Neuberger Berman Inc.

605 Third Avenue
New York, New York 10158
U.S.A.
Telephone: (212) 476-9000
Toll Free: (800) 877-9700
Fax: (212) 476-9890
Web site: http://www.nb.com

Public Company
Incorporated: 1939 as Neuberger & Berman
Employees: 1,247
Total Assets: $4.1 billion (2002)
Stock Exchanges: New York
Ticker Symbol: NEU
NAIC: 523120 Securities Brokerage; 522110 Commercial Banking

Neuberger Berman Inc. is the holding company for the venerable money management firm Neuberger Berman LLC. Neuberger Berman had about $56.3 billion in assets under management in 2003. About $40 billion was in individual accounts, the rest in mutual funds. Neuberger Berman also offers trust services in certain areas.

The company treasures experience in its portfolio managers; job candidates are expected to have weathered several bear markets before they will be considered. Many Neuberger Berman partners have been in the business more than 25 years. Founder Roy Neuberger once quipped, “We don’t want anyone learning to shave on our clients’ faces!”

Origins

Company founder Roy Neuberger was born on July 21, 1903, in Bridgeport, Connecticut. He moved to New York City to be raised by a sister after he became an orphan at age 12. Neuberger’s passion for art was in evidence by the time he was studying journalism at New York University. After taking a few art classes, he then worked in interior decorating at a department store.

Neuberger traveled to Paris in 1925 to continue his art education at the Sorbonne. While there, he became enthralled by the works of Vincent van Gogh. Touched by van Gogh’s struggle with poverty and obscurity, Neuberger resolved to support living artists by collecting their works.

First, he had to make his fortune. He returned to New York and became a stockbroker at Halle & Stieglitz in 1929. It was probably not the best time to set out on Wall Street, but Neuberger’s decision to short Radio Corporation of America stock before the crash earned him a reputation for uncannily good instincts.

Neuberger formed Neuberger & Berman in 1939 with partners Robert Berman and Howard Lipman. The firm’s first specialty would be its most enduring, and most profitable: managing money for “high net-worth individuals.”

Early No-Load Fund in 1950

Neuberger & Berman also launched one of the first no-load mutual funds, the Guardian Mutual Fund, in 1950. Roy Neuberger personally managed Guardian until 1978.

Roy Neuberger turned over daily management of the firm to a six-person executive committee in 1968. He would continue working at the firm for decades, however. Roy Neuberger was also a fitness enthusiast, swimming and taking long walks into his 90s.

He also remained active in his patronage of the arts. The Neuberger Museum of Art opened at the Purchase campus of the State University of New York in 1974. Its collection was based on 500 sculptures and paintings from leading contemporary artists donated by Roy Neuberger. Neuberger and his wife, Marie, would give away hundreds more art works to more than 60 other museums and universities.

Buying Manhattan Fund in 1979

Neuberger & Berman—then called the Neuberger & Berman Management Company—acquired Manhattan Fund Inc. from CNA Financial Corporation in 1979. The Manhattan Fund, formed in the bull market of the mid-1960s, was able to replicate a measure of its early success under new ownership.

Neuberger & Berman was managing about $11 billion in assets in the mid-1980s. This more than doubled within a few years. The firm managed more than $24 billion in the early 1990s. It had about 600 employees and 49 partners. Plans for expansion consumed much of the rest of the decade.

A short-lived joint venture was formed with Banque Nationale de Paris in 1992. It ended four years later. Neuberger & Berman underwent an abortive, six-month search for a buyer in 1995. Most of the suitors were European banks, reported Institutional Investor, and Neuberger Berman’s partners felt that the difference in cultures was insurmountable.

Late 1990s IPO

By the late 1990s, Neuberger & Berman had grown to 59 partners managing $56 billion in assets. When the firm began openly contemplating a stock offering in early 1998, the market for money management firms was hot, reported the Wall Street Journal. Neuberger Berman was one of the largest, and was looking to float 15 percent of its shares to raise $250 million to acquire other money management companies.

