LEGAL
INFORMATION
Table of contents (click on each section to quickly access the content)
- Brokerage fees
- Variable management fees: calculation methods
- Order execution and intermediary selection policy
- Application of the Dodd-Frank act by Lazard Frères Gestion
- Complaint handling procedure
- Information from Lazard Frères Banque
- Exercise of voting rights
- Integrity and technical failings
- FATCA
- Solvency II
- Compensation policy
- Gender equality index
- Personal data privacy policy
- Definitions and methodologies
BROKERAGE FEES
Report on brokerage fees for 2023
This report is intended to meet the requirements of Article 314-82 of the General Regulation of the Autorité des Marchés Financiers (French Financial Markets Authority).
As part of managing funds, Lazard Frères Gestion uses order execution services provided by service providers. The brokerage fees incurred by service providers were in excess of €500,000 and Lazard Frères Gestion is therefore required to report on the conditions under which it has used investment decision and order execution support services. It must also report on the breakdown between (1) brokerage fees relating to the reception and transmission service and the order reception service, and (2) brokerage fees relating to investment decision and order execution support services.
Use of investment decision and order execution support services (SADIE)
In the 2023 financial year, Lazard Frères Gestion used the services of investment service providers with which it had entered into a shared commission agreement.
The objective of our policy of best selection and control policy for SADIE providers is to use the best service providers in each speciality (geographical analysis, sector analysis, analysis by capitalisation size, arbitrage, etc.).
With this in mind, we may decide between analysis provided by a sell-side department of an execution broker and analysis available from an independent research firm.
The quality of service provided by SADIE providers will be monitored and assessed by the same committee that analyses and controls execution services provided by Brokers.
The monitoring of SADIE providers and any reallocation of resources between them are carried out using the methodology described below.
Allocation of brokerage fees
Brokerage fees relate to transactions involving equities, similar instruments and futures traded as part of discretionary management and fund management activities. Lazard Frères Gestion is authorised to receive and transmit orders. Brokerage fees are therefore intended to compensate providers of investment decision and order execution support services. 62.5% of the total fee is allocated to decision-making support and 37.5% to order execution support. Fees for investment decision and order execution support services paid to third-party service providers under shared commission agreements represented 14.09% of the total amount of brokerage fees in 2023.
Investment decision support and order execution service fees repaid to third-party services providers in the context of commission sharing agreements represented 14.09% of total intermediation fees paid in 2023.
Prevention of conflicts of interest
This report must also cover the measures put in place to prevent and deal with any conflicts of interest arising as a result of the choice of service providers.
At Lazard Frères Gestion, service providers are selected twice a year at meetings of the Broker Committee, attended by a manager, fund managers, traders, compliance staff and the head of the middle office. Brokers are selected via a transparent selection process based on:
- the quality and availability of research,
- the quality of prices and the execution of orders,
- administrative processing,
- the commercial relationship (relationship with issuers).
In addition, Lazard Frères Gestion does not receive soft commissions or kickbacks on brokerage fees from its service providers.
No conflicts were detected at Lazard Frères Gestion in the 2023 financial year.
PERFORMANCE FEES (VARIABLE MANAGEMENT FEES): CALCULATION METHODS
In accordance with the "Guidelines on performance fees in UCITS and certain types of AIFs" (ESMA34-39-992) of the European Securities and Markets Authority (ESMA) and AMF Recommendation 2021-01, Lazard Frères Gestion will amend the drafting of the procedures it uses to calculate variable management fees for the relevant funds.
The ESMA guidelines aim to promote greater convergence and standardisation in the area of performance fees.
Reminder of the principle of performance fees:
If, at the end of the financial year (the "crystallisation date"), the fund’s performance (net dividends reinvested and excluding variable management fees) is higher than that of its benchmark index, a performance fee is levied, even if the fund’s performance is negative.
New calculation methods:
For each fund affected by these provisions, variable management fees will now be calculated based on the performance achieved by the fund over the previous five years, or since its creation if the fund was launched less than five years ago. Periods of underperformance are thus offset against periods of outperformance in the calculation of variable fees.
To illustrate how this mechanism works, the ESMA has published an example that Lazard Frères Gestion has included for information purposes. The chart below represents the years of outperformance and underperformance of a fund relative to its benchmark index (blue curve). Only the years with a percentage figure shown in green result in the payment of performance fees.
