Neuberger Berman US Multi Cap Opportunities Fund berman... · US Multi Cap Opportunities Fund October 2018 Richard S. Nackenson Managing Director and Senior Portfolio Manager

Neuberger Berman

US Multi Cap Opportunities Fund

October 2018

Richard S. Nackenson

Managing Director and Senior Portfolio Manager

Overall MORNINGSTAR RATINGTM as of 30/9/18

For Professional Client Use Only


Table of Contents

I. FIRM OVERVIEW

II. FUND OVERVIEW

III. INVESTMENT PROCESS

IV. FUND PERFORMANCE & PORTFOLIO CHARACTERISTICS

V. HISTORICAL CATEGORY, CAPITALISATION & SECTOR WEIGHTINGS

VI. BIOGRAPHIES & TEAM STRUCTURE

VII. CASE STUDIES

VIII. LONG-TERM PERFORMANCE & SUMMARY TERMS

IX. DISCLAIMER

FIRM OVERVIEW

Employee-Owned Investment Manager

Partnering with clients to achieve their unique objectives

Alignment of Interests

Portfolio managers invest alongside clients

Breadth of Independent Perspectives

600 investment professionals connected across public and

private markets, equity, fixed income and alternatives

Experienced and Stable Teams

25+ year average industry experience for lead PMs; 96%

annualized retention rate of senior investment professionals at MD

and SVP level since becoming an independent company in 2009

Innovative Investment Solutions

A track record of client partnerships and long-term performance

Deep Resources

Extensive fundamental research, access to management,

innovative ESG research, and sophisticated risk management

1. Institutional-oriented equity and fixed income assets under management (“AUM”) includes the firm’s equity and fixed income institutional separate account (“ISA”), registered fund, and managed account/wrap (“MAG”) offerings and are based on the overall performance of each individual investment offering against its respective benchmark. High net worth/private asset management (“HNW”) AUM is excluded. If HNW AUM were included, the percentage of AUM outperforming the benchmark since inception period would have been 86% for equities and 94% for fixed income. Equity and Fixed Income AUM outperformance results are asset-weighted so individual offerings with the largest amount of assets under management have the largest impact on the results. Please see additional disclosures for important information regarding Private Equity methodology. All performance data for NB Private Equity funds, private equity indices data is as of March 31, 2018. Results are shown gross of fees. Individual offerings may have experienced negative performance during certain periods of time. See Additional Disclosures for additional information regarding the outperformance statistics shown (including 3-, 5- and 10-yr statistics for institutional-oriented equity and fixed income). Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.

Long-term Outperformance1

87%Institutional-oriented equity

Percentage of institutional-oriented AUM outperforming

benchmark since inception ended September 30, 2018

95%Institutional-oriented fixed income

Percentage of institutional-oriented AUM outperforming

benchmark since inception ended September 30, 2018

73%

Private equity

Percentage of NB Private Equity funds raised between

2005 – 2016 (since inception performance)

outperforming benchmark Net IRR

4

Employee Ownership Fosters Team Stability and Alignment with Clients

Industry-leading experience, retention and culture

1. Employee assets include current and former employees and their family members.

of clients’ assets managed by

lead PMs who have 20+ years

of industry experience

Manager Experience

Retention Levels For Senior Investment Professionals

Managing Directors

(includes retirements)

Managing Directors

(competitor departures only)

98%

98%

99%

91%

94%

100%

99%

100%

99%

100%

2013

2014

2015

2016

2017

93%

Alignment With Clients

invested by Neuberger Berman employees

alongside clients1~$3bn100%independent,

employee-owned

Ownership Structure

deferred cash compensation directly linked to team

and firm strategies100%

Our Culture

2013 2014 2015

2016 2017

5

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwi4nP-UvfrLAhXCJh4KHTelByYQjRwIBw&url=https://www.trsretire.com/industry_awards.jsp&bvm=bv.118443451,d.dmo&psig=AFQjCNFS3swgy264EL-T9uAUy7LzUMo8Og&ust=1460048075527346

Investment Platform

Breadth of independent perspectives across asset classes

1. As of September 30, 2018. Firm assets under management (AUM) includes $106.2 billion in Equity assets, $135.4 billion in Fixed Income assets and $73.9 billion in Alternatives assets. Alternatives “AUM and Committed Capital” includes assets under management for non-Private Equity businesses and Committed Capital since inception for the Private Equity businesses. Committed Capital since inception reflects all contractual commitments, including those still in documentation, to fund investments, including those which have since been realized, advised by NB Alternatives Advisers LLC and its affiliates or predecessors (the oldest mandate of which was founded in 1981).

EQUITY FIXED INCOME ALTERNATIVES

AUM $315bn1

Investment

Professionals

$106bn

225

$135bn

179

Risk Parity

Global Tactical Asset Allocation

Global Relative & Absolute Return

Income Focused

Inflation Management

Liability Aware

$82bn AUM and Committed Capital

152

Quantitative Global

U.S.

Emerging Markets

Custom Beta

Risk Premia

Options

Global Macro

Commodities

Fundamental Global Investment Grade

Global Non-Investment Grade

Emerging Markets, Regional EM, China

Multi-Sector, Opportunistic

Municipals

Specialty Strategies

– CLO Mezzanine

– Currency

– Corporate Hybrids

Private Equity:

– Primaries

– Co-Investments

– Secondaries

– Specialty Strategies– Minority stakes in

alternative firms - Dyal

Alternative Credit:

– Private Credit

– Residential Loans

– Special Situations

Hedge Funds:

– Multi-Manager

– Equity Long/Short

– Credit Long/Short

– Event Driven

QuantitativeFundamental

MULTI-ASSET CLASS SOLUTIONS AND STRATEGIC PARTNERSHIPS

Integration of Environmental, Social and Governance Factors

Global, EAFE

U.S. Value, Core, Growth

Emerging Markets

Regional EM, China

Global Thematic, Disruptive Themes

Sustainable Equity

Income Strategies

– MLP

– REITs

6

FUND OVERVIEW


Our Style of Multi Cap Equity

A DISTINCT APPROACH

• Comprehensive cash flow analysis is key to unlocking a company’s potential value:

