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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2022
Fair Value Disclosures [Abstract] |
Fair Value Measurements |
5. | FAIR VALUE MEASUREMENTS
Fair Value Hierarchy of Investments and Certain Other Assets and Liabilities—Lazard categorizes its investments and certain other assets and liabilities recorded at fair value into a three-level fair value hierarchy as follows:
Level 1. | Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that Lazard has the ability to access.
Level 2. | Assets and liabilities whose values are based on (i) quoted prices for similar assets or liabilities in an active market, or quoted prices for identical or similar assets or liabilities in non-active markets, or (ii) inputs other than quoted prices that are directly observable or derived principally from, or corroborated by, market data.
Level 3. | Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect our own assumptions about the assumptions a market participant would use in pricing the asset or liability. Items included in Level 3 include securities or other financial assets whose trading volume and level of activity have significantly decreased when compared with normal market activity and there is no longer sufficient frequency or volume to provide pricing information on an ongoing basis.
The fair value of debt is classified as Level 1 when the fair values are based on unadjusted quoted prices in active markets. The fair value of equities is classified as Level 1 or Level 3 as follows: marketable equity securities are classified as Level 1 and are valued based on the last trade price on the primary exchange for that security as provided by external pricing services; equity interests in private companies are generally classified as Level 3. The fair value of investments in alternative investment funds, debt funds and equity funds is classified as Level 1 when the fair values are primarily based on the publicly reported closing price for the fund. The fair value of investments in private equity funds is classified as Level 3 for certain investments that are valued based on the potential transaction value. The fair value of securities sold, not yet purchased, is classified as Level 1 when the fair values are based on unadjusted quoted prices in active markets. The fair value of derivatives entered into by the Company and classified as Level 1 is based on the listed market price of such instruments. The fair value of derivatives entered into by the Company and classified as Level 2 is based on the values of the related underlying assets, indices or reference rates as follows: the fair value of forward foreign currency exchange rate contracts is a function of the spot rate and the interest rate differential of the two currencies from the trade date to settlement date; the fair value of total return swaps is based on the change in fair value of the related underlying equity security, financial instrument or index and a specified notional holding; the fair value of interest rate swaps is based on the interest rate yield curve; and the fair value of derivative liabilities related to LFI and other similar deferred compensation arrangements is based on the value of the underlying investments, adjusted for forfeitures. The fair value of derivatives entered into by the Company and classified as Level 3 is based on a Black-Scholes valuation model that utilizes both observable and unobservable inputs. Unobservable inputs include model adjustments for valuation uncertainty. See Note 6. Investments Measured at Net Asset Value (“NAV”)—As a practical expedient, the Company uses NAV or its equivalent to measure the fair value of certain investments. NAV is primarily determined based on information provided by external fund administrators. The Company’s investments valued at NAV as a practical expedient in (i) alternative investment funds, debt funds and equity funds are redeemable in the near term, and (ii) private equity funds are not redeemable in the near term as a result of redemption restrictions. The following tables present, as of September 30, 2022 and December 31, 2021, the classification of (i) investments and certain other assets and liabilities measured at fair value on a recurring basis within the fair value hierarchy and (ii) investments measured at NAV or its equivalent as a practical expedient:
|  | September 30, 2022 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | NAV |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities |  | $ | 39,218 |  |  | $ | - |  |  | $ | 529 |  |  | $ | - |  |  | $ | 39,747 |
Funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Alternative investments |  |  | 25,937 |  |  |  | - |  |  |  | - |  |  |  | 28,264 |  |  |  | 54,201 |
Debt |  |  | 167,759 |  |  |  | - |  |  |  | - |  |  |  | 4 |  |  |  | 167,763 |
Equity |  |  | 319,669 |  |  |  | - |  |  |  | - |  |  |  | 38 |  |  |  | 319,707 |
Private equity |  |  | - |  |  |  | - |  |  |  | 240 |  |  |  | 41,564 |  |  |  | 41,804 |
Derivatives |  |  | - |  |  |  | 18,502 |  |  |  | - |  |  |  | - |  |  |  | 18,502 |
