Lazard Frères Gestion is counting on flexible funds for a complicated year
Best European manager in the category of establishments that manage a range of between 71 and 100 funds, Lazard Frères Gestion retains the title it had already won in 2022. The management company with 35.9 billion euros in assets under management at the end of 2022, a subsidiary of the American group Lazard, also won a Fund Class trophy for its long-term performance.
After doing well in 2022, in a context marked by a joint decline in the equity and bond markets, the team remains very cautious for 2023. “We think the year is going to be very complicated, warns Matthieu Grouès, director of institutional management of the company. We have just emerged from a very long economic cycle marked by a drop in interest rates, which has buoyed the markets. We were therefore starting out, at the beginning of 2022, from very high valuation levels and we believe that certain asset categories have not yet fallen enough, including equities. »
To navigate in this complex environment, the house emphasizes flexible management. It is based on the results of its heritage fund Lazard Patrimoine SRI, which was able to preserve the capital of its subscribers in 2022 (+ 0.3%) when its benchmark index lost more than 16%.
Among the beliefs that paid off last year: negative sensitivity on the bond portion. Explanation: the year 2022 was marked by the rise in interest rates, a phenomenon that automatically lowers bond prices. Sensitivity precisely measures the magnitude of the fall in a security or a portfolio when rates increase by 1%. The manager can use different techniques to reduce the fund’s sensitivity, or even be in negative sensitivity and thus avoid this impact.
Identify market entry points
Today, the corrections are not complete on the various markets, anticipate the managers of Lazard Frères Gestion. Hence the need to be agile throughout the year to manage its allocation between government debt, corporate debt or even equities.
“Over the next fifteen months, there are going to be market entry points”, believes Matthieu Grouès. The difficulty is to identify them. The rate hike is not over. However, it is only once interest rates have reached their maximum that we will enter a cycle that is more favorable to investment.
Same caution on the part invested in equities, especially since the markets have rebounded strongly since the start of the year. But, for Lazard Frères Gestion, a further decline seems inevitable. “Statistically, we never saw a low point in the equity markets before the recession entered”, emphasizes Matthieu Grouès. However, its teams are anticipating a recession linked to the battle being waged by central banks against inflation. This is why, within the Lazard Patrimoine SRI fund, the equity portion is only 4% currently, whereas it can climb up to 40%.