Quantitative

Qualitative

Use of cash

Capital structure

• Seeks investments across three categories: special situations, opportunistic, and classic

DISCIPLINED BOTTOM-UP INVESTMENT PROCESS

• Deep fundamental research

• Rigorous valuation criteria and dynamic price limits

• Quality management with demonstrated record of building shareholder value

MULTI-FACETED RISK MANAGEMENT

• Security and portfolio level risk management

• Rigorous buy/sell process seeks to maximise upside potential, minimise downside risk

• Well-defined portfolio construction parameters

• Independent analysis from firm’s portfolio risk team

EXPERIENCED INVESTORS

• Senior Portfolio Manager Richard Nackenson has managed the strategy for over 15 years and has more than 25

years of industry experience

• Supported by a dedicated investment team

Invests across the

market cap spectrum

using an opportunistic

approach focused on

in-depth cash flow and

capital structure

analysis

_______________________This material is intended as a broad overview of the Portfolio Manager’s style, philosophy and process and is subject to change without notice. Portfolio Manager’s views may differ from those of other Portfolio Managers as well as the views of Neuberger Berman LLC.

8


Investment Philosophy and Approach

Companies that require tailored,

specific valuation methodologies

and investment research

• Unrecognised recovery prospects

• Restructuring

• Post bankruptcy

• Spin-offs

• New management teams

• Initial public offerings

• Net asset value

• Shareholder activism

Companies with proven

management teams and consistent

long-term performance

• Consistent free cash flow

• High return on invested capital

• Financial stability

• Shareholder-oriented management

• Diversified sources of operating

income

Companies that have become

inexpensive for a tangible

reason that we believe is

temporary, not permanent

• High free cash flow yield

• Superior free cash flow growth

• Improving return on invested capital

• Balance sheet optimisation

• Misunderstood by the market

• “Underfollowed” companiesCLASSIC

SPECIAL

SITUATIONS

OPPORTUNISTIC

US Multi Cap

Opportunities

Fund


We believe that a disciplined and focused approach driven by fundamental research can uncover

investment opportunities across market capitalisation and style spectrums

9


Accumulate Cash/

Reduce Debt

Reinvest

in

Core Business

Invest in

High Return

Expansion

Projects

Buy Back

Stock

Issue

Dividends

Pursue Selective

Acquisitions

Use of Free Cash Flow

How a company uses its free cash flow is a key factor in our decision making process

BUSINESS MODEL CAPITAL STRUCTURE


10

INVESTMENT PROCESS


# of Securities

Investment Process Overview

Comprehensive, disciplined process focused on free cash flow analysis

IDEA

GENERATION

• Dedicated team

• Centralised firm

research resources

• Proprietary screens

• Field research network

IN-DEPTH

RESEARCH

• Determine performance

drivers:

Incorporate

company specific

analysis and field

research

• Detailed financial and

valuation models

COMPREHENSIVE

FREE CASH FLOW

ANALYSIS

• Quantitative

• Qualitative

• Uses of free cash flow

• Storehouse of

knowledge

INITIAL

INVESTMENT

UNIVERSE

• Publicly traded US

equities and related

securities and

American Depository

Receipts (ADRs)

across market

capitalisations and

sectors

• Filter on quantitative

and qualitative metrics

PORTFOLIO

CONSTRUCTION AND

ONGOING RISK

ANALYSIS

• Well-defined portfolio

construction guidelines

• Multi-faceted risk

management

FOCUSED

PORTFOLIO

Typically 30 – 40

Core Holdings

DISCIPLINED

BUY/SELL PROCESS


RISK MANAGEMENT

2,000+ 500 150 75 30 - 40

12


Resources for Idea Generation

• Core proprietary research conducted by

dedicated investment team

• Focus on free cash flow, capital structure and

return on invested capital analysis

• Proprietary financial models and field research

network

NACKENSON GROUP RESOURCES

FIRM RESEARCH RESOURCES


Investment ideas

generated by portfolio

team with access to

centralised firm

resources

• Central global research department of 41

senior sector analysts and associates

• Host more than 1,500 meetings annually with

company management teams, analysts and

strategists

• Third party and specialised research

Idea

Generation

13


In-depth Research

COMPREHENSIVE FREE CASH FLOW ANALYSIS

How do we arrive at a numerical value

for a company’s free cash flow?

Utilise proprietary valuation models

• Income statement

• Cash flow statement

• Balance sheet

• Quality of earnings

• Determine appropriate valuation

methodology

Analyse key metrics

• Free cash flow

• Return on invested capital (ROIC)

• Earnings growth

• Revenue growth

• Tangible book value

• Net asset value

USE OF

FREE CASH FLOW

QUALITATIVE ANALYSIS

OF FREE CASH FLOW

QUANTITATIVE ANALYSIS

OF FREE CASH FLOW

Analyse the quantitative and qualitative factors that influence core operating capabilities and

valuation

How do we evaluate the quality of a

company’s free cash flow?

Conduct field research

• Industry associations

• Customers and competitors

• Operating line managers

• Supply chain analysis

• Empirical data sources

Evaluate management experience

• Articulation of corporate strategy

• Implementation and execution

• Track record of results

Assess industry structure and

dynamics

• Sustainable competitive advantage

• Change and evolution

How does a company allocate its

free cash flow?

