Asset management giant Lazard is readying to scoop up underpriced US equities after Russia’s invasion of Ukraine caused stocks to plunge in value.
The firm’s co-head of multi-asset and head of US equity Ron Temple told City A.M that the geopolitical jitters in the markets had presented an opening for the firm to snap up stocks.
“In equity markets, we see opportunities in quality stocks that have been discounted since the invasion and have historically been better able to pass through price increases during periods of inflation, protecting margins and delivering solid returns,” he said.
Temple said Lazard, which manages around $258.6bn, would also be doubling down on investments focused on tackling the climate crisis, which would be largely immune to the current shocks to the market.
“The other opportunity is to identify companies that benefit from delivering solutions to climate change as the demand for their goods and services will only increase in the years ahead.”
Hiked interest rates and rising inflation had not changed the playing field for climate focused firms, he argued, which he said presented a “multi-year opportunity” for investors.
Lazard’s bullish approach to equities comes as investors indicated a more tempered approach to stocks in a leading survey of global fund managers this week.
The survey of global fund managers by Bank of America found that equity allocation had plunged, with investors bolstering cash reserves and favouring commodities.
Cash levels have surged to the highest level since April 2020 when the pandemic rattled markets, while allocation to commodities have jumped to record levels and exposure to equities fell to the lowest level in two years.
Investors in the UK have indicated that rate rises on both sides of the Atlantic could signal a longer term shift to commodities.
“The rate rises do highlight the move to a more stagflationary environment of higher inflation and less growth, which is less positive for equities, more attractive for commodities, and riskier overall increasing the attraction of cash,” said Rupert Thompson, chief investment officer at investment firm Kingswood.
“Fund manager allocations to equities have been reduced recently while allocations to cash, commodities and also commodity-related equities have been increased.”
Dan Boardman-Weston, investment chief at wealth management firm BRI said fund managers’ reading of the longevity of soaring inflation would determine their allocations in the year ahead.
“The fundamental question is whether inflation is permanently higher and whether interest rates move up too far and too fast,” he told City A.M.
“Depending on your answers to those questions depends on how your asset allocation may have changed or will change over the coming months. If you believe inflation is here to stay and interest rates move significantly higher, then allocations to commodities and value equities are likely to be higher.”