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Fair Value Measurements
 3 Months Ended
Mar. 31, 2023
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 based on the publicly reported closing price for the fund.

The fair value of investments in certain private equity funds is classified as Level 3 for (i) certain investments that are valued based on the potential transaction value and (ii) when the acquisition price is considered the best measure of fair 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 the contingent consideration liability is classified as Level 3 and the fair value of the liability is remeasured at each reporting period. The inputs used to derive the fair value of the contingent consideration include the application of probabilities when assessing certain performance thresholds for the relevant periods. Any change in the fair value is recognized in “amortization and other acquisition-related costs” in the condensed consolidated statement of operations. Our business acquisitions may involve the potential payment of contingent consideration upon the achievement of certain performance thresholds. The contingent consideration liability is initially recorded at fair value of the contingent payments on the acquisition date and is included in “other liabilities” on the condensed consolidated statements of financial condition.

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. 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 March 31, 2023 and December 31, 2022, 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:

 

 

 

March 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

NAV

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt

 

$

4,116

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

4,116

 

Equities

 

 

51,454

 

 

 

-

 

 

 

634

 

 

 

-

 

 

 

52,088

 

Funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative investments

 

 

28,066

 

 

 

-

 

 

 

-

 

 

 

42,167

 

 

 

70,233

 

Debt

 

 

205,696

 

 

 

-

 

 

 

-

 

 

 

5

 

 

 

205,701

 

Equity

 

 

358,160

 

 

 

-

 

 

 

-

 

 

 

42

 

 

 

358,202

 

Private equity

 

 

-

 

 

 

-

 

 

 

19,139

 

 

 

32,389

 

 

 

51,528

 

Derivatives

 

 

-

 

 

 

3,991

 

 

 

-

 

 

 

-

 

 

 

3,991

 

Total

 

$

647,492

 

 

$

3,991

 

 

$

19,773

 

 

$

74,603

 

 

$

745,859

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold, not yet purchased

 

$

4,106

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

4,106

 

Contingent consideration liability

 

 

-

 

 

 

-

 

 

 

6,342

 

 

 

-

 

 

 

6,342

 

Derivatives

 

 

-

 

 

 

368,452

 

 

 

-

 

 

 

-

 

 

 

368,452

 

Total

 

$

4,106

 

 

$

368,452

 

 

$

6,342

 

 

$

-

 

 

$

378,900

 

 

 

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

NAV

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

$

43,243

 

 

$

-

 

 

$

646

 

 

$

-

 

 

$

43,889

 

Funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative investments

 

 

27,073

 

 

 

-

 

 

 

-

 

 

 

29,874

 

 

 

56,947

 

Debt

 

 

178,552

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

178,556

 

Equity

 

 

350,242

 

 

 

-

 

 

 

-

 

 

 

40

 

 

 

350,282

 

Private equity

 

 

-

 

 

 

-

 

 

 

18,772

 

 

 

35,050

 

 

 

53,822

 

Derivatives

 

 

-

 

 

 

14,554

 

 

 

-

 

 

 

-

 

 

 

14,554

 

Total

 

$

599,110

 

 

$

14,554

 

 

$

19,418

 

 

$

64,968

 

 

$

698,050

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities sold, not yet purchased

 

$

4,651

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

4,651

 

Derivatives

 

 

115

 

 

 

327,045

 

 

 

-

 

 

 

-

 

 

 

327,160

 

Total

 

$

4,766

 

 

$

327,045

 

 

$

-

 

 

$

-

 

 

$

331,811

 

 

 

The following tables provide a summary of changes in fair value of the Company’s Level 3 assets and liabilities for the three month periods ended March 31, 2023 and 2022:

 

 

 

Three Months Ended March 31, 2023

 

 

 

Beginning

Balance

 

 

Net Unrealized/

Realized

Gains/Losses

Included In

Earnings (a)

 

 

Purchases/

Acquisitions/

Issuances

 

 

Sales/

Settlements

 

 

Foreign

Currency

Translation

Adjustments

 

 

Ending

Balance

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

$

646

 

 

$

1

 

 

$

-

 

 

$

-

 

 

$

(13

)

 

$

634

 

Private equity funds

 

 

18,772

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

367

 

 

 

19,139

 

Total Level 3 assets

 

$

19,418

 

 

$

1

 

