Specialty Manager of 2022: Lazard

U.K. utilities was another area in which the market seemed “overly pessimistic,” Keating said. Therefore, there was some softness to the market, and “we were able to increase our positions in several specific investments in the U.K.”

Further, “utility companies have some very strong inflation pass-through mechanisms by way of regulation, and as inflation started to pick up near the second half of 2000 to 2021,” more investors were looking for that type of stock, he noted.

The pandemic reined in driving, which definitely hit toll road stocks. As Keating explained, a simple calculation to determine revenues is number of cars multiplied by the tolls. And during the pandemic, global traffic fell by 75%, “which were incredible figures around the world.”

But as COVID restrictions fell and traffic increased, these stocks rose. In the United States, most toll roads are owned by public entities, like a municipality or the federal government, Keating said. But that’s not the case in Europe and Australia, where Lazard owns stock in Australian, Italian and French toll road companies, some which own assets in other countries, including the United States.

One of the key challenges is these assets have “very, very long-dated asset contracts in which these companies sign with governments to maintain operational ownership of the assets,” he said. “They could be 50 to 75, or as long as 99 yearlong contracts. And it’s challenging in this market [today] to think that far out. But we believe that’s where much of the value is in infrastructure investing.”

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Edward Keating

Title: Manager; Years with firm: 20; Years in financial services: 20; Investment/Asset Class Focus: Specialty; Asset management firm: Lazard; Year firm founded: 1848; Number of employees: 900+; AUM as of March 31, 2022: $220.9 billion