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Fixed Income Investment Outlook

2Q 2021
Real Yields, Inflation Breakevens and Risk Assets: The Changing Environment
The fixed income world is beginning to undergo a multiyear transition as aggressive monetary accommodation and government spending across key economies drive higher near-term economic growth rates. The result could be a shift to higher real rates as output gaps narrow, as well as moderately higher but stable inflation. In our opinion, this bodes well for risky assets, but will likely be accompanied by increased volatility and changing correlations. We outline our views in this report.
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Commentary
Real Yields, Inflation Breakevens and Risk Assets: The Changing Environment

For the past dozen years since the financial crisis, the overall environment for fixed income investors has been largely unchanged. Global growth has been sluggish across the developed and emerging markets. Central banks have unleashed a range of support programs aimed at supporting growth and financial assets. And fixed income investors have been persistently rewarded for positioning for low nominal yields, low real yields and a low-inflation (or even disinflationary) environment. Whether it’s government bonds, credit instruments or even trends in the equity markets, these powerful trends in yields and inflation have significantly influenced the return outcomes of a vast swath of financial instruments.

This backdrop, to which investors have grown accustomed, is quickly changing, and we think investors need to position for a different and more complex environment. In our view, this is not a one-quarter or two-quarter shift, but likely the beginning of a multiyear transition to a different fixed income world.

What characterizes this new environment? In a nutshell, it’s continued aggressive monetary accommodation, coordinated with remarkably aggressive fiscal spending across a range of key economies, that will drive substantially higher growth rates over the near term. For fixed income investors, it means a transition to higher real yields as output gaps narrow globally. It’s also an environment characterized by moderately higher, but stable, inflation rates. As we will discuss in more detail—and perhaps surprisingly for some readers—we think this is an environment that will continue to be positive for risky assets.

That said, investors need to prepare for a few changes. We expect significantly more volatility around real yields in the coming quarters and years than we’ve experienced in the recent past. Intuitively, that’s due to uncertainty about whether this higher fiscal spending will drive quasi-permanent higher growth rates, or whether growth fades as fiscal stimulus eventually fades. We also believe that higher inflation rates will drive changing correlations across a range of risky assets.



Real Yields in Perspective

It’s important to first highlight where we are coming from: an environment of persistently declining real yields. As the chart below highlights, developed market real yields have been in a constant decline over the past 20 years, with acceleration lower after the financial crisis and then again in response to the COVID crisis. Relatively weak growth across the global economy has been the primary driver.

U.S. vs. European 10-Year Real Yields – Last 20 Years
Figure 1
Source: Bloomberg. Data through February 2021.

Markets currently appreciate that the growth outlook for 2021 will be strong given the reopening of economies and pent-up demand in many services sectors. However, we think investors under-appreciate how strong the growth trajectory could be after this year. Although declining, fiscal stimulus should support major economies well into 2023. Household savings rates are relatively high and will drive continued consumer spending. And, as consumption patterns change as some forms of work-from-home become permanent, we expect multiyear adjustments toward higher goods spending. As the chart below highlights, this should all result in significantly above-trend growth in the three major economies not only this year, but over the next three years.

Bloomberg Aggregated Real GDP Growth Forecasts
Figure 2
Source: Bloomberg. Data as of March 24, 2021.

What does a multi-year period of higher growth rates imply for markets? Above all, it means we are entering a “period of transition,” where strong growth will help close output gaps across the world, and where very accommodative central bank policies will increasingly feel different given these higher growth rates.

For fixed income investors, this should translate into a period of structurally higher and/or rising real yields, reflecting the more persistent and stronger economic backdrop. We have three key conclusions about the emerging transition to higher real yields.

First, of all the factors that can impact the appropriate level of real rates, we expect that output gaps—or realized growth relative to potential growth—will be the main driver of equilibrium levels. As highlighted in the chart below, this analysis points to continued and sustained upward pressure on real yields in the coming quarters as aggressive policies continue to drive above-trend growth rates. For investors, focusing on fiscal stimulus multipliers, tax policy and the likelihood of additional fiscal stimulus—policies that can accelerate or decelerate the closing of the output gap—will be the priority.

The Output Gap Is Set to Continue its Sharp Recovery
Figure 3
Source: CBO, Federal Reserve, ECB, Neuberger Berman calculations. Data as of March 22, 2021.

Second, based on our expected evolution of fiscal policy, monetary policy and expected growth, our “fair value” view for U.S. and German 10-year real yields at the end of 2021 is -0.20% and -1.45%, respectively, or approximately 30 basis points higher than current levels (see chart below). German 10-year real yields in equilibrium are substantially lower than the U.S. equivalents due to both a weaker growth trajectory in Europe and the need for the ECB to “enforce” very negative real yields in core Europe to ensure modestly negative real yields in the periphery. Near term, we do not expect substantially more upward pressure in rates as markets and investors digest the moves in the first quarter, and thus we are positioning for a more range-bound rate environment over the coming months.

