Unlocking Value in Lazard: Riding Japan and ETF Innovation to Outperform

The asset management industry faces headwinds: volatile markets, passive fund dominance, and investor skepticism. Yet within this landscape, Lazard (NYSE: LAZ) presents a compelling opportunity to unlock value in its $231.4 billion asset management division—a figure that grew by $4 billion in just one month (March to April 2025). While net outflows and geopolitical risks have spooked short-term traders, Lazard's strategic bets on Japanese equity tailwinds, active ETF innovation, and European utilities position it to rebound strongly. Here's why now could be the time to buy.

---

### The Case for Lazard's Asset Management Resilience

#### 1. Japanese Equity: Governance, Dividends, and Inflation Catalysts
Lazard's Japan Equity Advantage fund has quietly attracted $390 million from a Swiss institutional client—a testament to its focus on structural shifts in Japan's equity market. The firm's research highlights three tailwinds:
- Corporate Governance Reforms: Over 90% of Japanese firms now disclose ESG metrics, attracting global investors seeking transparency.
- Dividend Yield Advantage: Japan's Topix Index offers a 2.5% dividend yield—50% higher than the S&P 500—amid companies like Sony and Toyota boosting payouts.
- Inflation-Linked Opportunities: Lazard's analysis shows Japanese infrastructure spending (transport, renewables) will hit $300 billion by 2030, favoring firms with exposure to public-private partnerships.

Lazard's ability to capture these trends through active management—rather than passive ETFs—creates an edge. Its $180.5 billion equity AUM (as of May 2025) reflects institutional demand for expertise in navigating Japan's unique market dynamics.

---

#### 2. Active ETFs: A Weapon Against Passive Dominance
The rise of passive investing has pressured active managers, but Lazard is fighting back with targeted active ETF launches, such as its Japanese Equity Active ETF and Megatrends ETF (focusing on AI, robotics, and energy transition). These products blend low-cost access with active stock-picking—a sweet spot for investors seeking performance without high fees.



The strategy is paying off: Lazard's equity AUM grew +2.4% month-over-month in May, outpacing fixed income. Active ETFs also reduce reliance on volatile institutional sub-advisory relationships (e.g., the $4.3 billion outflow in May), diversifying revenue streams.

---

#### 3. European Utilities: A Dividend Machine for Rising Rates
Lazard's research identifies European utilities as a hidden gem in its portfolio. With inflation stabilizing at 3–4%, regulated utilities like E.ON and Engie offer:
- Stable Cash Flows: 80% of European utility revenue is regulated, shielding them from commodity price swings.
- High Dividend Yields: The sector's 5.5% average dividend yield—double the Eurozone average—attracts income-focused investors.
- Infrastructure Plays: Lazard's analysis shows €200 billion will be invested in EU energy grids by 2030, boosting utility valuations.

By emphasizing these themes in its multi-asset strategies, Lazard is aligning with a long-term trend of capital flowing to defensive, cash-generating sectors.

---

### Why Now Is the Time to Buy Lazard

Despite recent underperformance, three catalysts suggest Lazard's stock (LAZ) is primed for a rebound:

#### 1. Sector Rebound Potential
The financial sector has lagged the S&P 500 by -12% YTD (June 2025), but Lazard's ROE of 13.35% and ROA of 1.75% outperform peers. A rotation into undervalued financials could lift its valuation.



#### 2. Strategic Alliances and Geographic Diversification
Lazard's new Abu Dhabi office and partnership with Arini Capital (to expand private debt in Europe) signal a global growth strategy. These moves reduce reliance on U.S. markets, where regulatory scrutiny (e.g., SEC fund fee investigations) looms.

#### 3. Institutional Inflows Are Already Flowing
- A $400 million allocation from an Asian sovereign wealth fund to Global Equity Advantage.
- A $300 million commitment from a U.S. pension fund to International Quality Growth.

These wins suggest institutional confidence in Lazard's ability to navigate sector challenges—a contrast to the noise around short-term outflows.

---

### Investment Thesis and Risks

Buy on dips, target $55–$60, hold for 12–18 months.
Lazard's $51.67 analyst consensus price target (as of June 2025) undervalues its strategic assets. Key upside drivers:
- Sustained equity AUM growth from Japan and active ETFs.
- European utilities dividend payouts outperforming expectations.
- Debt-to-equity ratio normalization (currently 3.45x, down from peak 3.63x).

Risks to Monitor:
- Net outflows from legacy sub-advised mandates.
- Geopolitical risks (e.g., Japan-China trade tensions).
- Fed rate hikes impacting fixed income performance.

---

### Conclusion: A Contrarian Play on Active Management

Lazard's recent underperformance masks a strategic repositioning to capture high-conviction themes—Japanese equity reform, active ETF innovation, and European utilities. With $235 billion in AUM (May 2025) and a pipeline of institutional wins, the firm is well-positioned to outperform when markets rotate toward value and active alpha. For investors willing to look past short-term noise, Lazard offers a rare chance to buy a global asset manager at a discount.



Final Call: Consider adding LAZ to a diversified portfolio at current levels. The catalysts are in place; the rest is patience.

---
[Disclaimer: This analysis is for informational purposes only. Consult a financial advisor before making investment decisions.]