Principle Meets Performance

In this month’s Chart of the Month, Arthur Moretti and Ingrid Dyott show us that investors can achieve competitive returns by investing in companies that meet sustainable and responsible criteria.

From July of 2001 to February of 2014—a period that includes two market crashes and two recoveries—the total return of the U.S. equity funds focused on sustainabilityspecific criteria relating to environmental, social and governance practices (ESG), outperformed the S&P 500 Index by 69.5% cumulatively, or 2.4% on an annualized basis, and the Morningstar Large Blend Category by 86.6% cumulatively, or 3.21% on an annualized basis.

Sustainability: A Positive Factor in Long-Term Returns

Total Return of All U.S. Actively Managed Socially Responsible Equity Funds versus S&P 500 Index and Morningstar Large Blend Category 7/1/01 through 2/28/14

Sources: Morningstar, Neuberger Berman, Forum for Sustainable and Responsible Investment. Past performance is no guarantee of future results.

Implications for Investors

Funds incorporating ESG criteria have grown to over a total net AUM of more than $600 billion, according to the latest report on Socially Responsible Investing Trends in the United States, 2012. Moretti and Dyott believe that incorporating ESG criteria into investment analysis is relevant to understanding a company’s business, and that overall, responsibility is a hallmark of quality.

Neuberger Berman Socially Responsive Fund—Total Returns

 Average Annualized Total ReturnsExpense Ratios1
At NAV (for periods ended December 31, 2013)
1 Year 3 Years 5 Years
Gross Capped
Neuberger Berman Socially Responsive Fund — Class A
37.87% 18.81% 8.10%
1.10 N/A
Neuberger Berman Socially Responsive Fund —Institutional Class
38.48% 19.24% 8.31%
0.69 N/A
With Sales Charge    
Neuberger Berman Socially Responsive Fund — Class A
29.94% 17.41% 7.46%
S&P 500 Index
32.39% 17.94% 7.41%

1 Information as of most recent prospectuses dated December 16, 2013.

An investor should consider Neuberger Berman Socially Responsive Fund‘s investment objectives, risks and fees and expenses carefully before investing. This and other important information can be found in the Fund‘s prospectus and, if available, summary prospectus, which can be obtained by calling 877.628.2583. Please read the prospectus and, if available, summary prospectus carefully before making an investment. The prospectus contains a more complete discussion of the risk of investing in the Fund.

Mid-capitalization stocks are more vulnerable to financial risks and other risks than larger stocks. They are generally less liquid than larger stocks, so their market prices tend to be more volatile. Large-cap stocks are subject to all the risks of stock market investing, including the risk that they may lose value.

Investing in foreign securities involves greater risks than investing in securities of U.S. issuers, including currency fluctuations, interest rates and political conditions. Uncertainty in the markets and international events may cause markets to fluctuate dramatically.

With a value approach, there is the rule that stocks may remain undervalued during a given period. This may happen because value stocks lose favor with investors or because of a failure to anticipate which stocks or industries would benefit from changing market or economic conditions.

The Fund may use certain practices and invest in certain securities involving additional risks. Borrowing, securities lending and using derivatives could create leverage, meaning that certain gains or losses could be amplified, increasing share price movements. In using certain derivatives to gain stock market exposure for excess cash holdings, the Fund increases its risk of loss.

The Fund’s social policy could cause it to underperform similar funds that do not have a social policy. Among the reasons for this are: undervalued stocks that do not meet the social criteria could outperform those that do, economic or political changes could make certain companies less attractive for investment or the social policy could cause the Fund to sell or avoid stocks that subsequently perform well.

This material is not intended to address every situation, nor is it intended as a substitute for the legal, tax, accounting or financial counsel of your professional advisors with respect to your individual circumstances. This material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are as of the date herein and are subject to change without notice. This material is not intended to be a formal research report and should not be construed as an offer to sell or the solicitation of an offer to buy any security.

S&P 500 Index—An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. Please note that you cannot invest directly in an index.

Morningstar Large Blend—These funds seek capital appreciation by investing in a variety of large international stocks. Large-cap foreign stocks have market capitalizations greater than $5 billion. The blend style is assigned to funds where neither growth nor value characteristics predominate. These funds typically will have less than 20% of assets invested in U.S. stocks.

There is no guarantee that these investment strategies will work under all market conditions, and investors should evaluate their ability to invest for the long term, especially during periods of downturn in the market. The “Neuberger Berman” name and logo are registered service marks of Neuberger Berman Group LLC.