Real Yield Should Trend Upward but Remain Range-Bound
REAL YIELD SHOULD TREND UPWARD BUT REMAIN RANGE-BOUND
Source: Bloomberg, Neuberger Berman calculations. Data as of March 22, 2021.

Third, we expect risk assets to perform well in the intermediate term despite rising real rates. The table below delineates what history can teach us about rising real-rate environments: If the rise in real yields is exogenous and driven by a one-off tightening of financial conditions, like the taper tantrum of 2013, risk assets have tended to fare poorly. But if real yields are going up because of stronger growth and closing output gaps, as in the other four cases we highlight, it has been a flat or supportive environment for risk assets. For the rest of 2021, we expect outcomes more like what we saw in 1Q 2021, where credit spreads actually tightened despite a rise in real yields.

Real Rates: Change in Historic Periods
  Nov. 07 - Dec. 17,
2001
June 13 - Aug. 5,
2003
Mar. 17 - May 4,
2004
Oct. 13 - Feb. 08,
2011
May 21 - June 24,
2013
GS Financial Conditions 0.2 0.9 0.5 -0.2 0.8
S&P 500 Total Return 1.8% -2.1% -0.2% 13.1% -5.6%
Russell 1000 Index 1.9% -2.1% -0.6% 13.0% -5.9%
Russell 2000 Index 8.9% 1.7% -1.5% 15.2% -4.8%
MSCI EM Index 12.2% 6.1% -4.8% 0.8% -15.7%
10-Year Treasury Return -6.9% -9.8% -6.2% -9.3% -5.1%
Corporate OAS -12 -6 -4 -29 23
High Yield OAS -168 -86 -47 -160 91
Avg Chg. in Fed Exp -3.6% -1.29% -0.19% -0.44% +0.08%
Real Rates 10-Year 72 bps 101 bps 77 bps 102 bps 98 bps
Source: Bloomberg.

In addition, just as we are transitioning to a higher real-yield environment, we are also transitioning to a higher realized and expected inflation environment. Demand-side and supply-side factors are pointing toward higher inflation. But perhaps the most significant recent change is credible central bank shifts toward conducting policy explicitly to achieve this outcome. In our view, investors should position not just for an upward shift in inflation (as fixed income markets have begun to price in), but sustained inflation at these modestly higher levels. Referencing the chart below, we expect inflation rates to return to levels seen in some of the stronger years since the global financial crisis.

2021 Inflation Could Be Comparable to Stronger Post-Crisis Years
Average Inflation Rate
Figure 6
Source: Bloomberg, Neuberger Berman calculations. Data as of March 22, 2021.

This transition to higher real yields and higher inflation rates poses two main risks to markets and economies. We don’t think these issues surface in 2021, but believe it’s not too early for investor consideration.

  • Rising government bond supply versus growth sustainability. Expanded deficit spending in the U.S., Europe and China is driven by the premise that accelerated fiscal stimulus can kickstart economies into higher and more sustainable growth rates. If this spending has low or negative multipliers to growth, the risk is an environment of upward pressure on yields without higher growth.
  • Rising term premiums. Central bank purchase programs, primarily in the U.S. and Europe, have helped push government bond term premiums to low or even negative yields. Whenever these programs begin unwinding—we do not expect this in 2021—balancing the positives of a stronger growth environment with rising term premiums will likely introduce a different type of volatility into fixed income markets.

Finally, it’s worth highlighting the risk of increasing global divergences. Europe and certain emerging markets may lag in the coming global recovery, particularly versus the U.S. and China. This may result in a more disjointed yield environment globally than has been typical over the past few years, and create opportunities for global investors.



Investment Conclusions

Our fixed income portfolios currently reflect the following ideas:

  • Credit spreads will continue to tighten. The fundamental growth environment suggests this direction. As a few data points, we expect high yield default rates of 2% or less and see more potential upgrades from high yield into investment grade than potential downgrades. We generally observe that businesses used the COVID period to improve balance sheets and liquidity, and to reduce expenses, and we expect those trends to remain stable in the coming quarters. The fundamental earnings power of corporate bond issuers remains strong and provides a key support for tighter credit spreads. In addition, investor needs for income in what remains a low-yield world remain overwhelming.
  • Interest rates will consolidate after the move higher in Q1. As discussed above, we believe the strong growth environment will drive both real and nominal yields higher over the course of the year, led by U.S. markets. However, we expect a period of range-bound rates near term. European and Chinese government bond yields have already begun to stabilize. Hedged yields in the U.S. are attractive to non-U.S. investors. Liability-driven investors should find fixed income markets more interesting. Adding it all up, we think 2% 10-year notes in the U.S. remain an appropriate target, but believe that near term we will see less volatile interest rate markets.
  • Tactical opportunities have emerged in intermediate- and long-duration credit markets. Although credit spreads at the index level have tightened this year, pockets of markets offer value after the rise in interest rates. In particular, we find opportunities in emerging markets sovereign debt, “rising stars” and “fallen angels” in high yield markets, and BBB rated longer-duration credit attractive on a tactical basis. These areas should be prime beneficiaries of a more stable interest rate environment over the coming months.


