Lazard Frères
Gestion

• Lazard Frères Gestion manages €8,3 billion in equities through open-ended and dedicated investment funds, representing over half of our assets under management as of 31 December 2020.
• The equity team comprises 12 fund managers/analysts covering a wide range of small, mid and large caps around the world.
• Our investment philosophy is based on a rigorous company selection drawing on a fundamental approach. We select companies with robust balance sheets, sound economic performance profiles and value creating potential over the long term.

We offer three types of strategy:

• Lazard Frères Gestion manages €6.3 billion in fixed-income and monetary products through open-ended and dedicated investment funds, representing over one quarter of all assets under management as of 31 December 2020.
• Eleonaure Bunel is the Head of Fixed Income team composed of eight portfolio managers.

• The investment process draws on a fundamental macro-economic top-down approach — economic cycle analysis and its impacts on the public and corporate debt markets — , and on a bottom-up approach to assess and select issuers, as well as sovereign, corporate and financial issues.
• Lazard Frères Gestion has developed a highly specific expertise in the financial debt segment since 2004, accessible through a range of open-ended funds:

• Lazard has developed a specific expertise in convertible bonds for over 30 years through open-ended and dedicated investment funds. Total assets under management stood at €6.6 billion as of 31 December 2020.
• Delegated to Lazard Asset Management, the convertible bond branch comprises 4 analysts - managers and 1 Trade Execution analyst covering a number of geographical areas. The team works closely with Lazard Frères Gestion's equity and credit analysts in Paris, benefitting from their skills and use of our in-house proprietary models.
• Our investment management style is characterised by its thoroughness. This allows us to calibrate the major characteristics and performance sources among convertible bonds, such as stock picking, credit risk, volatility, or interest rate sensitivity. Our investment management process draws on both a bottom-up approach to select convertible bonds and a top-down approach applied to a tactical allocation strategy.
• We construct our portfolio to benefit the most from the diversified profiles and existing asymmetry within this asset class. When stock markets rise, convertible bonds do too, but during downward trends, convertible bonds fall more gradually.
• We offer a range of European and international convertible funds with forex-hedged units:

• Diversified investment management and asset allocation advisory services represented almost 24% of assets managed on behalf of our institutional and private clients on 31 December 2020.
  Diversified investments are managed by two portfolio managers and three strategists-economists within a single dedicated independent equity and fixed-income investment management team. The team benefits from the group’s expertise in terms of specialist investment strategy and research.
• Economic analysis, particularly cycle analysis, is at the core of our process. We apply a fundamental approach over a medium- to long-term view. Our investment choices reflect the positioning within the cycle and our appreciation of the valuation of the asset class.
  We establish a core 6-12 month macroeconomic and financial scenario, reviewed as the economic environment changes in the main geographical areas or in the asset classes.
  We carry out a dual analysis, integrating our medium-term macroeconomic scenario and a short-term tactical approach, to define the optimum allocation that reflects our core convictions. Portfolio management is then delegated to the specialist teams.
  

• For investors seeking protection against sharp market fluctuations, we also propose a range of UCITS offering a “balanced” investment management process, i.e, both fundamental and systematic. This includes our economic cycle analysis — our medium-term performance driver, while seeking to protect the portfolio against irrational market events through the use of dynamic and systematic hedging strategies.

• Lastly, we also provide a wealth-management range dedicated to private clients:

ALTERNATIVE INVESTMENTS AND FLEXIBLE SYSTEMATIC FUNDS

• Our investment strategy is based on delivering absolute performance. Lazard Frères Gestion has developed a quantitative and systematic model with two objectives: rapidly detect signs of shifts in market trends, to enable portfolio allocation to be dynamically adjusted, and limit false trend indicators.
• Our investment support selection is based on a multi-criteria process developed in-house by a team of three professionals.
• Our approach draws on the skills of a dedicated team of two experienced fund managers/analysts and on the synergies generated by the fund selection expertise within the Lazard Group.

OUR PHILOSOPHY

• • At Lazard Frères Gestion, we believe that actively addressing environmental, social and corporate governance (ESG) considerations is essential for the sustainability of any company’s economic performance.
  • Indeed, the long-term performance of investments does not depend on financial strategy alone. Companies must interact with their social, economic, and financial environments.
  • To ensure this, we consider extra-financial criteria:
    - Social criteria: by valuing human capital
    - Environmental criteria: by preventing the occurrence of all risks impacting our environmental
    - Governance criteria: by respecting the balance between management and shareholder structures to prevent potential conflicts of interest and ensure minority shareholders are respected.
    

