This week, Neuberger Berman, the private, independent, employee-owned multi-asset investment firm that manages $405 billion in client assets, announced the launch of a new closed-end fund that will make private equity investments available to a broader investor base, marking a major step toward “private equity for public investors.”
NB Crossroads Private Markets Access Fund LLC is a registered, continually offered closed-end fund that the firm says “democratizes the firm’s private equity offerings and increases access to these important portfolio solutions for individual investors.”
Per Neuberger, which has managed private market assets for more than 30 years and registered funds for more than 70 years, the debut of the fund couldn’t be timelier. Faced with an ever-shrinking universe of public companies in the U.S. over the past several years as new companies have stayed private for longer, most retail investors ave been prevented from participating directly in their growth potential (a phenomenon that some—notably NYSE President Stacey Cunningham—say worsen the already gaping U.S. wealth divide and erode capitalism itself).
Additionally, there are benefits to be had from private equity as a diversifier, in terms of enhanced return potential and offsetting risk characteristics compared to a traditional portfolio of public securities.
“We have spoken for a long time about the need to make private equity available to more investors,” said Tony Tutrone, Head of Neuberger Berman Alternatives. “While this asset class is already a large part of most public and private pensions, and therefore impacts the retirement portfolios of millions of employees and pensioners, this new Fund can be a direct way to gain exposure to an important driver of returns and risk differentiation.
“This Fund is designed to help a massive group of qualified ‘Main Street’ investors gain access to private markets more directly.”
NB Crossroads Private Markets Access Fund launched with $208 million in initial capital, including $34 million from Neuberger Berman employees. It will be available to investors with a minimum investment of $50,000 and lower eligibility requirements than most private equity funds, while still providing access to institutional-quality private equity investments, including direct equity investments in private companies and secondary investments in private equity funds.
Structurally, the Fund features just a single capital call (unlike traditional private equity, which may require multiple calls over a multi-year period), simple tax reporting (via a Form 1099), transparent reporting and fee structure, and a monthly fund subscription with limited quarterly liquidity via tender offers.
The Fund will be available through financial advisors, who will play a key role in educating investors and properly allocating private markets assets within a balanced portfolio. NB Crossroads Private Markets Access Fund is a closed-end fund registered under both the Investment Company Act of 1940 and the Securities Act of 1933.
“Wealth advisors play a key role in helping their clients prepare for the financial realities of important life events. Accessing private markets can help advisors and their investors create a complete and optimal portfolio to address these realities,” said Scott Kilgallen, Neuberger’s Head of North American Intermediary Client Coverage. “This Fund, designed for broad access and with lower investment minimums, allows individual investors to access an asset class previously reserved for pensions and other large institutional investors.”
Meanwhile, in the truly private markets
Last week, Neuberger announced the successful close of its fourth NB Strategic Co-Investment Partners fund (Fund IV), exceeding its target with $2.1 billion of capital commitments.
Fund IV will seek to build a diversified portfolio of direct co-investments in buyout and growth equity transactions alongside high quality private equity sponsors. Since its inception in 2005, Neuberger’s co-investment strategy has deployed over $11.5 billion into direct co-investment transactions. The firm currently manages over $90 billion of committed capital just to private equity.
According to Neuberger, Fund IV is backed by a global investor base that includes public and corporate pension plans, insurance companies and other financial institutions, endowments, foundations and family offices. Investors are represented across a broad geographic range including North America, Europe, Latin America, Asia and the Middle East.