Dear Client,
In these uncertain times, I am writing to update you on the steps we are taking at Neuberger Berman to keep our employees and your portfolios secure, to maintain effective operations at the firm, and to stay meaningfully engaged with each other and each of you.
Keeping Our Employees and Their Families Safe and the Firm’s Operations Running Smoothly
We have been aggressive about preparing for unanticipated events, investing in extensive remote work technology and careful business continuity planning. Our full-time Business Continuity Planning staff is partnering with over 60 dedicated Business Continuity Coordinators, located in each Neuberger Berman office around the world, to assure the safety of our employees.
While our Shanghai office is now hopefully through the worst and, as of today, back at full staffing levels, these investments have enabled us to move to full “work-from-home” mode in our North America and EMEA offices. Our New York office, which typically has 1,110 people at work on any given day, is now staffed by fewer than 20 individuals and will remain at this level until we repopulate. London and The Hague are on remote work status with one employee in each office, and Milan remains on a full remote work approach at this time.
Communicating and Collaborating With Each Other—And With You
A Neuberger Berman employee can, from any connected device, receive and place phone calls to/from their work number, participate in a video conference, share screens, and discharge any other functions that they would be responsible for if in the office.
Last week, our remote work platform, Citrix, registered an average of nearly 2,100 employees working outside the office simultaneously around the world, with no major problems reported. The usage of that infrastructure has increased by 400% since the crisis broke. Our key professionals are coordinating via the conference calling platform Zoom and our Jabber instant messaging application, internationally and across time-zones.
Of course, communicating internally is only part of the mission. Our goal is to communicate just as seamlessly with you. On our website, you will find short market reaction pieces from our investment teams. We have also held audio webinars to share our teams’ thoughts on the fast-changing situation. We are now creating video content with our investment professionals using Zoom. These won’t be as polished as our usual corporate videos, but they get our key information and insights out to you as fast as possible—paramount at a time like this. Expect to hear more from your portfolio managers, our chief investment officers, and subject matter experts in the fields of health care, energy and other relevant areas.
We are sure there is more we can do for you. Your ongoing feedback to help us reach you most effectively is valuable to us.
Safeguarding Client Portfolios and Uncovering Opportunities
First we acknowledge that there is great uncertainty around the path of the virus and its impact on economic growth and markets.
Our base case remains that COVID-19 will peak in the U.S. in approximately seven weeks. In the short-term, the most urgent priorities are focused fiscal stimulus to help cushion the impact of the growth shock, combined with central bank liquidity injections to relieve stress in credit markets. We are encouraged to see action on both fronts.
Once the immediate volatility begins to ease and greater clarity emerges around the path of the virus, investors can think about fundamentals. There will be a government-mandated shutdown for much of the economy in the second quarter and we anticipate a strong recovery in the fall. Much depends on the effectiveness of stimulus, however, and the fallout for small, leveraged and vulnerable businesses. A full recovery to the pre-crisis trend level of GDP is likely to take a number of quarters.
A drop in earnings for large-cap U.S. companies greater than 30% is well within scope, and it is possible that equity and credit markets have further to fall in the near term, especially as market stresses are revealed and fear grows. We think that markets could begin to re-price for the recovery soon as we approach the peak of infections, and businesses are better able to offer earnings guidance. At that point, our Asset Allocation Committee recommends exposures to higher quality assets such as U.S. large company stocks and investment grade credit. In private markets, those managers with high levels of un-invested dry powder will provide flexibility to help portfolio companies through the difficult weeks to come, and the potential to seek out opportunities when the time is right.
In Closing
While the projections for the number of infected vary dramatically, our base case remains that we are in the early days of the pandemic in the U.S., with a potential peak in approximately seven weeks. It is comforting that 85% of cases seem to be mild, but imperative that we each protect the vulnerable among us—I trust you are all doing the same with your own loved ones. Please don’t hesitate to reach out at any time, for any reason.
Best Regards,
George H. Walker
