Make Your Money
Overview
As interest rates have risen, excess cash balances have been generating attractive yield—but it may be time to think about moving on.
Introduction to Make Your Money Move
Now is the time to push your portfolio's potential.
Navigating investment opportunities can be a challenge—whether it's interest rates, geopolitics or economic uncertainty—but the fundamentals remain the same. Drawing on years of global experience, we identify where to add calculated risk in pursuit of long-term results.
The stage is set. Don't miss the performance.
Fixed Income
We think this moment is about really getting ready to start locking in those yields, having these higher yields for longer. That's why we think it's a huge moment for investors to think about moving out of cash and starting to find those opportunities.
Cash Is Unlikely to Offer Today’s Rate Forever
Source: Refinitiv, Neuberger Berman. Data as of February 5, 2024.1
Generating Income
Market participants think cash rates are on their way down, from more than 5.5% today to more like 4% in a year’s time. In comparison, investing in longer duration bonds today offers the opportunity to enjoy that yield until the bonds mature.
Equities
In our view, when we think about where and how to invest this excess cash, we actually see those three different objectives being represented. We see the opportunity to generate income with potentially modest price volatility or some diversifying characteristics.
We see the opportunity to get some equity market exposure, and then we see the ability to potentially diversify some of that risk, particularly with cash going into a diversified portfolio.
Equities Have Historically Performed Well During and After Rate Hikes
Source: Bloomberg, Neuberger Berman. Data as of December 31, 2023.
Getting Equity Market Exposure
Over the past 25 years, when the S&P 500 Index multiple was between 18 and 20 times, the average subsequent one-year excess return over cash was 4.7%. In addition, if rates have peaked, the historical data suggests to us that equities are likely to outperform over the next 12 months.
Alternatives
Accessing companies that are different from many of the companies that you get if you're in the public markets… The short-term gyrations of the market and volatility tend to be a bit less if you're in a private equity investment.
Hedge Funds, Commodities and Private Equity Can Diversify a Traditional Portfolio
Source: Neuberger Berman. Data as of December 31, 2023.2
Seeking Diversifying Risks
As you move out of cash and take more risk in fixed income and equity markets, also consider alternative investments that can add diversification and could help reduce volatility.
Explore Our Portfolio Solutions
Anchored by a global investment manager, NB Private Wealth offers you a full range of innovative institutional-quality investments, spanning public and private markets, and customized to fit your goals and objectives. Our unique structure as an independent, employee-owned firm defines true partnership at its core, creating a unique alignment with you and your purpose.
PORTFOLIO SOLUTIONSGet in touch with us
1Refinitiv, Neuberger Berman. Data as of February 5, 2024. Short-duration IG corporate bond index is the ICE BofA 1-3 Year U.S. Corporate Index. U.S. municipal bond index is the ICE BofA U.S. Municipal Securities Index. Tax equivalent yield is for an investor in the highest federal U.S. tax bracket. Current yield of the U.S. two-year Treasury is the coupon rate divided by the current bid price.
2Neuberger Berman. This is for illustrative and discussion purposes only and does not constitute an offer or solicitation with respect to the purchase or sale of any security. Any investment decision with respect to an investment in a private fund should be made based on the information to be contained in the private placement memorandum and the limited partnership agreement of the applicable fund. Past performance is not indicative of future results. “Bonds” represent the Bloomberg U.S. Aggregate Index, ”Stocks” represent the S&P 500, “Private Equity” represents the Burgiss Private Capital index, “Hedge Funds” represent the HFRX Global Hedge Fund Index and “Commodities” represent the Bloomberg Commodity Index. This hypothetical portfolio is not a suggestion, projection or guarantee that the returns will be realized or achieved or that an investment strategy will be successful. Neuberger Berman’s ability to achieve the hypothetical portfolio returns is subject to a range of factors over which Neuberger Berman may have no or limited control. The hypothetical portfolio cannot account for the impact that economic, market, regulatory and other factors may have on the implementation of an actual investment program and the future returns of a strategy.
Index Definitions
The ICE BofA 1-3 Year Euro Corporate Index measures the market capitalization-weighted performance of public debt of investment-grade corporate issuers, with maturities of between one and three years, issued and denominated in U.S. dollars.
The ICE BofA U.S. Municipal Securities Index tracks the performance of U.S. dollar-denominated investment grade tax exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. Qualifying securities must have at least one year remaining term to final maturity, at least 18 months to final maturity at the time of issuance, a fixed coupon schedule and an investment grade rating (based on an average of Moody’s, S&P and Fitch).
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 Bloomberg U.S. Intermediate Government Bond Index measures the fixed-rate government-related U.S. bond markets with a maturity greater than one year and less than 10 years.
The Bloomberg U.S. Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.
The Burgess Private Capital Indexes include 132 indexes which cover the spectrum of private capital asset classes including private equity and private capital, private debt and private real assets both globally and by region.
The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies; including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus.
The Bloomberg Commodity Index is composed of commodities traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which trade on the London Metal Exchange (LME). The index is calculated on a total return basis and reflects the return on fully collateralized position in the underlying commodity futures.
Disclosures
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. Neuberger Berman products and services may not be available in all jurisdictions or to all client types.
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