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DOCUMENT EXCLUSIVELY INTENDED FOR RANKIA
Lazard Fund Managers is a common initiative of Lazard Asset Management LLC, its subsidiaries and Lazard Frères Gestion SAS.
Lazard Fund Managers (Ireland) Limited, Sucursal en España, is registered with the CNMV with number 18, having its registered office at Paseo de la Castellana, 140, Piso 10, letra E, Madrid
and is a branch office of Lazard Fund Managers (Ireland) Limited, incorporated in Ireland and supervised by the Central Bank of Ireland.
Subordinated and Hybrid Financial DebtsPresentation of the expertise
Lazard Credit FiLazard Subordinated Financial Debt - Hybrid Contingent
26TH NOVEMBER 2019
1 Lazard Fund Managers
I. Lazard Fund Managers
II. Subordinated and Hybrid Financial Debts Expertise
A. What? Overview of the Financial Debts Segment
B. Why? Fundamentals have improved a lot
C. Who? Team, Investment Approach, Clients
D. How? Strategies and Portfolios
E. Conclusion
Appendices
Disclaimer
Contents
Lazard Fund ManagersI
3 Lazard Frères Gestion
Over 170 Years of International Financial ExpertiseLazard
Source: Lazard.
* Assets Under Management (AUM) as of 30 September 2019
Information reserved for professional investors.
1,000+ employees
400+ investment professionals
45% of 2018 revenues
$231bn of Assets Under Management*
ASSET MANAGEMENT
Mergers & Acquisitions
FINANCIAL ADVISORY
1,400+ employees
55% of 2018 revenues
Wealth Management
Institutional Asset Management Debt & Restructuring Advisory
Government and Sovereign Advisory
US
France
UK
Argentina
Australia
Belgium
Brazil
Canada
Chile
China
Colombia
Germany
Hong Kong
India
Italy
Japan
Mexico
Middle East
Netherlands
Panama
Peru
Singapore
Spain
Sweden
Switzerland
Australia
Belgium
Canada
France
Germany
Hong Kong
Ireland
Italy
Japan
Middle East
Netherlands
Singapore
South Korea
Spain
Switzerland
UK
US
4 Lazard Frères Gestion
Asset Management ExpertiseLazard
Source: Lazard. As of 30 September 2019
Information reserved for professional investors.
EUROPE NORTH AMERICA
ASIA-PACIFICMIDDLE EAST
1848 +1000 +400 $231bnLazard brothers found Lazard
Frères
Employees worldwide Research and Portfolio
management specialists
of AUM
LAZARD ASSET MANAGEMENT & LAZARD FRÈRES GESTION
KEY FIGURES
5 Lazard Fund Managers
Lazard Fund Managers offers investors a range of UCITS managed by Lazard Asset Management and Lazard Frères Gestion,
providing a single point of access to the investment expertise of two firms within the Lazard family with distinct capabilities but
shared beliefs.
Lazard Fund Managers’ UCITS fund range combines the best investment ideas of Lazard Asset Management and Lazard Frères
Gestion in developed and emerging markets.
The offering, which encompasses Equity, Fixed Income, Multi-Assets and Alternative Investment Funds managed by Lazard’s
experienced investment professionals, builds on our tradition of evolving our investment platform by developing innovative
investment solutions to meet our investors’ needs.
Throughout all market environments, our managers maintain a disciplined approach to investing with a research-driven
investment process focusing on financial productivity and valuation.
We are committed to active management and we believe there are substantial opportunities for investors to invest in companies
with healthy balance sheets and sustainable returns.
OverviewLazard Fund Managers
We Are Lazard Fund Managers
6 Lazard Fund Managers
Assets under ManagementLazard Fund Managers
Asset breakdown by asset class
Assets under Management2:
USD 231 billion | EUR 212 billion | CHF 230 billion
1 Others reflect institutional & private mandates and outstanding funds in life insurance as well as private Equity.2 As of 30 September 2019. Includes those of Lazard Asset Management LLC (New York) and its affiliates as well as those of Lazard Frères Gestion
(Paris) or other asset management businesses of Lazard Ltd.
1
7 Lazard Fund Managers
Investment FundsLazard Fund Managers
Emerging Markets Bond
Emerging Markets Debt Blend
Emerging Markets Local Debt
Emerging Markets Total Return Debt
EMERGING MARKETS
CONVERTIBLES
GLOBAL
Lazard Convertible Global*
FIXED INCOME
MULTI-ASSET
GLOBAL
Diversified Return Strategy
EUROPE
Lazard Credit Fi*
As of 30 September 2019 and is subject to change.
This information is for illustrative purposes only and should not be considered an offer or solicitation with respect to any product managed by Lazard.
*Funds managed by Lazard Frères Gestion
EQUITY
EMERGING MARKETS
Emerging Markets Equity
US
US Equity Concentrated
GLOBAL
Global Equity Franchise
Global Listed Infrastructure
Equity
Global Managed Volatility
EUROZONE
Lazard Actions Euro*
Lazard Dividendes Min Var*
Lazard Small Caps Euro*
NORTHERN EUROPE
Norden*
Subordinated and Hybrid Financial Debts
ExpertiseII
9 Lazard Fund Managers
In our opinion, investors have three ways of achieving returns on the Fixed Income market:
Alternatives available for investors in the Fixed Income market
Source: Lazard Frères Gestion, Bloomberg.
For illustration purposes only.
Going down in the capital structure
Lengthening the maturity
Going down in terms of credit quality
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1
3
2
10 Lazard Fund Managers
Corporate Hybrids IG 1.8% 4.4 A-
Corporate Hybrids HY 2.2% 3.5 BBB
Financial Hybrids 2.8% 3.9 A-
Yield, duration and issuer ratingAsset class features
Source: Lazard Frères Gestion, Bloomberg, as of 28 October 2019.
