The Lazard Rathmore strategy has, both over the qualifying 12-month period and on a since inception basis, delivered compelling risk-adjusted returns to investors. Broadly speaking, the strategy aims to deliver equity-like returns, with bond-like risk, while providing a low correlation to traditional fixed income and a low duration exposure.
Sarah George, Senior Vice President, Client Portfolio Manager at Lazard, says: “We believe that this investment objective has been substantiated by both the strategy’s long-term and recent performance, and kindly recognised by Hedgeweek/ Bloomberg through the strategy’s receipt of this award.”
The Rathmore strategy
The strategy has navigated the challenges of the last 18 months through operating collectively, relying on the team’s extensive experience managing and trading hedged convertibles over varying market cycles, and bolstered by the broader, global footprint of Lazard.
George adds: “The portfolio management team’s vast experience in the space (senior investment professionals each with 25+ years of experience trading convertible securities), coupled with the depth of resources afforded to the Team by Lazard Asset Management, have been key to navigating the past months.”
Further, George notes that the past 12 months have served to underscore the benefits of this exposure set, and of the Rathmore strategy specifically, in uncertain markets. “We believe that this will continue to be the case on a forward-looking basis, in light of recent market dynamics that would appear to lie ahead,” she says.
Building on this performance
To build on this performance, the team will continue to focus on return-on-risk-capital as a guiding principal, which includes continuing to enhance and build upon those proprietary systems, tools and processes that the team utilises, in an effort to both navigate and fully capitalise on the unique risks and opportunities presented by the current market environment. This includes a growing emphasis on ESG considerations, which are of significant importance to the strategy.
Industry trends
Industry trends Rathmore has seen three key trends emerge within the space over the past 12 months, each reflected by the Rathmore strategy. First, convertible arbitrage strategies are now steadily attracting capital again for the first time since the Global Financial Crisis. Secondly, post the Archegos PB crisis, leverage has become more available for a strategy like this, as prime brokers have recognised the lower gross/net risk associated with the strategy. And lastly, the strategy’s focus on ESG reflects the increased importance of ESG issues to investors and prospective investors, as well as the investment community as a whole.
Going forwards, the strategy expects to see continued investment flows into the space, as investors look to diversify their traditional fixed income exposure away from the traditional 60/40 portfolio allocation that the market has embraced since the early 1980s, in light of the current market backdrop, through alternative credit and relative value products.
George concludes: “We expect the recent growth of the asset class to continue, and for the supportive backdrop – as relates to liquidity, financing, investor base, etc. – to continue to provide a solid foundation for return generation.”
Sarah George, Senior Vice President, Lazard Asset Management
Sarah George is a Senior Vice President and Client Portfolio Manager focusing on Lazard’s capital structure and convertibles-based strategies. She began working in the investment field in 2010. Prior to joining Lazard in 2010, Sarah worked on the Mergers and Acquisitions team at Debevoise & Plimpton LLP. Sarah has a BA in Political Science from Franklin and Marshall College.