 

$

-

 

 

$

-

 

 

$

354

 

 

$

19,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liability

 

$

-

 

 

$

33

 

 

$

7,754

 

 

$

(1,445

)

 

$

-

 

 

$

6,342

 

Total Level 3 liabilities

 

$

-

 

 

$

33

 

 

$

7,754

 

 

$

(1,445

)

 

$

-

 

 

$

6,342

 

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Beginning

Balance

 

 

Net Unrealized/

Realized

Gains/Losses

Included In

Earnings (a)

 

 

Purchases/

Issuances

 

 

Sales/

Settlements

 

 

Foreign

Currency

Translation

Adjustments

 

 

Ending

Balance

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

$

578

 

 

$

7

 

 

$

-

 

 

$

-

 

 

$

(10

)

 

$

575

 

Private equity funds

 

 

293

 

 

 

-

 

 

 

-

 

 

 

(13

)

 

 

(6

)

 

 

274

 

Total Level 3 assets

 

$

871

 

 

$

7

 

 

$

-

 

 

$

(13

)

 

$

(16

)

 

$

849

 

 

(a)

Earnings recorded in “other revenue” for investments in Level 3 assets for the three month periods ended March 31, 2023 and 2022 include net unrealized gains of $1 and $7, respectively. Unrealized losses of $33 were recorded in “amortization and other acquisition-related costs” for the contingent consideration liability for the three month period ended March 31, 2023.

There were no transfers into or out of Level 3 within the fair value hierarchy during the three month periods ended March 31, 2023 and 2022.

The following tables present, at March 31, 2023 and December 31, 2022, certain investments that are valued using NAV or its equivalent as a practical expedient in determining fair value:

 

 

 

March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments Redeemable

 

 

Fair Value

 

 

Unfunded

Commitments

 

 

 

% of

Fair Value

Not

Redeemable

 

 

Redemption

Frequency

 

Redemption

Notice Period

Alternative investment funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge funds

 

$

41,526

 

 

$

-

 

 

 

NA

 

 

(a)

 

30-60 days

Other

 

 

641

 

 

 

-

 

 

 

NA

 

 

(b)

 

<30-30 days

Debt funds

 

 

5

 

 

 

-

 

 

 

NA

 

 

(c)

 

<30 days

Equity funds

 

 

42

 

 

 

-

 

 

 

NA

 

 

(d)

 

<30-60 days

Private equity funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity growth

 

 

32,389

 

 

 

5,455

 

(e)

 

100%

(f)

 

NA

 

NA

Total

 

$

74,603

 

 

$

5,455

 

 

 

 

 

 

 

 

 

 

(a)

monthly (73%) and quarterly (27%)

(b)

daily (5%) and monthly (95%)

(c)

daily (100%)

(d)

monthly (34%) and annually (66%)

(e)

Unfunded commitments to private equity investments consolidated but not owned by Lazard of $8,003 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, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments Redeemable

 

 

Fair Value

 

 

Unfunded

Commitments

 

 

 

% of

Fair Value

Not

Redeemable

 

 

 

Redemption

Frequency

 

Redemption

Notice Period

Alternative investment funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge funds

 

$

29,259

 

 

$

-

 

 

 

NA

 

 

 

(a)

 

30-60 days

Other

 

 

615

 

 

 

-

 

 

 

NA

 

 

 

(b)

 

<30-30 days

Debt funds

 

 

4

 

 

 

-

 

 

 

NA

 

 

 

(c)

 

<30 days

Equity funds

 

 

40

 

 

 

-

 

 

 

NA

 

 

 

(d)

 

<30-60 days

Private equity funds:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity growth

 

 

35,050

 

 

 

5,455

 

(e)

 

 

100

%

(f)

 

NA

 

NA

Total

 

$

64,968

 

 

$

5,455

 

 

 

 

 

 

 

 

 

 

 

 

(a)

monthly (68%) and quarterly (32%)   

(b)

daily (5%) and monthly (95%)

(c)

daily (100%)

(d)

monthly (35%) and annually (65%)

(e)

Unfunded commitments to private equity investments consolidated but not owned by Lazard of $8,003 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 March 31, 2023, the Company’s maximum unfunded commitments for capital contributions to investment funds primarily arose from commitments to EGCP III, which amounted to $5,093. 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.