1. YTW in Euro
The yield is the counterparty of a capital risk. Past yields do not guarantee the capital or future performance.
Yield to Worst1 Modified Duration Average issuer rating
Sovereigns 0.1% 8.2 A+
Euro Corporates 0.4% 5.2 A-
Euro Senior Banks 0.2% 4.1 A
Indices used:
EG00: ICE BofAML Euro Government Index
ERS0: ICE BofAML Euro Corporate Senior Index
EB3A : ICE BofAML Euro Senior Banking Index
GNEC: ICE BofAML Global Hybrid Non-Financial Corporate Index
HNEC: ICE BofAML Global Hybrid Non-Financial High Yield Index
BCCGTREH: Bloomberg Barclays Global Contingent Capital Hedged Index
1
3
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11 Lazard Fund Managers
Source: Lazard Frères Gestion.
The above opinion was expressed as of the date of this presentation and is likely to change.
What are the advantages of hybrid debt?
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Credit risk on Investment Grade issuers
Shorter maturity
An additional spread vs senior debt
What?
Overview of the Financial Debts
SegmentA
13 Lazard Fund Managers
Versus similar strategiesRelative size of Financial Subordinated Debts
Source : Lazard Frères Gestion, Bloomberg, as of 31 December 2018.
Methodology: ICE BofAML Global High Yield Index (HW00) for global high yield bonds, Bloomberg Barclays Global Contingent Capital Total Return
Index Unhedged EUR (BCCGTREU) for AT1 bonds, JP EMBI Global for Emerging Sovereign Bonds.
We extract bonds issued by western European issuers from IG, HY and AT1 index to make the computations.
Data are as of 31/12/2018 in EUR.
The above opinion was expressed as of the date of this presentation and is likely to change.
Financial Subordinated Debts from Western European issuers compare to European High Yield
Corporates and Emerging Govies (in € billions)
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AT1212
387
477
Tier 2472
0
100
200
300
400
500
600
700
Financial Subordinated European High Yield Emerging Markets - Sovereign HardCurrency
684
14 Lazard Fund Managers
Why are issuers issuing hybrid debt ?
T2: Tier 2 Debt / AT1: AT1 Debt.
For illustrative purposes only.
Regulatory reasons:
Support for credit ratings
Rating agencies reason:
Tier 1 leverage ratio
AT11,5%
T22%
Equity
Cost
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15 Lazard Fund Managers
0%
1%
2%
3%
4%
5%
6%
7%
0% 5% 10% 15% 20%
Senior Banks Tier 2 Banks Tier 2 Insurance AT1 Equity
Sources: Lazard Frères Gestion, Bloomberg.
Spread levels as of 5 September 2019.
Indices used : JP Morgan Subordinated Security Index Senior, JP Morgan Subordinated Security Index Lower Tier 2 Banks, JP Morgan Subordinated
Security Subordinated Incos Index and Bloomberg Barclays Global Contingent Capital for AT1 / Equity : Stoxx 600 Banks.
Past performance does not guarantee future performance. Performance over less than one year is provided for illustration purposes only.
Performance data is provided for information purposes only and should be assessed over the recommended investment period.
Yield/Volatility profile
Capital structure of a
bank
Tier 2
Additional Tier 1
Equity
Senior
Credit spreads
In basis points
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Investment universe
90
193
410
Yields
2.1
2.1
1.1%
2.0%
3.5%
1.8
1.8
Yield
Vol.
16 Lazard Fund Managers
-100
-50
0
50
100
150
200
250
AT1 Tier 2 Senior Equity (Dividend included)
Cumulative return since 31 December 2008Performance overview
Sources : Lazard Frères Gestion, JP Morgan, Barclays and Bloomberg. As of 30 September 2019, in euro hedged.
Cumulative performance since 31/12/2008 to 30/09/2019.
Inception date Global Bloomberg Barclays 09/05/2014.
Indices used: JP Morgan Subordinated Security Index Senior, JP Morgan Subordinated Security Index Lower Tier 2 Banks and Bloomberg Barclays Global
Contingent Capital for AT1 / Stoxx 600 Bank equity.
Past performance does not guarantee future performance.
Performance data is provided for information purposes only and should be assessed over the recommended investment period. For illustrative
purpose only.
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CUMULATIVE PERFORMANCE FROM 31/12/2008 TO 30/09/2019
+ 228%
+112%
+24%
+60%
Why?
Fundamentals have improved a lot and
let’s talk about the RisksB
18 Lazard Fund Managers
Fundamentals
Source: Lazard.
The above opinion was expressed as of the date of this presentation and is likely to change.
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EarningsCapital
p. 75-76
Liquidity
p. 78
Asset Quality
p. 77
19 Lazard Fund Managers
Banks: AT1 vs EquityDifferent risk/return profiles
Source: Lazard Frères Gestion, Bloomberg, as of 30 September 2019.
Performance and volatility figures over 5 years.
Index: Bloomberg Barclays Global Contingent Capital (AT1: BCCGTREH) / Stoxx 600 Banks dividends reinvested (Banks equity: SX7R).
Past performance does not guarantee future performance.
Performance data is provided for information purposes only and should be assessed over the recommended investment period. For
illustrative purpose only.
The above opinion was expressed as of the date of this presentation and is likely to change.
