GLOBAL - The bulk of Lehman Brothers' asset management business, including the private equity division Neuburger Berman, is being moved into a new independent company carrying the Neuburger name, in a deal won by two private equity firms and its senior management.
Neuburger Berman along with Lehman's fixed income asset management business and selected elements of Lehman Bros' Investment Management's alternatives operations have been bought by Bain Capital and Hellman & Friedman for $2.15bn (€1.4bn), in partnership with portfolio managers, the management team and key members of its staff.
The pension fund mandates and institutional assets currently held by these divisions of Lehman Bros Asset Management will in future be managed by as part of Neuburger Investment Management's $230bn in assets under management, unless pension funds decide to review their arrangements.
The deal still has to clear its regulatory hurdles, including approval through the bankruptcy courts.
But this should effectively mean business as usual for investors, as Bain Capital and Hellman & Friedman have agreed to an all-equity arrangement between the two firms and senior managers are being incentivised to stay long-term as portfolio and senior managers own "significant stake and will increase their ownership over time through an ongoing, equity-based compensation programme", said the firms in a joint statement.
George Walker, who joined Lehman Bros almost three years ago from Goldman Sachs to become global head of investment management will be chief executive of Neuburger IM while Joe Amato will lead Neuburger Berman.
More specifically, the deal will see Neuburger IM take on:
Neuburger Berman, which primarily delivers equities products and services, mutual funds and which already has a strong focus on high-net-worth and institutional clients
Lehman Bros' private funds investment group and its fund of funds- including some elements of hedge funds, and private equity
Secondary private equity and co-investment, which includes its real estate funds marketed to pension funds, and
Several startup private equity businesses including infrastructure and mezzanine debt.
What it will not take on, however, is Lehman's direct private equity businesses such as Merchant Banking, Real Estate, Venture Capital and MLP as well as certain hedge funds and the majority of Lehman Bros Holdings' limited partner investments.
The company's plan is to continue to offer a broad range of products including separately managed accounts, institutional business, fixed income, mutual funds and alternatives assets.
This is seen as good news by Andrew Chapman, pension investment manager at John Lewis plc's pension trust, as the fund in the past appointed Lehman Brothers asset management to look after its commodities mandate, though the new division does now need to rest confidence in the brand behind its products.
"Clearly, it is better to be part of a company that is live rather than dead," said Chapman.
"The investment was held with Gresham Associates and they did the investing so to a degree we are fortunate it was a badged launch. Lehman Brothers was the better name at launch but what they need to do is change the badge," he added.
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