Thematic Equities –Why? How? When? · Source (1) American Pet Products Association's 2017-2018...
Transcript of Thematic Equities –Why? How? When? · Source (1) American Pet Products Association's 2017-2018...
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Thematic Equities – Why? How? When?Punta del Este – March 2020
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Agenda
Current Themes & Holdings
WHY? Potential Benefits of Thematic Investing
HOW? What to Focus on When Incorporating Thematic Investing
OK But WHEN?
Current Themes & Holdings
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Themes Are Supported By Global Secular Trends
Themes provide visibility and predictability in an uncertain world
Source: (1) United Nations: World Population Prospects 2019, (2) Institutional Investor; (3) eMarketer 2019; (4) Ericsson Mobility Report, 2019. (*) Developed Markets include USA, Canada, Europe and Japan.This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman. 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.
Ageing Population, Peak Child & Labour Supply 1
2.8 3.2 3.4
2.23.9
4.80.3
0.7
1.6
1990 2020 E 2050 E
Elderly to grow by ~150% by 2050 65+ yrs
25-64 yrs
<25 yrs
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$2.4
$3.5
$4.9
$6.5
2017 2019 E 2021 E 2023 E
Themes Are Supported By Global Secular Trends
Themes provide visibility and predictability in an uncertain world
Source: (1) United Nations: World Population Prospects 2019, (2) Institutional Investor; (3) eMarketer 2019; (4) Ericsson Mobility Report, 2019. (*) Developed Markets include USA, Canada, Europe and Japan.This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice.
Ageing Population, Peak Child & Labour Supply 1 Global Online Retail Sales ($T) 3
Online 22% of total by 2023E, up from 10% in 2017
2.8 3.2 3.4
2.23.9
4.80.3
0.7
1.6
1990 2020 E 2050 E
Elderly to grow by ~150% by 2050 65+ yrs
25-64 yrs
<25 yrs
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$2.4
$3.5
$4.9
$6.5
2017 2019 E 2021 E 2023 E
Themes Are Supported By Global Secular Trends
Themes provide visibility and predictability in an uncertain world
Source: (1) United Nations: World Population Prospects 2019, (2) Institutional Investor; (3) eMarketer 2019; (4) Ericsson Mobility Report, 2019. (*) Developed Markets include USA, Canada, Europe and Japan.This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice.
Ageing Population, Peak Child & Labour Supply 1 Global Online Retail Sales ($T) 3
Global Infrastructure Private Equity Commitments ($B) 2
$175
$419
2012-15 2016-19E
Online 22% of total by 2023E, up from 10% in 2017
~60% for renewablesin ‘18, up from ~45% in ‘16
2.8 3.2 3.4
2.23.9
4.80.3
0.7
1.6
1990 2020 E 2050 E
Elderly to grow by ~150% by 2050 65+ yrs
25-64 yrs
<25 yrs
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$2.4
$3.5
$4.9
$6.5
2017 2019 E 2021 E 2023 E
Themes Are Supported By Global Secular Trends
Themes provide visibility and predictability in an uncertain world
Source: (1) United Nations: World Population Prospects 2019, (2) Institutional Investor; (3) eMarketer 2019; (4) Ericsson Mobility Report, 2019. (*) Developed Markets include USA, Canada, Europe and Japan.This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice.
Ageing Population, Peak Child & Labour Supply 1 Global Online Retail Sales ($T) 3
Global Infrastructure Private Equity Commitments ($B) 2 Global IoT Connections (in billions) 4
8
22
2018 2024 E
$175
$419
2012-15 2016-19E
Online 22% of total by 2023E, up from 10% in 2017
~60% for renewablesin ‘18, up from ~45% in ‘16
2.8 3.2 3.4
2.23.9
4.80.3
0.7
1.6
1990 2020 E 2050 E
Elderly to grow by ~150% by 2050
Almost 3x growth over next 6 years
65+ yrs
25-64 yrs
<25 yrs
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Current Themes Overview
Themes position investors in the way of secular shifts, enhancing visibility, predictability and focus
Source: Neuberger Berman. For illustrative purposes only. This is provided for informational purposes only and nothing herein constitutes investment advice, or a recommendation to buy, sell or hold any securities.