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AT1 Banks equity
Solvency risk
Earnings volatility risk
Solvency risk
6.4%
5.2%
-4.5%
22.5%
5Y annualised Performance
5Y annualised Volatility
20 Lazard Fund Managers
Quick summary about securities features – Coupons RisksFinancial Subordinated Debts
Source : Lazard Frères Gestion, Bloomberg. For illustrative purpose only.
*5 years annualized volatility as of 30 September 2019, on a daily basis.
Indices used: JP Morgan Subordinated Security Index Lower Tier 2 Banks (JPSULTEI Index) / Bloomberg Barclays Global Contingent Capital for AT1
(BCCGTREH Index) / Stoxx Europe 600 Banks for equities (SX7R).
The above opinion was expressed as of the date of this presentation and is likely to change.
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Tier 2 Fixed & Mandatory
Coupons1 2 3 4 5
K
10
Average rating: BBB
Volatility*: 2.5%
1 2 3 4 5
CallK
AT1Fixed & Optional
Coupons
10Average rating: BB
Volatility*: 5.2%
Cash flows
EquityVariable & Optional
Dividends
Rating: NR
Volatility*: 22.5%
12
3
4 65
1
21 Lazard Fund Managers
Financials vs Corporates default rate over the long termDefault rate
Source: S&P. Data on Corporates are biased by the high weight of issuers in the HY category (60% of non-financial issuers vs. 26% for financial
issuers) all geographical areas combined as of December 2018.
Nevertheless, the cumulative overall default rates over 5 years between 1981 and 2018, all geographical areas and all sectors combined, are 0.49%
for A-rated issuers (vs. 0.30% for European financial issuers), 1.64% for BBB issuers (vs. 0.24%) and 6.78% for BB issuers (vs. 1.43%).
The above opinion was expressed as of the date of this presentation and is likely to change. For illustrative purpose only.
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0
5
10
15
20
25
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
All financials All nonfinancials
Standard & Poor's publication of its annual study on Corporate Default Rates between 1981 and 2018:
10-Year Cumulative Default Rates
Average cumulative default rate over 10 years was:
4.9% for Financials Institutions
11.5% for Corporates
2
22 Lazard Fund Managers
Source: Lazard Frères Gestion, JP Morgan and Bloomberg. As of 30 September 2019.
Standard Deviation on a daily basis over 260 days.
Volatility is normalised and limited
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260-day trailing standard deviation trend
0
10
20
30
40
50
60
70
Stoxx 600 Europe Banks ND
Bloomberg Barclays Global Contingent Capital Total Return Index Value Hedged EUR
JPM SUSI T1 Index
JPM SUSI LT2 Index
4
23 Lazard Fund Managers
Source: Lazard Frères Gestion, Bloomberg, as of 30 September 2019.
Security: Santander 6.25%, callable in March 2019.
The above opinion was expressed as of the date of this presentation and is likely to change. For illustrative purpose only.
Rising Rates impact on Capital Instruments Securities
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Cash flow illustration
1 2 3 4 5 6 7 8 9 10
Coupons
Years
From year 1 to year 10:
Fixed 5% coupon Euribor 3 Months + initial Spread + step-up 100bps
=
1 to 3% coupon
Old generation
New generation
1 2 3 4 5 6 7 8 9 10
Coupons
Years
From year 1 to year 5:
6.25% coupon5Y Euros Mid-Swaps Rates at 0.840%
From year 6 to year 10:
5.481% coupon5Y Euros Mid-Swaps Rates at 0.071%
15
if Rates rise / decline
Coupon declinedby 12%
Coupon will rise
Coupon will decline
3 5
Securities prices declinedfrom 15 to 30%
Coupons declinedfrom 40 to 80%
Security price declinedby 1%
Who?
Team, Investment Approach, ClientsC
25 Lazard Fund ManagersSource: Lazard Asset Management and Lazard Frères Gestion, as of 30 June 2019. Include LAM expertise.
Global platformLazard Fixed Income Investment Resources
US, EM & Global Fixed Income Global, Euro & Nordic Fixed Income
New-York Frankfurt
Paris
Singapore
MONTHLY MEETING
Global Fixed Income Team
60 professionals
BI-MONTHLY MEETING
European Credit Research Team
12 professionals
€ 34 Bn in Assets Under ManagementAs of 30 June 2019
60 professionals within the Fixed Income
Franchise (Lazard Group)
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26 Lazard Fund Managers
Source : Lazard Frères Gestion, as of September 2019.
Our team is traditionally stable, unfortunately, we are unable to guarantee the presence of the managers listed above during the life of the product.
The information listed above is current as of the date of this presentation.
A dedicated investment team on Financial sector
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2 Fund Manager / Analyst dedicated to Hybrid and Subordinated Financial Debt
23 years of experience
12 years at Lazard Frères Gestion
Lead Fund Manager/Analyst
François LAVIER, CFA Alexis LAUTRETTE
Fund Manager/Analyst
10 years of experience
2 years at Lazard Frères Gestion
Head of Fixed Income
Jean-Philippe
Quiterio
ÉléonoreBunel
Camille Suh
Benjamin Le Roux
Frédéric Penel
Lionel
Clément
Alexia Latorre, CFA
François Lavier, CFA
Alexis Lautrette
21years of experience
in financial markets on average
8 Fund Manager/Analyst
1 Money Market Fund Manager
1 Fund Manager Assistant
Lazard Frères Gestion Fixed Income Management Team
Money MarketFund Manager
27 Lazard Fund Managers
A combination of Fixed Income & Equity expertiseAnalysis resources dedicated to Financial sectors
Source : Lazard Frères Gestion, as of September 2019.
LFG for Lazard Frères Gestion: François Lavier, Alexis Lautrette, Scander Bentchikou.