| Net outperformance or underperformance of the fund relative to its benchmark index | Underperformance to be offset in the following year | Application of performance fees | |
|---|---|---|---|
| Year 1 | 5% | 0% | Yes |
| Year 2 | 0% | 0% | No |
| Year 3 | -5% | -5% | No |
| Year 4 | 3% | -2% | No |
| Year 5 | 2% | 0% | No |
| Year 6 | 5% | 0% | Yes |
| Year 7 | 5% | 0% | Yes |
| Year 8 | -10% | -10% | No |
| Year 9 | 2% | -8% | No |
| Year 10 | 2% | -6% | No |
| Year 11 | 2% | -4% | No |
| Year 12 | 0% | 0%* | No |
| Year 13 | 2% | 0% | Yes |
| Year 14 | -6% | -6% | No |
| Year 15 | 2% | -4% | No |
| Year 16 | 2% | -2% | No |
| Year 17 | -4% | -6% | No |
| Year 18 | 0% | -4%** | No |
| Year 19 | 5% | 0% | Yes |
| Year 1 | |
| Net performance vs. the benchmark index | 5% |
| Underperformance to be compensated in the following year | 0% |
| Payment of performance fees | Yes |
| Year 2 | |
| Net performance vs. the benchmark index | 0% |
| Underperformance to be compensated in the following year | 0% |
| Payment of performance fees | No |
| Year 3 | |
| Net performance vs. the benchmark index | -5% |
| Underperformance to be compensated in the following year | -5% |
| Payment of performance fees | No |
| Year 4 | |
| Net performance vs. the benchmark index | 3% |
| Underperformance to be compensated in the following year | -2% |
| Payment of performance fees | No |
| Year 5 | |
| Net performance vs. the benchmark index | 2% |
| Underperformance to be compensated in the following year | 0% |
| Payment of performance fees | No |
| Year 6 | |
| Net performance vs. the benchmark index | 5% |
| Underperformance to be compensated in the following year | 0% |
| Payment of performance fees | Yes |
| Year 7 | |
| Net performance vs. the benchmark index | 5% |
| Underperformance to be compensated in the following year | 0% |
| Payment of performance fees | Yes |
| Year 8 | |
| Net performance vs. the benchmark index | -10% |
| Underperformance to be compensated in the following year | -10% |
| Payment of performance fees | No |
| Year 9 | |
| Net performance vs. the benchmark index | 2% |
| Underperformance to be compensated in the following year | -8% |
| Payment of performance fees | No |
| Year 10 | |
| Net performance vs. the benchmark index | 2% |
| Underperformance to be compensated in the following year | -6% |
| Payment of performance fees | No |
| Year 11 | |
| Net performance vs. the benchmark index | 2% |
| Underperformance to be compensated in the following year | -4% |
| Payment of performance fees | No |
| Year 12 | |
| Net performance vs. the benchmark index | 0% |
| Underperformance to be compensated in the following year | 0%* |
| Payment of performance fees | No |
| Year 13 | |
| Net performance vs. the benchmark index | 2% |
| Underperformance to be compensated in the following year | 0% |
| Payment of performance fees | Yes |
| Year 14 | |
| Net performance vs. the benchmark index | -6% |
| Underperformance to be compensated in the following year | -6% |
| Payment of performance fees | No |
| Year 15 | |
| Net performance vs. the benchmark index | 2% |
| Underperformance to be compensated in the following year | -4% |
| Payment of performance fees | No |
| Year 16 | |
| Net performance vs. the benchmark index | 2% |
| Underperformance to be compensated in the following year | -2% |
| Payment of performance fees | No |
| Year 17 | |
| Net performance vs. the benchmark index | -4% |
| Underperformance to be compensated in the following year | -6% |
| Payment of performance fees | No |
| Year 18 | |
| Net performance vs. the benchmark index | 0% |
| Underperformance to be compensated in the following year | -4%** |
| Payment of performance fees | No |
| Year 19 | |
| Net performance vs. the benchmark index | 5% |
| Underperformance to be compensated in the following year | 0% |
| Payment of performance fees | Yes |
* The underperformance in year 12 to be carried forward to year 13 is 0% (and not -4%) due to the fact that the residual underperformance resulting from year 8 that has not yet been offset (-4%) is no longer included in the calculation. The 5-year period has now passed: the underperformance in year 8 is offset until year 12.