EVOLVING GLOBAL CONSUMER
SMART SYSTEMS
PERSONALIZATIONOF MEDIA
EXPEDIAALIBABA
DELTA AIRLINES
ALPHABETNICE
WESTERN DIGITALNORTONLIFELOCK
CRITEO
AMDOCSCORNING
GTT COMMUNICATIONS
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Current Themes Overview
Themes position investors in the way of secular shifts, enhancing visibility, predictability and focus
Source: Neuberger Berman. For illustrative purposes only. This is provided for informational purposes only and nothing herein constitutes investment advice, or a recommendation to buy, sell or hold any securities.
ENERGY INFRASTRUCTURE
RISING VALUE OFWATER
ENERGY EFFICIENCY
TE CONNECTIVITYALLEGHENY TECH
TETRA TECHQUANTA SERVICES
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Current Themes Overview
Themes position investors in the way of secular shifts, enhancing visibility, predictability and focus
Source: Neuberger Berman. For illustrative purposes only. This is provided for informational purposes only and nothing herein constitutes investment advice, or a recommendation to buy, sell or hold any securities.
HEALTH ANDWELL-BEING
HUMANIZATION OF PETS EDUCATION
INOVALONAON
STERICYCLEPERRIGO
PROVIDENCECHARLES RIVER LABS
PETS AT HOME SCHOLASTIC
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2015 20192015 20192015 2019
Alibaba (BABA) – Evolving Global Consumer
China – $400B+ Market Cap
Source: (1) eMarketer (2) Company Filings, Factset (3) Factset. For discussion and illustrative purposes only. As of December 31, 2019. This is provided for informational purposes only and nothing herein constitutes investment advice, or a recommendation to buy, sell or hold any securities. These examples may not necessarily be indicative of a product holdings at any time. Past performance is not a reliable indicator of future returns.
Stock Price Evolution 3
Chinese Online Retail Sales ($T) 1
Fast Growing & Profitable Tech Giant 2
824M
393M
Monthly Active Users$50
$90
$130
$170
$210
Began Investing in 10/18 during trade tensions &
Jack Ma departure
$56B
$12B
Revenue Free Cash Flow
$6B
$15B
$0.5$1.1
$2.4
$4.1
2014 2017 2020E 2023E
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$20
$55
$90
$125
$160
NICE Systems (NICE) – Smart Systems
Israel – $9B+ Market Cap
Source: (1) Company filings, Factset (2) Factset. For discussion and illustrative purposes only. As of December 31, 2019. This is provided for informational purposes only and nothing herein constitutes investment advice, or a recommendation to buy, sell or hold any securities. These examples may not necessarily be indicative of a product holdings at any time. Past performance is not a reliable indicator of future returns
Began investing in 2H12 with data analytics more prevalent
NICE grew FCF 3x since 2012/13
Fast Growing End-Markets ($B) 1
$7
$12
$2
$9
2018 2025E 2018 2025ECustomer Engagement Financial Crime & Compliance
2014 2016 2018
68%
32%
92%96%
Leading Transition to Cloud ($M) 1
$872 Non-Cloud
Cloud
Stock Price Evolution 2
$1,016
$1,445
WHY? Potential Benefits of Thematic Investing
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Forward Looking Investing
Most of today’s largest companies were not so ten years ago; earnings power can change rapidly
Source: Bloomberg.
World’s Largest Companies by Market Cap ($B)
$724
$512
$375
$354
$339
$333
$329
$264
$252
$250
Petrochina
Exxon Mobil
GE
China Mobile
ICBC
Microsoft
Gazprom
Shell
AT&T
Sinopec
$861
$729
$660
$564
$515
$494
$489
$442
$375
$371
Apple
Alphabet
Microsoft
Amazon.com
Tencent
Berk Hathaway
Alibaba
J&J
JPM Chase
2007 2017
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More Flexible Approach to Equities
Thematic investing is a more flexible approach to equity investing
This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman. All information is current as of the date of this material and is subject to change without notice.
PROMOTESDIVERSIFICATION
INTUITIVE
ALIGNS WITHCONVICTIONS
TRASCENDSCYCLES
SEEKS ALPHA THRUINNOVATION
REGIONS
SE
CTO
RS
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Thru-Cycle Investing: TE Connectivity (TEL) & Global Auto Production Slowdown
Themes help identify secular trends in cyclical industries, thereby insulating investors from potential downturns
Source: Company filings. Company earnings calls. Goldman Sachs February 2020 conference. As of February 24, 2020.