LAM Lazard Asset Management: Ulrich Teutsch, Agnese Melbarde, Seung-Ho Ahn, Jonathan Morris.
Our team is traditionally stable, unfortunately, we are unable to guarantee the presence of the managers listed above during the life of the product.
The information listed above is current as of the date of this presentation.
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Equity
Jonathan Morris30 years of experience
11 years at LAM
Scander Bentchikou17 years of experience
9 years at LFG
Fixed Income
Alexis Lautrette10 years of experience
1 year at LFG
Agnese Melbarde11 years of experience
7 years at LAM
Seung-Ho Ahn18 years of experience
5 years at LAM
DEVELOPED
COUNTRIES
EMERGING
COUNTRIES
Ulrich Teutsch20 years of experience
9 years at LAM
François Lavier23 years of experience
11 years at LFG
28 Lazard Fund Managers
Source: Lazard Frères Gestion.
For illustrative purpose only.
The above opinion was expressed as of the date of this presentation and is likely to change.
Investment Approach
A model of Fund Manager/Analyst
200 meetings with issuers over the last year
In-depth knowledge of the regulations (impacts on securities, clauses specific to hybrids,
covenants ...)
Seek to generate among the best risk-adjusted return for our clients
An active and unconstrained investment approach
12 years of track recordon the asset class
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BOTTOM-UP
INVESTMENT
APPROACH
29 Lazard Fund Managers
Source: Lazard Frères Gestion, March 2019.
The top 10 investors refer to the top 10 clients of open-funds, dedicated funds or mandates invested in Subordinated Financial Debt and managed by Lazard
Frères Gestion.
Client base
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Breakdown by client type Top 10 investors
Name % of total assets
French Non-Life Insurer 18%
French Life Insurer 14%
French Corporate 11%
French Life Insurer 4%
Italian Life Insurer 4%
French Asset Manager 3%
French Pension Fund 2%
Spanish Private Bank 2%
French Asset Manager 2%
French Composite Insurer 2%
3%
8%
11%
28%
49%
0% 20% 40% 60%
Pension Funds
Asset Managers
Corporates
Private Banks / Family Offices
Insurers
30 Lazard Fund ManagersSource: Lazard Frères Gestion.
Reasons for investing in Financial Subordinated and Hybrid Debt Strategies
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INSURERS
PRIVATE BANKS / FAMILY
OFFICES / ASSET
MANAGERS
CORPORATES
Asset class attractiveness
Expertise delegated to external AM
Not investing directly in AT1
Not investing directly in Tier 2 outside of
best rated entities
Not investing hugely in subordinated
debts of insurers
Not sensitive to ratings of those securities
Yield enhancement
Good quality credit of issuers
Good risk-adjusted returns
Fundamentals are improving
Visibility on fundamentals
Expertise delegated to external AM
Not investing directly in AT1
Not investing directly in Tier 2
How?
Strategies and PortfoliosD
32 Lazard Fund Managers
-
500
1 000
1 500
2 000
2 500
3 000
0
500
1000
1500
2000
2500
3000
Open Funds Others (Mandates, Dedicated Funds, Dated Closed Funds) Total AUM €M (Right scale)
A track record of twelve years – Lazard Frères Gestion
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Source: Lazard Frères Gestion, as of 30 September 2019.
Total AUM€ 2 449M
33 Lazard Fund Managers
Source: Lazard Frères Gestion, as of 30 September 2019. GIPS Classification: Product and Strategies offering.
Does not include LAM AUM.
Asset Under Management Lazard Frères Gestion
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SUBORDINATED FINANCIAL DEBT
BLEND HYBRID CONTINGENT
OPEN FUNDOPEN FUNDDEDICATED
FUND
€ 1 144M AUM
€ 913M AUM
€ 231M AUM
€ 342M AUM
€ 342M AUM
SENIOR FINANCIAL
DEBT
BUY & HOLD
€ 209M AUM
MANDATE
€ 708M AUM
DATED FUND MANDATES
€ 21M AUM
€ 687M AUM
€ 2.4 BN
Assets Under Management
€ 209M AUM
€ 2.2Bn AUM
BUY & HOLD
SUBORDINATED
CREDIT
OPEN FUND
€ 17M AUM
€ 17M AUM
Legend:
Financial Subordinated
Hybrid Financial
Hybrid Corporate
34 Lazard Fund Managers
Subordinated Financial Debt Hybrid Contingent Strategy – Representative Account
GSIB: Global Systemically Important Banks (G-SIBs) Defined by the Financial Stability Board (FSB), list of banks which are large enough to put
Financial Stability at risk in case of failure of one of them. They are defined depending on the scale and the degree of influence they hold in global and
domestic financial markets.
Sources: Bloomberg and Lazard Frères Gestion, as of 30 September 2019.
For illustrative purpose only. Figures may vary over the time.
Which is making us different, or, at least, complementary?
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But not
China, Russia, Turkey, Brazil… x x
Private placements x x
Credit Linked Notes x x
< €150M securities 0.1% 0.2%
< €300M securities 7.5% 6.5%
18%
6%
Insurance companies
BBB-
BB
Average rating at the security level
17%
20%
Legacy instruments
79%
71%
Non-GSIB issuers
69%
77%
Large size securities
30%
24%
Recovery stories
25%
30%
USD, GBP securities
17%
75%
AT1
But also
GSIB issuers 21% 29%
Legend:
Lazard Credit Fi
Subordinated Financial Debt Hybrid Contingent Strategy – Hybrid Contingent
35 Lazard Fund Managers
Source: Lazard Frères Gestion.
As of 30 September 2019. For illustrative purpose only.
