Two New York City pension funds have decided to keep WR Lazard & Co. as manager of more than $400 million in assets, but will monitor the firm's performance indefinitely, a city official said yesterday.
"We have instituted an extraordinary due diligence and ongoing monitoring for the foreseeable future," said Jon Lukomnik, deputy city comptroller for pensions.
WR Lazard manages $237 million in fixed-income assets for the city employees' pension fund and $234 million in fixed-income assets for the city teachers' pension fund, Lukomnik said.
New York City began scrutinizing the firm's asset management practices after the death of the firm's founder, Wardell R. Lazard. Lazard, who founded the firm in 1985, died last month in Pittsburgh of an accidental drug overdose.
A lack of employee turnover at the firm, particularly on the asset management side, was key to New York City's decision to maintain its relationship with Lazard, Lukomnik said.
Besides Wardell Lazard, "there have been no key personnel changes to the firm," Lukomnik said. "Our portfolio manager is the same, and the structure by which we invest is the same."
The retention of New York City as a client is significant for several reasons. First, the city's pension assets represent a sizable portion of Lazard's overall assets under management. In addition, industry sources widely believed that if the city terminated its relationship with the firm, other clients would do the same.
Lazard manages approximately $2.6 billion in assets for a host of clients, including municipalities, colleges, unions, and private companies.
Lukomnik described New York City's examination of Lazard as "a tight monitoring system designed to give us early notice if there is any reason to change the relationship."
So far, the process has included face-to-face meetings with Lazard officials and a review of the portfolio's structure, characteristics, and trades, Lukomnik said.
Since Lazard's death, three asset management clients have left the firm, Lazard officials said. The firm managed less than $100 million in total for those clients, which the firm declined to name.