6 9
81 75
FY 2019 FY 2020 E
Hybrids/EVs Production Growth (M)
‘Traditional’
Hybrids/EVs
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Thru-Cycle Investing: TE Connectivity (TEL) & Global Auto Production Slowdown
Themes help identify secular trends in cyclical industries, thereby insulating investors from potential downturns
Source: Company filings. Company earnings calls. Goldman Sachs February 2020 conference. As of February 24, 2020.
$65
$90
$120
Feb 2020 Hybrids EVs
Content per Vehicle Type (Est.)
6 9
81 75
FY 2019 FY 2020 E
Hybrids/EVs Production Growth (M)
‘Traditional’
Hybrids/EVs
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Thru-Cycle Investing: TE Connectivity (TEL) & Global Auto Production Slowdown
Themes help identify secular trends in cyclical industries, thereby insulating investors from potential downturns
Source: Company filings. Company earnings calls. Goldman Sachs February 2020 conference. As of February 24, 2020.
8%
-3%
1%
-6%
2018 2019
TEL Outpacing Auto Production
TEL Automotive Revenue Growth
$65
$90
$120
Feb 2020 Hybrids EVs
Content per Vehicle Type (Est.)
6 9
81 75
FY 2019 FY 2020 E
Hybrids/EVs Production Growth (M)
‘Traditional’
Hybrids/EVs
Global Auto Production Growth
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Promotes Patience: Petsmart & The Financial Crisis
A thematic foundation promotes patience in challenging market environments
-18%-22%
45%49%
5%
-37%
26%
15%
2007 2008 2009 2010
Petsmart Stock Performance vs S&P500 – 2007-2010 2
Source (1) American Pet Products Association's 2017-2018 National Pet Owners Survey; (2) FactSet; (3) Petsmart company filings.This material has been prepared by Neuberger Berman on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. Neuberger Berman has not sought to independently verify information taken from public and third party sources and does not make any representation or warranty as to the accuracy, completeness or reliability of the information contained herein. Indices are unmanaged, and, unless otherwise stated, the performance for the index shown includes reinvestment of all dividends and capital gains distributions and does not reflect any fees or expenses. Investors cannot invest directly in an index. Past performance is not indicative of future results, which may vary. This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman. Of course, all accounts are managed based upon each client’s needs and objectives.
Petsmart
S&P500
PETS -36% (S&P500 -34%)
PETS +38% (S&P500 -4%)
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Promotes Patience: Petsmart & The Financial Crisis
A thematic foundation promotes patience in challenging market environments
$5.1 $5.6 $5.9 $6.3
2007 2008 2009 2010
Petsmart Sales ($B) 3
$36 $39 $41 $43 $46 $48 $51
2005 2006 2007 2008 2009 2010 2011
US Pet Industry Expenditures ($B) 1
Source (1) American Pet Products Association's 2017-2018 National Pet Owners Survey; (2) FactSet; (3) Petsmart company filings.This material has been prepared by Neuberger Berman on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. Neuberger Berman has not sought to independently verify information taken from public and third party sources and does not make any representation or warranty as to the accuracy, completeness or reliability of the information contained herein. Indices are unmanaged, and, unless otherwise stated, the performance for the index shown includes reinvestment of all dividends and capital gains distributions and does not reflect any fees or expenses. Investors cannot invest directly in an index. Past performance is not indicative of future results, which may vary. This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman. Of course, all accounts are managed based upon each client’s needs and objectives.
-18%-22%
45%49%
5%
-37%
26%
15%
2007 2008 2009 2010
Petsmart Stock Performance vs S&P500 – 2007-2010 2
Petsmart
S&P500
PETS -36% (S&P500 -34%)
PETS +38% (S&P500 -4%)
HOW? What to Focus on When Incorporating Thematic Investing
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Different Approaches to Thematic Investing
GTE uses multiple themes to reduce risk in equity investing
This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman.
SINGLE THEMES MULTI – THEMATIC
Fast Growth / Higher Returns GOAL Risk Managed?
Narrower / Restricted UNIVERSE Broader / Flexible
Challenging PURITY Easier?
Beta of Theme SELECTIVITY More Selective? Disciplined?
Higher? VOLATILITY Equity-like
Potentially Significant COMPLEMENTARITY Less Overlap?
