Neuberger & Berman Planning an IPO . . . Now?

Neuberger & Berman, known for its stable of value-oriented mutual funds, is banking that there are enough value-oriented stock pickers in today’s market to justify an initial public offering.

The venerable New York money management firm said Wednesday that it intends to sell stock to the public, joining a list of more than a dozen mutual fund companies that have either gone public or recently announced plans to do so.

The move, expected to raise at least $250 million (although the offering price has not been set), comes at an awkward time--particularly so for asset management firms, analysts say. Competitors such as T. Rowe Price and Affiliated Managers Group began selling stock as the bull market was still raging, but Neuberger & Berman, which has about $59 billion in assets under management, is coming out in uncertain times.

The asset management sector was red-hot over the last two years, as investors have been pumping billions of dollars into mutual funds and 401(k) plans. Since the stock market’s July 17 peak, though, this sector has gone stone-cold.

AMG shares, for instance, have tumbled more than 30% since July 17 to an all-time low and are off nearly 40% from their 52-week high set in May. Shares of Franklin Resources, which manages the Franklin, Templeton and Mutual Series funds, are off nearly 20% since the market peak.

The sector now trades at about a 20% discount to the blue-chip Standard & Poor’s 500, based on its average price-to-earnings ratio versus the P/E ratio of the index.

“With these companies, when the market goes down, there’s a double whammy,” says Barrington Research analyst Alexander Paris Jr. “Not only are these companies’ share prices at risk in the event of a general market decline, their revenues are at risk as well.”

Also Wednesday, Merrill Lynch financial services analyst Mark Constant lowered his earnings estimates for several asset management firms in light of the market correction.

Jeffrey Lane, Neuberger & Berman’s chief administrative officer, says the firm’s 62 partners aren’t concerned.

“We’ve been in this business for 59 years. We’ve come to know that the market goes up and the market goes down. But in the long run, we think going public will improve the value of the franchise.”

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Investing in Investors

After soaring in recent years, stocks of investment management companies have been slumping recently. A look at selected industry leaders:

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% down from Company Ticker Wed. close 52-wk. high Forward P/E* Franklin Resource BEN $40.06 -30.8% 19.3 T. Rowe Price TROW 36.00 -16.0 26.0 Alliance Capital AC 25.00 -13.8 15.0 United Asset Mgt. UAM 26.25 -13.2 20.4 Pimco Advisors PA 31.56 -12.2 12.1 S&P; 500 -7.8 23.1

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*Price-to-earnings ratio based on estimated earnings per share for the next four quarters

Source: Bloomberg News