** The underperformance in year 18 to be carried forward to year 19 is -4% (and not -6%) due to the fact that the residual underperformance resulting from year 14 that has not yet been offset (-2%) is no longer included in the calculation. The 5-year period has now passed: the underperformance in year 14 is offset until year 18.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Performance of the Fund's units | 10% | -4% | -7% | 6% | 3% |
| Performance of the benchmark | 5% | -5% | -3% | 4% | 0% |
| Outperformance/underperformance | 5% | 1% | -4% | 2% | 3% |
| Cumulative performance of the Fund over the observation period | 10% | -4% | -7% | -1% | 2% |
| Cumulative performance of the benchmark over the observation period | 5% | -5% | -3% | 1% | 1% |
| Cumulative outperformance/underperformance over the observation period | 5% | 1% | -4% | -2% | 1% |
| Deduction of a fee ? | Yes | No, because the Fund's performance is negative, despite outperforming the benchmark | No, because the fund underperformed the benchmark and its performance was negative over the year | No, because the fund underperformed over the entire current observation period, beginning in year 3 | Yes |
| Start of a new observation period ? | Yes, a new observation period begins in year 2 | Yes, a new observation period begins in year 3 | No, the observation period is extended to include years 3 and 4 | No, the observation period is extended to include years 3, 4 and 5 | Yes, a new observation period begins in year 6 |
| Performance of the Fund's units | |
| Year 1 | 10% |
| Year 2 | -4% |
| Year 3 | -7% |
| Year 4 | 6% |
| Year 5 | 3% |
| Performance of the benchmark | |
| Year 1 | 5% |
| Year 2 | -5% |
| Year 3 | -3% |
| Year 4 | 4% |
| Year 5 | 0% |
| Outperformance/underperformance | |
| Year 1 | 5% |
| Year 2 | 1% |
| Year 3 | -4% |
| Year 4 | 2% |
| Year 5 | 3% |
| Cumulative performance of the Fund over the observation period | |
| Year 1 | 10% |
| Year 2 | -4% |
| Year 3 | -7% |
| Year 4 | -1% |
| Year 5 | 2% |
| Cumulative performance of the benchmark over the observation period | |
| Year 1 | 5% |
| Year 2 | -5% |
| Year 3 | -3% |
| Year 4 | 1% |
| Year 5 | 1% |
| Cumulative outperformance/underperformance over the observation period | |
| Year 1 | 5% |
| Year 2 | 1% |
| Year 3 | -4% |
| Year 4 | -2% |
| Year 5 | 1% |
| Deduction of a fee ? | |
| Year 1 | Yes |
| Year 2 | No, because the Fund's performance is negative, despite outperforming the benchmark |
| Year 3 | No, because the fund underperformed the benchmark and its performance was negative over the year |
| Year 4 | No, because the fund underperformed over the entire current observation period, beginning in year 3 |
| Year 5 | Yes |
| Start of a new observation period ? | |
| Year 1 | Yes, a new observation period begins in year 2 |
| Year 2 | Yes, a new observation period begins in year 3 |
| Year 3 | No, the observation period is extended to include years 3 and 4 |
| Year 4 | No, the observation period is extended to include years 3, 4 and 5 |
| Year 5 | Yes, a new observation period begins in year 6 |
NB: To make the example easier to understand, we have stated the performances of the Fund and the benchmark as percentages. Outperformance/underperformance will, in reality, be measured as an amount, i.e. the difference between the net assets of the Fund and those of a fictitious fund as described in the above methodology.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Performance of the Fund's units | 10% | -4% | -7% | 6% | 3% |
| Performance of the benchmark | 5% | -5% | -3% | 4% | 0% |
| Outperformance/underperformance | 5% | 1% | -4% | 2% | 3% |
| Cumulative performance of the Fund over the observation period | 10% | -4% | -7% | -1% | 2% |
| Cumulative performance of the benchmark over the observation period | 5% | -5% | -3% | 1% | 1% |
| Cumulative outperformance/underperformance over the observation period | 5% | 1% | -4% | -2% | 1% |
| Deduction of a fee ? | Yes | Yes | No, as the fund underperformed the benchmark | No, because the fund underperformed over the entire current observation period, beginning in year 3 | Yes |
| Start of a new observation period ? | Yes, a new observation period begins in year 2 | Yes, a new observation period begins in year 3 | No, the observation period is extended to include years 3 and 4 | No, the observation period is extended to include years 3, 4 and 5 | Yes, a new observation period begins in year 6 |
| Performance of the Fund's units | |
| Year 1 | 10% |
| Year 2 | -4% |
| Year 3 | -7% |
| Year 4 | 6% |
| Year 5 | 3% |
| Performance of the benchmark | |
| Year 1 | 5% |
| Year 2 | -5% |
| Year 3 | -3% |
| Year 4 | 4% |
| Year 5 | 0% |
| Outperformance/underperformance | |
| Year 1 | 5% |
| Year 2 | 1% |
| Year 3 | -4% |
| Year 4 | 2% |
| Year 5 | 3% |
| Cumulative performance of the Fund over the observation period | |
| Year 1 | 10% |
| Year 2 | -4% |
| Year 3 | -7% |
| Year 4 | -1% |