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Valuation Discipline: Thematic Funds Can ‘Stretch’ on Valuation
Many thematic funds seem less disciplined on valuations and more focused on fast growing businesses
33x 33x31x 31x 31x
28x 28x 27x25x
23x 23x20x 19x
Fund A Fund B Fund C Fund D Fund E Fund F Fund G Fund H Fund I Fund J S&P500 MSCIWorld
MSCIACWI
Last 12-Month P/E Ratios for Multi-Thematic Funds Selection *
(*) Multi-Thematic Funds Selection represents 10 multi-thematic funds based on AUM, flows, and investor exposure.Source: Morningstar, Facstet. As of January 31, 2020 (latest information available). Funds Selection P/E ratios by Morningstar. This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman.
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Valuation Discipline: The Microsoft Lesson
$0
$1
$2
$3
$4
$5
$6
$7
0x
10x
20x
30x
40x
50x
60x
70x
80x
99 01 03 05 07 09 11 13 15 17 19
EPS Forward P/E Ratio
Microsoft Earnings & P/E Evolution
Source: FactSet; December 2019.This material has been prepared by Neuberger Berman on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. Neuberger Berman has not sought to independently verify information taken from public and third party sources and does not make any representation or warranty as to the accuracy, completeness or reliability of the information contained herein. For discussion and illustrative purposes only. This should not be deemed as a recommendation to buy or sell any securities.
Even some of the best performing businesses can result in poor investments if entry valuation is excessive
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Valuation Discipline: The Microsoft Lesson
Source: FactSet; December 2019.This material has been prepared by Neuberger Berman on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. Neuberger Berman has not sought to independently verify information taken from public and third party sources and does not make any representation or warranty as to the accuracy, completeness or reliability of the information contained herein. For discussion and illustrative purposes only. This should not be deemed as a recommendation to buy or sell any securities.
$0
$40
$80
$120
$160
Microsoft Stock Price Evolution
Even some of the best performing businesses can result in poor investments if entry valuation is excessive
MSFT FLAT FROM 2000 TO 2014
$0
$1
$2
$3
$4
$5
$6
$7
0x
10x
20x
30x
40x
50x
60x
70x
80x
99 01 03 05 07 09 11 13 15 17 19
EPS Forward P/E Ratio
Microsoft Earnings & P/E Evolution
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Theme Purity: ‘Stretching’ Into Less Exposed Businesses
Many thematic funds ‘stretch’ and invest in businesses that are less exposed to underlying themes
Source: Morningstar, Factset, Company filings, VEGN ETF website. As of January 31, 2020 (based on latest information available at the time).This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman.
Robotics Thru FAANG Danaher Held in Top Water Funds
NameAUM($B)
FAANG in Top 10
Robotics Fund A $5.9 GOOG
Robotics ETF 2.6 AAPL
Robotics Fund B 1.0AMZN APPL
GOOG
Robotics Fund C 0.1 GOOG
Other Businesses$17.5B
Water Related$2.4B
2018 Revenue$19.9B
Top 10 Holdings %
Microsoft 5.4
Apple 5.4
Facebook 3.6
Mastercard 3.2
Visa 3.1
Intel 3.0
United Health 3.0
Bank of America 2.8
Verizon 2.8
AT&T 2.6
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Theme Purity: ‘Stretching’ Into Less Exposed Businesses
Many thematic funds ‘stretch’ and invest in businesses that are less exposed to underlying themes
VEGN: US Vegan Climate ETF
Source: Morningstar, Factset, Company filings, VEGN ETF website. As of January 31, 2020 (based on latest information available at the time).This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman.
Robotics Thru FAANG Danaher Held in Top Water Funds
NameAUM($B)
FAANG in Top 10
Robotics Fund A $5.9 GOOG
Robotics ETF 2.6 AAPL
Robotics Fund B 1.0AMZN APPL
GOOG
Robotics Fund C 0.1 GOOG
Other Businesses$17.5B
Water Related$2.4B
2018 Revenue$19.9B
Top 10 Holdings %
Microsoft 5.4
Apple 5.4
Facebook 3.6
Mastercard 3.2
Visa 3.1
Intel 3.0
United Health 3.0
Bank of America 2.8
Verizon 2.8
AT&T 2.6
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Holdings Overlap: Thematic Exposure Can Be Repetitive
Many thematic funds overlap exposure to the most of the ‘usual suspects’ – FAANGs and other top index holdings
Source: Morningstar, fund manager websites. As of January 31, 2020 (based on latest information available at the time).(*) Thematic Funds Selection based on AUM, flows, and investor exposure. Red Bold denotes Top 20 MSCI World holding. Bold denotes overlapping holding.This material is intended as a broad overview of the Portfolio Managers’ style, philosophy and process and is subject to change without notice. Portfolio Managers’ views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman.
