everything. Sharpe ratio shortchanges managers who deliver large but irregular gains. There’s another version of the same idea called the Sortino ratio. Instead of penalizing the manager for all volatility, the Sortino ratio only penalizes the manager for downside volatility. After all, no one minds volatility on the upside, right? This makes the Sortino ratio a more interesting metric to me, and one that I prefer to the Sharpe ratio for exactly that reason. Of course, that still requires finding an objective way of measuring risk. Academics equate risk and volatility. They look backward and, if a manager has had erratic returns, they say that’s indicative of risk. So if you want to boil down Sharpe ratio, you might even say it’s returns divided by consistency because the Sharpe ratio really rewards you for consistency of returns. Both Sharpe and Sortino ratios offer excellent ways to measure risk-adjusted returns but, however you measure them, keep in mind that it doesn’t pay to look only at gross returns. It is essential to weigh the amount of risk that a manager took to generate those returns in the first place. “In recent years, stocks have been highly correlated to each other, regardless of which section of the style box you chose, which has reduced their utility as the backbone of a truly diversified portfolio.” Correlation There are three major categories of REITs. Equity REITs are the traditional “apple pie” REITs. Mortgage REITs are a little racier—a higher-octane type of investment. And then there are non-traded REITs, a riskier, less-illiquid investment that I think investors would want to consider very carefully before investing. The classic REITs, publicly traded equity REITs, may own or lease property. There are subcategories of publicly traded equity that invest in specific areas like health-care facilities, hotels or entertainment properties, for example. Mortgage REITs tend to be a pure interest-rate play. They borrow with short-term money and invest in mortgages, which are long-term instruments. That tends to work well while interest rates are moving in a particular direction. During these periods mortgage REITs can provide healthy returns. If interest rates start to reverse quickly, however, they can be extremely volatile. Ideally, your portfolio will include investments that are uncorrelated to the stock market as well as uncorrelated to each other. While, in a true crisis, correlations of many asset classes tend to come together, most of the time we’re not experiencing a true crisis. In the majority of market environments, a well-diversified portfolio is very important. In crisis conditions, however, divergent strategies like global macro or long-short strategies can provide less correlated returns. For the full video selection visit www.practicalalternative.com. | VID EO TR AN SCRI P TS A REIT is a passive investment company in the sense that it can’t go out and develop real estate. Instead, it’s taking in rents and other types of income streams from real estate projects. It is not taxable at the corporate level, which is a great benefit, and it is required to pass the majority of its income directly to investors every year. As a result, REITs can produce nice annual yields. C 11 Real Estate Investment Trusts (REITs) orrelation is the degree to which investments move in lockstep with each other. It is the enemy of diversification, because what most people want is a variety of investments that perform differently in different economic conditions. In recent years, stocks have been highly correlated to each other, regardless of which section of the style box you choose, which has reduced their utility as the backbone of a truly diversified portfolio. “But most investors don’t need 100% liquidity. When was the last time you liquidated your entire portfolio in a day?” I Illiquidity Premium nvestors have a huge preference for liquid investments, and it’s easy to understand why. But sometimes liquid is not better. If you gave me two investment options that were precisely identical but one was liquid and one was illiquid, of course, I would take the liquid one. But we live in a capitalist society, and the laws of economics apply. Liquidity drives prices higher. If you truly require complete liquidity in your portfolio, then you must have it, regardless of what the expected returns look like. But most investors don’t need 100% liquidity. When was the last time you liquidated your entire portfolio in a day? It’s rare. The point is, if you can withstand some illiquidity, why not spend some of your investment dollars in less-liquid investments and get lower multiples and better expected returns? That extra you’re going to earn for choosing to tie up your capital is called the illiquidity premium. It’s important to remember, of course, that just because something is illiquid doesn’t make it a great investment. But fearing illiquidity is its own trap that, over time, can drive poorer overall investment performance. What are some examples? The most traditional less-liquid asset class for public investors is real estate. Institutional