The 48-year-old Guardian Fund had grown to $9 billion in assets, and the Partners Fund was worth $7 billion. Neuberger Berman also had created a Genesis Fund, then valued at $2.5 billion, to invest in small companies. The company traditionally focused on value stocks, rather than growth stocks. It reoriented the venerable Manhattan Fund toward growth in 1997, however, and the next year launched another growth portfolio, the Millennium Fund. By 1999, the company also had one international fund and three bond portfolios in addition to its five value-oriented funds.

While 1998 was a great year for such tech stocks as Dell and Yahoo!, it was one of the worst for value-oriented investors, who saw miniscule gains. They had been slipping behind growth-oriented counterparts since the mid-1990s.

Neuberger & Berman canceled its initial public offering (IPO) plans in October 1998, citing the volatile stock market. The offering did go through a year later, in October 1999. Fifteen percent of its shares was offered, priced at $32 a share. Within a month the firm had announced a stock buyback plan due to a slide in its share price.

By this time, the company had dropped the ampersand from its name, becoming Neuberger Berman Inc. Neuberger Berman had a new chief executive, Wall Street veteran Jeffrey B. Lane. He had been brought in before the IPO from Travelers Group Inc. Lane would include real estate investment trusts (REITs) and bonds in the firm’s repertoire; both areas would perform well as investors’ affinity for stocks waned following the collapse of the tech bubble in the late 1990s.

New Funds for the New Millennium

High-flying Chicago fund manager Michael Fasciano sold his company to Neuberger Berman in October 2000, during a period of industry consolidation. He had started his one fund in 1987 with $1 million; a dozen years later, it peaked at assets of $420 million—too much for Fasciano to successfully invest on his own. The next month, Neuberger Berman bought Delta Capital’s private asset management business, and in the first quarter of 2000 added Executive Money Management (EMM), a New York firm specializing in managing money for high net worth individuals, or those with more than $500,000 to invest. Neuberger Berman also set up a unit to cater to individually managed funds for professional athletes.

After receiving a national trust bank charter in early 2001, Neuberger Berman opened Neuberger Berman National Trust Co. in Seattle and a Los Angeles office soon after. The firm had had state charters in Delaware, Florida, and New York since the mid-1990s. The trust banks allowed Neuberger Berman to offer a much more comprehensive and intimate array of wealth management services.

In 2001, Neuberger Berman was rolling out its “Women Partnership” program aimed at high-net-worth businesswomen. The company had been showing impressive results with its Socially Responsive Fund, started in 1994. This fund evaluated companies on such factors as diversity in employment, and avoided connections to alcohol, tobacco, firearms, gambling, and nuclear power. Neuberger Berman’s socially responsible fund focused on larger stocks than most of its peers, companies with a market capitalization of $1 billion or more.

Neuberger Berman replaced its Boston office with growth stock-oriented investment managers hired from Chicago’s Northern Trust Corp. in December 2002. The Boston talent had fared poorly in the bear market of the previous three years. The Manhattan, Millennium, and Century Funds were affected; the three had combined assets of $352 million.

Company Perspectives

INVESTMENT EXPERTISE AND OUTSTANDING SERVICE. Neuberger Berman \s mission is to provide our clients with the highest caliber investment expertise, supported by outstanding personal service. This has been our philosophy since our founding, and it is the primary reason behind our reputation for integrity and excellence.

We have built a special reputation within the securities industry, not only for our long-term excellent investment performance, but also for our high ethical standards in our dealings with clients, competitors, and with each other. We believe the following are the essential principles that have helped create that reputation, and that should always be remembered as we continue to grow and evolve.

Neuberger Berman developed a marketing relationship with Merrill Lynch & Co. in 2002. It also had A.G. Edwards & Sons Inc. take two of its closed-end REIT funds to public offerings. Neuberger Berman had operating revenues of $650.8 million in 2002.

