Neuberger Berman Group has offloaded approximately $1.2bn in securities backed by cash flows from a suite of funds under its management, a strategic move designed to bolster liquidity for the asset manager, according to a report by Bloomberg.
The transaction, structured as a collateralised fund obligation (CFO), included bonds rated A and BBB-, alongside a first-loss tranche, according to sources familiar with the matter.
The bonds are secured by interests in a diverse mix of both legacy and newly launched private capital funds, spanning strategies such as private equity, private credit, and secondaries, the sources revealed. Evercore acted as the advisor on the deal.
The securitisation attracted interest from a range of institutional investors, including insurance companies, family offices, and other entities, as confirmed by Peter von Lehe, Head of Investment Solutions and Strategy at Neuberger Berman.
CFOs, which pool cash flows from various funds and package them into bonds with varying credit ratings based on repayment risk and the type of underlying assets, have gained traction in recent years.
These instruments provide general partners with an opportunity to monetise their fund holdings without resorting to more traditional methods like selling portfolio companies.
Insurance companies, in particular, have shown strong demand for CFOs, as these vehicles offer exposure to private capital funds with relatively lower capital charges, in contrast to the higher charges associated with direct private fund investments under National Association of Insurance Commissioners (NAIC) regulations.
The Neuberger Berman deal is notably large compared to other recent transactions, such as Churchill Asset Management’s $750m CFO issuance last month. In 2024, nearly $8bn worth of CFOs were rated by Kroll Bond Rating Agency, marking a year-over-year increase, largely driven by the rise of CFOs backed by secondaries funds.