| Year 5 | 2% |
| Cumulative performance of the benchmark over the observation period | |
| Year 1 | 5% |
| Year 2 | -5% |
| Year 3 | -3% |
| Year 4 | 1% |
| Year 5 | 1% |
| Cumulative outperformance/underperformance over the observation period | |
| Year 1 | 5% |
| Year 2 | 1% |
| Year 3 | -4% |
| Year 4 | -2% |
| Year 5 | 1% |
| Deduction of a fee ? | |
| Year 1 | Yes |
| Year 2 | Yes |
| Year 3 | No, as the fund underperformed the benchmark |
| Year 4 | No, because the fund underperformed over the entire current observation period, beginning in year 3 |
| Year 5 | Yes |
| Start of a new observation period ? | |
| Year 1 | Yes, a new observation period begins in year 2 |
| Year 2 | Yes, a new observation period begins in year 3 |
| Year 3 | No, the observation period is extended to include years 3 and 4 |
| Year 4 | No, the observation period is extended to include years 3, 4 and 5 |
| Year 5 | Yes, a new observation period begins in year 6 |
NB : To make the example easier to understand, we have stated the performances of the Fund and the benchmark as percentages. Outperformance/underperformance will, in reality, be measured as an amount, i.e. the difference between the net assets of the Fund and those of a fictitious fund as described in the above methodology.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|
| Performance of the Fund's units | 0% | 5% | 3% | 6% | 1% | 5% |
| Performance of the benchmark | 10% | 2% | 6% | 0% | 1% | 1% |
| A: Outperformance/underperformance for the year to date | -10% | 3% | -3% | 6% | 0% | 4% |
| B1: Non-offset underperformance carried forward Year 1 | N/A | -10% | -7% | -7% | -1% | Outside scope |
| B2: Non-offset underperformance carried forward Year 2 | N/A | N/A | 0% | 0% | 0% | 0% |
| B3: Non-offset underperformance carried forward Year 3 | N/A | N/A | N/A | -3% | -3% | -3% |
| B4: Non-offset underperformance carried forward Year 4 | N/A | N/A | N/A | N/A | 0% | 0% |
| B5: Non-offset underperformance carried forward Year 5 | N/A | N/A | N/A | N/A | N/A | 0% |
| Outperformance/underperformance over the observation period | -10% (A) | -7% (A + B1) | -10% (A + B1 + B2) | -4% (A + B1 + B2 + B3) | -4% (A + B1 + B2 + B3 + B4) | 1% (A + B2 + B3 + B4 + B5) |
| Deduction of a fee ? | No | No | No | No | No | Yes |
| Performance of the Fund's units | |
| Year 1 | 0% |
| Year 2 | 5% |
| Year 3 | 3% |
| Year 4 | 6% |
| Year 5 | 1% |
| Year 6 | 5% |
| Performance of the benchmark | |
| Year 1 | 10% |
| Year 2 | 2% |
| Year 3 | 6% |
| Year 4 | 0% |
| Year 5 | 1% |
| Year 6 | 1% |
| A: Outperformance/underperformance for the year to date | |
| Year 1 | -10% |
| Year 2 | 3% |
| Year 3 | -3% |
| Year 4 | 6% |
| Year 5 | 0% |
| Year 6 | 4% |
| B1: Non-offset underperformance carried forward Year 1 | |
| Year 1 | N/A |
| Year 2 | -10% |
| Year 3 | -7% |
| Year 4 | -7% |
| Year 5 | -1% |
| Year 6 | Outside scope |
| B2: Non-offset underperformance carried forward Year 2 | |
| Year 1 | N/A |
| Year 2 | N/A |
| Year 3 | 0% |
| Year 4 | 0% |
| Year 5 | 0% |
| Year 6 | 0% |
| B3: Non-offset underperformance carried forward Year 3 | |
| Year 1 | N/A |
| Year 2 | N/A |
| Year 3 | N/A |
| Year 4 | -3% |
| Year 5 | -3% |
| Year 6 | -3% |
| B4: Non-offset underperformance carried forward Year 4 | |
| Year 1 | N/A |
| Year 2 | N/A |
| Year 3 | N/A |
| Year 4 | N/A |
| Year 5 | 0% |
| Year 6 | 0% |
| B5: Non-offset underperformance carried forward Year 5 | |
| Year 1 | N/A |
| Year 2 | N/A |
| Year 3 | N/A |
| Year 4 | N/A |
| Year 5 | N/A |
| Year 6 | 0% |
| Outperformance/underperformance over the observation period | |
| Year 1 | -10% (A) |
| Year 2 | -7% (A + B1) |
| Year 3 | -10% (A + B1 + B2) |
| Year 4 | -4% (A + B1 + B2 + B3) |
| Year 5 | -4% (A + B1 + B2 + B3 + B4) |
| Year 6 | 1% (A + B2 + B3 + B4 + B5) |
| Deduction of a fee ? | |
| Year 1 | No |
| Year 2 | No |
| Year 3 | No |
| Year 4 | No |
| Year 5 | No |
| Year 6 | Yes |
The underperformance generated in year 1 and partially offset in subsequent years becomes irrelevant in year 6.
ORDER EXECUTION AND INTERMEDIARY SELECTION POLICY
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APPLICATION OF THE DODD-FRANK ACT BY LAZARD FRERES GESTION
Lazard Frères Gestion SAS does not provide any investment service, directly or indirectly, to clients or investors categorised as "US persons” (as defined by Rule 902 of Regulation S under the United States Securities Act of 1933). In addition, Lazard Frères Gestion SAS will not accept potential clients or investors:
(i) who acquire financial instruments for or on behalf of a US person or
(ii) through whom an investment service is provided for or on behalf of a US person
COMPLAINT HANDLING PROCEDURE
LFG notifies its Clients that it has a complaint handling procedure in place. To be dealt with as effectively as possible, any complaint sent by post must be addressed to the Legal Department of Lazard Frères Gestion at 25, rue de Courcelles, 75008 Paris.
