Neuberger Berman Aims to Create ETF Share Class

Neuberger Berman, the asset manager with $474 billion across its investment vehicles, is the latest firm to seek permission from the Securities and Exchange Commission to offer ETF share classes of its existing mutual funds.

The legacy asset manager joins other firms such as Morgan Stanley and Dimensional Fund Advisors in seeking to offer the unique structure, which until recently was exclusively patented by Vanguard for two decades. Neuberger, which manages $966 million in 8 U.S. ETFs, filed on May 9 to list ETF share classes of mutual funds. 

If approved, the filing from Neuberger Berman Investment Advisors LLC would apply to the company’s entire line of mutual funds and allow investors in mutual funds to opt into the more tax efficient and low-cost ETF structure.

“We believe being able to offer ETFs as a class of a mutual fund will be beneficial for both ETF investors and mutual fund investors alike,” a Neuberger Berman representative said in a statement to etf.com.

It is unclear whether the SEC plans to approve the new strategy, which some see as making ETF investors subsidize mutual fund investors. Vanguard group's patent from 2003 expired last May.

ETF Assets Balloon

ETFs have been gaining assets from mutual funds for years, as retail investors and financial advisors alike have been drawn to the low cost and liquidity of exchange traded funds. Over $60 billion in assets has been converted from mutual funds to ETFs since the first ETF conversion in 2021. The U.S. ETF industry’s assets recently reached a high of nearly $9 trillion partially due to the exodus to the vehicles from mutual funds.

Firms such as Fidelity Investments, J.P. Morgan Asset Management, and TCW Group have gone the route of converting mutual funds into ETFs.

Neuberger Berman's largest is the Neuberger Berman Option Strategy ETF (NBOS), which has $458.2 million in assets.

Contact Lucy Brewster at [email protected].