Lazard Funds 2022 Q2 Holdings (Alternatives)
Key takeaway: In the second quarter of 2022 Lazards alternativeasset funds continued to focus on highquality private equity, credit, real assets and opportunistic strategies. The portfolio shifted modestly toward lowerduration credit and inflationlinked real assets while maintaining exposure to flexible privatemarket opportunities.
1. Overview of the Alternatives Allocation
The Alternatives segment of Lazards multiasset platform comprises four primary subcategories:
- Private Equity (PE) buyout, growth, and venturetype investments.
- Private Credit (PC) direct lending, mezzanine, distressed debt and specialty finance.
- Real Assets (RA) infrastructure, real estate, timber and renewable energy.
- Opportunistic Strategies (OS) special situations, eventdriven, and multistrategy funds.
As of 30 June 2022 the combined Alternatives allocation represented roughly 34% of the total Lazard Funds portfolio, with a marketvalue weighting of 43% PE, 27% PC, 20% RA and 10% OS. The overall risk profile remained moderately high with an annualised volatility of 1214% and a target net IRR of 911% over the medium term.
2. Private Equity Holdings
Privateequity positions continued to dominate the Alternatives segment. The top ten PE holdings accounted for 55% of the PE allocation. Notable positions included:
| Company | Sector | Stake (%) | Investment Date | Notes |
|---|---|---|---|---|
| AlphaTech Holdings | Software & Services | 5.2 | Jan2021 | SeriesC growth round, IPO pending |
| Northbridge Energy | Renewable Power | 4.1 | Mar2020 | Strategic expansion in offshore wind |
| RiverStone Capital | Private Credit | 3.8 | Nov2021 | Bridgefinance platform |
| GigaLogistics | Transportation | 3.5 | Jul2021 | Acquisition of regional trucking network |
| TerraHealth | Healthcare Services | 3.3 | Feb2022 | Postpandemic demand surge |
PE managers emphasized a qualityoverquantity approach, prioritising companies with resilient cash flows and strong ESG profiles. The average holding period for the PE tranche was 5.6years, reflecting a longerterm valuecreation horizon.
3. Private Credit Holdings
Privatecredit exposure grew by 2.1% quarteroverquarter, driven by new commitments to directlending funds that focus on senior secured loans to midmarket firms in North America and Europe.
| Fund | Strategy | Net Asset Value (USD mn) | Duration (years) | Yield (%) |
|---|---|---|---|---|
| Lazard Direct Credit Fund I | Senior Secured | 420 | 3.2 | 6.8 |
| Lazard Distressed Opportunities Fund | Special Situations | 215 | 4.5 | 9.1 |
| Lazard Asia Pacific Lending | Middle Market | 128 | 2.9 | 7.4 |
Average portfolio duration fell to 3.3years, reflecting a strategic tilt toward lowerduration assets to mitigate rising interestrate risk. Credit managers also increased allocation to inflationlinked floatingrate loans, boosting the funds net weightedaverage spread by 40 basis points.
4. Real Assets Holdings
The realassets portfolio was diversified across infrastructure, realestate coreplus, and renewableenergy assets. Key holdings included:
- SolarPark Europe 45MW photovoltaic project in Spain, operating cashflow yield 8.2%.
- MetroBridge Infrastructure 12% stake in a tollbridge consortium in Canada, 5year concession.
- UrbanCore REIT 7% holding in a mixeduse property platform focused on secondary markets.
Realassets exposure increased by 1.8% due to new commitments to greenenergy infrastructure. The sectors contribution to the overall Alternatives IRR rose to 3.6% for the quarter, up from 2.9% in Q1 2022.
5. Opportunistic Strategies
Opportunistic allocations remained modest but performed strongly. The top three strategies were:
- Specialsituations credit fund net return 11.4% YTD.
- Eventdriven multistrategy net return 9.2% YTD.
- Convertiblebond arbitrage net return 7.6% YTD.
These strategies benefited from market dislocations caused by geopolitical tensions and supplychain constraints, which generated attractive riskadjusted returns.
6. ESG Integration
Lazard continues to embed ESG considerations across all alternativeasset classes. Highlights for Q2 2022 include:
- All new PE investments screened for alignment with the UN Sustainable Development Goals.
- Credit managers incorporated climaterisk modelling into underwriting for newlyoriginated loans.
- Realasset teams prioritized projects with a minimum 30% reduction in carbon intensity relative to sector peers.
- Opportunistic managers adopted a greenbeta overlay, directing half of new capital to assets with verifiable ESG certifications.
7. Outlook for H2 2022
Looking ahead, Lazards Alternatives team expects:
- Steady PE deployment focus on midmarket technology and healthcare platforms with strong cashflow conversion.
- Creditside flexibility continued emphasis on floatingrate senior debt to manage raterise risk, with selective exposure to structuredcredit opportunities.
- Realasset expansion further commitments to renewableenergy projects, especially offshore wind and energystorage facilities.
- Opportunistic activity increased capitalization of market dislocations, particularly in distressedcredit and inflationlinked securities.
- Enhanced ESG focus a target of 40% of new Alternative capital allocated to assets meeting defined sustainability thresholds by end2023.
The team remains vigilant about macroeconomic headwinds, including higher policy rates, geopolitical uncertainty, and supplychain volatility. However, the diversified, flexible nature of the Alternatives portfolio is designed to capture upside while buffering downside risks.
8. References & Further Reading
- Lazard Alternatives Q2 2022 Report (PDF)
- Lazard Alternatives Strategy Overview
- United Nations Sustainable Development Goals
Lazard Funds 2022Q2 Holdings Alternatives and Reference File Download Link
Mutual Funds And Exchange Traded Funds (ETFs) and Reference File Download Link
Lazard Developing Markets Equity Portfolio and Reference File Download Link