Business model

• Reinvest in core business

• Invest in high return expansion

projects

• Pursue selective acquisitions

Capital structure

• Accumulate cash / Reduce debt

• Buy back stock

• Issue dividends

21 3


14


Portfolio Construction and Ongoing Risk Management

Construct multi cap core portfolio

• Diversified across three investment categories

(Special Situations, Opportunistic, Classic)

Select best ideas

• Consider risk/reward profile of each holding as well as

implications within the portfolio

Holdings and sector weightings

• 30 - 40 core holdings

• Invests across the market capitalisation spectrum

• Maximum initial position of 5%

• Maximum sector weighting ±15% versus benchmark

• Category allocation “soft caps” of 50% Special Situation,

50% Opportunistic, 50% Classic

• Cash weighting of 0-5%

Ongoing monitoring

• Automatic review if a position declines 10% relative to the

benchmark

• Tracking error target guideline: <5.0%

• Barra metrics used to measure and manage risk

• Review if management shifts strategy unexpectedly

• Review if research indicates deteriorating fundamentals

MULTI-FACETED RISK MANAGEMENTPORTFOLIO CONSTRUCTION GUIDELINES


MULTI-CAP

CORE PORTFOLIO

Research-based

Investment Process

Disciplined

Portfolio

Construction

Ongoing

Investigative

Monitoring

Dynamic Price

Limits

US MULTI CAP

OPPORTUNITIES

FUND

Research-based

Investment Process

Disciplined

Portfolio

Construction

Ongoing

Investigative

Monitoring

Dynamic Price

Limits

Our disciplined approach integrates proactive portfolio construction with comprehensive risk

management

15


Disciplined Buy / Sell Process

BUY

• New ideas generated by our research process

• Portfolio construction

• Entry point based on price

Our approach to buying and selling portfolio holdings seeks to maximise upside potential while

minimising downside risk

BUY ADD

SELL REDUCE

REDUCE

• Position becomes large due to appreciation

• Approaching price target

• Raise capital to introduce new ideas

SELL

• Price target achieved

• Superior opportunities available

• Research indicates deteriorating fundamentals

• Limit downside

ADD

• Fundamentals and risk/reward improve

• Price target revised

• Larger position warranted


16

FUND PERFORMANCE & PORTFOLIO CHARACTERISTICS


Fund Performance

_______________________Source: FactSet, Standard & Poor’s.The inclusion of any individual security in this document does not constitute a recommendation to invest.1. Representative of the USD Class I Accumulating share class, Net of Fees.2. Benchmark = S&P 500 Index.

PERFORMANCE (USD)

As of September 30, 2018

TOP 10 HOLDINGS %

Fund1 Benchmark2

1 Month 0.68% 0.57%

3 Month 7.46% 7.71%

YTD 8.72% 10.56%

1 Year 16.23% 17.91%

3 Years 16.98% 17.31%

5 Years 12.10% 13.95%

Since Inception (Ann) 15.83% 15.77%

Since Inception (TR) 150.70% 149.91%

Security Name Fund Sector

HCA Healthcare Inc. 5.38 Health Care

Berkshire Hathaway Inc. Class B 5.28 Financials

JPMorgan Chase & Co. 4.84 Financials

Motorola Solutions, Inc. 4.79 Information Technology

Alphabet Inc. Class C 4.43 Communication Services

Apple Inc. 4.27 Information Technology

US Foods Holding Corp. 4.01 Consumer Staples

CSX Corporation 3.82 Industrials

Stanley Black & Decker, Inc. 3.70 Industrials

Goldman Sachs Group, Inc. 3.70 Financials

18


Fund Sector Weightings

_______________________Source: FactSet, Standard & Poor’s.Sector weightings are as of the date noted and are subject to change without notice. Weightings shown are equity only and excluding cash.

CURRENT SECTOR WEIGHTINGS


% of Total Market Value

6.4

2.6

5.8

2.7

27.4

10.0

17.2

18.8

9.1

0.0 0.0

10.0 10.3

6.76.0

13.3

15.0

9.7

21.0

2.4 2.7 2.8

0

5

10

15

20

25

30

CommunicationServices

ConsumerDiscretionary

Consumer Staples Energy Financials Health Care Industrials InformationTechnology

Materials Real Estate Utilities

NB US Multi Cap Opportunities Fund S&P 500 Index

19


2.9

8.4

3.1

25.8

59.8

0.01.9

9.0

19.3

69.8

0

10

20

30

40

50

60

70

80

$0–5bn $5–10bn $10–20bn $20–50bn >$50bn

NB US Multi Cap Opportunities Fund S&P 500 Index

Fund Market Cap Allocation

_______________________Source: FactSet, Standard & Poor’s.Market cap weightings are as of the date noted and are subject to change without notice. Weightings shown are equity only and excluding cash.

FUND ALLOCATION VS. S&P 500 INDEX


% of Total Market Value

20


Fund Top Holdings Compared to Benchmark (Quarterly)

_______________________Source: FactSet, Standard & Poor’s.The inclusion of any individual security in this document does not constitute a recommendation to invest.1. Holdings are subject to change, without notice.2. Benchmark = S&P 500 Index.


FUND TOP 10 HOLDINGS % BENCHMARK TOP 10 HOLDINGS %

Benchmark2 Fund1 Difference

Apple Inc. 4.21 4.27 0.06

Microsoft Corporation 3.57 1.53 -2.04

Amazon.com, Inc. 3.34 0.00 -3.34

Berkshire Hathaway Inc. Class B 1.70 5.28 3.59

Facebook, Inc. Class A 1.61 0.00 -1.61

JPMorgan Chase & Co. 1.54 4.84 3.30

Johnson & Johnson 1.51 0.00 -1.51

Alphabet Inc. Class C 1.50 4.43 2.94

Alphabet Inc. Class A 1.47 0.00 -1.47

Exxon Mobil Corporation 1.46 0.00 -1.46

Fund1 Benchmark2 Difference

HCA Healthcare Inc. 5.38 0.15 5.23

Berkshire Hathaway Inc. Class B 5.28 1.70 3.59

JPMorgan Chase & Co. 4.84 1.54 3.30

Motorola Solutions, Inc. 4.79 0.09 4.70

Alphabet Inc. Class C 4.43 1.50 2.94

Apple Inc. 4.27 4.21 0.06

US Foods Holding Corp. 4.01 0.00 4.01

CSX Corporation 3.82 0.25 3.58

Stanley Black & Decker, Inc. 3.70 0.09 3.61

Goldman Sachs Group, Inc. 3.70 0.32 3.38

21

HISTORICAL CATEGORY, CAPITALISATION & SECTOR WEIGHTINGS


Investment category allocations change actively as a function of the market environment

