WHAT’S NEW AT NEUBERGER? QUITE A LOT: TRAVELERS AIDE HIRED TO HEAD 1 OF 3 UNITS AS IPO NOD LOOMS

Though the principals in Neuberger & Berman LLC have yet to decide whether to open the old-line investment house to the public, they have been busy getting it in order.

To better manage the explosive growth it has experienced over the past few years, the 59-year-old New York firm has reorganized itself into three divisions and earlier this month revved up its public relations machine to announce the hiring of Jeffrey B. Lane to head one of them, administration. Mr. Lane is a former vice chairman at Travelers Group Inc. and top lieutenant of Travelers Chairman Sanford Weill.

News of the changes — the other units are high net worth and institutional, which includes mutual funds — comes several months after Neuberger announced that it may follow the lead of other money managers that have raised much-needed capital recently by selling stock. A decision on the offering is expected before autumn. Even if the firm decides to pursue an IPO, its partners have said they will sell only a small portion of the blue-chip company to the public.

growth forces change

Lawrence Zicklin, Neuberger’s managing principal, says the changes — in the works for about a year — are intended to help the firm cope with its recent explosive growth. Neuberger’s assets under management have swelled 106% since January 1994, to $60 billion. Its family of 21 no-load mutual funds accounts for $24 billion, or 40%, of that total.

Still, it could be that the company is seeking to put its best foot forward in preparation for a possible IPO.

“They are adding support where necessary so that they are not perceived as being a vulnerable organization, either as a private firm or one that might have shareholders, which is a smart strategy that a number of firms are following, given the current environment,” says Lawrence Lieberman, managing director of the Orion Group Inc., a mutual fund executive search firm in Princeton, N.J.

In addition to making room at the top, Neuberger has sought to round out its product line and in July 1997 it opened an office in Boston, which serves as a base for its $1.6 billion growth-style management group, headed by former Putnam Investments Inc. portfolio manager Jennifer Silver.

The company rolled out a high-yield bond fund this year and expects to unveil two equity funds by yearend.

The opening of the Boston office signals the first departure from the longtime value orientation at the firm, which was founded in 1939 by legendary value investor Roy R. Neuberger.

More expansion is on the way. Neuberger has explored joint venture opportunities overseas and later this year it intends to launch at least two new growth funds-one small-cap and one large-cap. Mutual fund chief Stan Egener also says the firm is considering offering load funds. Mr. Lane’s ties to Travelers’ subsidiary Salomon Smith Barney would surely be an asset.

While sales remain strong, Neuberger’s fund performance has not been up to its usual standards. Through the first half of 1998, the average Neuberger equity fund returned 10.7%, putting Neuberger 257th among the 580 fund families tracked by Lipper Analytical Services.

“They’ve done well historically, but some of their larger funds seem to be slowing down,” says Michael Stout, an analyst with Morningstar Inc. in Chicago.

The company’s success in the mutual fund business, says Burton Greenwald, a Philadelphia-based financial services consultant, is due largely to its early participation in Schwab’s OneSource mutual fund program and its efforts to garner new business through 401(k) and variable annuity programs.

The firm placed strong emphasis on distribution through financial intermediaries when many no-load firms were convinced that direct distribution was the way to go.

“They are one of the few partnerships still on the Street,” says Mr. Greenwald. “They built an enormously successful high-net-worth asset-management business and because of their success in the mutual fund arena, they have attracted a substantial amount of institutional money as well.”

In addition to heading the administrative division, Mr. Lane, 56, is also a principal and member of Neuberger’s executive committee. He joins the firm this week.

“The executive group hasn’t grown as rapidly as it should have,” says Mr. Zicklin.”Not long ago, we looked at it and determined that we needed to make some changes, including adding an administrative officer. Fortunately for us, Jeffrey was someone we had known for years.” Talks with Mr. Lane began about a year ago when Neuberger was re-evaluating its management structure. Neuberger is a longtime shareholder in and client of New York-based Travelers.

“The growth of the firm caused new needs, and new needs had to be met with more executive talent,” adds Mr. Zicklin, who dismisses the notion that Mr. Lane’s hiring is linked to the possible IPO.

The move to an investment house allows Mr. Lane, who at Travelers was responsible for various administrative functions, to get back to his first love.

“For the last three years, I have not been involved with the asset management business. This gives me an opportunity to return to a business that I love,” says Mr. Lane, who once had helped oversee money management at the Travelers brokerage units but most recently was in charge of such departments as public and investor relations.

“My blood,” he adds, “is moving a lot faster that it has been recently.”

In his new post, Mr. Lane also will oversee operations, compliance and human resources. He insists his decision to leave Travelers was unrelated to its pending merger with Citicorp.

In recent years, Mr. Greenwald says, Neuberger’s biggest challenge has been a “succession-type issue.”

“The problem has always been that the partners there really relish the lack of a bureaucracy and complete freedom to operate in a very collegial environment.The question is whether that type of organization can continue to run as it did under the leadership of some of the senior partners,” the consultant adds.

With the recent changes, Neuberger’s top brass have apparently sought to answer such questions.

Jon Birger contributed to this story.