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Neuberger Berman has announced it will close its Global Real Estate ETF, a fund that struggled to gain traction following its conversion from a mutual fund earlier this year. The asset manager, known for its active strategies, had shifted the fund into the exchange-traded fund (ETF) structure in hopes of capturing investor interest in an increasingly popular vehicle. Despite these efforts, the ETF managed to amass only $6 million in assets under management, falling short of the scale needed to be financially viable in a competitive landscape dominated by low-cost giants.
The decision to liquidate underscores the difficulty smaller and niche ETFs face in an industry where economies of scale are critical. Unlike larger rivals such as Vanguard’s $VNQ or Schwab’s $SCHH, which boast billions in assets and extensive investor bases, Neuberger Berman’s offering failed to differentiate itself enough to attract significant inflows. Analysts point to factors such as low trading volume, limited marketing reach, and its inability to significantly outperform its benchmarks in a sector weighed down by rising interest rates. Real estate assets, in general, have seen suppressed performance this year as inflationary pressures and elevated borrowing costs dampened investor sentiment.
The broader adoption of active ETFs has risen in recent years, with some fund managers transitioning from mutual funds to ETFs to appeal to cost-conscious investors and benefit from greater tax efficiency. However, Neuberger Berman’s experience illustrates the risk of conversion strategies without adequate preparation or differentiation. The real estate sector, already facing headwinds such as commercial property devaluations and tight credit conditions, further constrained the fund’s appeal. This development raises questions about the sustainability of niche ETFs in a market increasingly favoring large, well-established players with more resources for promotion and investor outreach.
While the closure of the fund might seem like an isolated incident, it speaks to larger trends within investment management. ETFs have amassed over $7 trillion globally, attracting significant inflows away from traditional mutual funds, yet not every launch is a success story. Neuberger Berman’s exit reflects the challenges of operating in a crowded and cost-sensitive landscape, where merely joining the ETF wave isn’t enough. This liquidation may prompt smaller players to reconsider launching or converting funds without a clear differentiated strategy, especially in sectors that are currently out of favor with broader markets.
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