HEAD-TO-HEAD: Neuberger Berman versus Pictet

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Source: FE Fundinfo. Three-year cumulative returns in US dollars.

Performance

The Neuberger Berman fund has posted a 16.29% three-year cumulative return, underperforming its JP Morgan EMBI Global Diversified index benchmark (19.51%), but performing better than its category average (12.04%), according to FE Fundinfo.

The Pictet fund has generated a slightly higher return than the Neuberger Berman strategy, achieving 17.75% during the same period, FE Fundinfo data shows.

“In the past, the Pictet strategy really made a name for itself by outperforming during market sell-offs by taking dramatic measures,” said Kirwin. For example, it implemented a 30% net short position in emerging market currencies during 2015’s sell-off.

Since the change in management in 2018, “the fund has had less of an extremely defensive profile, but it still tends to protect investors from losses in down markets better than its average peer,” she said. A case in point, is it’s 19.9% drawdown during the March 2021’s Covid-19 crisis, which was slightly less severe than the -20.7% category average.

The Neuberger Berman fund, on the other hand, had a slightly – “but only slightly” — worse drawdown of -21.4% during the Covid-19 crisis (from 20 February to 23 March 2020).

Over longer time periods, the Neuberger Berman fund has done a better job of delivering consistent outperformance, landing it in its category’s top half in seven of the last eight years,” said Kirwin.

The Pictet fund has the freedom to add foreign exchange exposure, and thus can benefit from rallies in emerging market, while the Neuberger Berman fund cannot enjoy the same enhancements.

“This helps explain why the Pictet fund outperformed dramatically in 2020 as emerging market currencies rallied,” said Kirwin, as it had a 20% allocation to the asset class during part of the year. Pictet returned 8.3% for the year, while the Neuberger Berman fund returned 5.6%.

However, “it is worth noting that this is a new style for that fund; before its change in management in 2018, it typically did not outperform in market rallies,” said Kirwin.

Comparing the two products’ volatility, Kirwin pointed out that the Neuberger Berman fund’s more high-conviction, longer-term approach to investing would be expected to generate higher volatility, “since the managers have more tolerance for short-term losses and are willing to take more liquidity risk through building substantial stakes in less easily traded securities”.

Pictet’s more diversified portfolio would be expected to have less volatility, although its “liberal use of emerging market currencies is likely to introduce a fair amount of volatility, because currencies are more volatile than bond yields,” she said.

“On balance, it looks like the two factors almost cancel each other out,” said Kirwin. The funds had a similar standard deviation during the past 12 months through June 2021, “but over the past three and five years, the Neuberger Berman fund is slightly, but not dramatically, more volatile”.

Discrete calendar year performance

Discrete calendar year performance

Source: FE Fundinfo. Annual returns in US dollars. *31 December – 22 July 2021

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