Fixed Income Asset Class Overviews
Global Investment Grade: Growth Tailwinds, Moderate Supply

Global investment grade credit should benefit from the significant fundamental tailwind of strong global growth combined with improving technicals due to a moderation of supply. Rarely has our confidence in the expectation for improving corporate cash flows been as high as it stands today. While the rollout of vaccines and the growth that will ensue is occurring somewhat inconsistently throughout the world, the direction of travel for underlying corporate cash flows is clear. Having weathered the onset of the COVID pandemic, we expect corporate balance sheets to recover meaningfully in 2021.

Despite the rise in rates in the first quarter, interest rates remain low around the world and should result in continued strong demand for bonds with incremental yield above government securities. Somewhat offsetting this positive, fundamental backdrop is the potential, and some expectation, for increased event risk (M&A, share buybacks) for high-quality corporates.

Our focus remains on BBB industrial credit risk and high-quality banks. We prefer BBB industrials, because, with higher levels of financial leverage already in place, these companies are more likely to manage their forward-looking balance sheets more conservatively and should benefit most from a strong cyclical growth environment. In credits where we are most comfortable with the credit profile, it makes sense to consider subordinate bond structures such as corporate hybrids.

In our view, banks are a good diversifier to BBB industrials. First, they generally do not suffer from the higher levels of event risk possible in industrials. Second, banks should benefit from an “improving” interest rate framework. This has already started in the U.S. with higher rates and a steeper curve. Over time, it should begin to occur in Europe, but less dramatically. Finally, underlying fundamentals remain strong. A healthy banking system was an important part of the successful global response to the pandemic. Here, too, we suggest considering subordinated bond structures as appealing instruments to enhance portfolio yield.

Regarding interest rates, we would use any weakness caused by interest rate as an opportunity to add exposures to investment grade fixed income. Historically, these bouts of weakness caused by volatility and uncertainty in interest rates as economies grow rapidly, are periods to add bonds.

Looking at securitized product markets, we continue to believe that they provide a good diversifier to corporate credit in portfolios and a way to gain exposure to the U.S. consumer. Despite the pandemic, by many measures the consumer’s balance sheet has never been stronger, due to massive government stimulus combined with robust financial and real estate markets. The housing market has continued to show strong price appreciation, and unlike the early 2000s, rather than being underpinned by rampant speculation, this is being driven by a lack of supply. Underwriting standards remain stringent, and affordability measures remain well within historical norms, unlike the 2005 – 2008 period. We believe the best way to take advantage of these fundamentals is through the Fannie Mae/Freddie Mac Credit Risk Transfer (CRT) market. While these securities have performed very well, we still believe they offer attractive yields for securities that continue to deleverage. For the rest of the securitized products markets, we think that agency MBS offer nice carry, but have limited further price appreciation relative to Treasuries. The CMBS market has recovered well, but overall is not extremely cheap, as the commercial real estate market continues a bumpy recovery; we continue to look for security-specific opportunities in that market.

Global Non-Investment Grade: Durable Income as Rates Rise

We think the robust economic growth environment that we are projecting will drive improving fundamentals, deleveraging and low default rates. In addition to providing investors with lower interest rate sensitivity versus other global fixed income markets, non-investment grade corporate credit also has attractive absolute and relative yields. We would argue that the income generated from these corporate credit sectors is also more durable as we start a new credit cycle. Defaults have declined materially, and credit-rating upgrades are outpacing downgrades by a wide margin. We see a backdrop of broad-based credit improvement across non-investment grade credit sectors.

High Yield: Capital markets remain wide open for high yield issuers, default rate expectations are trending lower and issuer fundamentals are improving, but spreads have remained mostly unchanged year-to-date. With close to flat spreads, yield levels are higher on the increase in rates as economic forecasts continue to get revised upward. This is a favorable backdrop for high yield, generally, and the asset class offers investors attractive absolute and relative yields with much lower duration than most other fixed income sectors. Moreover, compared to its history, the high yield universe now has its highest-ever share of BB rated issuers, which enhances the reliability of income generation for investors.

Senior Floating Rate Loans: The loans asset class features exposure to improving credit fundamentals and also offers very attractive yield with limited duration—a unique set-up in global fixed income markets. During the prior nine episodes where 10-year Treasury yields have risen by 100 basis points or more, the loans asset class (S&P Leveraged Loan Index) outperformed the broader bond market (Bloomberg Barclays U.S. Aggregate Bond Index) in nine out of nine instances. Declining defaults, issuers’ robust access to liquidity, improving fundamentals and positive technical factors—particularly inflows and demand from CLOs—should continue to provide support for the asset class and drive durable income for investors.

