Neuberger Berman's Next-Gen Connectivity Fund: A 5-Star Income Play in a Niche Tech Boom

The Neuberger Berman Next Generation Connectivity Fund (NYSE: NBXG) has emerged as a standout performer in the specialized world of closed-end technology funds, recently earning a 5-star Morningstar Rating for its 3-year risk-adjusted returns. As of May 31, 2025, the fund sits atop the U.S. Closed-End Technology Morningstar Category—a group of just five investment vehicles—making its top-tier ranking a rare and compelling signal for income-focused investors. Here's why NBXG warrants attention now.

The Case for NBXG's 5-Star Momentum

Morningstar's ratings are not merely about raw returns; they factor in risk management and consistency. NBXG's 5-star designation (shared by only the top 10% of its category) reflects its ability to deliver strong performance while limiting downside volatility—a critical edge in tech's volatile landscape. The fund's narrow peer group—just five funds—means this accolade is particularly meaningful. Outperforming such a concentrated group suggests the portfolio's focus on 5G and future mobile network technologies is paying off.

The fund's strategy targets companies involved in the development, advancement, or use of next-gen connectivity, a sector projected to unlock a $13.1 trillion market opportunity by 2030. This includes semiconductors, software, and infrastructure plays, all of which are integral to the global shift toward faster, more connected systems.

The Distribution Edge: Transparent, if Risky

NBXG's monthly distribution of $0.10 per share (payable July 31, 2025) offers an 8.5% annualized yield based on its recent net asset value. But investors must parse the fine print: the fund's “level distribution policy” means payouts stay steady even if income or capital gains fluctuate. While this consistency appeals to income seekers, the catch is that distributions may include return of capital (ROC)—a practice that can erode principal over time.

Neuberger Berman mitigates this risk by maintaining a $1.2 billion asset base and a disciplined portfolio approach. The fund holds at least 80% of its assets in equities of companies aligned with its theme, with a global tilt (e.g., U.S., Asian tech leaders). The firm's $515 billion AUM and experienced global management team also add credibility, as does the transparency of its disclosures.

Why the Risks Are Worth the Reward

Critics will note that ROC-heavy distributions can be unsustainable, and tech's inherent volatility poses challenges. But NBXG's 5-star rating signals that its managers have navigated these risks effectively. The fund's low 1.37% expense ratio for a actively managed closed-end fund (CEF) further underscores cost discipline, especially in a category where fees often exceed 1.5%.

Moreover, the tech sector's long-term growth trajectory supports the fund's thesis. From 5G rollouts to AI-driven infrastructure upgrades, connectivity is a foundational theme for global economic progress. While broader tech ETFs like the Invesco QQQ (QQQ) or the iShares Expanded Tech-Software (IGV) offer diversification, NBXG's niche focus and yield advantage could provide a high-beta play for investors willing to accept some ROC exposure.

Action Steps for Investors

For income investors with a 3–5 year horizon and a tolerance for tech volatility, NBXG is worth considering. Key considerations:
1. Entry Point: The fund's discount/premium to NAV can fluctuate. Check its current level before buying.
2. Tax Implications: Distributions' ROC components reduce cost basis, so track them carefully.
3. Sector Overlap: Ensure the fund doesn't duplicate holdings in your broader tech portfolio.

Final Take

NBXG's 5-star rating and tech sector tailwinds make it a compelling income vehicle, even with ROC risks. While not a “set it and forget it” investment, its transparent management and focus on a $13 trillion growth area justify a spot in portfolios seeking yield and tech exposure. For investors ready to lean into connectivity's future, NBXG is a name to watch—and act on.

Investors should consult their financial advisors before making any investment decisions. Past performance does not guarantee future results.