Launched in 2015, Lazard’s Real Assets and Pricing Opportunities strategy (RALIX) had offered investors three-year average annualized returns of 5.89 percent as of March 31, 2018—at that time, the strategy was nearly 60 percent equities, 24 percent fixed income, less than 14 percent commodities and less than 3 percent cash. The strategy carries a 90-basis-point expense ratio.

The rising rate environment has led Lazard to lower its allocation to real estate in its portfolio. So far, however, most of 2018’s investment themes have played into Jacob’s hands, especially as the impacts of the Tax Cuts and Jobs Act of 2017 are felt throughout financial markets.

“The tax reform had the effect of a stimulus package fairly late in the cycle,” said Jacob. “They’re increasing the debt while the economy is growing, but it’s still hard to say whether over the long term the Treasury will have to issue a lot more bonds. So far, all readings have been fairly positive since the tax reform.”

Thanks, in part, to the tax reform, Jacob’s team determined that equities were not as pricey as many investors thought they were, a view that has been supported by increased earnings in 2018.

Jacob is still concerned about trade, however.

“Trade is one of the big topics our clients are asking us about, and the reality is that any kind of capital controls on trade will impact the price of goods,” said Jacob. “It will have a pass-through effect to inflation.”

Trade wars are largely seen as a headwind for core equity and fixed income, said Murphy, but they can be beneficial to opportunistic strategies where managers can trade around spread volatility.

The trade war rhetoric also widens the dispersion in returns between companies in the same sector or geography, said Murphy.

“We’ve seen outperformance in domestic focused companies without international exposure,” he said. “We’ve also seen a wide divergence between companies within industries based on business model and sensitivity to tax rates.

“Small-cap companies have had massive tailwinds compared to large-cap multinationals, so the net result is that you’ve had a number of companies down materially in 2018 while others have been up a lot. We haven’t seen that type of dispersion on a fundamental basis in a few years.”