Overall, the persistent income and lower duration advantage of non-investment grade credit stands out relative to other asset classes, and benefits from a positive backdrop of improving fundamentals and the potential for spread compression as investor demand for lower-duration yield persists.

Emerging Markets: Tighter Spreads in Hard Currency, More Nuance in Local Markets

In some periods, rising rate environments can be disruptive for emerging markets debt, given their higher dependency and vulnerability to funding costs in external markets. Also, higher nominal and real U.S. Treasury rates tend to put upward pressure on local rates and downward pressure on currencies as they typically lead to a stronger U.S. dollar.

In the current environment, however, with the U.S. expected to grow at a faster pace than the rest of the world due to the aggressive fiscal stimulus and relative outperformance on vaccinations, we also anticipate an upswing of the global economy. The reopening and growth recovery is also leading to a strong market for commodities as the lift in demand exceeds supply constraints, and stronger commodities typically translate into a tailwind for a significant segment of emerging economies and currencies. Also different from prior episodes of rising rate environments, such as in 2013, in the aggregate they are running current account surpluses, with very few in large deficit positions, and have come into 2021 with competitive real exchange rates.

Economic growth and commodity strength thus provide support to emerging market economic performance and ultimately should lead to improving fundamentals, overwhelming the potential headwinds triggered by higher rates and/or a stronger U.S. dollar. This should lead to a compression of hard currency spreads, mainly of sovereign issuers as they continue to trade at elevated levels relative to equivalent credits in developed markets.

The impact on local markets is more nuanced: Higher core rates will add to upward pressure on local rates, already in the process of repricing higher domestic inflation dynamics with central banks pivoting to monetary tightening from, in certain cases, historically low policy rates. Also, in some instances, the risk of higher risk premia being priced into local curves has risen as a result of unprecedented stimulus leading to weaker fiscal conditions. On the other hand, higher local rates and the economic rebound should ultimately lead to currency revaluation, especially in the case of commodity currencies undergoing meaningful improvement in their terms of trade. If the movement in rates, especially real rates, is gradual and in step with global rather than U.S. growth, the ability to outperform should return and be more in line with risky assets generally, where credit spreads tend to be more insulated. Countries that are more comfortable from a funding point of view, whether in terms of balance of payments or due to reforms, continue to be better positioned for this. Overall, in local markets, we are cautious on rates, and only tactically long emerging markets FX for now.

Municipals: Tax Picture, Recovery Offer Support

The tax-exempt municipal bond market has benefited year-to-date from a combination of factors, including very strong market technicals, an improved economic outlook and unprecedented aid to the major sectors of the market totaling almost $600 billion from the American Rescue Plan Act of 2021. In addition, to fund increased spending and potential infrastructure investments, the Biden administration has intensified the dialogue around raising federal taxes for some individuals and corporations, which should lead to continued demand for the tax-efficient nature of municipals.

We are also seeing a trend toward tax increases at the local level, as evidenced by Hawaii and New York currently debating significant tax increases for some individuals. Given this backdrop, tax-exempt municipals have outperformed Treasuries meaningfully this year, and have been somewhat impervious to the backup in Treasury rates. As a result, high-grade municipals are currently trading at stronger valuations when compared to historical norms. Taxable municipals have seen meaningful spread tightening year-to-date due to the noted fiscal aid and stronger economic backdrop, as well as high levels of overseas demand.

Going forward, we are very constructive on adding credit exposure based on the economic and fiscal backdrop and think A/BBB rated and high yield municipals offer value, as not all of the spread-widening due to COVID has been retraced. In our view, high yield municipals are particularly attractive right now. While taxable municipals have rallied and are now trading in line with investment grade corporates, we remain constructive on the segment given the demand for spread and high-quality fixed income. Finally, although the credit backdrop is favorable, credit selection is critical given tighter valuations and some issuers (such as tourism-focused economies) that are still dealing with meaningful challenges due to the pandemic.

Revisiting Our 2021 Fixed Income Themes
Revisiting Our 2021 Fixed Income Themes

Key market themes we identified at the start of 2021 remain intact. With the market movements in the first quarter, we slightly update our views.

Earn income without duration.
This theme was a key driver of relative returns in the first quarter, as short duration income sectors such as high yield, bank loans and CLOs delivered higher returns than other fixed income markets. We expect continued outperformance on both a relative and absolute basis from these areas. However, with the rise in interest rates in the first quarter, tactical opportunities have emerged in intermediate or longer duration sectors, such as fallen angels and rising starts in the non-investment grade markets, BBB rated securities in the investment grade market, and emerging market sovereigns. European credit markets are attractive relative to U.S. markets.

Position for rising inflation.
We expect continued increases in inflation breakeven rates, driven by the U.S. markets. After the 35 bps move wider in U.S. 10-year breakevens in the first quarter, we expect more modest upward pressure near term, but still target higher inflation expectations across the developed markets. We continue to believe that emerging market currencies are also attractive expressions of a higher inflation theme, although volatility will remain relatively high as U.S. growth expectations rise.