Historical Investment Category Weightings

Special Situations

Max 38% (4Q 2016)

Min 14% (4Q 2009)

Opportunistic

Max 50% (4Q 2010)

Min 24% (1Q 2018)

Classic

Max 44% (3Q 2018)

Min 27% (1Q 2012)

_______________________ Source: FactSet and Neuberger Berman. Data quoted refers to a representative account, and is included for illustrative purposes only and will not necessarily accurately represent the intended portfolio.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017

23


Historical Market Capitalization Weightings

Market capitalization weightings change actively as a function of the market environment


$0-5 Billion

Max 24% (1Q 2012)

Min 7% (3Q 2014)

$5-20 Billion

Max 46% (3Q 2013)

Min 17% (4Q 2015)

>$50 Billion

Max 51% (2Q 2018)

Min 19% (1Q 2012)

$20-$50 Billion

Max 27% (3Q 2016)

Min 8% (3Q 2013)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


24


Historical Sector Weightings

Sector weightings change actively as a function of the market environment

Consumer Staples

Utilities

Industrials

Consumer

Discretionary

Financials

Health Care

Info. Tech

Materials

Energy


Communication

Services

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


25

BIOGRAPHIES & TEAM STRUCTURE


Portfolio Manager

Richard S. Nackenson is a Managing Director of Neuberger Berman and Senior Portfolio Manager

for the Neuberger Berman US Multi Cap Opportunities Fund. He joined the firm in 1999. Previously,

Richard was a Securities Analyst with Appaloosa Management focusing on global investing across

capital structures and industry sectors. He was a Senior Research Analyst with Pzena Investment

Management and also an Associate with James D. Wolfensohn Incorporated. He began his career

with McKinsey & Company. Richard earned both a BS, summa cum laude, and an MBA from the

Wharton School at the University of Pennsylvania. He has 27 years of industry experience.

Compelling valuations and strong cash flow generation at the company level are

providing an attractive backdrop for equity investing. We believe we are in a stock

picker’s market where stock selection becomes the key driver of portfolio returns.

—Richard S. Nackenson,

US Multi Cap Opportunities Fund

Dedicated investment team headed by Richard S. Nackenson

_______________________Staffing is subject to change without notice. As of September 30, 2018.

27


Team Structure

Cohesive team of dedicated investment professionals supported by centralized global resources

_______________________Staffing is subject to change without notice. As of September 30, 2018. Forty-one Research Analysts and Associates in total.

Richard Nackenson, Senior Portfolio Manager

• Founder and creator of the Strategy

• Broad experience across investment disciplines,

including deep value and distressed credit

• McKinsey background provides unique perspective on

corporate strategies and business models

MULTI CAP OPPORTUNITIES TEAM

Securities Analysts

• 3 securities analysts focused on bottom-up

research

• Responsibilities across Classic, Opportunistic,

and Special Situations

Portfolio Administration

• 1 business manager

• 2 dedicated traders

• 2 portfolio analysts

Global Equity Research Department1

• 35 sector-based analysts; senior analysts have an

average of 22 years industry experience

• Cover over 1,000 companies, representing the Russell

1000 Index and ~70% of the MSCI ACWI Index by

market cap

• Host over 1,500 company and analyst meetings annually

CENTRALIZED RESOURCES

Global Trading Desk

• Centralized trading desk with fully automated

global electronic platform

• 24/7 access to more than 70+ equity markets

and 80 execution counterparties

Risk Oversight and Portfolio Analysis

• 25+ member risk management team

• Charged with identifying and mitigating

investment and operational risk

28

CASE STUDIES


$1,503

$3,192

$1,750

$2,397

$2,751

$2,051$1,138 $15,282

$500

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Share

Buyback

Special

Dividend

($6.50/sh)

Share

Buyback

Share

Buyback

Share

Buyback

Share

Buyback

Share

Buyback

Share

Buyback &

Dividend

Cumulative

Return

Millions

STEADY ADMISSION TRENDS & REVENUE GROWTH

SUBSTANTIAL CAPITAL RETURN TO SHAREHOLDERS

Case Study: HCA Healthcare (HCA)

Business

• HCA is the largest for-profit hospital system in the United States,

operating over 175 hospitals and 100 surgery centers

Investment Rationale

• Substantial beneficiary of recent US tax law changes

• Access to Care initiative allows HCA to grow its market share in

core markets

• Consistent operating income and free cash flow profile

• Proven management team with a strong commitment to

shareholder return

Capital Allocation

• Issued three special dividends in 2012, totaling $6.50 per share,

a 22.3% effective yield

• Refinanced high-cost debt in March 2014, resulting in

approximately $70 Million of annual interest cost savings

• HCA repurchased $2.4 Billion of its stock in 2015, $2.8 Billion in

2016 and $2.1 Billion in 2017

• Company has a full pipeline of acquisition candidates and

announced strategic acquisitions in 2017 and 2018

• Initiated its first regular quarterly dividend since its 2011 IPO

Valuation

• Price-to-Earnings: 13.9x 2019E

• EV/EBITDA: 8.7x 2019E

Special Situation investment (Market Cap = $48.1bn)