ESG integration overview
EXTERNAL INPUTS: ESG DATABASES
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For issuer with a weak Global Score
ESG TEAM ANALYSIS
ESG ANALYST
Pascale Petit
INTERNAL DATABASE OUTPUTS ESG
EQUITY & FIXED INCOME TEAMS
Strategies
37 Lazard Fund Managers
Lazard Credit Fi Fund Index: ICE BofAML Euro Financial Index.
Subordinated Financial Debt - Hybrid Contingent Strategy Index: Global Contingent Capital Total Return hedged in EUR, net income reinvested.
Strategy profiles
Currently focused on
Tier 2
Currently focused on Additional Tier 1
Tier 2
Additional Tier 1
Equity
Senior
Capital structure Lazard Credit Fi
Investment horizon : 3 years
Subordinated Financial Debt - Hybrid Contingent
Investment horizon : 5 years
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Strategy description
The Subordinated Financial Debt – Hybrid Contingent strategy
invests primarily in subordinated debt (AT1) issued by European
financial institutions.
Investment objective
The investment objective is to outperform compounded ICE
BofAML Euro Financial Index, expressed in euros, net of charges,
over a recommended investment period of three years.
38 Lazard Fund Managers
Breakdown by level of subordinationStrategies with identifiable profiles
Allocations are subject to change.
Subordinated Financial Debt Hybrid Contingent Strategy – Representative Account
Sources: Bloomberg and Lazard Frères Gestion, as of 30 September 2019.
Excluding cash and UCITS
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Legacy Tier 1
20%
Tier 2 5%
Additional Tier 175%
Additional Tier 117%
Legacy Tier 115%
Tier 257%
Senior11%
Lazard Credit Fi Subordinated Financial Debt - Hybrid Contingent
39 Lazard Fund Managers
Key figuresStrategies with identifiable profiles
Subordinated Financial Debt Hybrid Contingent Strategy – Representative Account
Source: Lazard Frères Gestion, as of 30 September 2019.
1. As of 30 September 2019. Yield in euro hedged, on a weekly basis.
The yield is the counterparty of a capital risk. Past yields do not guarantee the capital or future performance. Past performance is not
indicative of future performance.
YIELD1
2.3%
3Y ANNUALISED
PERFORMANCE1
5.1%
3Y VOLATILITY1
3.6%
YIELD1
4.0%
3Y ANNUALISED
PERFORMANCE1
6.6%
3Y VOLATILITY1
4.8%
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Lazard Credit Fi Subordinated Financial Debt - Hybrid Contingent
40 Lazard Fund Managers
Key figuresStrategies with identifiable profiles
Subordinated Financial Debt Hybrid Contingent Strategy – Representative Account
Source: Lazard Frères Gestion, as of 30 September 2019.
AVERAGE SPREAD
VS. GOVERNMENT
319 BPS
MODIFIED
DURATION
4.3
SPREAD
DURATION
4.4
AVERAGE SPREAD
VS. GOVERNMENT
489 BPS
MODIFIED
DURATION
4.4
SPREAD
DURATION
4.6
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Lazard Credit Fi Subordinated Financial Debt - Hybrid Contingent
41 Lazard Fund Managers
Distribution of coupons paymentFor Investors looking at Income
Subordinated Financial Debt Hybrid Contingent Strategy – Representative Account
Source: Lazard Frères Gestion, as of 30 September 2019.
The yield is the counterparty of a capital risk. Past yields do not guarantee the capital or future performance. Past performance is not
indicative of future performance.
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4,7%
4,2%
4,7%
4,0%
4,2%
4,4%
4,6%
4,8%
2017 2018 2019
Average
Average
4,4%
3,9%
3,0%
4,1%
2,5%
2,8%
3,1%
3,4%
3,7%
4,0%
4,3%
4,6%
2016 2017 2018 2019
Lazard Credit Fi Subordinated Financial Debt - Hybrid Contingent
ConclusionsE
43 Lazard Fund Managers
*in 2017.
Subordinated Financial Debt Hybrid Contingent Strategy – Representative Account
Source: Lazard Frères Gestion, as of 30 September 2019. For illustration purposes only.
Securities are given for illustration purposes only and may not be included in our portfolio.
For more information about the fund’s other characteristics and risks, please refer to the prospectus available from the company on request or on
www.lazardfreresgestion.fr
What makes us different ?
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Good compromise size
Flexibility
2019 turnover 80%
Agility
Non-GSIB 79% / 71%
Group supportLarge resources of the Lazard Group for Research
and Portfolio Management
Communication
Availability1-to-1 meeting with PM
Conference call on demand
Marketing materials
Many documentation available p.39-40-41
Expertise
Track record
Longest experience – since March 2008
Rigorous AnalysisTremendous Fundamental Analysis and
knowledge of our Universe:
no Banco Popular
no Monte dei Paschi*
Deep Expertise
Less well-known entities 79% / 71%
Important knowledge on Legacy Instruments 15% / 20%
Recovery story 30% / 24%
Focused on Western EuropeNo exposure to China, Russia, Turkey, Brazil
Legend:
Lazard Credit Fi
Subordinated Financial Debt - Hybrid Contingent
Appendices
45 Lazard Fund Managers
Communication – Product focus
Product Marketing Material
Product presentation (on a quarterly basis)
Market outlook
Philosophy and Investment process
Positioning and performance
Fund profile - 4 pager (on a quarterly basis)
Market environment key points
Performance snapshot
Characteristics
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6
46 Lazard Fund Managers
Communication – Markets thoughts & Sales Help
Thought leadership Material
Asset Class Sales Deck
(on a yearly basis)
Financial Debt Universe snapshot
Correlation analysis
Asset classes comparison
Market Flash – Financial Debts
(Bi-monthly)
Systematic risk indicators
Primary market issuances
Financial Debt and Money Market
key indicators
Letter from the Manager
(occasional)
Views on the market
Key events and comments
Education and regulation changes
DOCUMENT INTENDED FOR PROFESSIONAL INVESTORS
6
47 Lazard Fund Managers
Communication – Reporting Material
Reporting and Performance Analysis Material
Factsheet (on a monthly basis; 2 pages)
Positioning and performance
Performance analysis (on a monthly basis; 17 pages)
Performance contribution / attribution
DOCUMENT INTENDED FOR PROFESSIONAL INVESTORS
6
48 Lazard Fund Managers
Fixed Income
Reminder of Risks for Investors
Risk of capital loss:
The strategy does not provide any guarantees or capital protection. It is
therefore possible that you may not recover the full amount of your initial
investment.
