MutualFundWire.com: The SEC Approves Neuberger's Request

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Friday, November 23, 2012

The SEC Approves Neuberger's Request

Neuberger Berman [ profile] may be one step to creating its own asset allocation mutual funds and other funds of funds. In two sets of filings, the U.S. Securities Exchange Commission has given three Neuberger companies approval to set up funds of funds that can buy parts of other investment firms as well as other financial instruments.

According to the latest filing, Neuberger Berman Alternative Funds, Neuberger Berman Equity Funds, and Neuberger Berman Management, to “operate as “fund of funds” to acquire shares of certain registered open-end management investment companies and unit investment trusts that are within and outside the same group of investment companies as the acquiring investment companies,” among other things.

According to an earlier filing, this approval is important because federal regulations prohibit “a registered investment company from acquiring shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company.”

Moreover, these regulations (namely parts A and B of Section 12(d)(1) of the Investment Company Act of 1940 which governs ownership in other investment firms) also prohibit “a registered open-end investment company, its principal underwriter, and any Broker from selling the investment company’s shares to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company’s total outstanding voting stock, or if the sale will cause more than 10% of the acquired company’s total outstanding voting stock to be owned by investment companies generally.”

What kinds of assets will these Neuberger companies be able to buy now as a result of this approval?

According to the earlier filing, they would include:

Shares of (i) registered open-end management investment companies that are not part of the same “group of investment companies,” within the meaning of section 12(d)(1)(G)(ii) of the Act, as the Fund of Funds (“Unaffiliated Investment Companies”) and UITs that are not part of the same group of investment companies as the Fund of Funds (“Unaffiliated Trusts,” and together with the Unaffiliated Investment Companies, “Unaffiliated Funds”)2 or (ii) registered open-end management companies that are part of the same group of investment companies as the Fund of Funds (“Affiliated Investment Companies”) or UITs that are part of the same group of investment companies as the Fund of Funds (“Affiliated Trusts,” and together with the Affiliated Investment Companies, the “Affiliated Funds”; the Affiliated Funds and Unaffiliated Funds together are the “Underlying Funds”) and (b) each Unaffiliated Investment Company and Affiliated Investment Company, any principal underwriter for the Unaffiliated Investment Company or Affiliated Investment Company, and any broker or dealer registered under the Securities Exchange Act of 1934 (“Broker”) to sell shares of the Unaffiliated Investment Company or Affiliated Investment Company to the Fund of Funds.