_______________________Source: FactSet; Company Reports. All information as of September 30, 2018. For illustrative purposes only. The inclusion of any individual security in this document does not constitute a recommendation to invest.*Estimated dividend payout in the fourth quarter of 2012, based on 1Q 2012 dividend payout amount. ** 3Q17 admissions and revenue growth adjusted for one-time event related to hurricanes

-2%

0%

2%

4%

6%

8%

10%

4Q13 1Q142Q143Q144Q141Q15 2Q153Q154Q151Q162Q163Q164Q16 1Q172Q173Q17**4Q171Q18 2Q18

Adjusted Admissions Growth Revenue Growth

2011 2012 2013 2014 2015 2016 2017 1H 2018

30


Independent Restaurant Case Growth Remains Strong

Case Study: US Foods Holding Corp. (USFD)

Special Situation investment (Market Cap = $6.7 Bn)

Business

• Second largest US food distributor

• One of only two foodservice distributors with a national footprint


• Profits are slated to grow as food inflation has returned after a

prolonged deflationary period

• Margin expansion potential as company focuses on more

profitable independent restaurants, private label products and

restructures its field organization

• Continued strength in independent restaurant case volume

• Best-in-class E-commerce platform, which accounts for over two-

thirds of sales

Capital Allocation

• Continues to successfully acquire accretive bolt-on food

distributors in highly fragmented industry

• Repurchased 10 million shares in November 2017. First share

repurchase since initial public offering in May 2016

• Announced the acquisition of SGA Food Group which will allow

US Foods to expand in the Pacific Northwest region and complete

its national footprint

Valuation


• FCF Yield: 8.8% 2019E

2.5%4.0% 4.4% 4.7%

8.0%6.8%

5.4%6.1%

4.0%4.7%

6.0%7.1%

4.3% 3.8%

0%

2%

4%

6%

8%

10%

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18

Year-Over-Year Growth

3.8% 3.8%4.2%

4.4% 4.5%4.8%

2.0%

3.0%

4.0%

5.0%

2014 2015 2016 2017 2018E 2019E

Margin Growth

EBITDA Margin

_______________________Source: FactSet; Company Reports. All information as of September 30, 2018. For illustrative purposes only. The inclusion of any individual security in this document does not constitute a recommendation to invest.

31


Case Study: Boeing (BA)

Business

• Boeing offers products and services in both the aerospace (70% of

sales) and the defense (30% of sales) industries

Duopolistic aerospace industry provides stable pricing dynamics

Defense business focused on higher-value verticals, and

generates ~1/3 of revenues internationally


• Long-cycle business provides visible earnings stream: total

contracted backlog valued at $464 Billion

• Significant cash flow growth as aircraft production rates increase,

R&D expenses decline, and working capital needs lessen

• Company has a multi-year technological advantage over

competitors due to the development of the 787

Capital Allocation

• Strong balance sheet; potential for continued significant return of

capital to shareholders

• Increased annual dividend over 250% since 2013

• In December 2017, authorized an $18 Billion share repurchase plan

to be completed over the next 24 to 30 months. Boeing repurchased

$9.2 Billion worth of its shares in 2017

Valuation

• Price-to-Free Cash Flow 14.3x 2019E


Classic investment (Market Cap = $213.7bn)


CONTRACTED BACKLOG

$250$275$300$325$350$375$400$425$450$475$500

1Q 1

2

2Q 1

2

3Q 1

2

4Q 1

2

1Q 1

3

2Q 1

3

3Q 1

3

4Q 1

3

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

Billions

STEP-UP IN FREE CASH FLOW AS PRODUCTION RATES

INCREASE AND DEVELOPMENT COSTS DECLINE

$2.75

$26.10

$2.00$4.00$6.00$8.00

$10.00$12.00$14.00$16.00$18.00$20.00$22.00$24.00$26.00$28.00

2011 2019E

32% CAGR

32


EFFECTIVE ALLOCATION OF CAPITAL

1.1 1.30.9

1.3 1.2 1.11.9 2.0

6.0

0.2

5.9

1.2

0.20.20.10.5

1.1 0.91.1

$0.0

$2.0

$4.0

$6.0

2009 2010 2011 2012 2013 2014 2015 2016 2017

Billions

Av ailable Free Cash Flow Shareholder Return (Buy back & Div idend) Accretiv e Acquisition

PROFITABILITY INCREASING

Case Study: Activision Blizzard (ATVI)

Business

• Best franchises in the video game industry: Call of Duty, Candy

Crush, World of Warcraft, Skylanders, Destiny, Overwatch


• Consistent and recurring cash flow from Call of Duty, Skylanders,

Candy Crush and its subscription based World of Warcraft

franchise

• Improving margins as business shifts to digital sales

• Introduction of new franchises, mobile games, advertising

opportunities, and “esports” initiatives all should support growth

• Management is aligned with shareholders as CEO / Chairman

has significant investment in ATVI shares

Capital Allocation

• In 2013, completed a major share buyback from Vivendi,

reducing total outstanding shares by 38.5% and significantly

reducing Vivendi’s ownership position

• In February 2016, Activision completed the acquisition of King

Digital Entertainment (Developer/Publisher of Candy Crush

Saga) which was approximately 30% accretive to pro forma

earnings

Valuation



Added to S&P 500 in August 2015

Special Situation investment Classic investment (Market Cap = $63.4bn)


31.2%31.7% 31.7%

35.4%

33.5%34.3%

36.5%

30%

32%

34%

36%

38%

2013 2014 2015 2016 2017 2018E 2019E

Operating Margin (Non-GAAP)

Accretive

share buyback from

Vivendi in 2013

Accretive

Acquisition

33


Case Study: Hanesbrands Inc. (HBI)