5 54
3 3
Microsoft Visa Ecolab Alibaba Amazon.com
Overlap Analysis – Most Overlapping Top 10 Holdings Across Multi-Thematic Funds Selection *
Top 10 Holdings for Multi-Thematic Selection * – Cross-Fund & Index Overlap
Fund A Fund B Fund C Fund D Fund E Fund F Fund G Fund H Fund I Fund JAlphabet Mastercard Alphabet Nevro Prologis Thermo Fisher Microsoft Ecolab Thermo Fisher West Japan Rail
Visa Visa Amazon.com Teladoc Health Kerry Group Splunk Philip Morris American Water Visa Nike
Alibaba Microsoft Microsoft Dexcom Mowi Asa Servicenow Reckitt Benckiser Visa Ecolab Conagra Brands
PayPal Apple ASML Holding ServiceNow Equinix Clean Harbors SAP Apollo Hospitals Autodesk Takeda Pharma
AstraZeneca Nestle Comcast Apple Vestas Wind Sys Halma Plc Visa Xylem Equinix Stericycle
Amazon.com Lululemon Alibaba Global Pmts Microsoft Nvidia Accenture Kingspan Group Waste Mgmt Amazon.com
Nike Sony Tencent Tron ASML Holding Ecolab ADP Philips NXP Semis Sage Group
Facebook Netflix Edwards LifeSc Nvidia Zebra Tech Trimble Baxter Intl MSCI Nestle Aon PLC
UnitedHealth Alibaba Adv Micro Dev Microsoft Mastercard Danaher Danaher Bio-Rad Labs Fidelity NIS Ecolab
Adobe Square Adobe Splunk Novo Nordisk Synopsys Becton Dickinson UnitedHealth Splunk PT Bnk Ctral Asia
OK But WHEN?
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Equity Valuations in Perspective
Equity valuations seem reasonable, especially considering FAANG+ relevance and record low inflation
Source: www.multpl.com website. Data as of Jan 2020. Past performance is not a reliable indicator of current or future results.
Implied P/E Ratio Comparison – S&P500 Index & 10-Yr US Treasury Bonds
0x
20x
40x
60x
80x
100x
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Implied P/E Ratio on 10-Yr US Treasury Bonds
S&P 500 Trailing P/E Ratio
Warren Buffett on Equity & Bond Valuations
“If somebody said to you, ‘I wanna sell you a stock that's at 50x earnings. The earnings can't go up for 30 years,’ you'd say that doesn't sound very good.”
CNBC, Feb 24 2020
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Equity Ownership At Reasonable Levels
Current global equity ownership among global investors appears within historical ranges
Global Equity Allocation Evolution
0%
10%
20%
30%
40%
50%
60%
1999 2004 2009 2014 2019
Note: Global Equity Allocation as % of Equities + Bonds +M2. Based on global non-bank investors.Source: JP Morgan research. Data as of January 2020. Past performance is not a reliable indicator of current or future results.
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Equity Investing Requires Patience
Source: JPMorgan, data as of December 31, 2019. For illustrative purposes only. Nothing herein constitutes a prediction or projection of future events or future market or economic behavior. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed or any historical results. Investing entails risks, including possible loss of principal. Past performance is not indicative of future results.
Patience to withstand large declines and volatile markets has typically rewarded investors
S&P500 Calendar Year Returns and Max Intra-Year Declines
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
Calendar Year Return
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Equity Investing Requires Patience
Source: JPMorgan, data as of December 31, 2019. For illustrative purposes only. Nothing herein constitutes a prediction or projection of future events or future market or economic behavior. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed or any historical results. Investing entails risks, including possible loss of principal. Past performance is not indicative of future results.