Total |  | $ | 552,583 |  |  | $ | 18,502 |  |  | $ | 769 |  |  | $ | 69,870 |  |  | $ | 641,724 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities sold, not yet purchased |  | $ | 4,301 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 4,301 |
Derivatives |  |  | 575 |  |  |  | 310,570 |  |  |  | - |  |  |  | - |  |  |  | 311,145 |
Total |  | $ | 4,876 |  |  | $ | 310,570 |  |  | $ | - |  |  | $ | - |  |  | $ | 315,446 |
|  | December 31, 2021 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | NAV |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt |  | $ | 299,990 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 299,990 |
Equities |  |  | 53,462 |  |  |  | - |  |  |  | 578 |  |  |  | - |  |  |  | 54,040 |
Funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Alternative investments |  |  | 24,972 |  |  |  | - |  |  |  | - |  |  |  | 24,785 |  |  |  | 49,757 |
Debt |  |  | 164,947 |  |  |  | - |  |  |  | - |  |  |  | 5 |  |  |  | 164,952 |
Equity |  |  | 375,712 |  |  |  | - |  |  |  | - |  |  |  | 49 |  |  |  | 375,761 |
Private equity |  |  | - |  |  |  | - |  |  |  | 293 |  |  |  | 46,296 |  |  |  | 46,589 |
Derivatives |  |  | - |  |  |  | 922 |  |  |  | - |  |  |  | - |  |  |  | 922 |
Total |  | $ | 919,083 |  |  | $ | 922 |  |  | $ | 871 |  |  | $ | 71,135 |  |  | $ | 992,011 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities sold, not yet purchased |  | $ | 6,828 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 6,828 |
Derivatives |  |  | 10,005 |  |  |  | 362,240 |  |  |  | - |  |  |  | - |  |  |  | 372,245 |
Total |  | $ | 16,833 |  |  | $ | 362,240 |  |  | $ | - |  |  | $ | - |  |  | $ | 379,073 |
The following tables provide a summary of changes in fair value of the Company’s Level 3 assets and liabilities for the three month and nine month periods ended September 30, 2022 and 2021:
|  | Three Months Ended September 30, 2022 |
|  | Beginning Balance |  |  | Net Unrealized/ Realized Gains/Losses Included In Earnings (a) |  |  | Purchases/ Acquisitions/ Issuances |  |  | Sales/ Dispositions/ Settlements |  |  | Foreign Currency Translation Adjustments |  |  | Ending Balance |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities |  | $ | 542 |  |  | $ | 28 |  |  | $ | - |  |  | $ | - |  |  | $ | (41 | ) |  | $ | 529 |
Private equity funds |  |  | 256 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (16 | ) |  |  | 240 |
Total Level 3 assets |  | $ | 798 |  |  | $ | 28 |  |  | $ | - |  |  | $ | - |  |  | $ | (57 | ) |  | $ | 769 |
|  | Nine Months Ended September 30, 2022 |
|  | Beginning Balance |  |  | Net Unrealized/ Realized Gains/Losses Included In Earnings (a) |  |  | Purchases/ Acquisitions/ Issuances |  |  | Sales/ Dispositions/ Settlements |  |  | Foreign Currency Translation Adjustments |  |  | Ending Balance |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities |  | $ | 578 |  |  | $ | 35 |  |  | $ | - |  |  | $ | - |  |  | $ | (84 | ) |  | $ | 529 |
Private equity funds |  |  | 293 |  |  |  | - |  |  |  | - |  |  |  | (13 | ) |  |  | (40 | ) |  |  | 240 |
Total Level 3 assets |  | $ | 871 |  |  | $ | 35 |  |  | $ | - |  |  | $ | (13 | ) |  | $ | (124 | ) |  | $ | 769 |
|  | Three Months Ended September 30, 2021 |
|  | Beginning Balance |  |  | Net Unrealized/ Realized Gains/Losses Included In Earnings (a) |  |  | Purchases/ Acquisitions/ Issuances |  |  | Sales/ Dispositions/ Settlements |  |  | Foreign Currency Translation Adjustments |  |  | Ending Balance |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities |  | $ | 1,646 |  |  | $ | (836 | ) |  | $ | - |  |  | $ | - |  |  | $ | (28 | ) |  | $ | 782 |
Private equity funds |  |  | 2,628 |  |  |  | 4,593 |  |  |  | - |  |  |  | (16 | ) |  |  | (7 | ) |  |  | 7,198 |
Total Level 3 assets |  | $ | 4,274 |  |  | $ | 3,757 |  |  | $ | - |  |  | $ | (16 | ) |  | $ | (35 | ) |  | $ | 7,980 |
|  | Nine Months Ended September 30, 2021 |
|  | Beginning Balance |  |  | Net Unrealized/ Realized Gains/Losses Included In Earnings (a) |  |  | Purchases/ Acquisitions |  |  | Sales/ Dispositions/ Settlements/ Transfers (b) |  |  | Foreign Currency Translation Adjustments |  |  | Ending Balance |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equities |  | $ | 1,671 |  |  | $ | (835 | ) |  | $ | - |  |  | $ | - |  |  | $ | (54 | ) |  | $ | 782 |
Private equity funds |  |  | 1,486 |  |  |  | 5,745 |  |  |  | - |  |  |  | (16 | ) |  |  | (17 | ) |  |  | 7,198 |
Total Level 3 assets |  | $ | 3,157 |  |  | $ | 4,910 |  |  | $ | - |  |  | $ | (16 | ) |  | $ | (71 | ) |  | $ | 7,980 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  | $ | - |  |  | $ | - |  |  | $ | 11,500 |  |  | $ | (11,500 | ) |  | $ | - |  |  | $ | - |
Total Level 3 liabilities |  | $ | - |  |  | $ | - |  |  | $ | 11,500 |  |  | $ | (11,500 | ) |  | $ | - |  |  | $ | - |
(a) | Earnings recorded in “other revenue” for investments in Level 3 assets for the three month and nine month periods ended September 30, 2022 and 2021 include net unrealized gains of $28, $35, $3,757 and $4,910, respectively.