Business

• Global consumer goods company with leading apparel brands

• Limited fashion risk mitigates key retail risk factor

• Global manufacturing capability provides cost advantage


• Initial investment thesis focused on under-recognized earnings

and free cash flow potential due to a sharp rise in cotton cost

• Normalization of cotton costs, coupled with improved price/mix

from the company’s Innovate-to-Elevate program drove operating

profitability higher

Capital Allocation

• Followed through on commitment to debt pay-down through 2013

HBI reduced net leverage from 4.3x to 2.2x

Interest cost reduction accretive to earnings and cash flow

• Initiated dividend of $0.80 per share in 2013; increased dividend

by 50% in January 2014 to $1.20 per share (1.1% yield)

• Completed the acquisition of Maidenform, DBApparel and Knights

Apparel, all accretive to earnings and cash flow

Valuation



Added to S&P 500 in March 2015

Opportunistic investment (Market Cap = $6.6bn)

IMPRESSIVE EARNINGS PER SHARE GROWTH

LIFECYCLE OF INVESTMENT

$0

$25

$50

$75

$100

$125

$150

Mar

-11

Jun-

11

Sep

-11

Dec

-11

Mar

-12

Jun-

12

Sep

-12

Dec

-12

Mar

-13

Jun-

13

Sep

-13

Dec

-13

Mar

-14

Jun-

14

Sep

-14

Dec

-14

Mar

-15

Jun-

15

Sep

-15

Share price (pre-split basis)

$0.67 $0.65

$0.98

$1.42$1.66

$1.85 $1.93

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

2011 2012 2013 2014 2015 2016 2017

Initiated

HBI

Position

Exited HBI

PositionAcquired

DB Apparel

Acquired

MaidenForm

Initiated

Dividend

Acquired

Knights

Apparel

Completed Debt

Pay-down

Added to

S&P 500


34


Case Study: Great Wolf Resorts (WOLF)

Business

• Indoor waterpark resort owner and operator delivering a fully-

integrated, branded vacation experience


• Over-levered / under-followed stock created a special

situation opportunity

• Net debt/EBITDA >6.5x, Free Cash Flow Yield >25%

• Property visits and due diligence reinforced our view that

EBITDA could grow, and debt level was manageable

• Lack of new supply in lodging industry supported our thesis of

RevPar growth

• Majority of debt was tied directly to properties with little recourse

back to the parent

Capital Allocation

• Cash flow used for debt reduction; covenants significantly limited

management’s ability to spend Free Cash Flow

Valuation

• EV/EBITDA: 7.0x vs. 9.0x for theme park operators and 10.0–

12.0x for lodging companies

Special Situation investment (Market Cap = $0.2bn)


LIFECYCLE OF INVESTMENT

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12

Price

WOLF

Delisted

Initiated

WOLF

Position

35


Case Study: Great Wolf Resorts (WOLF) (Continued)

Deal timeline


$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

$7.00

$7.50

$8.00

$8.50

Ma

rch

1,

20

12

Ma

rch

6,

20

12

Ma

rch

11

, 2

01

2

Ma

rch

16

, 2

01

2

Ma

rch

21

, 2

01

2

Ma

rch

26

, 2

01

2

Ma

rch

31

, 2

01

2

Ap

ril 5

, 2

01

2

Ap

ril 1

0,

20

12

Ap

ril 1

5,

20

12

Ap

ril 2

0,

20

12

Ap

ril 2

5,

20

12

Ap

ril 3

0,

20

12

Price

March 13, 2012

WOLF / Apollo

issue joint press

release

announcing

$5.00/sh

transaction

March 14, 2012

R.Nackenson quoted in WSJ

article, “Great Wolf Investors

Howl for Higher Bid.”

March 22, 2012

R.Nackenson quoted

in Bloomberg article,

“Leon Black’s Bid

Gets No Respect as

Great Wolf Surges:

Real M&A.”

April 04, 2012

KSL submits

$6.25/sh rival

bid

April 06, 2012

WOLF / Apollo

issue joint press

release announcing

$6.75/sh revised

offer

April 08, 2012

KSL submits

$7.00/sh bid

April 18, 2012

WOLF / Apollo issue

joint press release

announcing

agreement on

$7.00/sh offer

April 19, 2012

KSL submits

$7.25/sh bid

April 20, 2012

WOLF / Apollo issue

joint press release

announcing

agreement on

$7.85/sh offer KSL

notifies company they

will not bid further

May 04, 2012

Deal Complete;

stock delisted

36

LONG-TERM PERFORMANCE & SUMMARY TERMS


Multi Cap Opportunities Composite

Annualized Rates of Return – As of September 30, 2018

Past performance is no guarantee of future results.Please see attached important disclosures which contain complete performance information and definitions.

¹ Periods less than 1 year are not annualized.

Annualized Rates of Return¹ (%, for periods ended September 30, 2018)

3Q 2018 YTD 1 Year 3 Years 5 Years

Since Inception

(1/1/2010)

Total Portfolio Return (Gross of Fee) 7.74 9.62 17.49 18.36 13.49 15.04

S&P 500 Index 7.71 10.56 17.91 17.31 13.95 13.96

38



Calendar Year Rates of Return


Annual Rates of Return (%, for periods ended December 31)

Total Portfolio Return

(Gross of Fee) S&P 500 Index

2017 25.50 21.83

2016 14.06 11.96

2015 -0.22 1.38

2014 7.22 13.69

2013 44.14 32.39

2012 21.09 16.00

2011 1.20 2.11

2010 14.89 15.06

39


Multi Cap Opportunities Composite (Inception 1/1/2010)

Investment Performance Results – As of September 30, 2018


Composite Benchmark Composite 3 Year Standard Deviation

Total Return

(%, Gross

of Fees)

Total Return

(%, Net

of Fees)

S&P 500 Index

(%)

No. of

Accounts

Market Value

($, m)

Total Firm

Assets

($, bn)

% of Firm

Assets

Internal

Dispersion

Composite

(%)

S&P 500 Index

(%)