Lazard Frères Gestion undertakes to acknowledge receipt of the complaint within 10 business days of receipt, unless a response is provided within that period, and to respond within two months of receipt of the complaint unless there are specific duly justified circumstances. However, if the Client is not fully satisfied with the response provided by Lazard Frères Gestion, they may refer the matter to the AMF's Ombudsman in writing (Autorité des Marchés Financiers, Service Médiation - 17, place de la Bourse, 75082 PARIS-CEDEX 02) or by filling in an electronic form on the AMF's website http://www.amf-france.org (under the heading AMF Ombudsman). The AMF Ombudsman applies a mediation charter that is available on the aforementioned website.
In relation to our brokerage activities, investors may send complaints directly to LFG Courtage by calling 01 44 13 01 11 or by sending an email to LFG.JURIDIQUE@LAZARD.FR. LFG Courtage undertakes to acknowledge receipt of the complaint within 10 business days of receipt, unless a response is provided within that period, and to respond within two months of receipt of the complaint unless there are specific duly justified circumstances. If the policyholder disagrees with LFG Courtage, they may refer the matter to the mediator at La Médiation de l’Assurance by writing to La Médiation de l’Assurance TSA 50110 – 75441 Paris Cedex 09 - France.
INFORMATION FROM LAZARD FRÈRES BANQUE
Lazard Frères Banque informs its clients that its guide to banking mobility is available from its branch at 175 boulevard Haussmann, Paris 8th arrondissement.
EXERCISE OF VOTING RIGHTS
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INTEGRITY AND TECHNICAL FAILINGS
The security and integrity of communications via the Internet cannot be guaranteed. Lazard Frères Gestion does not therefore accept any liability in the event of any technical failings, particularly in the event of issues encountered in accessing the website or interrupting the publication of the website.
FATCA
The purpose and legal framework of FATCA
The Foreign Account Tax Compliance Act (FATCA) is a US law enacted on 18 March 2010 that seeks to combat tax evasion in the United States of America. Under FATCA, US taxpayers are required to submit an annual return to the US Internal Revenue Service (IRS) for any accounts they hold outside the United States.
US tax law requires US taxpayers, regardless of their place of residence, to submit their own return.
The law applies to “U.S. Persons”, i.e. all persons with US nationality and persons resident in the United States. Its purpose is to obtain information from financial institutions on the identity of these persons, the balances held in their accounts, their financial income and, in the future, proceeds from the sale of securities.
The first annual returns to the IRS were submitted in 2015 and related to 2014. This return will also cover the accounts of companies or asset-holding structures owned by US taxpayers.
In France, the application of FATCA is part of the legal framework set out in an Intergovernmental Agreement (IGA) signed on 14 November 2013 and submitted to Parliament for ratification. It seeks to allow banking and tax information to be disclosed between France and the United States and to make such disclosure mandatory.
How FATCA affects Lazard
From 1 July 2014, Lazard Frères Banque and Lazard Frères Gestion are required to comply with FATCA as a result of being categorised as “Participating Financial Institutions” by the IRS.
As such, Lazard Frères Banque and Lazard Frères Gestion apply the client identification obligations provided for by FATCA.
When opening an account, Lazard obtains from Clients, whether individuals or legal entities, information that identifies whether they are a "U.S. Person" and asks Clients to confirm their status.
Information provided by Lazard's existing Clients is also analysed to determine whether there are any indications that these Clients may be "U.S. Persons". The Clients in question will be contacted so that their FATCA status can be established.
Clients should contact their usual contacts if they require any additional information.
SOLVENCY II
Pursuant to AMF Position 2004-07, Lazard Frères Gestion SAS informs the unitholders and/or shareholders of the funds that it manages that it may be required to send details of the composition of the portfolios of these funds to certain professional investors for the purposes of calculating the regulatory requirements under Directive 2009/138/EC (“Solvency 2”).
COMPENSATION POLICY
Information about the fixed and variable compensation paid by the management company to its employees, in proportion to the investment made in the management of funds, excluding discretionary management, may be obtained by post from Lazard Frères Gestion fund legal department.
The aggregate amount of variable compensation is set by the Lazard Group based on various criteria, including the financial performance of the Lazard Group over the past year, and takes account of Lazard Frères Gestion's results.
The Executive Management team decides on the total amount of compensation to be split between fixed and variable compensation, in accordance with the principle that the fixed component of compensation is absolutely separate from the variable component.
The aggregate amount of variable compensation must not be such that it prevents the Lazard Group and Lazard Frères Gestion from strengthening its capital position when necessary.
