Lazard Global's Managed Distributions: A Balancing Act Between Income and Capital Preservation

In an era where income-generating investments are paramount, the Lazard Global Total Return and Income Fund (NYSE:LGI) stands out as a disciplined player in the closed-end fund space. Its Managed Distribution Policy, designed to deliver consistent monthly payouts, has positioned it as a favorite among income-seeking investors. But beneath the surface lies a critical question: How sustainable is LGI’s income generation, and what risks arise from its reliance on return of capital?

The Managed Distribution Policy Explained

LGI’s Managed Distribution Policy, in effect since at least 2019, guarantees monthly distributions of $0.14646 per share since January 2025—a slight reduction from the prior year’s $0.14941 rate. This adjustment, tied to 10% of the fund’s NAV as of December 31, 2024, underscores Lazard’s commitment to aligning payouts with underlying asset performance. The policy’s consistency is evident in its distribution schedule, with dates meticulously set each quarter (e.g., the May 22, 2025, declaration for a June 24 payout).

But the devil lies in the distribution’s composition. Each payout is split into three components: net investment income (interest/dividends), realized capital gains, and return of capital. While the first two reflect true earnings, return of capital—a portion of investors’ original principal—is a double-edged sword.

Sustainable Income vs. Return of Capital: The Balancing Act

The fund’s May 2025 disclosure reveals that 63% of cumulative distributions year-to-date include return of capital. This means investors are receiving a share of their own capital back, which reduces their cost basis and could trigger capital gains taxes when shares are sold. While this practice is common in closed-end funds, it raises critical questions:

1. Is the NAV holding steady? A shows a slight dip in early 2025, but the consistency of the $0.14646 rate suggests Lazard is prioritizing stability over growth. Investors must monitor LGI’s NAV trends to ensure distributions aren’t eroding principal over time.

2. How is the fund structured to support payouts? LGI’s portfolio spans 60–80 global equities, including emerging markets and currencies, and holds debt obligations in these regions. This diversification, managed by Lazard’s $231.4 billion asset team, aims to balance income and capital appreciation. Yet, reliance on return of capital implies that realized gains and interest may not fully cover distributions—a red flag if asset values decline.

3. What’s the tax impact? Return of capital reduces taxable income in the short term but lowers the investor’s tax basis, potentially magnifying capital gains taxes upon sale. LGI’s disclosures explicitly warn against conflating return of capital with yield, urging investors to treat it as a structural component—not a profit signal.

The Investment Case: Why LGI Still Attracts Income Seekers

Despite these risks, LGI’s strategy offers compelling advantages:
- Predictability: The 10%-of-NAV annualized rate provides a clear framework for income planning, ideal for retirees or income-focused portfolios.
- Global Diversification: Exposure to 60+ global equities and emerging markets cushions against regional volatility.
- Track Record: Lazard’s Managed Distribution Policy has endured since 2019, with distributions declared monthly and dates adjusted with precision.

For investors willing to accept return-of-capital dynamics, LGI’s 6.5% trailing 12-month yield (as of May 2025) is hard to ignore—especially in a low-yield environment. However, this comes with caveats:

Risks to Consider

• Capital Erosion: If NAV declines faster than distributions, return of capital could accelerate, eating into principal.
• Tax Complexity: Investors must track cost basis changes meticulously to avoid surprises at tax time.
• Market Dependency: Emerging market exposure and global equities carry geopolitical and currency risks.

Final Analysis: A Strategic Bet on Discipline

Lazard Global Total Return and Income Fund is a masterclass in managed consistency, not growth. Its policy prioritizes steady payouts over NAV growth, making it a top-tier option for investors who prioritize predictable income over capital appreciation. The inclusion of return of capital is neither a flaw nor a secret—it’s a structural feature of the fund’s design.

For the right investor—those who understand the trade-off between income and capital preservation—LGI offers a compelling blend of yield and diversification. Monitor its NAV closely, factor in tax implications, and hold it as part of a diversified portfolio. In a world hungry for income, LGI remains a disciplined, if nuanced, choice.

Act Now: With its May 22, 2025, distribution declared and the June 10 ex-dividend date looming, investors can lock in LGI’s 6.5% yield—provided they’re prepared to navigate its return-of-capital dynamics. The question isn’t whether to invest, but whether you’re ready to embrace the balance of income and capital discipline.