ETF of the Week: Neuberger Berman Disrupters ETF 'NBDS'

NBDS is an actively managed fund that invests in companies that are either set to disrupt current markets or are creating new markets through their innovation. It’s a fund in a suite of new actively managed ETFs from Neuberger Berman, a well-established mutual fund firm that has made the transition to ETFs at what Lydon believes to be a good time for funds like this.

“First of all, this is a disrupter type of portfolio: many technology stocks, companies that are growing at a pretty favorable rate,” Lydon said.

While tech stocks and disruptive style ETFs have taken large hits in the last year with many of the tech giants off of their valuation highs, the investment strategy of NBDS offers diversification opportunities for portfolios during a difficult time for markets. The fund utilizes the experience of its portfolio managers who have been managing mutual funds for decades to select stocks and invests across sectors instead of concentrating within just a singular sector.

“When things are tough in the markets, a lot of people do turn to active management because they want their managers to be a little bit discerning about the underlying companies that they’re buying,” Lydon explained.

Jaffe expressed concern at the diversification potential of the portfolio, as it does contain a number of mega-cap companies within it that are likely already represented in an existing portfolio. Lydon explained, however, that while the portfolio may carry some correlation, it currently has 29 holdings that are specifically targeted to the theme of disruption versus simply a broad allocation that an index provides.

“With indexing, there’s not a lot of change, and you can imagine how some of these companies have changed tremendously; things like inflation, pipelines being disrupted, have had a negative effect on many constituents in the major market indexes, but those major market indexes can’t act quickly,” Lydon said.

The current market environment is one that is presenting active managers a number of opportunities that funds likes NBDS could stand to benefit from.

As a newer fund, Lydon explained that given the underlying companies and the liquidity, it’s investible right from its recent launch in April, particularly with Neuberger Berman at the helm.

“They want to show, from the start, that they deserve to be in the ETF business and they have something different to offer,” Lydon said.

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