Lehman Brothers was in talks to acquire Neuberger Berman in the middle of 2003. The purchase price was estimated at $3 billion. Asset management was one of the most stable businesses in the financial services industry, and Lehman had lacked such a unit since it was spun off from American Express in 1994.

Principal Subsidiaries

Executive Money Management; Neuberger Berman National Trust Co.; Neuberger Berman LLC.

Principal Divisions

Private Asset Management; Neuberger Berman Trust Companies; Executive Money Management; Neuberger Berman Mutual Funds; Advisory Services; Institutional Separate Accounts; Broker Advised Products; Professional Investor Clearing Service; Research Sales.

Principal Operating Units

Wealth Management Services; Mutual Funds and Institutional; Professional Securities Services.

Principal Competitors

BlackRock Inc.; FMR Corporation; M.J. Whitman LLC; Old Mutual (US) Holdings, Inc.; Tweedy, Browne Company LLC; U.S. Trust Corporation.

Key Dates

1939:

Neuberger & Berman is formed.

1950:

Early no-load Guardian Mutual Fund is launched.

1979:

Manhattan Fund is acquired.

1999:

Neuberger Berman floats 15 percent of the firm in an initial public offering.

2000:

Fasciano Fund, Delta Capital unit, and Executive Money Management are acquired.

2001:

Neuberger Berman receives a national trust bank charter.

Further Reading

Ackermann, Matt, “Northern Guarding Clients As Neuberger Hires Team,” American Banker, December 19, 2002, p. 10.

Anderson, Amy L., “Neuberger Berman Buying N.Y. Company,” American Banker, December 28, 2000, p. 10.

Atlas, Riva, “Neuberger’s Old-Fashioned Dilemma,” Institutional Investor, December 1998, p. 163.

Bergen, Kathy, “Fasciano to Sell Fund Company to Neuberger Berman,” Chicago Tribune, October 18, 2000.

Bianco, Anthony, “At Neuberger & Berman the Status Quo Is Quite Enough,” Business Week, October 6, 1986, p. 77.

_____, “When the Dow Took a Dive, Roy Neuberger Didn’t Even Blink,” Business Week, October 6, 1986, p. 76.

Birger, Jon, “Tough Market Awaits Two Money Managers: Neuberger, BlackRock Eye IPOs,” Crain’s New York Business, September 20, 1999, p. 3.

_____, “Value Funds Struggling to Keep Low-Ratio Faith: Humiliating Returns Prompt Neuberger to Start Diversifying; Purists See Heresy,” Crain’s New York Business, February 15, 1999, p. 17.

Boroson, Warren, “Boring Can Be Beautiful,” Record (Bergen County, N.J.), August 7, 1996, p. Bl.

Braga, Michael, “Neuberger Flexing Trust Power,” Miami Daily Business Review, June 1, 1999, p. A2.

Brewster, Deborah, “Second Passion of a Wall Street Veteran,” Financial Times (London), January 3, 2003, p. 15.

Brown, Ken, “Neuberger Berman Is Acquiring Fasciano,” Wall Street Journal, October 17, 2000, p. C26.

Chu, Kathy, “Socially Responsible Fund Excels—Neuberger Berman Offering Tops Market with Returns As It Eschews Some Stocks,” Wall Street Journal, May 15, 2003, p. D7.

Francis, David R., “One Fund’s Formula: Put Stock in Women-Run Firms,” Christian Science Monitor, February 10, 2003, p. 15.

Fredrickson, Tom, “Analyzing the Situation; Investment Chief Will Work to Hone Research Reputation at Neuberger,” Crain’s New York Business, February 10, 2003, p. 25.

Gabriel, Frederick P., Jr., “Neuberger Itching to Score with Top Athletes; Kicks Off Special Unit to Manage Pros’ Bucks,” Investment News, March 6, 2000, p. 10.

Gewirtz, Lisa, and Josh Karlen, “Neuberger Too Pricey for Lehman,” Daily Deal, June 27, 2003.