                                Download the  ESG Policy  (Article 173 of the law on Energy Transition for Green Growth Act)

IMPLEMENTATION IN LAZARD FRERES GESTION ASSET MANAGEMENT

Integrating ESG Criteria In Our Investment Strategies

• ESG criteria are embedded into our strategies to offer a better understanding of the underlying ESG risks for a company, or a sovereign asset. They differ according to the asset class or investment strategy:

  - Equities: ESG criteria are embedded in the risk premium of our valuation models
    % of assets under management affected: 100% of AUM

  - Convertible bonds: our ESG criteria analysis is included in our investment scenarios
    % of assets under management affected: 100%

  - Fixed income: ESG criteria are included in our assessment of the credit spread
    % of assets under management affected: 100%

• The way we implement ESG criteria into our management must be adapted to the asset class, both in terms of the scope and characteristics.
• Each fund manager/analyst can enhance his/her own extra-financial analysis thanks to an extra-financial database provided by VIGEO and by working in close collaboration with the SRI team, comprising two people: an ISR manager and an ESG analyst.
• Our equity management process is based on a quantitative and qualitative fundamental analysis of corporate issuers that integrates financial and non-financial criteria.
• Our extremely rigorous financial analysis of the company covers the quality of assets, financial solidity, the predictability of cash flows and their reinvestment by the company, and profitability trends and their sustainability. This is ensured by considering non-financial criteria:

• We continue our analysis by taking into account ESG criteria at the sovereign issuer level. In addition to economic and financial aspects, sovereign states are evaluated according to ESG criteria structured around three pillars based on their commitments vis-à-vis institutional, environmental and social responsibility, or how the State creates value for its fellow citizens and contributes to their well-being.
• We can apply exclusion policies when necessary, for example for the tobacco and alcohol sectors, or the arms industry, at our clients' request.
  

Engagement

We consider corporate engagement, as opposed to shareholder activism, to be constructive when it proactively encourages organisations to improve their ESG practices.
Constant dialogue with company management, along with our proxy voting policy, enable us to influence corporate conduct in terms of governance as well as on social and environmental issues.

                                        Download our Engagement Policy

Lazard Frères Gestion is currently working on a complete review of its engagement and ESG documentation in compliance with the new regulatory requirements from the French “loi PACTE” (2019).

Proxy voting policy

• Our proxy voting policy highlights our endeavour to safeguard the interests of minority shareholders in the long term and avoid conflicts of interest that favour majority shareholders, senior managers or any stakeholder to the detriment of minority shareholders.

                                        Download our Voting Policy

                                        Download our latest Annual Voting Report

OUR SRI STRATEGY

• Over 15 years ago, we entered into a partnership with Vigeo-Eiris, an independent SRI ratings agency, to combine our financial analysis with the best SRI competence available.
• This expertise applies to our equities management through our Lazard Equity SRI fund created in June 2001. This Eurozone Equity fund was awarded the SRI Label in 2018 following a strict and independent labelling process.
• The non-financial analysis favours the "Best in Class” approach, which is an ESG selection favouring the issuers with the highest ratings within their sector of activity.
• Our human resources and environmental criteria carry the most weightings in our investment criteria.
  
  Lazard Frères Gestion has strengthened its SRI management offering with the launch in 2020 of a Buy & Monitor fund, Lazard Sustainable Credit 2025 fund. The approach chosen is a "Best in Universe" type of approach, consisting of selecting issuers on their ESG performance without sector distinction.

EXTRA-FINANCIAL REPORTING

• Carbon footprint and energy transition efforts
  Lazard Frères Gestion decided to measure carbon footprints and energy transition efforts for all funds with assets exceeding € 500 million. The perimeter also covers our SRI management with no minimum threshold.

                                   Examples of Carbon Footprint and Energy Transition Efforts
  

• ESG reporting
  We produce tailored reports that can be adapted to clients’ particular constraints and which highlight ESG information.

                                  Download the carbon footprint and energy transition reporting in the Environmental Footprint Report - Lazard Equity SRI
  

OUR COMMITMENTS

• Lazard Frères Gestion has been a signatory to the PRI (Principles for Responsible Investment) since 9 February 2015 and commits to upholding the six United Nations Principles for Responsible Investment. Lazard Frères Gestion reaffirms the desire to consider environmental, social, and governance issues when conducting analysis and making investment decisions.

• Lazard Frères Gestion is a member of the AFG’s Responsible Investment Committee and actively participates in various industry committees.