This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice. This material is general in nature and is not directed to any category of investors and should not be regarded as individualized, a recommendation, investment advice or a suggestion to engage in or refrain from any investment-related course of action. Investment decisions and the appropriateness of this material should be made based on an investor’s individual objectives and circumstances and in consultation with his or her advisors. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. This material may include estimates, outlooks, projections and other “forward-looking statements.” Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. The use of tools cannot guarantee performance. Diversification does not guarantee profit or protect against loss in declining markets. Indices are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.
Valuation and Other Financial Analysis Endnote
Epidemics, Pandemics, Outbreaks of Disease and Public Health Issues. Neuberger Berman’s business activities as well as the activities of the Fund and its operations and investments could be materially adversely affected by outbreaks of disease, epidemics and public health issues in Asia, Europe, North America, the Middle East and/or globally, such as COVID-19 (and other novel coronaviruses), Ebola, H1N1 flu, H7N9 flu, H5N1 flu, Severe Acute Respiratory Syndrome, or SARS, or other epidemics, pandemics, outbreaks of disease or public health issues. In particular, coronavirus, or COVID-19, has spread and is currently spreading rapidly around the world since its initial emergence in December 2019 and has negatively affected (and will likely continue to negatively affect or materially impact) the global economy, global equity markets and supply chains (including as a result of quarantines and other government-directed or mandated measures or actions to stop the spread of outbreaks). Although the long-term effects of coronavirus, or COVID-19 (and the actions and measures taken by governments around the world to halt the spread of such virus), cannot currently be predicted, previous occurrences of other epidemics, pandemics and outbreaks of disease, such as H5N1, H1N1 and the Spanish flu, had material adverse effects on the economies, equity markets and operations of those countries and jurisdictions in which they were most prevalent. A recurrence of an outbreak of any kind of epidemic, communicable disease, virus or major public health issue could cause a slowdown in the levels of economic activity generally (or push the world or local economies into recession), which would be reasonably likely to adversely affect the business, financial condition and operations of Neuberger Berman and the Fund. Should these or other major public health issues, including pandemics, arise or spread farther (or continue to worsen), Neuberger Berman and the Fund could be adversely affected by more stringent travel restrictions (such as mandatory quarantines and social distancing), additional limitations on Neuberger Berman’s (or the Fund’s) operations and business activities and governmental actions limiting the movement of people and goods between regions and other activities or operations.
Valuation Risk. Due to the illiquid nature of many Fund investments, any approximation of their value will be based on a good-faith determination as to the fair value of those investments. There can be no assurance that these values will equal or approximate the price at which such investments may be sold or otherwise liquidated or disposed of. In particular, the impact of the recent COVID-19 pandemic is likely to lead to adverse impacts on valuations and other financial analyses for current and future periods.
The Swiss Re CAT Bond Total Return Index is a non-investable index that tracks the total return of a representative basket of the global catastrophe bond market, excluding life and health catastrophe bonds and zero-coupon bonds. Bonds within the index are weighted by notional size. Swiss Re launched its CAT Bond Index in 2007, tracking the performance of CAT bonds since 2002.
The S&P 500 Index consists of 500 U.S. stocks chosen for market size, liquidity and industry group representation. It is a market value-weighted index (stock price times number of shares outstanding), with each stock’s weight in the Index proportionate to its market value.
The ICE BofAML Global High Yield Index tracks the performance of below investment grade, but not in default, U.S. dollar denominated corporate bonds publicly issued globally, and includes issues with a credit rating of BBB or below, as rated by Moody’s and S&P.
The ICE BofAML U.S. Treasury 10 Year + Total return Index is market value weighted and is designed to include U.S. dollar denominated, fixed rate securities with minimum term to maturity greater than or equal to 10 years.
Industry Loss Warranties (“ILWs”) are private investment contracts enabling the transfer of catastrophe risk from the protection buyer to the protection seller. The term “industry loss” refers to the fact that the triggers for the contracts are typically based not on the losses of a specific insurance company but rather on insured losses across the insurance industry as reported by a third-party, independent reporting agent. ILWs are typically fully cash-collateralized by both parties, reducing credit risk. ILWs are short-term instruments, typically 180 days to 365 days in duration, and are self-liquidating. In addition, as they are privately negotiated instruments, ILWs allow for greater customization of risk and return profiles.
Catastrophe Bonds are typically 144A securities structured as floating-rate principal-at-risk notes of 3- to 5-year maturity, and designed to transfer reinsurance risk to the capital markets. A central feature of a catastrophe bond is its trigger mechanism, which defines the type of event that would cause a principal reduction to the notes. The trigger mechanism could be based on actual insured losses of the issuer (known as indemnity cover), industry-index losses (aggregating all insured losses in the covered area) or even parametric data (e.g. wind speed measurements). Today, most catastrophe bonds are indemnity-based, approximately a quarter index-based and the rest in parametric form.
Correlation with Other Asset Classes. Catastrophic events are unpredictable and it is entirely possible that major losses will occur at or about the same time as other components of an investor’s portfolio are also declining in value. In addition, the amount of global capital investing in insurance-related risks may be impacted to some extent by interest rates and other events affected traditional asset classes within the broader capital markets.
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.
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