Neuberger Berman Group LLC is the latest firm to join the increasingly competitive multialternatives category. Multialternatives mutual funds, which combine several alternatives strategies in a single fund, has been the most popular alternatives category for new fund launches over the past four years. Since 2008, 58 new multialternative funds have launched, according to Morningstar Inc. The long/short equity category had the second most launches with 46.
The
Neuberger Berman Absolute Return Multi-Manager Fund Ticker:(NABAX) allocates its assets among eight different alternatives managers, ranging from global long/short equity to merger arbitrage to event-driven. The
portfolio management team will handle allocating among the various subadvisers and swapping out the managers as they see fit.
“The idea is to find the best-in-breed
hedge fund managers,” said David Kupperman, managing director of alternatives.
The fund hires
hedge fund managers to run
separately managed accounts, rather than purchasing shares directly in their hedge funds. Thus, there aren't any incentive fees being passed onto shareholders,
as is the case with some managed futures funds.
The fund is intended to appeal to investors fed up with volatility in the stock market, and the low yields and interest rate risk of fixed-income investments, Mr. Kupperman said. “It's a solution that fits in between,” he said.
The managers also will have the ability to transfer among various strategies. Today, for example, the fund includes a long/short health care strategy run by Turner Investments. Mr. Kupperman said the team sees an opportunity in health care right now, but that could change down the road. If so, a different sector or strategy altogether could be swapped in.
While alternatives have been a hot category for investors since 2008, a recent Morningstar/Barron's survey of financial advisers found that enthusiasm for the funds was dampening. Alternatives funds had $23 billion of inflows last year, down $1.8 billion from the year prior. Additionally, 65% of the advisers surveyed said alternatives are more important or as important as traditional investments, down slightly from 2010.
The biggest hurdle advisers see to using alternatives, according to the survey, is the high fees. The Neuberger fund has an expense ratio of 2.82%, while the category's average is 2.32%, according to Morningstar. For his part, Mr. Kupperman said it's important for investors to pay attention to net returns.