Sector and issue selection will drive returns.
With relatively tight credit spreads across markets, sector and issue selection will remain key drivers of returns across fixed income. We continue to construct portfolios with an emphasis on secular winners (sectors like telecommunications and media), but are finding attractive opportunities in more cyclical exposures such as commodity-focused companies or countries.

Investment Implications
  • The long-term market backdrop of slow growth, low inflation and low yields is rapidly changing, in our view, and investors need to be positioned for a different, more complex environment.
  • Aggressive monetary policy accommodation and fiscal spending likely will drive substantially higher growth rates over the near term, leading to higher real yields and moderately higher, but stable, inflation rates.
  • We anticipate increased volatility around real yields as investors consider whether faster growth driven by government spending will be quasi-permanent or recede as stimulus eventually fades. Higher inflation rates will drive changing correlations across a range of risky assets.
  • After a period of near-term consolidation, real and nominal yields should move higher over the course of the year, led by U.S. markets; our target for the 10-year U.S. Treasury yield is 2%. Credit spreads are likely to tighten as growth accelerates and businesses improve balance sheets/liquidity and reduce expenses.
  • We see tactical opportunities in intermediate and long-duration credit markets, particularly focused on emerging markets sovereign debt, “rising stars” and “fallen angels” in high yield markets, and BBB rated longerduration credits.
Market Views
Figure 1
Views expressed herein are generally those of the Neuberger Berman Fixed Income Investment Strategy Committee and do not reflect the views of the firm as a whole. Neuberger Berman advisors and portfolio managers may make recommendations or take positions contrary to the views expressed. Nothing herein constitutes a prediction or projection of future events or future market behavior. Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed. See additional disclosures at the end of this material, which are an important part of this presentation.
*Currency views are based on spot rates, including carry.
OUTLOOK
The Fixed Income Investment Outlook
Investors need to position themselves for a different and more complex environment.
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Fixed Income Investment Strategy Committee
About the Members
The Neuberger Berman Fixed Income Investment Strategy Committee consists of 18 of our most senior investment professionals who meet monthly to share views on their respective sectors to inform the asset allocation decisions made for our multisector strategies. The group covers the full range of fixed income combining deep investment knowledge with an average of 28 years of experience.
Brad Tank
Chief Investment Officer—Fixed Income
39 Years of Industry Experience
18 Years with Neuberger Berman
Ashok Bhatia, CFA
Deputy Chief Investment Officer—Fixed Income
27 Years of Industry Experience
3 Years with Neuberger Berman
Thanos Bardas, PhD
Co-Head of Global Investment Grade Fixed Income
23 Years of Industry Experience
23 Years with Neuberger Berman
David M. Brown, CFA
Co-Head of Global Investment Grade Fixed Income
30 Years of Industry Experience
18 Years with Neuberger Berman
Brad Tank, Chief Investment Officer—Fixed Income
Brad Tank, Managing Director, joined the firm in 2002 and is the Chief Investment Officer and Global Head of Fixed Income. He is a member of Neuberger Berman’s Operating, Investment Risk, Asset Allocation Committees and Fixed Income’s Investment Strategy Committee, and leads the Fixed Income Multi-Sector Group. From inception in 2008 through 2015, Brad was also Chief Investment Officer of Neuberger Berman’s Multi-Asset Class Investment business and remains an important member of that team along with the firm’s other CIOs. From 1990 to2002, Brad was director of fixed income for Strong Capital Management in Wisconsin. He was also a member of the Office of the CEO and headed institutional and intermediary distribution. In 1997, Brad was named “Runner Up” for Morningstar Mutual Fund Manager of the Year. From 1982 to 1990, he was a vice president at Salomon Brothers in the government, mortgage and financial institutions areas. Brad earned a BBA and an MBA from the University of Wisconsin.

