Evan Russo, CEO at Lazard Asset Management, returned from the holidays recharged, re-energized, and ready to keep pace with fast-moving markets, he says. Keeping pace also means staying up-to-date with potential acquisitions.
Take Japanese equities as an example of just how quickly sentiment and markets can change.
The $224.9 billion firm has an investment team in Tokyo and New York covering Japan, and has seen “interest and demand come into that product from around the globe, (going) from a 20-year period where nobody wanted to touch Japanese equities to a … period where they can’t get enough of it,” Russo said in an interview with Pensions & Investments.
He uses that example “with my team — to remind ourselves how quickly things can turn.” When the Japanese equities team is visiting clients, full days are booked out in the diaries due to demand for conversations, he said.
Fast-moving markets also “plays into the ETF market — it can be the fastest way to get in,” he said — fortuitous given exchange-traded funds, a new area of business for Lazard AM, are “probably one of the biggest areas of focus for us in 2025. Active management for ETFs continues to grow … (and) what we can offer through that wrapper is very, very interesting for us. Our focus continues to be on how do you create great investment returns, build great insights, turn those into returns, (and) then how (do you) package that to put into portfolios, to get the exposures different participants want?”
Lazard launched exchange-traded funds last year, with the first ETF launched in Australia — the Lazard Global Listed Infrastructure Active ETF — and the firm made “significant hires” including Robert Forsyth as managing director and global head of ETFs. Based in New York, Forsyth will play an important role in Lazard’s active ETFs offering, and joined from State Street Global Advisors, where he was global head of ETF strategy for the $1 trillion ETF business.
Acquisition strategy
Pace in markets also means that “the acquisition strategy has to be part of what we’re looking at every day,” he said.
The firm has a “pretty high bar” for acquisitions, he said. Growth historically has been mostly organic, with just two examples of deals in the last decade: a minority stake in European digital and deep tech venture capital firm Elaia Partners (with an option to purchase up to 100% of the firm over time) in April, and its 2023 acquisition of U.S.-based Truvvo Partners, a $3.8 billion family office-focused firm. Elaia Partners has €850 million ($876.6 million) in AUM.
“We’re a disciplined acquirer of things, and also making sure it fits with our clients, business, culture. It’s easy to acquire things — as an M&A guy!” Russo said, referring to his career history on the capital markets side of Lazard and, prior to that, in Goldman Sachs’ investment banking division. “What’s difficult is to make it work afterwards — you have to be focused on cultural connection, fit into the existing system … and is this the right piece? You’re better off waiting for the right one than (to) jump out and do the best or first or biggest one that comes to market,” Russo said.
And while “organic opportunities always overwhelm everything else, (which is) why we continue to (make) good hires, broaden our distribution and research platform,” there are areas where acquisitions from time to time might be complementary.
“We’re looking at other things in the wealth space — it’s an interesting area for us. Another area we’ve highlighted publicly is private credit,” Russo said, but warned “you have to be cautious as there’s a lot of excitement and interest in that area.”
Topics among allocators
In the run-up to the break, Russo spent time discussing outlooks with large allocators around the globe, seeing “the seedlings of what’s going to become bigger topics over the coming years,” he said in an interview.
There are three main focuses in terms of markets for 2025: the importance of investment style in allocations; private vs. public markets; and the skew that’s emerging in market performance.
Investment style has made “really big differences over the past several years,” he said. Value stocks in the S&P 500, for example, gained 12.29% in 2024, while quality-style equities added 25.7%. Growth stocks, meanwhile, returned 36.07% in 2024. The S&P 500 gained 23.31% overall in 2024.
“The choice of style box, which a lot of big institutional clients think about, has been the biggest determinant of returns,” he said. “That choice … has been a huge winner or loser relative to the market as a whole.”
The concept has led to renewed interest in more broad-based quant strategies, which are “not constrained by style. They’re looking for opportunities, moving around to find those opportunities,” he said. “That’s what’s getting a lot more attention.”
On the public/private markets topic, Russo said cash flow is top of mind, with allocators looking for liquidity in other parts of the portfolio to fund private markets commitments. Private equity, for example, hasn’t delivered the expected portfolio monetization to return capital at a pace investors may be expecting. That’s led to conversations over “the liquidity needs of private investing in the context of the overall portfolio.”
The last of Russo’s three key topics is one that came into sharp focus with the rise of artificial intelligence — the increased skew toward the so-called Magnificent Seven stocks in the U.S.
“Markets are getting skewed, (and) allocations are certainly getting skewed if you are not readjusting your portfolios,” Russo said, noting that unloved and underallocated parts of the market can offer opportunities if investors just take a look.
He cited emerging markets as one such area that’s “falling behind in terms of allocations in portfolios … It’s definitely difficult to fight the trend we’ve seen over the last several years,” he added.