Interest rate risk:
Risk of a fall in the value of equities, and hence in the portfolio, resulting
from a change in interest rates. Because of its sensitivity range, the
value of this component of the portfolio may decrease, either in the case
of a rise in interest rates if the portfolio's sensitivity is positive, or in the
case of a fall in interest rates if the portfolio's sensitivity is negative.
Credit risk:
Credit risk is the risk that the borrower does not repay his debt or cannot
pay the coupons during the lifetime of the security. Risk of a fall in the
value of equities, and hence in the portfolio, due to a change in the credit
quality of the issuers or to the change in credit spreads. Because of its
credit sensitivity range, the value of this component of the portfolio may
decrease, either in the case of a rise in spreads, if the portfolio's credit
sensitivity is positive, or in the case of a fall in spreads if the portfolio's
credit sensitivity is negative.
Risks linked to contingent or subordinated securities:
The strategy may be exposed to contingent or subordinated securities.
Subordinated debt and contingent convertible bonds are subject to
specific risks of non-payment of coupons and capital loss in certain
circumstances. At a certain solvency threshold, referred to as the
"trigger” threshold, the issuer may or must suspend the payment of
coupons and/or reduce the nominal value of the security or convert such
bonds into shares. Notwithstanding the thresholds specified in the
issuing prospectuses, the supervisory authorities may apply these rules
preventively if the circumstances require, based on a subjective
threshold known as the "point of non-viability". These securities expose
holders to either a total or partial loss of their investment following their
conversion into shares at a predetermined price or because of the
application of a discount provided for contractually in the issuing
prospectus or applied arbitrarily by a supervisory authority. Holders of
these securities are also exposed to potentially large price fluctuations in
the event that the issuer has insufficient equity or experiences difficulties.
Currency risk:
The strategy may invest in securities and UCIs that are themselves
permitted to purchase stocks denominated in currencies other than the
euro. The value of these assets may decline in line with changes in the
exchange rates.
Liquidity risk:
This is the risk that a financial market can absorb the volumes of sell (or
buy) transactions only by significantly decreasing (or increasing) the
price of assets when trade volumes are low or when there are market
tensions, resulting in a possible decrease in the fund's net asset value.
Equity risk:
Investors are exposed to equity risk. Fluctuations in share prices may
have a negative impact on the fund’s net asset value. The fund's NAV
may decrease during periods in which equity markets are falling.
Counterparty risk:
Counterparty risk is related to the use of over-the-counter products. The
strategy is exposed to the risk of non-payment or delivery by the
counterparty with which the transaction is negotiated. This risk may
result in a decline in the fund's NAV.
Risk associated with investment in the futures markets:
The use of derivatives may cause exposure to an upward or downward
change of the fund’s net asset value.
DOCUMENT INTENDED FOR PROFESSIONAL INVESTORS
49 Lazard Fund Managers
CharacteristicsLazard Credit Fi
(1) Ongoing charges do not include: outperformance fees and transShare charges except in the case of subscription and/or redemption fees paid by the Fund when it buys or sells units in
another collective management vehicle. The data communicated, which include management and operating costs as well as transShare fees charged to the Fund, are based on the previous
exercise, ended in March 2019. These figures may vary from year to year.
For more information about the fund’s other characteristics and risks, please refer to the prospectus available from the company on request or on www.lazardfreresgestion.fr
PVC EUR PVD EUR PC EUR PD EUR PC H-USD PC H-CHF TC EUR RVC EUR RVD EUR
CH
AR
AC
TE
RIS
TIC
S
Management company Lazard Frères Gestion
Custodian Caceis Bank
Delegated agent for the centralisation of orders
from December 4th 2017Caceis Bank and Lazard Frères Banque, on behalf of clients for whom it provides custody account-keeping services
Legal form French open-end investment fund
AMF classification International bonds and debt securities
Subject to European Directive 2009/65/EC Yes Yes Yes Yes Yes Yes Yes Yes Yes
PEA eligible No No No No No No No No No
Inception date 7-Mar.-08 29-Jul.-14 14-Apr.-14 31-Jan.-14 5-Jan.-16 20-Feb.-17 31-Jan.-18 3-Jul.-09 31-Jan.-18
Currency Euro Euro Euro Euro USD CHF Euro Euro Euro
ISIN code FR0010590950 FR0012074151 FR0011844034 FR0013306743 FR0013076932 FR0013236791 FR0013305935 FR0010752543 FR0013306735
Appropriation of distributable amounts:
allocation of net incomeAccumulation Distribution Accumulation Distribution Accumulation Accumulation Accumulation Accumulation Distribution
Appropriation of distributable amounts:
allocation of net realised capital gainsAccumulation
Accumulation
and/or distribution
and/or retained
Accumulation
Accumulation
and/or distribution
and/or retained
Accumulation Accumulation Accumulation Accumulation
Accumulation
and/or distribution
and/or retained
Benchmark ICE BofAML Euro Financial Index
PL
AC
ING
OR
DE
RS
Minimum initial subscription None 1 share 500 000 euros 1 share 1 share 1 share ≥ 500 000 euros 1 share 1 share
Frequency of NAV calculation Daily Daily Daily Daily Daily Daily Daily Daily Daily
Execution of orders Based on the next NAV for orders placed before 12:00am
Subscription / redemption settlement date D (NAV date) + 2 business day / D (NAV date) +2 business days
FE
ES
Ongoing charges(1) 0.28% 0.28% 0.66% 0.66% 0.71% 0.72% 0.66% 0.95% 0.95%
Financial management fees maximum (incl.
