Additional Disclosures
Index Definitions
The Bloomberg U.S. Government Index includes Treasuries (public obligations of the U.S. Treasury that have remaining maturities of more than one year) and U.S. agency debentures (publicly issued debt of U.S. Government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. Government).
The Bloomberg U.S. Mortgage Backed Securities (MBS) Index covers agency mortgage-backed passthrough securities (both fixed-rate and hybrid ARM) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). Introduced in 1986, the GNMA, FHLMC, and FNMA fixed-rate indices for 30- and 15- year securities were backdated to January 1976, May 1977, and November 1982, respectively. Balloon securities were added in 1992 and removed on January 1, 2008. 20-year securities were added in July 2000. On April 1, 2007, agency hybrid adjustable-rate mortgage (ARM) passthrough securities were added to the U.S. MBS Index. Hybrid ARMs are eligible until 1 year prior to their floating coupon date.
The Bloomberg U.S. Corporate Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers that meet specified maturity, liquidity and quality requirements. The Index was launched on January 1, 1973.
The Citi Legacy RMBS Index is a calculation of monthly total returns among pre-crisis P&I paying, non-exhangeable non-agency RMBS, utilizing cashflows reported by Intex and month-end prices from IDC. Returns are computed for the overall market and for each credit subsector. To eliminate the impact of data errors and settlements, the top and bottom 5% performers are not included in the calculation.
The Morningstar LSTA U.S. Leveraged Loan Index is a market-value weighted index designed to measure the performance of the market in U.S. syndicated, term leveraged loans that are held within top-tier institutional investor loan portfolios tracked by PitchBook and LCD.
The Bloomberg U.S. Corporate High Yield Bond Index covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes Emerging Markets debt. The Index was created in 1986, with index history backfilled to January 1, 1983.
The JPMorgan Emerging Markets Bond Global Diversified Index (EMBI GD) includes U.S. dollar-denominated Brady bonds, Eurobonds, and traded loans issued by sovereign and quasi-sovereign entities. The EMBI GD IG is a subset of EMBI GD containing only securities where the middle rating of Moody’s Fitch, and S&P is Baa3/BBB-/BBB- or above. The EMBI GD HY is a subset of EMBI GD containing only securities where the middle rating of Moody’s Fitch, and S&P is Ba1/BB+/BB+ or below.
The JPMorgan Corporate Emerging Markets Bond Diversified Index (CEMBI) is a market-capitalization weighted index of corporate bonds issued by entities in emerging countries. The CEMBI D IG is a subset of CEMBI D containing only securities where the middle rating of Moody’s Fitch, and S&P is Baa3/BBB-/BBB- or above. The CEMBI D HY is a subset of CEMBI D containing only securities where the middle rating of Moody’s Fitch, and S&P is Ba1/BB+/BB+ or below.
The JPMorgan Collateralized Loan Obligation Index (CLOIE) is the frst total return benchmark for broadly-syndicated arbitrage US CLO debt. CLOIE tracks US $644 billion in debt from broadly-syndicated, arbitrage floating-rate CLOs, approximately 93% of the total US CLO debt stock, across 1,400+ transactions and 8,200+ tranches managed by 130+ CLO managers.
The Bloomberg ABS Index tracks the investment grade ABS components of the Bloomberg U.S. Aggregate index. Securities must be rated investment-grade by at least two of the following ratings agencies: Moody’s, S&P, Fitch. If only two of the three agencies rate the security, the lower rating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment-grade. Securities must be ERISA eligible under the underwriter’s exemption. 144A securities are not included. The ABS index includes pass-through, bullet, and controlled amortization structures. The ABS index includes only the senior class of each ABS issue and the ERISA-eligible B and C tranche. The Bloomberg ABS A 1-3 yrs is a subset of Bloomberg Barclays Capital ABS limited to securities with median rating A and weighted average life between 1 and 3 years, and the 125 bps spread comes from internal analytics at Neuberger Berman. The Bloomberg Barclays Capital ABS A 3+ yrs is a subset of Bloomberg Barclays Capital ABS limited to securities with median rating A and weighted average life greater than 3 years, and the 125 bps spread comes from internal analytics at Neuberger Berman. Bloomberg Barclays Capital ABS BBB 1-3 yrs is a subset of Bloomberg Barclays Capital ABS limited to securities with median rating BBB and weighted average life between 1 and 3 years, and the 250 bps spread comes from internal analytics at Neuberger Berman. The Bloomberg Barclays Capital ABS BBB 3+ yrs is a subset of Bloomberg Barclays Capital ABS limited to securities with median rating BBB and weighted average life greater than 3 years. The 250 bps spread comes from internal analytics at Neuberger Berman.
