NEW YORK - Neuberger & Berman L.L.C. was terminated by The Common Fund, Westport, Conn., for a $1 billion-plus assignment.
The firm also lost another of its senior fixed-income portfolio managers, William Cunningham.
It's not clear if the two events are connected.
Officials at The Common Fund, which is one of Neuberger's biggest fixed-income clients, if not the biggest, declined comment. Neuberger managed a portion of its short-term fund.
Other institutional fixed-income clients, though, are satisfied with Neuberger.
Industry sources said the assets from the terminated portfolio will be distributed among the three other existing Common Fund managers in the short-term fund.
When asked to comment on the loss of The Common Fund assets, Martin McKerrow, co-director of Neuberger & Berman's fixed-income department said: "We were told it was a consolidation" of the managers in the short-term fund.
"I can assure you our performance has been highly competitive," he said, with the firm continually ranking either first or second relative to the three other managers in the fund.
He didn't have performance numbers for the portfolio directly available, but fixed-income returns of all types have been improved in the last year in particular, he said.
In the Pensions & Investments Performance Evaluation Report, Neuberger's two short-term composites, the limited maturity and low duration portfolios, showed mixed results in terms of returns for the periods ended March 31.
The limited maturity portfolio ranked in the eighth decile in PIPER for the one-year period and sixth for the three-and five-year periods.
The low duration portfolio ranked in the sixth decile for the year, in the eighth decile for the three years, and in the ninth decile for the five-year period, according to PIPER.
Regarding Mr. Cunningham's departure and the loss of The Common Fund assignment, Mr. McKerrow said: "To my knowledge, there is no connection." He noted Mr. Cunningham is moving from an investment management to a sell-side position.
It could not be learned if Mr. Cunningham was involved in managing The Common Fund assets.
Mr. Cunningham, who was a senior portfolio manager, left Neuberger for Merrill Lynch Global Securities Research, New York, where he will work in corporate bond strategy. He could not be reached.
Mr. McKerrow said Mr. Cunningham was part of an investment team, and will be replaced, most likely with someone outside of the firm.
But Mr. Cunningham's departure is another in a string of 16 personnel losses in fixed-income portfolio management or in marketing and client servicing since 1994 (P&I, Oct. 28, 1996).
Fixed-income assets under management have been stable around $11 billion, not counting the eventual loss of The Common Fund portfolio, Mr. McKerrow said. The firm has gained and lost clients, with total fixed-income assignments not changing much, he said.
He said Neuberger's total assets under management have climbed to more than $50 billion, from about $45 billion at the end of 1996.
He also noted that Neuberger has added employees in both fixed income and marketing.
Prior to Mr. Cunningham, Neuberger this year lost:
William Hortz, former regional director for institutional services, who joined Peregrine Asset Management (USA), San Francisco, as president;
Dan Dumont, national sales manager of defined contribution and individual retirement accounts, who joined Goldman Sachs Asset Management, New York; and
Patrick Farnan, former senior performance analyst, who joined Bear Stearns Asset Management, New York, as a vice president.
Regarding the changes on the marketing side, Mr. McKerrow said that in a firm of Neuberger's size - close to 1,000 people - there is going to be a certain amount of turnover, particularly given the high demand for investment professionals. He didn't think the departures were unusual.
Personnel changes in 1996 included Theresa A. Havell, a former partner and co-founder of the fixed-income department, who formed her own firm, Havell Capital Management L.L.C., with two other Neuberger employees; Hemont Baijal, a senior portfolio manager; and Julia Wyatt, a senior marketer.
Mr. McKerrow said that until Mr. Cunningham left, there had been no fixed-income personnel losses since Ms. Havell's departure.
Moreover, "with a firm that has been as successful as it has been, we're going to be the subject of raids," he said.
Existing fixed-income clients that were contacted continue to use Neuberger.
"So far, we've been extremely happy with them," said Sylvia Huggins, assistant director in treasury services for Auburn University, Auburn, Ala. Auburn has been a client since March 1996, she said. Neuberger manages $13 million in fixed income for its $200 million endowment fund.
Andrew Bednarz, manager of benefit plan investments for Occidental Petroleum Corp., Los Angeles, said his company continues to be satisfied with Neuberger's performance. Neuberger manages a $50 million grantor trust with an intermediate government and corporate bond benchmark, he said.
Likewise, Ron Sease, controller for the Oklahoma State Insurance Fund, Oklahoma City, Okla., said officials there generally are satisfied with Neuberger's performance. Neuberger manages about $90 million in fixed income for the $720 million fund.