Neuberger Berman launched another unlisted closed end fund: NB CrossRoads Private Markets Fund VII LP, a feeder fund that will invest all of its assets in a master fund: NB CrossRoads Private Markets Fund VII Holdings LP. Th
Neuberger Berman is already one of the largest sponsors of unlisted closed end funds.This is the seventh fund in the Crossroads Private Portfolios Series. Neuberger Berman also sponsors the Private Market Access Funds, which provide private equity access to retail investors in a closed end fund structure. These funds typically use a master-feeder structure- in total, they sponsor four active master funds and ~15 feeder funds.
Lets take a look at the strategy and structure of Neuberger Berman’s newest fund.
NB CrossRoads Private Markets Fund VII LP Investment Strategy
NB CrossRoads Private Markets Fund VII LP has one objective: to provide attractive risk adjusted returns to investors. The Master fund will invest in a portfolio of professionally managed private equity funds, and make co-investments in operating companies alongside PE sponsors. It may also make opportunistic investments in private equity secondaries. The Master Fund has a broad mandate and intends to build a portfolio diversified by underlying fund strategy, acquisition method, and geography. Buyouts will be the largest category of investment strategy, followed by venture capital and special situations. Approximately 55-75% of the portfolio will be in primary investments, with the balance in co-investments and secondaries. Geographically, 60-75% of the portfolio will be in the US, 15-30% in Europe, and 5-20% in the rest of the world.
This table summarizes the expected diversification based on underlying fund strategy.
This table summarizes the expected geographical diversification:
The fund follows the capital commitment model typical of private equity funds. The investment period of the fund is 5 years- after that the fund can only make follow on investments in existing portfolio companies and funds.
Fund Structure and Fees
The minimum investment for NB CrossRoads Private Markets Fund VII is $50,000. Only people or entities that are both accredited investors and qualified clients may invest in the fund. The anticipated aggregate offering size is $350 million, but it may be extended at the sponsor’s discretion.
The fund will charge both a base management fee calculated off of capital committed, and carried interest based on realized returns. The preliminary prospectus did not specify the amount of management fees and carried interest. Since the fund invests in a portfolio of private equity funds, acquired fund fees will be a major component of overall costs borne by investors. The underlying funds will have base management fees of 1%-2.5% of capital commitments per year, in addition to incentive fees of 20%-30% of fund profits. The preliminary prospectus did not provide an estimate of acquired fund fees.
How do the fees charged by the NB CrossRoads Private Markets Fund VII LP compare to other unlisted closed end funds? We recently published a whitepaper on fee structures in the unlisted closed end fund space. To access this whitepaper, sign up for a Premium Membership.
About Neuberger Berman
Neuberger Berman Investment Advisers LLC, and NB Alternatives Advisers, LLC ,will serve as the advisor and subadvisor, respectively. According to the firm website, this platform of funds is designed to provide diversified PE access across asset classes, strategies, and geographies. Asset classes covered by Neuberger Berman’s private equity team include buyout, special situations, growth equity, and venture capital. Strategies diversified across primaries, secondaries, co-investments, and direct debt.
The alternatives business is part of a much larger organization. Founded in 1939, Neuberger Berman currently has more than $405 billion AUM. Neuberger Berman has 2,300 investment professionals working in offices across 24 countries.
To learn more about Neuberger Berman’s unlisted closed end funds, as well as private equity funds please visit our Active Funds Page.