All risks and conflicts of interest are factored into the calculation of the aggregate amount of variable compensation.
The amount of variable compensation is then individually calculated and is, in part, based on the performance of each Identified Employee.
The Executive Management team supervises the calculation of individual compensation amounts via an individual assessment form, which is used in the annual appraisal interview.
The annual individual assessment criteria are used to determine the suitability of Identified Employees for the positions they hold, to take their expertise into consideration and to assess their reliability and autonomy.
This assessment is used to report on the achievement of targets over the past year and to accordingly set future targets.
The compensation policy encourages rigorous and effective risk management in the area of sustainable development. As such, the assessment of Identified Employees takes account of both financial risks and also sustainability risks.
The compensation policy is reviewed each year.
Each year, Lazard Frères Gestion's the committee responsible for monitoring compliance with the compensation policy, made up of two members independent of the management company, is responsible for issuing an opinion on the application of the compensation policy and on its compliance with applicable laws.
GENDER EQUALITY INDEX
The law on the freedom to make career choices of 5 September 2018 aims to reduce the gender pay gap through binding measures. Equal pay for women and men is now an absolute obligation rather than a “best endeavours” commitment. Since 2019, companies with more than 250 employees, and since 2020, companies with 50 or more employees, have been subject to a duty to provide transparent information on identified pay gaps, while strengthening the ability of labour inspectorates to carry out checks.
The index takes the form of a score out of 100 consists of 4 indicators that measure different data on gender equality:
- gender pay gap (40 points)
- difference in the rate of increase in basic salaries between men and women (35 points)
- percentage of female employees who received a pay rise in the year in which they returned from maternity leave (15 points)
- number of employees of the under-represented gender (men or women) in the company's 10 highest earners (10 points)
If the resulting score is less than 75 points, the employer has 3 years to take corrective action. At the end of that period, it will incur a financial penalty.
For 2023, Lazard Frères Gestion achieved a score of 94 out of 100.
PERSONAL DATA PRIVACY POLICY
DEFINITIONS AND METHODOLOGIES
DEFINITIONS
The ALPHA represents the added value of the manager after subtracting the market influence that the manager does not control. It is usually given as a percentage. For instance, the ICVT ETF return was 13.17% in 2017. The Bloomberg Barclays U.S. Aggregate Index had a return of 3.06% over the same period. Therefore, the alpha for ICVT ETF was 10.11% in comparison to the Bloomberg Barclays U.S. Aggregate Index.
The BETA measures the influence of a market (represented by a reference indicator) on the behavior of the product. The average variation of the net asset value of the product expresses the Beta, for a variation of 1% of the reference indicator. If the beta is 0.8, this means that a 1% change in the reference indicator induces a 0.8% variation in the product.
The CORRELATION COEFFICIENT defines the direction and degree of dependence between two variables. It necessarily varies between -1 and 1. A positive correlation between an indicator and the product means both vary in the same direction, while a negative coefficient implies the opposite. Close to zero, it means that the influence of the reference indicator on the product is low.
The RECOVERY TIME measures the time needed to recover the maximum loss. This is often determined in days or months. The recovery starts at the yield following the maximum loss.
ELIGIBLE FOR PEA: Fund eligible for the stock savings plan. This tax measure depends on the individual situation of each client.
FCP means "Fonds Commun de Placement". SICAV stands for "Société d'Investissement à Capital Variable".
GAIN FREQUENCY is the percentage of positive returns over a defined frequency.
OVERLAY MANAGEMENT is an approach based on the hedging of existing risks (equity, interest rate, currency, etc.) in a portfolio. A management style that harmonizes the investor’s separately managed accounts.
UCI stands for "Undertakings for Collective Investment". This category of financial products includes mutual funds (FCP) and open-end investment companies (SICAV). There are two categories of mutual funds, UCITS (Undertakings for Collective Investment in Transferable Securities) and AIFs (Alternative Investment Funds).
UCITS stands for "Undertakings for Collective Investment in Transferable Securities". This category of financial products includes FCP and SICAV funds.
The PERFORMANCE, often expressed as a percentage, allows to measure the capital gain or loss of an investment over a period (10% = gain of 10 for 100 invested). The performance can also be expressed on an annual basis. It is equivalent to reporting the performance of a fund over a one-year period. In both cases, a loss will be expressed as a negative percentage and a gain as a positive percentage
The VOLATILITY of a security is the difference between its performance and its average and therefore allows us to assess the regularity with which this performance has been obtained. It is a measure of risk. If it is zero, it means that the unit performances are identical. The higher it is, the more the unit performances are different from each other.
The MAX LOSS is the maximum loss over a series of periodic returns. For instance, over these 3 days: May 4: -1.8%; May 5: -0.9%; May 6: -1.3%, the maxi loss is -1.8%. The Max Drawdown is the percentage loss between the highest value and the lowest value observed on a period.
DD recovery: It represents the time period to recover from the max drawdown.
