Name: Is There a Bubble in Private Credit? This CEO Weighs In.
Uploaded: 2026-02-19T22:06:00Z
Duration: 21 min 45 s
Description: George Walker, CEO of Neuberger Berman, spoke about the firm's art collection, alternative investments, and much more.

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George Walker, CEO of Neuberger Berman, spoke about the firm's art collection, alternative investments, and much more.

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Is There a Bubble in Private Credit? This CEO Weighs In.

Hello everyone, and welcome to "At Barron's." I'm Andy Serwer. And welcome to our guest, George Walker, CEO of Neuberger Berman. George, great to see you. Thanks for joining us.

Honored to be here, Andy.

So an investment management company, that's what Neuberger Berman is, with what? 558 billion under management in the last report I saw.

Plus or minus

Plus or minus. There's a lot of history. Firms goes back to, what, 1939, but some of the recent history is just unbelievable and fascinating. So can you get into that right away a little bit and tell us about some of the recent history of Neuberger Berman.

I presume you mean not in the past few weeks, but journey out of-

Going back. Global financial crisis.

Yes. I feared that was the question. So, Neuberger Berman was acquired by Lehman Brothers. Lehman Brothers also purchased a firm called Lincoln Capital in Chicago, which was an institutional fixed income firm and a small private equity fund of funds called the Crossroads Group in Dallas, put them together as the third operating division of Lehman Brothers, which they call investment management. Ship hit the iceberg. The other parts of Lehman Brothers were sold to Barclays in the United States and Nomura, outside the United States, the capital markets and investment banking business. And through a long story, which I'd be happy to share, the employees of Neuberger Berman were the employees of the investment management division, were able to purchase the firm from the creditors. And so it is operated as a wholly owned, wholly employee owned. We have 817 owners firm since 2008.

Right, I wanna talk about that private ownership and how that differentiates you a little bit later, but first I wanna ask you about just the lines of business known as an old line money management firm value shop, but you're a lot more than that these days, right?

It's always interesting to have people tell me what we're known as because we're known by different people in different ways and in different markets. But yeah, so roughly a third of our business is stock picking, historically a strong value orientation. Roughly a third of our business is fixed income and roughly a third of our business is alternatives. The business is still predominantly institutional, about 70% of our assets, 30% are for individuals, half of which would be through financial advisors at Morgan Stanley, or Merrill Lynch, or Nomura or Julius Baer, or whomever. So that's the broad contours of the firm.

And how has have those assets grown? How has the pie shifted, just say, since the global financial crisis? Where have you been accentuating?

The firm has grown nicely. Under employee ownership, we've had, knock on wood, good success. Each of those three units are materially larger than they were. I'd say the stock picking part of the business is the toughest part for reasons we're all familiar with, but markets keep appreciating so well such that the business each year has sort of record revenues and record profits. From a client flow perspective, the fixed income business and the alternatives business have grown substantially.

And so the organic growth, the actual outside money coming in, is from those two pieces of the pie more

Predominantly, those two pieces, yes. You do still have some value, that core value part of the business, like Marvin Schwartz who's worked there since 1961, he's still active in working there, right?

I don't look at card swipes by employees to check hours in the office, but if I did, my hunch would be Marvin might be in the top five of our 3,000 employees in terms of hours work. So he's not only there. He's really there. And he's not only a brilliant investor and a wonderful human being, but is such an important cultural touchpoint for the firm. So very much the equity business is incredibly important business for us. We've been able to deliver spectacular returns for clients over time, and we're very optimistic about the business. It just faces headwinds as the world. When I started in the business, passive was less than 5% of the world. It's now the majority. And so that has made it challenging, but I love our equity business and our fixed income and alternatives businesses are attracting, continue to attract lots of additional new capital each year.

All right, I promised to ask you about the alternatives business, but one more. Going back in the past icon question, which is about Roy Neuberger, one of the firm's two founders, a legendary character on Wall Street, and a great art collector. Does the firm have any of his art collection still?

The firm still does. Actually, it's interesting, the firm... Roy wanted to be an artist, and he painted, and he realized he couldn't make a living doing it. He was good, but not great. And so he decided, but he happened to be a great investor. He decided when he made money, he would use it to purchase art, but he would never pay much for... He was not gonna buy an expensive piece of art. He wanted to support struggling artists. He built an extraordinary collection worth a tremendous amount of value. Governor Rockefeller came to him and said, "If you give us your best pieces, we'll open a museum and put your name on it." It's the Neuberger Museum up in Purchase. He kept a chunk of it, and then a chunk of it remained at the firm. When Lehman failed, the creditors came in quickly. They looked at me as a liability, I think, and looked at the art as an asset. So they immediately seized all of the art, but then took it. They were wise and took it to auction a few years later, actually rented it to us for a dollar a year just to store it on our walls. And we were able to purchase something like 95% of the pieces for something like 7% of the value. So we didn't have the money to purchase the super important Richard Prince piece that sold for a gazillion dollars or the seminal Damien Hirst piece, but we still have the overwhelming majority of the collection, which is something that our employees and clients enjoy.