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 MSCI EAFE Index aims to capture the performance of large and mid cap quality growth stocks across 21 developed market countries excluding the U.S. and Canada.
The MSCI Emerging Markets Index is a market-value weighted index designed to represent the performance of large- and mid-cap securities in 26 emerging markets.
The NCREIF Fund Index—Open-End Diversified Core Equity Fund Index (NCREIF ODCE) is a capitalization-weighted, gross of fee, time-weighted return index of the performance of the net invested capital of open-end funds whose investing style typically reflects lower risk investment strategies utilizing low leverage and generally represented by equity ownership positions in stable U.S. operating properties diversified across regions and property types.
The NCREIF Property Index is a measurement of U.S. property-level returns dating back to 1977, comprised exclusively of operating properties acquired, at least in part, on behalf of tax-exempt institutions and held in a fiduciary environment, weighted by market capitalization.
The Markit iBoxx EUR Liquid Non-Financials Index is a subset of the Markit iBoxx EUR Non-Financials bonds universe and contains up to 20 investment grade rated non-financial securities with maturity 5-7yrs and a BBB rating. All bonds need to have an average rating of investment grade from Fitch Ratings, Moody’s Investor Service and Standard & Poor’s Rating Services.
The Burgiss Global Buyout Funds Index tracks the performance of closed-ended private equity buyout funds in the Burgiss Manager Universe, converted to U.S. dollars.
The Burgiss U.S. Private Debt Funds Index tracks the performance of U.S. closed-ended private debt funds in the Burgiss Manager Universe.
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Asset Class Assumptions & Estimates
Capital market assumptions used herein reflect Neuberger Berman’s forward-looking estimates of the benchmark return or volatility associated with an asset class. Estimated returns and volatilities are hypothetical return and risk estimates generated by Neuberger Berman’s Institutional Solutions Group. Estimated returns and volatilities do not reflect the alpha of any investment manager or investment strategy/vehicle within an asset class. Information is not intended to be representative of any investment product or strategy and does not reflect the fees and expenses associated with managing a portfolio or any other related charges, such as commissions and surrender charges. Estimated returns and volatilities are hypothetical and generated by Neuberger Berman based on various assumptions and inputs, including current market conditions, historical market conditions and subjective views and estimates. Capital market assumptions shown reflect Neuberger Berman’s long-term (20+ years into the future) estimates or intermediate-term (5-7 years into the future) estimates which are reviewed at least annually. Results will differ depending on whether they are based on Neuberger Berman’s long-term (20+ years into the future) or intermediate-term (5-7 years into the future) capital market assumptions. Neuberger Berman’s capital market assumptions are derived using a building block approach that reflects historical, current, and projected market environments, forward-looking trends of return drivers, and the historical relationships asset classes have to one another. These hypothetical returns are used for discussion purposes only and are not intended to represent, and should not be construed to represent, predictions of future rates of return. Actual returns may vary significantly. Neuberger Berman makes no representations regarding the reasonableness or completeness of any such assumptions and inputs. Assumptions, inputs, and estimates are periodically revised and subject to change without notice. Estimated returns and volatilities should not be used, or relied upon, to make investment decisions.
Rate of Return Estimate: Rate of return or geometric return is a measure of average returns of an investment over a period of time. Geometric rate of returns are typically referred to as annualized compound rate of returns and are always less than or equal to the arithmetic mean return of the same time series. Geometric rate of returns are used for straight-line calculations within the analysis, for example, the cash flow calculations. In straight-line calculations, each year is represented as a gain, so the compound (geometric mean) rate of return is used to adjust for the amount needed to make up for a loss in a given year. For example, if you lose 5% in one year, and gain 5% the year after, you still have less than you started with at the beginning of year one.
Arithmetic Mean Estimate: Arithmetic mean or average return is calculated by dividing the sum of a series of numbers by the number of overall items. This is more typically thought of as an “average” of the data set. Arithmetic mean or average return ignores the impact of compounding in the context of analyzing investment returns and is the simple average of returns observed over a period of time. Arithmetic mean returns are used in this material and, if applicable, the Efficient Frontier, because, through randomization, losses and gains are being accounted for each year.
Standard Deviation: A statistical measure of the volatility based on the distribution of a set of data from its mean (average value). For example, a portfolio with an average return of 10% and a standard deviation of 15% would return a result between -5% and +25% the majority of the time (68% probability or 1 standard deviation), almost all of the time the return would be between -20% and +40% (95% probability or 2 standard deviations). If there were 0 standard deviation then the result would always be 10%. Generally, more aggressive portfolios have a higher standard deviation and more conservative portfolios have a lower standard deviation.
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