Lazard Global Equity Franchise

Run by the four-strong team behind the successful Lazard Global Listed Infrastructure fund, this offering looks for companies that have an edge in their respective business sectors. It can invest in any business around the world, but because the managers are looking for industry leaders, there is a natural bias towards larger-sized companies.

Our opinion

We like that this fund has a very similar philosophy to some of the most successful funds in its sector, but with a very different resultant portfolio. The fund is also differentiated by the managers' systematic approach to portfolio construction, which means that behavioural biases should be removed. The team have an excellent track record with this process on another fund, which all makes for a reassuring approach to a very complementary offering in the global equities space.

Fund manager

The fund is run by a four strong team - Matthew Landy, John Mulquiney, Bertrand Cliquet and Warryn Robertson. They are based in three global offices: London, Sydney and New York, but have made the geographic distance work for them over more than ten years now. They have a weekly video call, as well as daily email contact and have incorporated this into their research process. The team also meets up for research trips. This team also run the successful Lazard Global Listed Infrastructure fund (now closed to new investments), which inspired the launch of this product.

Cliquet, Bertrand
Bertrand CliquetFund manager

Investment process

Stock selection is based on a four stage process. Step one filters out companies with low revenue visibility. Step two is to search for desirable factors such as natural monopolies, cost leadership, strong brands, intellectual property or high barriers to competition. The team calculates this using a 9-score framework, which looks at concepts such as the product, market and margins. This results in an investable universe of around 250 stocks.

Step three involves fundamental analysis to calculate a company’s intrinsic value, based on the current value of the future cash flows. The team will also meet company management as part of its combined research trips. This allows the managers to rank the stocks based on their potential upside versus the current share price. This then drives which stocks are added to the portfolio and at what weights in the fourth and final step of the process.

The fund will hold between 25-50 stocks based on how many companies exhibit good value opportunities. The managers are unlikely to hold banks, financials or real estate as customers can switch easily and margins are low. They are also unlikely to hold commodity companies due to the lack of forecast-able earnings or big pharmaceuticals as the patent expiry cliff is opaque.

ESG

ESG - Integrated  

This fund has ESG considerations built into multiple parts of the process. This starts with the initial filters, which screen out those firms with sustainability challenges, such as tobacco, energy, and mining firms. The next stage looks at the qualitative risk to potential stocks, where the team looks at specific ESG risks affecting the long-term outlook for a firm. This stage is driven by a 90-score criteria, of which 40 are ESG-based factors. This will be a combination of identifying risks and assessing their materiality. The risks identified here will also affect the team’s determination of valuations for a stock. Therefore, in stage three, the team will amend its modelling depending on the level of ESG risks identified. Not only will those with higher ESG risks have higher valuation requirements, but the team will pay much closer attention to these during the holding period.

Risk

The portfolio is unconstrained meaning there maybe periods where the fund behaves very differently to the index to which it is measured against. However, due to the types of factors the team is looking for, the fund is likely to hold mostly large and mega-cap companies, which are typically more established and stable than those further down the cap scale. As the managers target forecast-able earnings, it means they also tend to avoid more cyclical stocks. Subsequently, the fund has historically outperformed in falling markets. The systematic process helps limit potential behavioural errors in stock selection.

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