Q: You seem singularly focused on Neuberger’s culture.
A: I’m trying to figure out, are people proud to work at the firm and what some people call enablement — is the firm getting the very best from me or am I not able to fully contribute because … the technology stinks? Or my boss is a jerk? Or some work practices don’t make sense? Or I’m in the wrong role, for whatever reason?
Q: You’ve talked about “measuring” Neuberger’s culture.
A: Things I look at that correlate with strong culture (include) retention rates … particularly for senior investors. (Meanwhile) we’re launching our employee survey in the next week or so. We do it periodically, every 18 months or so. We ask, I think, 83 questions. I will read all 2,800 responses.
Q: Do the responses lead to change?
A: All the time. You’ll see it in the six to 12 months after we do the survey. There will be 10 different things that will be changed — oftentimes (touching on) individual team dynamics. For example, a few cycles ago one particular team scored very low on how comfortable they felt disagreeing with their boss. So, I got on a plane and went and visited with the leader of the team and the people on the team … and that changed.
Q: How much importance do you ascribe to that kind of fine-tuning?
A: We’re a people business. Those are our assets. It’s not machines or a brand. We’re a team and so how we get the best out of our individuals and how we function as a team and how we deliver for clients is absolutely fundamental to what we do.
If you get it right, it’s an enormous source of competitive advantage and if you get it wrong it can be disastrous.
People focus so much on strategy. Strategies are easy to copy. Cultures are really hard to copy. Neuberger has had a pretty terrific run over the course of the past decade and a half. How much of that has been great strategy versus how much of that has been culture? I would say more of it is a function of the culture that we’ve built and improved, as opposed to that we picked a radically different strategy than our peers.
Q: Did Roy Neuberger, who founded the firm in 1939 and died in 2010 at the age of 107, play a big role in defining that culture?
A: What Roy did, I think, particularly well was he stepped down as being CEO relatively quickly … and as owner and founder (worked) to build a firm that really supported its portfolio managers (and) its investment teams. I think that was absolutely definitional.
Q: After 16 years at the helm, are you still having fun?
A: I love what I do. I’m proud to work here. I’m excited about where we’re headed. I’m 55 — relatively young, I think, so feel like I’ve got another decade plus — a lot left in the tank.
Q: Some observers question whether recent senior executive departures at BlackRock are a function of long-time president and CEO Larry Fink’s continued reign at the $11.6 trillion behemoth he led the way in building. Could extending your stay at the helm lead to similar turnover?
A: The CEO matters more in a top-down driven firm. We’re a bottom-up driven firm and we function more as a partnership — super collaborative. If I got hit by a bus, the firm wouldn’t miss a beat.
Q: No power-hungry, egomaniacal money managers at Neuberger?
A: Not that I’ve found over 18 years, but perhaps somebody will shock me in the future.
Q: Neuberger Berman, a private company for most of its long life, went public briefly in 1999. Are you wedded to remaining private going forward?
A: Our structure is an enormous source of competitive advantage in terms of keeping people. Most of our competitors have to take 40% of pre-tax revenues and give it to public shareholders or a corporate parent. The fact that we take that same 40% and give it back to our employees — either in the context of compensation or in the context of returns or in the context of additional investment — is huge. Anyone who has managed more than one person knows that if you had just x percent more — 3% more, 5% more, whatever it is — you could make everybody happy. As a leader, having 40% more … makes the race a little less fair.
Another great benefit is people are able to take a much longer-term point of view, so the challenges that peers face in terms of having to deliver, for equity portfolio managers who are measured on daily, weekly, monthly, quarterly, annual performance, is just a very different lens than an employee-owned firm makes decisions about.
Q: Speaking of long-term, it seems as if a combination of domestic economic challenges and geopolitical tensions have taken the bloom off the China rose, a market Neuberger has been at the forefront of, among foreign managers investing to build a business there. Does China still burn bright on Neuberger’s radar screen?
A: It’s obviously tricky given the political conflict but I believe we are a force for good, and for us this is a super long-term investment. We had no expectation that the business would be large or profitable anytime soon. The challenges that the Chinese economy and markets have faced mean that any prospective financial returns are yet more distant than originally envisioned.
Still, I’m pleased with our progress, with our fund management company (in Shanghai) investing about 18 billion renminbi ($2.5 billion) of Chinese money in China — modest but growing. We continue to help the most sophisticated Chinese institutions invest globally. But business helping global investors invest into China has been fairly hard hit, given the geopolitical tensions.
It’s hard to build into struggling markets but I think it makes us better investors. I’m quite proud of what we’re doing. Our being able to co-exist is in all of our long-term interests. I’m comfortable where we stand but I have no expectation that it will be large or profitable. I just want it to be good.
And if you look at what our focus has been and what our focus will be, a lot of it is around green funds. The Chinese are quite serious about their commitments on the climate change front.
Q: Speaking of climate change, Neuberger appears to be taking an increasingly lonely stance with its sustained focus on stewardship, including ESG and diversity, equity and inclusion-related issues, even as many competitors have grown wary of leaving their heads sticking out above an increasingly politicized parapet.
A: The politicization of (ESG) has been unfortunate. We’re a leader in stewardship and sustainability. It’s important to us. We have huge investments around it. (And) we’re at a super interesting moment where you see many (money management) firms walking back their commitments to engagement.
I haven’t gotten my head around how does capitalism work when nobody’s behaving like an owner? If owners don’t engage and behave like owners, I worry that’s going to create a whole series of long-term systemic issues. So, we’re doubling down on stewardship. We think it’s really important. We think we do it really well. We care tremendously at the same moment that many firms are going the exact opposite direction.
We’re the only firm, broadly, that’s pre-announcing proxy votes, showing our work so people understand. It’s very hard to tell from a yes, no what’s really going on, so we try to explain why we voted a certain way.
Q: Have you had to pay any price in the market for that stewardship stance?
I’m not sure we’re getting tremendous commercial benefit from it. I do get angry phone calls but we think it's the right thing to do. We think that’s our role. We take our fiduciary obligations incredibly seriously.