(b) | Transfers out of Level 3 derivatives during the nine month period ended September 30, 2021 reflected transfers of derivative liabilities for LGAC Warrants to Level 1 principally due to a change in the inputs used to value these derivatives.
There were no other transfers into or out of Level 3 within the fair value hierarchy during the three month and nine month periods ended September 30, 2022 and 2021. The following tables present, at September 30, 2022 and December 31, 2021, certain investments that are valued using NAV or its equivalent as a practical expedient in determining fair value:
|  | September 30, 2022
|  |  |  |  |  |  |  |  |  |  |  |  |  | Investments Redeemable
|  | Fair Value |  |  | Unfunded Commitments |  |  |  | % of Fair Value Not Redeemable |  |  | Redemption Frequency |  | Redemption Notice Period
Alternative investment funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedge funds |  | $ | 27,668 |  |  | $ | - |  |  |  | NA |  |  | (a) |  | 30-60 days
Other |  |  | 596 |  |  |  | - |  |  |  | NA |  |  | (b) |  | <30-30 days
Debt funds |  |  | 4 |  |  |  | - |  |  |  | NA |  |  | (c) |  | <30 days
Equity funds |  |  | 38 |  |  |  | - |  |  |  | NA |  |  | (d) |  | <30-60 days
Private equity funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity growth |  |  | 41,564 |  |  |  | 5,520 |  | (e) |  | 100% | (f) |  | NA |  | NA
Total |  | $ | 69,870 |  |  | $ | 5,520 |  |  |  |  |  |  |  |  |
(a) | monthly (67%) and quarterly (33%)
(b) | daily (6%) and monthly (94%)
(c) | daily (100%)
(d) | monthly (32%) and annually (68%)
(e) | Unfunded commitments to private equity investments consolidated but not owned by Lazard of $8,032 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders.
(f) | Distributions from each fund will be received as the underlying investments of the funds are liquidated.
|  | December 31, 2021
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Investments Redeemable
|  | Fair Value |  |  | Unfunded Commitments |  |  |  | % of Fair Value Not Redeemable |  |  |  | Redemption Frequency |  | Redemption Notice Period
Alternative investment funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedge funds |  | $ | 24,162 |  |  | $ | - |  |  |  | NA |  |  |  | (a) |  | 30-60 days
Other |  |  | 623 |  |  |  | - |  |  |  | NA |  |  |  | (b) |  | <30-30 days
Debt funds |  |  | 5 |  |  |  | - |  |  |  | NA |  |  |  | (c) |  | <30 days
Equity funds |  |  | 49 |  |  |  | - |  |  |  | NA |  |  |  | (d) |  | <30-60 days
Private equity funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity growth |  |  | 46,296 |  |  |  | 5,597 |  | (e) |  |  | 100 | % | (f) |  | NA |  | NA
Total |  | $ | 71,135 |  |  | $ | 5,597 |  |  |  |  |  |  |  |  |  |  |
(a) | monthly (79%) and quarterly (21%)
(b) | daily (8%) and monthly (92%)
(c) | daily (100%)
(d) | monthly (36%) and annually (64%)
(e) | Unfunded commitments to private equity investments consolidated but not owned by Lazard of $9,128 are excluded. Such commitments are required to be funded by capital contributions from noncontrolling interest holders.
(f) | Distributions from each fund will be received as the underlying investments of the funds are liquidated.
Investment Capital Funding Commitments—At September 30, 2022, the Company’s maximum unfunded commitments for capital contributions to investment funds primarily arose from commitments to EGCP III, which amounted to $5,158. The investment period for EGCP III ended on October 12, 2016, after which point the Company’s obligation to fund capital contributions for new investments in EGCP III expired. The Company remains obligated until October 12, 2023 (or any earlier liquidation of EGCP III) to make capital contributions necessary to fund follow-on investments and to pay for fund expenses.

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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI https://asc.fasb.org/topic&trid=2155941 + Details
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