Patience to withstand large declines and volatile markets has typically rewarded investors
S&P500 Calendar Year Returns and Max Intra-Year Declines
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
Calendar Year Return Max Intrayear Decline
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Long Term Investors Rewarded (I): Growth of $1M Investment
1994 2007 2019
$1M Investment – Starting in 1995
$1M
$11.4M
$3.4M
$1M Investment – Starting in 2005 $1M Investment – Starting in 2015
2004 2012 2019
$1M
$3.6M
$1.6M
CAGR 3%
2014 2017 2019
$1M
$1.7M
$1.1M
S&P500
Barclays Global Agg
A $1 million investment in S&P500 yielded significantly more than bond investing over time
Source: Factset, data as of December 31, 2019. For illustrative purposes only. Nothing herein constitutes a prediction or projection of future events or future market or economic behavior. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed or any historical results. Investing entails risks, including possible loss of principal. Past performance is not indicative of future results.
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2004 2012 2019
Long Term Investors Rewarded (II): Growth of $100K Annual Contributions
Contributing $100K annually into S&P500 yielded significantly more than bond investing over time
1994 2007 2019
$100K Annually – Starting in 1995
$100K
$9.5M
$4.4M
$100K
$3.9M
$1.9M
2014 2017 2019
$100K
$0.8M
$0.6M
$100K Annually – Starting in 2005 $100K Annually – Starting in 2015
S&P500
Barclays Global Agg
Source: Factset, data as of December 31, 2019. For illustrative purposes only. Nothing herein constitutes a prediction or projection of future events or future market or economic behavior. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed or any historical results. Investing entails risks, including possible loss of principal. Past performance is not indicative of future results.
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Aug-87 Sep-95 Oct-03 Nov-11 Dec-19
Even “The Worst Market Timer Ever” Did Well (IF Remained Invested!)
Source: FactSet. As of Dec 31 2019. For illustrative purposes only.
Investing at the ‘market peaks’ in 1987, 2000 and 2007 still resulted in over 9% annualized returns on investment
Growth of Three $100K Investments at ‘Market Peaks’ (Aug 1987, Aug 2000, Oct 2007)
S&P500
Barclays US Agg
$100K on Aug31 1987
$2.6M
$1.1M$100K on
Aug 31 2000
$100K onOct 31 2007
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Risk Considerations
Market Risk: The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companiesand the market perception of the global economy.
Liquidity Risk: The risk that the Portfolio may be unable to sell an investment readily at its fair market value. In extreme market conditions this can affect the Portfolio’sability to meet redemption requests upon demand.
Emerging Markets Risk: Emerging markets are likely to bear higher risk due to a possible lack of adequate financial, legal, social, political and economic structures,protection and stability, as well as uncertain tax positions, which may lead to lower liquidity. The value of a portfolio may experience medium to high volatility due tolower liquidity and the availability of reliable information, as well as due to the strategy’s investment policies or portfolio management techniques.
Counterparty Risk: The risk that a counterparty will not fulfil its payment obligation for a trade, contract or other transaction on the due date.
Derivative Risk: The strategy is permitted to use certain types of financial derivative instruments (including certain complex instruments). This may increase thePortfolio’s leverage significantly which may cause large variations in the value of your share. Investors should note that the Strategy may achieve its investmentobjective by investing principally in Financial Derivative Instruments (FDI). Certain investment risks apply in relation to the use of FDI.
Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems, including those relating to the safekeeping ofassets or from external events.
Concentration Risk: The strategy’s investments may be concentrated in a small number of investments and its performance may therefore be more variable than theperformance of a more diversified Portfolio.
Currency Risk: Investors who subscribe in a currency other than the base currency of the Portfolio are exposed to currency risk. Fluctuations in exchange rates mayaffect the return on investment. The past performance shown is based on the share class to which this factsheet relates. If the currency of this share class is differentfrom your local currency, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your localcurrency.
Disclaimers and Disclosures
39For Professional Client Use Only
Index and Definitions
Performance Attribution shows the security and sector selection that contributed to the portfolio’s performance. It quantifies the impact of individual investment decisions and monitors performance
relative to a specific benchmark over a given period of time. It answers the questions of “How much of the return was achieved by over and under weighting sectors?” and “How much did security selection
within a sector contribute to relative performance?”
The Global Industry Classification Standard is used to derive the component economic sectors of the benchmark and the composite. The Global Industry Classification Standard (“GICS”)SM was
developed by and is the exclusive property of MSCI and Standard & Poor’s. “Global Industry Classification Standard (GICS),” “GICS” and “GICS Direct” are service marks of MSCI and Standard & Poor’s.