Ashok Bhatia, CFA, Deputy Chief Investment Officer—Fixed Income
Ashok K. Bhatia, CFA, Managing Director, joined the firm in 2017. Ashok is the Deputy Chief Investment Officer for Fixed Income. He is a lead portfolio manager on multi-sector fixed income strategies and is also a member of the Multi-Asset Class portfolio management team, the Fixed Income Investment Strategy Committee and the firm’s Asset Allocation Committee. Previously, Ashok has held senior investment and leadership positions in several asset management firms and hedge funds, including Wells Fargo Asset Management, Balyasny Asset Management, and Stark Investments. Ashok has had investment responsibilities across global fixed income and currency markets. Ashok began his career in 1993 as an investment analyst at Morgan Stanley. Ashok received a BA with high honors in Economics from the University of Michigan, Ann Arbor, and an MBA with high honors from the University of Chicago. He has been awarded the Chartered Financial Analyst designation.
Thanos Bardas, PhD, Co-Head of Global Investment Grade Fixed Income
Thanos Bardas, PhD, Managing Director, joined the firm in 1998. Thanos is the Global Co-Head of Investment Grade and serves as a Senior Portfolio Manager on Global Investment Grade and Multi-Sector Fixed income strategies. He sits on the firm’s Asset Allocation Committee and Fixed Income’s Investment Strategy Committee, and is a member of the Fixed Income Multi-Sector Group. Thanos also leads the Global Rates team in determining rates exposure across various portfolio strategies and oversees both inflation and LDI investments. Thanos graduated with honors from Aristotle University, Greece, earned his MS from the University of Crete, Greece, and holds a PhD in Theoretical Physics from State University of New York at Stony Brook. He holds FINRA Series 7 and Series 66 licenses.
David M. Brown, CFA, Co-Head of Global Investment Grade Fixed Income
David M. Brown, CFA, Managing Director, rejoined the firm in 2003. Dave is Co-Head of Global Investment Grade and acts as Senior Portfolio Manager on both Global Investment Grade and Multi-Sector Fixed Income strategies. He is a member of the Fixed Income Investment Strategy Committee and the Fixed Income Multi-Sector Group. Dave also leads the Investment Grade Credit team in determining credit exposures across both Global Investment Grade and Multi-Sector Fixed Income strategies. Dave initially joined the firm in 1991 after graduating from the University of Notre Dame with a BA in Government and subsequently received his MBA in Finance from Northwestern University. Prior to his return, he was a senior credit analyst at Zurich Scudder Investments and later a credit analyst and portfolio manager at Deerfield Capital. Dave has been awarded the Chartered Financial Analyst designation.
Patrick Barbe
Head of European Investment Grade Fixed Income
33 Years of Industry Experience
2 Years with Neuberger Berman
Jon Jonsson
Senior Portfolio Manager—Global Fixed Income
25 Years of Industry Experience
7 Years with Neuberger Berman
Julian Marks, CFA
Senior Portfolio Manager
20 Years of Industry Experience
13 Years with Neuberger Berman
Thomas A. Sontag
Head of Global Securitized & Structured Products
39 Years of Industry Experience
16 Years with Neuberger Berman
Patrick Barbe, Head of European Investment Grade Fixed Income

Patrick Barbe, actuary, Managing Director, joined the firm in 2018. Patrick is the European Fixed Income head and serves as a Senior Portfolio Manager on that asset class. Patrick graduated in Actuarial Studies from the Institut de Science Financière et d'Assurances in Lyon, France (1988). He started his career as a portfolio manager of dedicated mutual funds for a BNP Paribas subsidiary. Then he headed the European Fixed Income at BNP Paribas Asset Management from 1997 to 2018: Patrick has acquired considerable expertise from his long professional experience in credit and fixed income management. As such, he was responsible for defining and piloting the management process and the investment strategy implemented by the management team, and for coordinating the activities of each team member. He also participated in designing and developing the product range.

Jon Jonsson, Senior Portfolio Manager—Global Fixed Income
Jon Jonsson, Managing Director, joined the firm in 2013. Jon is a Senior Portfolio Manager for the Global Investment Grade and Multi-Sector Fixed Income strategies. He is a member of the Fixed Income Investment Strategy Committee and the Fixed Income Multi-Sector Group. Prior to joining the firm, Jon was employed by J.P. Morgan for 15 years. Most recently he served as Head of the Global Aggregate Team at J.P. Morgan in London. Jon received a Masters in Financial Engineering from New York University and a BSc in Applied Mathematics from the University of Iceland.
Julian Marks, CFA, Senior Portfolio Manager

Julian Marks, CFA, Managing Director, joined the firm in 2007. Julian is a Senior Portfolio Manager specializing in non-USD Investment Grade credit markets and is responsible for strategy and performance of Euro and Sterling Investment Grade allocations across portfolios as well as being a lead portfolio manager on Global and Euro Credit Mandates and our Corporate Hybrid Strategy. Prior to joining the firm, Julian worked for Merrill Lynch Investment Managers and Barclays Global Investors as a credit analyst and Dresdner Bank as both a credit analyst and a portfolio manager. Julian received a BSc (Hons) in Economics and Accounting from Bristol University. Julian has been awarded the Chartered Financial Analyst designation.

Thomas A. Sontag, Head of Global Securitized & Structured Products

Thomas A. Sontag, Managing Director, joined the firm in 2004. Tom is the Head of Global Securitized & Structured Products and serves as a co-portfolio manager and Senior Portfolio Manager on multiple fixed income strategies. He is a member of the senior investment team that sets overall portfolio strategy for Global Investment Grade. Tom also leads the Global Securitized team in determining exposure across various portfolio strategies. Prior to joining the firm, Tom served as a portfolio manager with Strong Capital Management for six years. His responsibilities included co-managing five mutual funds as well as separate institutional accounts. Previously, Tom worked in the Fixed Income divisions of Bear Stearns (1986 to 1998 as a managing director) and Goldman Sachs (1982 to 1985). Tom earned a BBA and an MBA from the University of Wisconsin.