Taxes)
0.265% of the net
asset (excluding
UCIs managed by
LFG)
0.265% of the net
asset (excluding
UCIs managed by
LFG)
0.665% of the net
asset (excluding
UCIs managed by
LFG)
0.665% of the net
asset (excluding
UCIs managed by
LFG)
0.715% of the net
asset (excluding
UCIs managed by
LFG)
0.715% of the net
asset (excluding
UCIs managed by
LFG)
0.665% of the net
asset (excluding
UCIs managed by
LFG)
0.965% of the net
asset (excluding
UCIs managed by
LFG)
0.965% of the net
asset (excluding
UCIs managed by
LFG)
Administrative fees external to the management
company maximum (incl. Taxes)0.035% of the net asset
Subscription fee maximum
(incl. Taxes)
Not retained by the
Fund4% max 4% max 4% max 4% max 4% max 4% max 4% max 4% max 4% max
Retained by the Fund None None None None None None None None None
Redemption fee maximum
(incl. Taxes)
Not retained by the
FundNone None None None None None None None None
Retained by the Fund None None None None None None None None None
Performance fees with High Water Mark
30% of the Fund's
outperformance
relative to the
index. This fee will
be capped at 2%.
Last exercise:
0.0%
30% of the Fund's
outperformance
relative to the
index. This fee will
be capped at 2%.
Last exercise: 0,0%
None None None None None
30% of the Fund's
outperformance
relative to the
index. This fee will
be capped at 2%.
Last exercise:
0.0%
30% of the Fund's
outperformance
relative to the
index. This fee will
be capped at 2%.
Last exercise: 0,0%
Countries of registration
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50 Lazard Fund Managers
RisksLazard Credit Fi
*Exposure in the interest rate and exchange explains the UCITS ranking in this category. The
used historical data could not give a reliable indication of the future UCITS risk profile. Nothing
guarantees that the above category remains unchanged, and the ranking may evolve in the time.
The lowest category is not synonymic of risk-free investment. Capital is not guaranteed.
Equity risk: The Fund may be subject to significant fluctuations in theunderlying equities through possible investments in convertible bonds.The equity risk will remain accessory (less than 10%).
Exchange rate risk: Besides euro-denominated securities, the Fund mayinvest up to 75% of its assets in securities denominated in US dollarsand/or pounds sterling. The resulting exchange rate risk (unhedged)may not exceed 10% of the Fund's assets.
Counterparty risk: This is the risk associated with the Fund’ use offinancial futures, over-the-counter financial instruments and/ortransactions involving temporary purchases and sales of securities.These transactions, entered into with one or more eligiblecounterparties, potentially expose the Fund to a risk of failure of anysuch counterparty, which may lead to default on payment.
Derivative instrument risk: The Fund may hold up to 100% of its netasset value with a synthetic exposure to interest rate instruments and/orindex instruments. The use of derivative products on organised or over-the-counter markets may expose the net asset value to strong upward ordownward variations, through underlying which react strongly to marketfluctuations.
Risk scale* :
Risk of capital loss: It is possible that the Fund may not meet its
performance objectives. The fund is not guaranteed or protected. Therefore
investor may not recover its initial investment.
Interest rate risk: There is a risk of a fall in the value of bonds and other
fixed-income securities and instruments, and hence in the portfolio,
resulting from a change in interest rates.
Credit risk: A bond issuer may default. Thus, such a default could bring
about a fall in the Fund’ net asset value. Even where there is no issuer’s
default, market variations in credit spreads may result in negative
performance. These risks are even more important as the bond issuer’s
quality declines. The fall in net asset value may be even greater as the Fund
is invested in debt belonging to the speculative or ‘high yield’ category. This
Fund must be considered as speculative for its investment holdings in
securities with low rating. Furthermore, the use of speculative or ‘high yield’
securities may involve a risk of greater fall in net asset value.
Risks linked to contingent or subordinated securities: The Fund maybe
exposed to contingent or subordinated securities. Holders of those
securities can partially or totally lose their investments following the
conversion into equities at a pre-determined price or a contractual haircut
as defined in clauses of the issue's prospectus, or arbitrarily decided by a
Supervisor. Holders of those securities can also be exposed to significant
prices fluctuations in case of lack of solvency requirements or issuer's
difficulties.
Liquidity risk: This relates to the difficulty or impossibility of selling the
securities held in the portfolio at the appropriate time and at the portfolio’s
valuation price, on account of the reduced size of the market or the absence
of volume on the market on which these securities are usually traded.
2 3 4 5 61 7
Lower risk, returns are likely to be lower
Higher risk, returns are likely to be higher
For more information about fund’s other characteristics and risks, please refer to the prospectus available from the company on request or on www.lazardfreresgestion.fr
51 Lazard Fund Managers
Lazard Subordinated Financial Debt – Hybrid ContingentGIPS Composite Information
Source: Lazard. As of 30 June 2019.