Leverage Ratio: A leverage ratio is a financial measurement stating how much capital comes in the form of debt to meet its financial obligation. A leverage ratio of 3 means that for 100$ invested, one borrows 200$ to invest 300$ on the whole. This allows for potentially more gains but increases the risk leading to possible bigger loss too.
The R2 or DETERMINATION COEFFICIENT measures the proportion of the product's fluctuations explained by fluctuations in the benchmark. Mathematically, it is the square of the correlation coefficient. It varies between 0 and 1. The more close to 1 the better the product’s fluctuations are close to the benchmarks.
The SHARPE RATIO is the product's outperformance compared to a risk-free rate (in this case STR), adjusted by the product's volatility. It adjusts a portfolio’s past performance—or expected future performance—for the excess risk that was taken by the investor.
The INFORMATION RATIO represents the relative performance generated by the manager for each point of volatility allowed compared to its benchmark. It reflects to what extent the additional risk taken by the manager compared to his market indicator is profitable or not.
The RETURN = this ratio is equal to the ratio of the dividend per share to the share price. The returns are gross before deduction of taxes and they take into account tax credits, if any. For example, for French and German companies, tax credits are included. In Singapore and Malaysia, corporate returns are based on net dividends after tax. For a fund, the yield is the weighted average of the yields of all the stock lines in the portfolio that have paid a dividend. This ratio is expressed in percentage per year.
The SCR (Solvency Capital Requirement) corresponds to the total amount of funds that insurance and reinsurance companies in the EU are required to hold. It is computed by applying 5 different economic chocks with regards to 5 different market risks.
- Equity: This module aims to quantify the impact of falling or rising markets. It applies a hypothetical chock of a certain percentage increase/decrease of the equity market, which is then multiply by the company exposure to equity.
- Interest Rates: This module aims to quantify the maximum loss generated by an increase or decrease in the yield curve on the value of the balance sheet. There is a preexisting table to make correspond maturities with shifts in the yield curve.
- Credit (spread): This module aims to quantify the impact of changing credit ratings.
- Concentration: This risks aims to capture a significant loss linked to the default of an issuer to which the exposure would be high.
- Currency: Risk of change arises from changes in the level or volatility in currency exchanges rates.
Once the different SCR are computed, the final SCR corresponds to a weighted sum of the specific SCRs. The weights being the correlation between the risks factors.
The TRACKING ERROR represents the volatility of the relative performance of the product compared to its benchmark. It is expressed as the difference between the relative performances and their average and thus allows appreciating the regularity of the performances relative to their index. The smaller the tracking error, the closer the product's performance and risk-taking are close to those of the benchmark.
Value at Risk (VaR): It is a standard measure of a portfolio possible future loss at a given time horizon with a given probability of that loss happening. For instance a VaR of 100 at a level of 99% at horizon 10 days means that there is a 99% chance that the portfolio losses will not exceed 100 within the next 10 days.
Expected Shortfall (cVaR): Building on the VaR, the expected shortfall at level q% measures the expected loss that a portfolio should encounter knowing that the calculus only accounts for a the q% worst returns. An ES of 10 at horizon 1à days at level 5% means that the portfolio has a 5% probability of losing 10.
EQUITY INDICATORS
P/CF = Price to Cash Flow. This is the ratio of the share price to the cash flow per share (operating cash flow per share). For the fund, the result is the weighted average of the PCFs on the securities held in the portfolios. The P/CF ratio measures how much cash a company generates relative to its stock price, rather than what it records in earnings relative to its stock price, as measured by the price-earnings (P/E) ratio
PE = Price Earning. This ratio is equal to the ratio of the share price to the earnings per share. It is also called the earnings multiple. For the fund, the result is the weighted average of the PEs on the securities held in the portfolios.
PEG stands for Price Earnings Growth. It is computed by dividing the PE by the average growth rate of expected earnings over future years. The PEG ratio is used to determine a stock's value while also factoring in the company's expected earnings growth, and it is thought to provide a more complete picture than the more standard P/E ratio.
Price to Book Value (PBV). This ratio is equal to the ratio of the share price to the equity. For the fund, the result is the weighted average of the PBV on the securities held in the portfolio.
VAR EPS = Variation in Earning Per Share. For the fund, the result is the weighted average of the VAR EPS on the securities held in the portfolio.
FIXED INCOME INDICATORS (INCLUDING CONVERTIBLE BONDS)
HIGH YIELD (HY) is a term used to define speculative bond issues with financial ratings strictly below BBB- on the Standard & Poor's scale. The remuneration of these issues is high, but so is the risk of default.
MATURITY AT NEXT CALL is the date of the next redemption of the bond. The issuer of the bond may define a clause that allows a portion of the principal to be redeemed before final maturity at a specified price. In general, these clauses provide for initial and final periods during which redemption is not possible. These bonds are named "Callable".
