If a fee of 1% of assets under management were charged and deducted from the returns, the resulting compounded annual return would be reduced to 8.91%. For example, assume Neuberger Berman achieves a 10% annual return prior to the deduction of fees each year for a period of 10 years. The deduction of fees has a compounding effect on performance results. A client’s return will be reduced by the advisory fees and any other expenses it may incur in the management of its account. Advisory fees are described in Part 2 of NB BH’s Form ADV. If such fees and expenses were reflected, returns referenced would be lower. The hypothetical performance figures are shown gross of fees, which do not reflect the deduction of investment advisory fees and other expenses. Unless otherwise indicated, results shown reflect reinvestment of any dividends and distributions. Neuberger Berman managed accounts in the manner reflected in the models during a portion of the backtested time periods shown. There can be no assurance that Neuberger Berman will achieve profits or avoid incurring substantial losses. Other periods selected may have different results, including losses.
Hypothetical backtested performance also is developed with the benefit of hindsight. Since trades have not actually been executed, results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity, and may not reflect the impact that certain economic or market factors may have had on the decision-making process. Unlike actual performance, they do not represent actual trading. Hypothetical backtested returns have many inherent limitations. Allocations in the current live NB BH Velocity strategy differ from the allocations represented in the NB BH Model Velocity Portfolio. The NB BH Velocity Model Portfolio is constructed using the following approximate risk allocations: 40% Equities, 20% Commodities, 20% Currencies and 20% Multi-Asset Trend. The following is a summary of the backtested methodology and assumptions for the NB BH Velocity Model Portfolio: Standard fees applied are a management fee of 0.75% per annum and estimated transaction costs. The results assume no withdrawals and reinvestment of any dividends and distributions. The results are shown on a supplemental basis and do not represent the performance of any Neuberger Berman managed account or product and do not reflect the fees and expenses associated with managing a portfolio. The hypothetical results were calculated by running the model portfolio on a backtested basis using the stated methodologies and assumptions below. The hypothetical performance results included in this material are of a backtested model portfolio that is shown for illustrative purposes only. Hypothetical Backtested Performance Disclosures We use the Neuberger Berman Breton Hill Velocity strategy as an illustration of how momentum strategies may be brought together in a single strategy that seeks to generate return in most market environments while also seeking to protect capital during periods of stress. This paper describes the characteristics of momentum strategies, the role they may play in a diversified portfolio and their historical performance across market environments. Each of these comes with pros and cons, of course, along with associated implicit or explicit costs that must be considered. Positions in more “defensive” assets such as bonds or gold, market-timing strategies and investing in volatility products such as options are just a few of the approaches investors have taken in an attempt to protect their portfolios from a market drawdown. While all prudent investors consider the risk of capital loss when making investment decisions, the methods employed to manage that risk can vary widely. For investors looking to balance risk mitigation with cost considerations and return potential, we offer momentum strategies as a potential solution.
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