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Fair Value Measurements
 9 Months Ended
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.