Neuberger & Berman Management Inc. is seeking a few good mutual fund companies to acquire, according to Stanley Egener, president.
The $8.4 billion mutual fund subsidiary of Neuberger & Berman also plans to break tradition by offering its first load funds, possibly through banks. Using the Hub & Spoke software of Signature Financial Corp., the firm will be able to create load funds from an existing portfolio.
"We're in negotiations with several distributors that would like a spoke with a sales charge into one or more of our portfolios," Mr. Egener said.
It also is seeking fund companies to acquire.
"We would be an eager buyer, and have been in finals in trying to buy other management companies. The problem is when a mutual fund buys another mutual fund, what they really want are the assets. .*.*. Some banks, insurance companies and foreign management companies want everything - back office and operations. For that you pay a lot.
"We're not willing to pay 10% to 15% extra for the trappings."
Neuberger is interested in a small-cap growth fund to complement its small-cap value fund, "an excellent balanced fund," and perhaps an international fund, he said. It offers one international stock fund, launched in 1994, through a joint venture with Banque Nationale de Paris.
Neuberger has benefited from the growth in 401(k) assets and mutual fund assets in general. Since 1992, its assets have grown to $8.4 billion from $5 billion.
Of the mutual fund assets, nearly $3 billion is from institutions led by 401(k) plans; $1 billion is backing variable annuity products; and the rest is retail.
Most of its 401(k) clients have come from alliances with benefit consultants. "I feel one-stop administration and money management is inflexible. If you're unhappy with one you generally have to give up the other," he said.
On the retail side, Mr. Egener sees the greatest potential in the wrap fee business.
"The biggest trend coming in the retail fund area is that we will see an enormous amount of money flow into wrap accounts where the underlying product is a group of selected mutual fund from different management companies. Clearly there's enormous pressure on load funds (with sales loads down to an average of 4% from 8.5% a few years back). On the other hand, people want advice," he said.
Wrap fee programs that charge a fee including asset allocation of 1% to 1.5% of assets will proliferate, he said.
Neuberger funds are available through some wrap programs including one offered by Wheat First Securities. They also are available through fee-only financial planner networks affiliated with discount brokers such as Charles Schwab.