YTD Sep-

20189.62 8.95 10.56 ≤ 5 3,286.0 -- -- -- 9.39 9.05

2017 25.50 24.38 21.83 ≤ 5 3,171.8 295.2 1.07 -- 10.88 9.92

2016 14.06 13.05 11.96 ≤ 5 2,765.8 255.2 1.08 -- 11.43 10.59

2015 -0.22 -1.11 1.38 ≤ 5 3,614.4 240.4 1.50 -- 11.89 10.47

2014 7.22 6.27 13.69 ≤ 5 4,966.7 250.0 1.99 -- 10.38 8.97

2013 44.14 42.92 32.39 ≤ 5 3,325.4 241.7 1.38 -- 13.44 11.94

2012 21.09 20.07 16.00 ≤ 5 684.6 205.0 0.33 -- 15.33 15.09

2011 1.20 0.34 2.11 ≤ 5 120.3 193.1 0.06 -- -- --

2010 14.89 13.92 15.06 ≤ 5 67.0 102.3 0.07 -- -- --

40



Investment Performance Disclosure Statement

Compliance Statement• Neuberger Berman Group LLC ("NB", "Neuberger Berman" or the "Firm") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS® standards. Neuberger

Berman was independently verified for the period January 1, 2011 to December 31, 2016. The GIPS® firm definition was redefined effective January 1, 2011. For prior periods there were two separate firms for GIPS® firm definition purposes and such firmswere independently verified for the periods January 1, 1997 to December 31, 2010 and January 1, 1996 to December 31, 2010, respectively. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS® standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS® standards. The Multi-Cap Opportunities Composite has been examined for the periods January 1, 2014 to December 31, 2016. The verification and performance examination reports are available upon request.

Definition of the Firm• The firm is currently defined for GIPS® purposes as Neuberger Berman Group LLC, ("NB", "Neuberger Berman" or the "Firm"), and includes the following subsidiaries: Neuberger Berman Investment Advisers LLC, Neuberger Berman Europe Ltd., Neuberger

Berman Asia Ltd., Neuberger Berman East Asia Ltd., Neuberger Berman Singapore Pte. Ltd., Neuberger Berman Taiwan Ltd, Neuberger Berman Australia Pty. Ltd., Neuberger Berman Trust Company N.A., Neuberger Berman Trust Company of Delaware N.A. and NB Alternatives Advisers LLC.

Policies• Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.Composite Description• The Multi-Cap Opportunities Composite (the "Composite") includes the performance of fee-paying Multi-Cap Opportunities portfolios with no minimum investment managed by the Nackenson Group. The Multi-Cap Opportunities strategy is designed for

investors who seek to participate in a portfolio of equity securities diversified across market capitalization and style. The portfolio consists of three distinct investment categories - Special Situation, Opportunistic, and Classic - designed to mitigate risk, while generating alpha through stock selection. The Composite was created in May 2013 and the performance inception date is January 2010. A complete list of Neuberger Berman's composites is available upon request.

Primary Benchmark Description• The benchmark is the S&P 500 Index (the "Index"). The index is a capitalization weighted index comprised of 500 stocks chosen for market size, liquidity, and industry group representation. The S&P 500 Index is constructed to represent a broad range of

industry segments in the U.S. economy. The S&P 500 Index focuses on the large-cap segment of the market with over 80% coverage of US equities. Criteria for inclusion include financial stability (minimize turnover in the index), screening of common shares to eliminate closely held companies, and trading activity indicative of ample liquidity and efficient share pricing. Companies in merger, acquisition, leveraged-buy-outs, bankruptcy (Chapter 11 filing or any shareholder approval of recapitalization which changes a company's debt-to-equity ratio), restructuring, or lack of representation in their representative industry groups are eliminated from the index.

Reporting Currency• Valuations are computed and performance is reported in U.S. Dollars.Fees• Composite Gross of Fee returns are the return on investments reduced by any trading expenses incurred during the period. Composite Net of Fee returns are the Gross of Fee returns reduced by investment advisory fees.Fee Schedule• The annual investment advisory fee, generally payable quarterly, is as follows: 0.80% on the first $100mn; 0.70% on the next $150mn; 0.65% thereafter. Internal Dispersion• Internal dispersion is calculated using the asset-weighted standard deviation of annual gross returns of those portfolios that were in the Composite for the entire year. Internal dispersion is not calculated if the Composite does not contain at least 6 portfolios

for the entire year.Annualized Standard Deviation• The three-year annualized standard deviation measures the variability of the Composite and the benchmark returns over the preceding 36-month period. The standard deviation is not required for periods prior to 2011.

41


Fund Summary Terms – Neuberger Berman US Multi Cap Opportunities Fund

Daily liquid UCITS Fund

Investment Manager Neuberger Berman Europe Limited

Vehicle / Structure

Irish-domiciled fund

Authorised by the Central Bank of Ireland

UCITS

Independent Board members

Daily Liquidity

Domicile Dublin

Inception Date June 28th, 2012

Fees Class I USD Acc: 0.85%

Maximum TER Class I USD Acc: 1.15%

Minimum Subscription Class I USD Acct: USD 2,500,000

Fund Codes ISIN: IE00B7XCGB41

Administrator BBH

Benchmark S&P 500 Index

Base Currency USD

_______________________Fees as latest available Prospectus. Please check with your Neuberger Berman representative to see if these share classes are available at this time.