Past performance does not guarantee future performance. Performance over less than one year is provided for illustration purposes only.
These performance data are provided for information purposes only and should be assessed over the recommended investment period. Information reserved for professional investors.
Range of standard management fees takes into consideration share class charges of all portfolios contained within this composite.
52 Lazard Fund Managers
Disclaimer
This is a financial promotion and is not intended to constitute investment advice.
Lazard Credit Fi is a French mutual fund (Fonds commun de placement), authorised and regulated as UCITS by the Autorité des marchés financiers and
managed by Lazard Frères Gestion SAS.
Copies of the full Prospectus, the relevant Key Investor Information Document (KIID) and the most recent Report and Accounts are available in English,
and other languages where appropriate, on request from the address below or at www.lazardfreresgestion.fr. Investors and potential investors should read
and note the risk warnings in the Prospectus and relevant KIID.
Past performance is not a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and you may not get
back the amount you invested. Any yield quoted is gross and is not guaranteed. It is subject to fees, taxation and charges within the portfolio and the
investor will receive less than the gross yield. There can be no assurance that the portfolio's objectives or performance target will be achieved. Any views
expressed herein are subject to change.
The returns from your investment may be affected by changes in the exchange rate between the portfolio's base currency, the currency of the portfolio's
investments, your share class and your home currency.
The information provided herein should not be considered a recommendation or solicitation to purchase, retain or sell any particular security. It should also
not be assumed that any investment in these securities was or will be profitable.
The contents of this document are confidential and should not be disclosed other than to the person or persons for whom it is intended.
FOR FINANCIAL PROFESSIONAL USE ONLY.
DOCUMENT INTENDED FOR PROFESSIONAL INVESTORS
53 Lazard Fund Managers
Disclaimer
Fixed income: Yields from bonds reflect in part the risk rating of the bond issuer. Investment in lower rated bonds increases the risk of default on
repayment and the risk to capital of the portfolio. High yielding assets may carry a greater risk of capital values falling or have limited prospects of capital
growth or recovery. Investment in high yield securities involves a high degree of risk to both capital and income. Yields from bonds reflect in part the risk
rating of the bond issuer. Investment in lower rated bonds increases the risk of default on repayment and the risk to capital of the portfolio.
Derivatives: The portfolio invests in financial derivative instruments ("FDIs"). While the use of FDIs can be beneficial, they also involve risks different
from, and in certain cases, greater than, the risks presented by more traditional investments. FDIs may be subject to sudden, unexpected and substantial
price movements that are not always predictable. This can increase the volatility of the portfolio’s Net Asset Value. FDIs do not always totally track the
value of the securities, rates or indices they are designed to track. The use of FDIs to gain greater exposure to securities, rates or indices than by a direct
investment, increases the possibility for profit but also increases the risk of loss. The Fund is also subject to the risk of the insolvency or default of its
counterparties to FDI investments. In such events the Fund may have limited recourse against the counterparty and may experiences losses.
S&P Credit Ratings: This may contain information obtained from third parties, including ratings from credit ratings agencies such as Standard & Poor’s.
Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third
party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible
for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content
providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use.
Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages,
costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs or losses caused by negligence) in connection with any use of
their content including ratings. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell
securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment
advice.
JP Morgan: Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index is
used with permission. The Index may not be copied, used or distributed without J.P. Morgan’s prior written approval. Copyright 2018, J.P. Morgan Chase
& Co. All rights reserved.
FOR FINANCIAL PROFESSIONAL USE ONLY.
DOCUMENT INTENDED FOR PROFESSIONAL INVESTORS
54 Lazard Fund Managers
Disclaimer
This strategy is available by way of either a Fund or a segregated mandate, subject to any local regulatory restrictions or requirements.
United Kingdom, Finland, Ireland, Denmark, Norway and Sweden: The information is approved, on behalf of Lazard Fund Managers (Ireland) Limited, by
Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LL. Incorporated in England and Wales, registered number 525667. Lazard Asset
Management Limited is authorised and regulated by the Financial Conduct Authority.
Germany and Austria: Lazard Asset Management (Deutschland) GmbH, Neue Mainzer Strasse 75, 60311 Frankfurt am Main is authorized and regulated in
Germany by the BaFin.
Belgium and Luxembourg: This information is provided by the Belgian Branch of Lazard Fund Managers Ireland Limited, at Blue Tower Louise, Avenue
Louise 326, Brussels, 1050 Belgium.
France: This information is provided by Lazard Frères Gestion SAS , 25, rue de Courcelles 75 008 Paris.
Italy: This information is provided by the Italian branch of Lazard Asset Management (Deutschland) GmbH. Lazard Asset Management (Deutschland)
GmbH Milano Office, Via Dell'Orso 2 - 20121 Milan is authorized and regulated in Germany by the BaFin.
Netherlands: This information is provided by the Dutch Branch of Lazard Fund Managers (Ireland) Limited, which is registered in the Dutch register held
with the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten).
Spain and Portugal: This information is provided by the Spanish Branch of Lazard Fund Managers Ireland Limited, at Paseo de la Castellana 140, Piso 10,
Letra E, 28046 Madrid and registered with the National Securities Market Commission (Comisión Nacional del Mercado de Valores or CNMV) under
registration number 18.
Switzerland: Lazard Asset Management Schweiz AG, Usteristraße 9, CH-8001 Zurich. Authorised and regulated in Switzerland by the FINMA.
FOR FINANCIAL PROFESSIONAL USE ONLY.
DOCUMENT INTENDED FOR PROFESSIONAL INVESTORS
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