Gould, Carole, “Neuberger Berman Focus Fund,” New York Times, May 14, 2000.

Healy, Beth, “Neuberger Fires Boston Fund Group; Chicago Team Replaces 3 Investment Managers,” Boston Globe, December 18,2002, p. C1.

Lenzner, Robert, “The Trials of a Whistle-Blower,” Boston Globe, July 22, 1990, p. 59.

Lim, Paul J., “Neuberger & Berman Planning an IPO … Now,” Los Angeles Times, August 20, 1998, p. 4.

Loftus, Peter, “Neuberger Team Purges 3 Portfolios,” Wall Street Journal, April 17, 2003, p. D7.

Lucchetti, Aaron, “IPO, New CEO May Make for Awkward Mix,” Wall Street Journal, August 30, 1998, p. C1.

_____, “Neuberger Sets Share Buyback Soon After IPO,” Wall Street Journal, November 3, 1999, p. C20.

McBride, Caryn A., “Money Can Buy Happiness—Just Ask Roy Neuberger,” Westchester County Business Journal, May 10, 1993, p. 6.

McGough, Robert, “Neuberger, After Half Century, Considers IPO,” Wall Street Journal, April 22, 1998, p. C1.

_____, “Neuberger & Berman Cancels IPO Plan,” Wall Street Journal, October 7, 1998, p. C23.

Marcial, Gene G., “How a Go-Go Fund Is Coming Back from the Dumps,” Business Week, October 3, 1983, p. 120.

Metz, Robert, “Fund Frenzy of Yesteryear,” New York Times, August 18, 1980, p. D4.

“Neuberger Revives Stalled IPO Plans; Partners to Vote,” Wall Street Journal, July 26, 1999, p. 19.

Neuberger, Roy R., and Alfred and Roma Connable, Eighty Years in the World of Art: The Passionate Collector, New York: John Wiley & Sons, 2002.

“Neuberger to Roll Out Women’s Site,” Fund Marketing Alert, June 4, 2001, p. 2.

O’Brian, Bridget, “Neuberger’s Stock Rises, Defying a Trend,” Wall Street Journal, November 28, 2000, p. C29.

Oppel, Richard A., Jr., “Neuberger & Berman Is Ready to Go Public, But at What Price?,” New York Times, October 5, 1999, p. 15.

Polyak, liana, “It’s Now or Never for Neuberger: Money Manager’s IPO Won’t Wait,” Investment News, September 20, 1999, p. 1.

Rasmussen, Eric, “Neuberger & Berman Rolls Out IPO Carpet,” Investment Management Weekly, August 24, 1998.

Ring, Niamh, “Neuberger Berman Receives National Trust Charter,” American Banker, January 10, 2001, p. 3.

Robaton, Anna, “IPO a No-Go, It Needs a Cash Source: Neuberger May Plan Its Own (on the) Block Party,” Investment News, November 16, 1998, p. 3.

_____, “Neuberger Retools After IPO Is Nixed: Will Mutual Fund Company Have to Sell?,” Crain’s New York Business, November 23, 1998, p. 14.

Sidel, Robin, and Susanne Craig, “Lehman Talks with Neuberger About a Deal,” Wall Street Journal, June 26, 2003, p. C1.

Southall, Brooke, “Firm Rebuilding Itself As Mutual Fund Powerhouse; Makeover Renews Neuberger,” Investment News, June 9, 2003, p. 3.

_____, “Neuberger Is on Its Feet and Walking a New Line; Revamped Leadership, Portfolio Managers Execute Turnaround Through Mutual Funds,” Crain’s New York Business, June 16, 2003, p. 17.

Steiger, Heidi L., ed., Wealthy & Wise (Secrets About Money), New York: John Wiley & Sons, 2002.

Ward, Sandra, “The Return of Value,” Barron s, August 7, 2000, pp. 28–32.

Wells, David, “Lehman in Talks to Buy Neuberger Berman,” Financial Times (London), June 26, 2003, p. 1.

—Frederick C. Ingram