Wow, I had no idea. That's amazing. I heard that he was the reason why he got into supporting new artists was because he read about Vincent Van Gogh. I think that's-

Dying poor, that no one recognized him during his lifetime.

I think that's right, but it was driven by a... You're exactly right, but it was a philanthropic goal of, gosh, if somebody had purchased more of his art, he may have continued to produce art, and what a horrible end to such a genius life. So that led him in part to be aggressive about purchasing lots of art from young talented artists in part to build a collection, but equally importantly, frankly, just to support their work.

And Roy passed away in 2011 at age 107.

I think he was the oldest living New Yorker at the moment that he passed away. We had him in the office about a year before that. He was an extraordinary man, an extraordinary investor, and his legacy is still very much with us,

An amazing character. Shifting gears, alternative assets.

Sure.

And so how much of that is going to institutions at this point, George, and how much of it is going into the retail pipeline?

In terms of our business, our business is predominantly institutional, more so than retail. Retail is important to us, but we, for a couple of reasons, have not been as aggressive as many of our peers have been. One is because, for many firms, it's been a brutal... They've had to do it by virtue of necessity, frankly. It's been a very tough fundraising environment. If you're on a foundation board and you have 50% of your assets committed to alternatives, you probably had distributions for many years in the 30% on that. So 30% on 50%, so 15 coming out. You'd take your five and spend it, and then another 10 would go back in. But we've had three years where distributions have been around 10% industry-wide. And so people haven't had any capital to reinvest after they've made the payouts. And so there are a lot of folks who have raced to intermediary, frankly, out of necessity, we've had the good fortune of continuing to have institutions allocate more capital to us, so haven't been pushed there. And second, there are parts of the intermediary market that we've been skeptical about. We're worried about, for example, in some of the credit vehicles, the need to deploy capital as it comes in, as opposed to when you see opportunity. So we've been slower to set up some of the private credit vehicles. We've been slower on the secondary front in private equity where others have taken advantage of what I think of as unfortunate accounting anomalies to race in and purchase secondaries. We've launched a vehicle that consists largely of co-investments and some continuation vehicles, and that's harder. Our portfolio happened. That particular vehicle has about a hundred individual investments in them, but half of which we've made over the past two years. Those haven't been marked up significantly. Whereas if you do a secondary, you get this sort of performance pop. So that vehicle in the US is about $2 billion. It's important. We're super proud of it. I think it's going to be a great long-term vehicle, but it lacks the sizzle of something that's realizing these enormous sort of short term gains.

So safe to say that you've been more conservative in this area.

Absolutely.

And so, George, do you think there's a bubble in private credit? Would you go that far?

I think we are absolutely, and I'm gonna steal someone else's line, but I can't remember who said it, but I loved it. We are definitely in a bubble of talking about private credit as a bubble.

That's pretty good. That's apt.

I don't think it's a bubble. I think if you or I win the lottery and we go to, insert name of great financial advisor, they will probably tell us to allocate 20, 30% of our capital to illiquid investments. As they look across their book, you see numbers like two and 3%. So there's a lot of... People saving for retirement don't need daily liquidity on 100% of their assets for assets that they need in 20, 30, 40 years. And they should be able to capture that illiquidity premium. So I think there will be... This is going to be a long-term trend. There will be mistakes made along the way. There will be a series of hiccups. There will be all sorts of... It'll be three steps forward, one step back, but I think it'll continue. In terms of systemic risk, I just haven't, the way others have talked about it, I don't see it, from my seat and grounded more in our clients. Most of our clients, for example, in private credit, are taking capital. They tend to be taking capital out of public markets, public equities and allocating it to private credit. So they are, frankly, probably have less volatility or risk than they previously had. This is not increasing risk. It's often decreasing risk. It's diversified. The entities themselves, great big pension funds are not levered, so this is not going on a levered guaranteed bank balance sheet. So I think that the general expansion of private credit is risk-reducing. But there are gonna be... A lot of folks have raced in. Some are very, very good at underwriting, some are not. As we go through a cycle and we have not gone through a cycle yet, we're gonna see who's good and who's not good, and they're gonna be guys who lose money, and that's just investing.