Dmitry Gasinsky, CFA
Head of Mortgage Loan Management
21 Years of Industry Experience
16 Years with Neuberger Berman
Ugo Lancioni
Head of Global Currency
25 Years of Industry Experience
13 Years with Neuberger Berman
Joseph P. Lynch
Global Head of Non-Investment Grade Credit
25 Years of Industry Experience
19 Years with Neuberger Berman
Vivek Bommi, CFA
Senior Portfolio Manager
23 Years of Industry Experience
13 Years with Neuberger Berman
Dmitry Gasinsky, CFA, Head of Mortgage Loan Management
Dmitry Gasinsky, CFA, Managing Director, joined the firm in 2005. Dmitry is a Senior Portfolio Manager overseeing Private US Residential Real Estate Debt Strategies. Prior to assuming his current role, Dmitry served as head of US mortgage credit research, leading the team’s research, modeling, quantitative strategy, and quantitative investment / portfolio analysis effort, while also being directly involved in new product development, analysis and implementation. Prior to joining the firm, he spent three years at The Vanguard Group, where he served as a fixed income trader and assisted in managing $16 billion in municipal bond assets. Dmitry earned an AB degree in Economics with distinction from Cornell University and an MBA with concentration in Analytic Finance from the University of Chicago. He has also been awarded the Chartered Financial Analyst designation.
Ugo Lancioni, Head of Global Currency

Ugo Lancioni, Managing Director, joined the firm in 2007. Ugo is the Head of Global Currency and serves as a co-portfolio manager on multiple fixed income strategies. He is a member of the senior investment team that sets overall portfolio strategy for Global Investment Grade. Ugo also leads the Currency team in determining FX exposures across various portfolio strategies. Prior to joining the firm, Ugo was employed by JP Morgan for 11 years. While at JP Morgan Asset Management Ugo gained experience as a currency strategist and portfolio manager in charge of the FX risk in the fixed income book. Prior to this, Ugo worked as a trader at JP Morgan Bank, both in London and Milan, in the short term interest rate trading group where he was responsible for foreign exchange forwards market making and derivatives trading. Ugo received a Masters Degree in Economics from the University “La Sapienza” in Rome.

Joseph P. Lynch, Global Head of Non-Investment Grade Credit

Joseph Lynch, Managing Director, joined the firm in 2002. Joe is the Global Head of Non-Investment Grade Credit and a Senior Portfolio Manager for Non-Investment Grade Credit focusing on loan portfolios. In addition, he sits on the Credit Committee for Non-Investment Grade Credit and serves on Neuberger Berman’s Partnership Committee. Joe was a founding partner of LightPoint Capital Management LLC, which was acquired by Neuberger Berman in 2007. Prior to joining LightPoint, he was employed at ABN AMRO where he was responsible for structuring highly leveraged transactions. Joe earned a BS from the University of Illinois and an MBA from DePaul University.

Vivek Bommi, CFA, Senior Portfolio Manager
Vivek Bommi, CFA, Managing Director, joined the firm in 2007. Vivek is a Senior Portfolio Manager for Non-Investment Grade Credit focusing on Global and European Non-Investment Grade portfolios. In addition, he sits on the Credit Committee for Non-Investment Grade Credit. Prior to joining the firm, Vivek worked in the leverage finance groups at The Carlyle Group and Banc of America Securities. He started his career as an investment analyst at Intel Capital. Vivek earned a BS from the University of Illinois, an MBA from Columbia Business School, has been awarded the Chartered Financial Analyst designation and is a Certified Public Accountant.
Gorky Urquieta
Co-Head of Emerging Markets Debt
26 Years of Industry Experience
8 Years with Neuberger Berman
Rob Drijkoningen
Co-Head of Emerging Markets Debt
30 Years of Industry Experience
8 Years with Neuberger Berman
James L. Iselin
Head of Municipal Fixed Income
27 Years of Industry Experience
14 Years with Neuberger Berman
Jason Pratt
Head of Insurance Fixed Income
28 Years of Industry Experience
5 Years with Neuberger Berman
Gorky Urquieta, Co-Head of Emerging Markets Debt
Gorky Urquieta, Managing Director, joined the firm in 2013. Gorky is a Portfolio Manager and Co-Head of the Emerging Markets Debt team. He joined the firm from ING Investment Management where he was most recently global co-head of EMD, responsible for global emerging markets debt external and local currency strategies. Gorky joined ING in 1997 as a member of Emerging Markets Investors, a hedge fund manager affiliated with ING Furman Selz Asset Management, where he conducted analysis of sovereign and corporate bonds and loans, local currency investments and equities. Previously, Gorky worked at Dart Container Corporation where he was part of a research and trading team active in emerging and developed markets. He obtained a BA in Business Administration from the Bolivian Catholic University in La Paz, Bolivia, and a Master’s degree in Finance from the University of Wisconsin.
Rob Drijkoningen, Co-Head of Emerging Markets Debt