investors look at private equity, venture capital, oil and gas drilling, other kinds of investments that will pay back over time, but which are not liquid on day one. From Defined Benefit to Defined Contribution Plans W 12 | A Practical Alternative e’re seeing the decline of private defined benefit plans continue... to decline. More and more workers have to rely on 401(k) and other types of defined contribution plans instead. So what should plan sponsors and fiduciaries be thinking about? The retirement industry has shifted over time from defined benefit to defined contribution plans such as 401(k) plans. As more and more workers are relying on defined contribution plans to fund retirement, plan sponsors need to be thinking about how to present the best possible retirement outcomes. What concerns me right now is that, as we’ve moved away from defined benefit plans, we’ve shifted investment respon- sibility from professional managers with the entire universe of investment options available to them to employees. In doing so, we’ve also limited the number of investment tools available to them to prepare for retirement. for in traditional retirement planning. Target date options mitigate market timing risk, but they don’t address the core issues of a very fully valued stock market, of duration and interest rates, and of bond valuations. Specifically, I think that many fiduciaries and plan participants are confusing two ideas that are very different: familiarity and safety. Just because something is familiar doesn’t mean it’s safe and effective for retirement planning. In the world we’re in right now the traditional idea of migrating to a 60/40 portfolio over time can create potential risk. Bonds offer interest rate and duration risk today. People nearing retirement today could see bond valuations fall significantly, something not accounted To me, the solution is to look back to the defined benefit world and evaluate the planning tools and solutions that were available, that we’ve lost in the defined contribution world. Why shouldn’t plan participants have the opportunity to invest in long-short funds to mitigate risk? Why shouldn’t they have exposure to private equity or emerging markets debt? Why have we taken those options away simply because we’ve pushed the responsibility over to the participant? For the full video selection visit www.practicalalternative.com. New Solutions for a Changed World The world has changed dramatically in recent years and the traditional investment paradigm no longer works as advertised. Fortunately, the industry is catching up with the times, and investors of all stripes now have access to a much broader tool set than was once available, enabling them to diversify their portfolios beyond equities and fixed income. Given a difficult, more choppy environment with persistent low rates, adopting a more panoramic portfolio that includes allocations to alternative strategies, can help investors address their persistent portfolio challenges. A Practical Alternative and The Language of Investing™ Neuberger Berman engages with thousands of advisors and their clients every day. The challenge of developing an outcome-oriented portfolio is a driving force behind the firm’s PRACTICAL ALTERNATIVE program— education for advisors. Working with Bob Rice, Neuberger Berman is bringing its message of understanding alternatives and non-traditional strategies to a wider audience. | VI DE O TRA NSCR IP TS company (the successor to his own startup); and a trial lawyer for the U.S. Department of Justice. He currently serves on boards of registered investment advisors that manage over $2 billion of assets. 3 Bob Rice is a recognized expert in the world of alternative investments. He is the author of The Wall Street Journal bestseller, The Alternative Answer, and a frequent guest on national business news programs. He has 25 years of experience of the alternatives world: as a lawyer, investment manager, banker and entrepreneur. Bob has served as a financial products partner at Milbank Tweed; the CEO of a publicly traded technology This material is provided for informational purposes only and 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 current as of the date of this material and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. Investing entails risks, including possible loss of principal. 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. Past performance is no guarantee of future results. This material is being issued on a limited basis through various global subsidiaries and affiliates of Neuberger Berman Group LLC. Please visit www.nb.com/disclosureglobal-communications for the specific entities and jurisdictional limitations and restrictions. The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC. “Neuberger Berman Management LLC” and the individual Fund names in this piece are either service marks or registered service marks of Neuberger Berman Management LLC. Neuberger Berman LLC 605 Third Avenue New York, NY 10158-3698 Q0149 05/15 ©2015 Neuberger Berman Management LLC, distributor. All rights reserved. www.nb.com