SPREAD: The actuarial margin or spread of a bond (or loan) is the difference between the actuarial rate of return of the bond and that of a risk-free loan of the same duration. The spread is naturally lower the better the issuer's creditworthiness is perceived to be.
SPREAD DURATION is an estimate of the change in a bond's price for every 100 basis points of change in its spread-adjusted option. This measure is often used to quantify the sensitivity of a portfolio to spread changes.
ACTUARIAL RATE: By convention, an actuarial rate is a rate for an investment with a term of one year and for which interest is received or paid after one year. Since there are many different rates and ways of paying interest, it is difficult to compare them directly. Therefore, they are transformed on a common basis the actuarial rate, to make them directly comparable.
The CONVERTIBLE BOND’S DELTA: The delta of a convertible bond issue measures the sensitivity of the convertible bond price to a change the underlying stock price [(share price * conversion ratio)/nominal]. Its value is always between 0 and 100. A delta of 50 implies that when the underlying stock has a 1% change, the convertible bond price changes by 0.5%.
SENSITIVITY: The sensitivity of a bond measures the percentage change in its value induced by a given change in the interest rate. Mathematically, it is equal to the absolute value of the derivative of the bond's value with respect to the interest rate, divided by the value of the bond. It is expressed as a percentage.
THE CONVERTIBLE BOND’S SHARE SENSITIVITY: The share sensitivity of a convertible issue measures the sensitivity of the value of the bond convertible bond for a 1% fluctuation in the value of the share (underlying). Its value is always between 0 and 100%. The closer the equity sensitivity is to 100%, the more the convertible bond price fluctuates towards the share price and vice versa. It is considered that for an equity sensitivity of between 80 and 100, the convertible bond behaves like an equity; between 20 and 80, the convertible bond is said to be mixed and is influenced by the share price and by interest rates; between 0 and 20 the convertible bond behaves like a bond.
SUBORDINATED DEBTS are issues for which the lenders agree to be disadvantaged compared to other senior creditors in the event of default by the borrower. The most common types of subordinated debt are those where the contract between the lender and the borrower defines the terms of repayment only after all other senior creditors have been repaid. Junior subordinated debt will have additional constraints and will be considered junior to subordinated debt. In return for these constraints, which have an unfavorable impact on the lenders' risk, the latter will expect a higher remuneration and other benefits defined in the terms of the issue.
DURATION: The duration of a bond is the period after which its profitability is not affected by interest rate changes. In other words, changes of interest rates will affect a bond’s value before the duration horizon. The duration appears as the average discounted life of all flows (interest and capital) expressed in years. For example, if a bond has a duration of five years and interest rates increase by 1%, the bond's price will decline by approximately 5%.
METHODOLOGIES
STATISTICAL COMPUTATIONS:
Statistical calculations are based on monthly returns for periods of more than 2 years and for products whose valuation frequency is monthly, and on weekly returns for periods of less than 2 years. For relative statistics, the reference indicator in the prospectus is used. The STR will be used for statistics referring to the risk-free rate.
CALCULATION OF THE ELEMENTARY RETURNS OF A SERIES:
Returns are computed on a monthly or weekly basis and are not normalized.
Monthly Yield in percentage: where mV is the Month-end value and mV-1 the Previous month-end value.
COUPON PROCESSING:
All performance or return results include coupons that may have been detached during the life of the fund in the calculation period. These coupons are integrated in the calculation of the performance on the detachment date.
Perf. Cps integrated = where Perf% is the performance in percentage between two dates, NdC the Value of the net detached coupon and NAV ex cp the 1st Net Asset Value after detachment of the coupon.
Therefore, the unit of a fund that capitalizes (C) will have identical performances to the unit that distributes (D), whatever the calculation periods concerned. The recapitalization of the coupons of the unit (D) on the detachment date during the performance and statistical computations explain this equality.
FINANCIAL DATA:
The above financial ratios are computed based on decomposed portfolios for funds of funds and based on direct lines for other funds. The Thomson source: IBES consensus is taken into account for these calculations. For the Japan and India zone, the financial data for year N are computed on the basis of the fiscal year from March N to March N+1 (e.g. PE2009 = March 2009 to March 2010): PE2009 = December 2009 to December 2010)
BEAMA RISK:
The BEAMA risk classification relies on an annualized standard deviation computed on a series of monthly returns obtained over the last five years or over a shorter period if the product has been in existence for less than five years. For products less than one year old, the calculation of the annualized standard deviation will be based on the monthly returns of the last five years of the representative investment benchmark as announced in the full and simplified prospectus. There are seven risk classes:
| Class | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Standard Deviation | [0%; 2,5%] | [2,5%; 5%] | [5%; 10%] | [10%; 15%] | [15%; 20%] | [20%; 30%] | [30%; 100%] |
The asset class may change over time. It must be adapted when, during two consecutive semester periods, the risk class of a product is different from the one initially attributed. For more information, we invite you to read the latest update of the Belgian circular.
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