Rob Drijkoningen, Managing Director, joined the firm in 2013. Rob is a Co-Head of the Emerging Markets Debt team and Senior Portfolio Manager responsible for over $24.5 bn in AuM in EMD¹ and 34 investment professionals. Rob joined the firm after working at ING Investment Management for almost 18 years, most recently as the global co-head of the Emerging Markets Debt team responsible for managing over $16 billion in assets. In 1990, Rob began his career on the sell-side at Nomura and Goldman Sachs, after which he became senior investment manager for global fixed income at ING Investment Management. In 1997 he became global head of the Emerging Markets Debt team and in 2004 was named global head of the Emerging Markets Debt and High Yield teams. From 2007 through 2009 Rob created and led ING Investment Management’s Multi-Asset Group in Europe, managing mandates across asset classes including fixed income, equities, real estate and commodities. In 2009 he was appointed global head of emerging markets for both emerging markets equity and debt strategies. Rob earned his Macro-Economics degree from Erasmus University in Rotterdam and has authored numerous articles on emerging markets debt subjects. He is a member of DSI.

1. As of June 30, 2020

James L. Iselin, Head of Municipal Fixed Income
James L. Iselin, Managing Director, joined the firm in 2006. Jamie is the Head of the Municipal Fixed Income Team and a Senior Portfolio Manager. Additionally, he co-manages the Neuberger Berman New York, California and Municipal Fund Inc. closed-end bond funds as well as the Neuberger Berman Municipal Intermediate Bond Fund, the Neuberger Berman Municipal Impact Fund and the Neuberger Berman Municipal High Income Fund. Prior to joining the firm, he was a managing director and senior portfolio manager with Robeco Weiss, Peck & Greer in the Municipal Fixed Income group, where he worked since 1993. Jamie holds a BA in Philosophy from Denison University.
Jason Pratt, Head of Insurance Fixed Income
Jason Pratt, Managing Director, joined Neuberger Berman in 2016 as Portfolio Manager and Head of Insurance Fixed Income. Jason is a member of the Fixed Income Investment Committee and Fixed Income Multi-Sector Group, and is responsible for the oversight of insurance fixed income portfolio management globally. Jason brings extensive insurance portfolio management and capital markets experience, having most recently served as chief investment officer of Montpelier Reinsurance Holdings Ltd., a global insurance and reinsurance platform. In this capacity, Jason had executive management responsibilities for the company’s investment portfolios including market strategy, asset allocation and risk management across jurisdictions including the US, Bermuda and Montpelier’s Lloyd’s Syndicate. In addition, Jason was President of Blue Capital Advisors, a wholly owned collateralized reinsurance subsidiary of Montpelier. Jason’s prior experience includes roles ranging from credit analysis, portfolio management and risk management across fixed income markets for insurance portfolios and asset management firms. Jason holds a BS in Economics from the University of Louisville.
Michael J. Holmberg
Co-Head of Special Situations and Senior Portfolio Manager
32 Years of Industry Experience
12 Years with Neuberger Berman
John Humphrey
Co-Head of Special Situations and Senior Portfolio Manager
31 Years of Industry Experience
2 Years with Neuberger Berman
Michael J. Holmberg, Co-Head of Special Situations and Senior Portfolio Manager
Michael J. Holmberg, Managing Director, joined the firm in 2009. Michael is a Senior Portfolio Manager for Non-Investment Grade Credit and Co-Head of Special Situations focusing on distressed and real asset portfolios. Prior to joining the firm, Michael founded Newberry Capital Management LLC in 2006 and prior to that Michael founded and managed Ritchie Capital Management’s Special Credit Opportunities Group. He was also a managing director at Strategic Value Partners and Moore Strategic Value Partners. He began investing in distressed and credit oriented strategies as a portfolio manager at Bank of America where he established the bank’s global proprietary capital account. Michael received an AB in economics from Kenyon College and an MBA from the University of Chicago.
John Humphrey, Co-Head of Special Situations and Senior Portfolio Manager
John Humphrey, Managing Director, joined the firm in 2019. John is a Senior Portfolio Manager for Non-Investment Grade Credit and Co-Head of Special Situations focusing on distressed and stressed corporate assets. Prior to joining Neuberger, John was a Portfolio Manager focused on eventdriven stressed and distressed for Archview Investment Group, a firm he co-founded in 2009. From 2004 to 2008, John was a Managing Director in Citigroup's Global Special Situations Group, a proprietary investment vehicle focusing on stressed and distressed credit. John served as head of research for Citi's DistressedTrading Group from 1999-2004. From 1991-1999 John was Head of Distressed Trading Research for Merrill Lynch's High Yield Trading Desk. John started his careeras a corporate banking analyst with Drexel Burnham Lambert. John graduated Magna Cum Laude with a degree in Economics from Middlebury College.