And you guys have a stake in Blue Owl, which is in that business? The part of that company comes from Neuberger Berman, correct?

Yes, we built an effort called Dial, a team led by guy named Michael Rees, together with a series of folks at the firm, Tony Tutrone, Andy Komaroff, and others, built an extraordinary business. They, over time, wanted to get into things like the secondary business. We already have a very large secondary business. I didn't want to have dueling efforts within the firm. And so we spun off Dial. It merged with a firm called Owl Rock and then created Blue Owl. The equity that that we received in that, we actually put into a vehicle outside of our operating business. So our employees own a stake in Blue Owl, but the firm, as we know, is totally independent from Blue Owl.

Right, and maybe that's a good segue, George, to ask you about the fact that Neuberger is private, and keeping it that way, and what that means to the culture, to the employees, as well as the customers. Why does it matter? How does it differentiate yourselves in a positive way?

I think, for anyone who's operated a business, if you think about it from a P&L perspective, most firms in our industry spend, for every revenue dollar they have, they spend about 20 cents on non-personnel expenses, buildings, travel, things like that, marketing. 40 cents on employees, and then operate with a 40% pre-tax margin. That goes to some combination of the government and owners. By virtue of being 100% employee-owned and having that ownership be brought in deep. We're not 100% employee-owned in the way some places are where one guy owns 98 and everybody else owns two. Ours is broad and deep. We actually operate the business a little differently. So it's the same 20, but instead of spending 40 on comp, we spend 60. And then the pre-tax profits, many of which then go back to 817 of our 3,000 employees. So, how many times... If you've managed a business, you've managed many folks. Have you thought to yourself, "If I only had 5% more, I could make everybody happy." or "If I had 10% more, I could hire these people and uncover interesting, important things for readers," or "I could add a new tech feature," or "I could do this or I could do that."? Not having that third mouth at the table, having it be just us and clients gives us a far greater capacity to retain people, and our retention rates are pretty exceptional. Virtually, we're the same people in the same seats year after year after year after year, going back to Marvin, and gives us the capacity to continue to invest in the business, hire additional research people, spend more on AI, improve our reporting, all of that, and that's for the benefit of clients. We also have tried to build all of our remuneration schemes around clients. So deferred comp, for example, is invested side by side into essentially client portfolio. So just having two people at the table is an enormous advantage versus having two plus a third common shareholder, corporate parent, whomever, who, frankly, A, is taking a lot of the revenues appropriately so for the role they play, and two, has just different objectives. Their objective is growth cash flow. That's not employee's objective, and that's not client's objective. I think a lot of the success that we have, people will attribute it, to the extent anyone were to attribute it to great leadership, I would love to disabuse them of that notion. The structure is enormous competitive advantage.

While I have you here, George, I have to ask you about your take on the economy and the markets.

Sure.

Where do things stand in your mind?

I think the economy is strong. I think their companies, and we get about 1,400 companies a year that come through our office, are in a good place in terms of their balance sheet. They're feeling good in terms of their business. We have fiscal tailwinds in terms of stimulus that's still being put into the economy. I think we'll continue to have a few additional rate cuts. So we'll have monetary stimulus, all of which is occurring against the backdrop of this extraordinary generational investment in AI. And so there are an awful lot of tailwinds that are helping propel the economy and markets. There are still enormous long-term challenges that I sure wouldn't wanna dismiss, and frankly I'm frustrated that we're not doing more to address and we live in obviously an uncertain world, but right now I'd say, overall, economy and markets, we're quite constructive on. We do worry about, K-shaped economy and folks at the lower end, both in terms of what that means for the economy longer term and also living in a sort of fair, more just world. But overall, in terms of averages, we have leaned in to risk and have for a while.

And final question and a little bit about you, George. You grew up in St. Louis. A long line family going back or financial executives, business people, prominent business people. Some people might have rebelled, but you seem to have taken on the family mantle and continued doing what some of your, frankly, ancestors have been doing for quite some time. Have you ever given that any thought

I need to lay down on a couch.

Here you are. This is the couch right here.

My father worked at a regional firm. I tried working for him. That lasted about 24 hours. And so my rebellion was to go and show I could do it on my own better somewhere else. And so, in my own mind, I'm a bit of a rebel, but I think your observation that you're a total conformist and you're doing exactly your parents or forefathers, or whatever, would've wished is probably true, but it's not how I see myself.

Got it. All right. Well, it's very kind of you to join us, George Walker, CEO of Neuberger Berman, thank you so much for your time.

Thank you Andy. Privilege to be with you.

This is "At Barron's." I'm Andy Serwer. We'll catch you next time.