Allocation effect is the portion of portfolio excess return attributed to taking different group bets from the benchmark. (If either the portfolio or the benchmark has no position in a given group, allocation
effect is the only effect.) A group’s allocation effect equals the weight of the portfolio’s group minus the weight of the benchmark’s group times the total return of the benchmark group minus the total return of
the benchmark in aggregate.
Selection effect is the portion of portfolio excess return attributable to choosing different securities within groups from the benchmark. A group’s selection effect equals the weight of the benchmark’s group
multiplied by the total return of the portfolio’s group minus the total return of the benchmark’s group.
Interaction effect is the portion of the portfolio's excess return attributable to combining allocation decisions with relative performance. This effect measures the strength of the manager’s convictions. The
interaction effect is the weight differential times the return differential. A group’s interaction effect equals the weight of the portfolio’s group minus the weight of the benchmark’s group times the total return of
the portfolio’s group minus the total return of the benchmark’s group.
Total Effect is the sum of the Sector Allocation, Stock Selection, and Interaction Effects. This effect measures the opportunity cost of the manager's investment decisions in a portfolio group relative to the
overall benchmark.
Attribution figures are based on information provided by FactSet. Although we consider this source to be reliable, Neuberger Berman does not offer an opinion as to the accuracy of these
numbers. FactSet calculates attribution on a buy-and-hold basis using daily portfolios. Since daily transactions are not taken into consideration, total returns of the portfolio will be slightly off from the actual
total returns.
Standard Deviation is a statistical measure of portfolio risk. Standard Deviation is equal to the square root of the Variance. It reflects the average deviation of the observations from their sample mean. In the case of portfolio performance, the Standard Deviation describes the average deviation of the portfolio returns from the mean portfolio return over a certain period of time. Standard Deviation measures how wide this range of returns typically is. The wider the typical range of returns, the higher the Standard Deviation of returns, and the higher the portfolio risk.
Sharpe Ratio A measure of the risk-adjusted return of a portfolio. The ratio represents the return gained per unit of risk taken. The Sharpe ratio can be used to compare the performance of managers. Managers with the same excess return for a period but different levels of risk will have Sharpe ratios that reflect the difference in the level of risk. The performance of the manager with the lower Sharpe ratio would be interpreted as exhibiting comparatively more risk for the desired return compared to the other manager. If the two managers had the same level of risk but different levels of excess return, the manager with the higher Sharpe ratio would be preferable because the manager achieved a higher return with the same level of risk as the other manager. The Sharpe ratio is most helpful when comparing managers with both different returns and different levels of risk. In this case, the Sharpe ratio provides a per-unit measure of the two managers that enables a comparison. The ratio is equal to the excess return divided by the Standard Deviation of the portfolio.
Beta is a measure of the systematic risk of a security or portfolio. Beta measures the historical sensitivity of portfolio or security excess returns to movement in the excess return of the market index. The value for Beta is expressed as a percentage of the market where the market Beta is 1.0. A security or portfolio with a Beta above the market has volatility greater than the market. If the Beta of a security was 1.3, a 1% increase in the market return resulted, on average, in a 1.3% increase in the security’s return. A security or portfolio with Beta below the market has lower volatility than the market and the return on the security will move less than the market return. If the Beta of the security was 0.9, a 1% decrease in the market resulted in only a 0.9% decrease in the security’s return.
40For Professional Client Use Only
Index and Definitions
Alpha represents the historical return from an asset, based on factors unrelated to the underlying factors affecting the market. As such, Alpha is a measure of the return for asset specific (or residual) risk. Alpha is used as measure of a manager’s contribution to performance due to security or sector selection. A positive (negative) Alpha indicates that a portfolio was positively (negatively) rewarded for the residual risk taken for a given level of market exposure. If the market excess return is 2% and the portfolio Beta is 1.1, then the manager would have to have an excess return greater than 2.2% for the manager to have contributed to the performance above and beyond the performance of the market.
Tracking Error is simply the standard deviation of a portfolio's relative returns (relative to some benchmark). Whereas the standard risk measure of standard deviation measures the absolute return volatility, tracking error measures the volatility of the return differences between the portfolio and the benchmark over time. A portfolio that is actively managed in an aggressive manner would have a large amount of tracking error versus its index, whereas a portfolio that is more constrained to look like its index (an index fund being the extreme) would have smaller amounts of tracking error.