42

DISCLAIMER


Additional Disclosures

Institutional-Oriented Equity and Fixed Income AUM Benchmark Outperformance Note: Institutional-oriented equity and fixed income assets under management (“AUM”) includes the firm’s equity and fixed

income institutional separate account (“ISA”), registered fund, and managed account/wrap (“MAG”) offerings and are based on the overall performance of each individual investment offering against its

respective benchmark offerings and are based on the overall performance of each individual investment offering against its respective benchmark. High net worth/private asset management (“HNW”) AUM

is excluded. For the period ending December 31, 2017, the percentage of total institutional-oriented equity AUM outperforming the benchmark was as follows: 10-year: 89%; 5-year: 76%; and 3-year: 79% ;

and total institutional-oriented fixed income AUM outperforming was as follows: 10-year:76%; 5-year:61%; and 3-year: 66%. If HNW AUM were included, total equity AUM outperforming the benchmark was

as follows: 10-year: 64%; 5-year: 52%; and 3-year: 54%; and total fixed income AUM outperforming was as follows: 10-year: 76%; 5-year: 62%; and 3-year: 65%. Equity and Fixed Income AUM

outperformance results are asset weighted so individual offerings with the largest amount of assets under management have the largest impact on the results. As of 12/31/2017, five institutional-oriented

equity offerings accounted for approximately 50% of the total firm institutional-oriented equity AUM reflected, and eight institutional-oriented fixed income offerings accounted for approximately 51% of the

total firm institutional-oriented fixed income AUM reflected. Performance for the individual offerings reflected are available upon request. AUM for multi-asset class, balanced and alternative (including long-

short equity or fixed income) offerings, as well as AUM for hedge fund, private equity and other private investment vehicle offerings are not reflected in the AUM outperformance results shown. AUM

outperformance is based on gross of fee returns. Gross of fee returns do not reflect the deduction of investment advisory fees and other expenses. If such fees and expenses were reflected, AUM

outperformance results would be lower. Investing entails risk, including possible loss of principal. Past performance is no guarantee of future results.

Private Equity Outperformance Note: The performance information includes all funds, both commingled and custom, managed by NB Alternatives Advisers LLC with vintage years of 2005 – 2015, with the

exception of a closed-end, public investment company registered under the laws of Guernsey (the “Funds”). Accounts that are only monitored are excluded. Vintage years post 2015 are excluded as

benchmark information is not yet available. Please note that private debt funds are also excluded as benchmark data is not yet available for the applicable vintages.

Percentages are based on the number of funds, calculated as the total number of funds whose performance exceeds their respective benchmarks divided by the total number of all funds with vintage years of

2005 through 2015. Performance is measured by net IRR, MOIC, and DPI and is compared to the respective index’s median net IRR, MOIC and DPI, respectively. The Cambridge Secondary Index was

used for secondary-focused funds; the Cambridge Buyout and Growth Equity for US and Developed Europe was used for co-investment-focused funds; the Cambridge Fund of Funds Index was used for

commingled funds and custom portfolios comprised of primaries, secondaries and co-investments; and the Cambridge Global Private Equity was used for strategies focused on minority stakes in asset

managers fund and healthcare credit.

The Cambridge Associates LLC indices data is as of March 31, 2017, which is the most recent data available. The Cambridge Associates Fund of Funds Index is the benchmark recommended by the CFA

Institute for benchmarking overall private equity fund of funds performance. The benchmark relies on private equity funds self-reporting data for compilation and as such is subject to the quality of the data

provided. The median net multiple of Cambridge Associates Fund of Funds Index is presented for each vintage year as of March 31, 2017, the most recent available. Cambridge Associates data provided at

no charge.

While one of the secondary funds closed in 2008, Cambridge Associates classifies that particular fund as a 2007 vintage year fund (the year of its formation) and, therefore, the Cambridge Associates

benchmarks used herein are for 2007 vintage year funds.

Private Offerings: Certain strategies referenced herein may only be available through a private offering of interests made pursuant to offering and subscription documents, which will be furnished solely to

qualified investors on a confidential basis at their request for their consideration in connection with an offering. These documents will contain information about the investment objective, terms and conditions

of an investment in such vehicle and will also contain tax information and risk disclosures that are important to an investment decision. Any decision to invest in such vehicle should be made after a careful

review of these documents, the conduct of such investigations as an investor deems necessary or appropriate and after consultation with legal, accounting, tax and other advisors in order to make an

independent determination of the suitability and consequences of an investment in such vehicle.

44


DisclaimerThis document is addressed to professional clients only.

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 and is also a Registered Investment Adviser with the Securities and Exchange Commission in the U.S.

and regulated by the Dubai Financial Services Authority.

This fund is a sub-fund of Neuberger Berman Investment Funds PLC, authorised by the Central Bank of Ireland pursuant to the European Communities (Undertaking for Collective

Investment in Transferable Securities) Regulations 2011, as amended. The information in this document does not constitute investment advice or an investment recommendation and is

only a brief summary of certain key aspects of the fund. Investors should read the prospectus and the key investor information document (KIID) which are available on our website:

www.nb.com/europe/literature. Investment objectives, risk information, fees and expenses and other important information about the fund can be found in the prospectus.

Notice to investors in Switzerland: Neuberger Berman Investment Funds plc is established in Ireland as an investment company with variable capital incorporated with limited liability

under Irish law, and the sub-funds are also authorised by the Swiss Financial Market Supervisory Authority FINMA for distribution to non-qualified investors in and from Switzerland. The

Swiss representative and paying agent is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zürich, Switzerland. The prospectus, the key investor

information documents, the memorandum and articles of association and the annual and semi-annual reports are all available free of charge from the representative in Switzerland.

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 fund 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 fund can only be promoted

if such promotion is made in compliance with the applicable jurisdictional rules and regulations. This document and the information contained therein may not be distributed in the US.

Indices are unmanaged and not available for direct investment.

An investment in the fund involves risks, with the potential for above average risk, and is only suitable for people who are in a position to take such risks. For more information please

read the prospectus which can be found on our website at: www.nb.com/europe/literature.

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 the fund 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.

© 2018 Neuberger Berman Group LLC. All rights reserved. M 148053

45

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Neuberger Berman US Multi Cap Opportunities Fund berman... · US Multi Cap Opportunities Fund October 2018 Richard S. Nackenson Managing Director and Senior Portfolio Manager