Downside Market Capture is a measure of the manager’s performance in down markets relative to the market itself. A value of 90 suggests the manager’s loss is only nine tenths of the market’s loss. During the selected time period (for example: 3 years), the return for the market for each period is considered a down market period if it is less than zero. The returns for the manager and the market for all down periods are calculated. The Downside Market Capture Ratio is calculated by dividing the return of the manager during the down periods by the return of the market during the same periods.
Upside Market Capture is a measure of the manager’s performance in up markets relative to the market itself. A value of 110 suggests the manager performs ten percent better than the market when the market is up. During the selected time period (for example: 3 years), the return for the market for each period is considered an up market period if it is greater than zero. The returns for the manager and the market for all up periods are calculated. The Upside Market Capture Ratio is calculated by dividing the return of the manager during the up market periods by the return of the market during the same periods.
Information Ratio is a ratio of portfolio returns above the returns of a benchmark -- usually an index -- to the volatility of those returns. The information ratio (IR) measures a portfolio manager's ability to generate excess returns relative to a benchmark but also attempts to identify the consistency of the investor.
The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of November 27, 2013, the MSCIWorld Index consists of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands,New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index (stock price times number of shares outstanding), witheach stock's weight in the Index proportionate to its market value. The "500" is one of the most widely used benchmarks of U.S. equity performance. As of September 16, 2005, S&P switched to a float-adjusted format, which weighs only those shares that are available to investors, not all of a company’s outstanding shares. The value of the index now reflects the value available in the public markets.Indices are unmanaged, and, unless otherwise stated, the performance for the index shown includes reinvestment of all dividends and capital gains distributions and does not reflect any fees or expenses.Investors cannot invest directly in an index.
41For Professional Client Use Only
Disclaimer
This document is is addressed to professional clients only.
United Kingdom: This document is a financial promotion and is issued by Neuberger Berman Europe Limited, which is authorised and regulated by the Financial Conduct Authority and is registered in
England and Wales, at Lansdowne House, 57 Berkeley Square, London, W1J 6ER.
European Economic Area (EEA): This is a marketing document and is issued by Neuberger Berman Asset Management Ireland Limited, which is regulated by the Central Bank Ireland and is registered in
Ireland, at MFD Secretaries Limited, 32 Molesworth Street, Dublin 2.
Switzerland: For qualified investors use only. This document is provided to you by Neuberger Berman Europe Limited.
Neuberger Berman Europe Limited is also a registered investment adviser with the Securities and Exchange Commission in the US, and the Dubai branch is regulated by the Dubai Financial Services
Authority in the Dubai International Financial Centre. Neuberger Berman Europe Limited is an authorised financial services provider with the South African Financial Sector Conduct Authority, FSP number
45020.
This document is presented solely for information purposes and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security.
We do not represent that this information, including any third party information, is complete and it should not be relied upon as such.
No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Each recipient of this document should make such investigations as it deems
necessary to arrive at an independent evaluation of any investment, and should consult its own legal counsel and financial, actuarial, accounting, regulatory and tax advisers to evaluate any such
investment.
It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable.
Any views or opinions expressed may not reflect those of the firm as a whole.
All information is current as of the date of this material and is subject to change without notice.
The product described in this document may only be offered for sale or sold in jurisdictions in which or to persons to which such an offer or sale is permitted. The product can only be promoted if such
promotion is made in compliance with the applicable jurisdictional rules and regulations.
Indices are unmanaged and not available for direct investment.
An investment in this product involves risks, with the potential for above average risk, and is only suitable for people who are in a position to take such risks.
Past performance is not a reliable indicator of current or future results. The value of investments may go down as well as up and investors may not get back any of the amount invested. The performance
data does not take account of the commissions and costs incurred on the issue and redemption of units.
The value of investments designated in another currency may rise and fall due to exchange rate fluctuations in respect of the relevant currencies. Adverse movements in currency exchange rates can result
in a decrease in return and a loss of capital.
Tax treatment depends on the individual circumstances of each investor and may be subject to change, investors are therefore recommended to seek independent tax advice.
Investment in this strategy should not constitute a substantial proportion of an investor’s portfolio and may not be appropriate for all investors. Diversification and asset class allocation do not guarantee
profit or protect against loss.
No part of this document may be reproduced in any manner without prior written permission of Neuberger Berman Europe Limited.
The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.
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