Q3 2019 Earnings Call
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Thank you Paul Good morning, welcome to Lazard earnings call for the third quarter first nine months in 2019, and Alexandra Deignan The company head of Investor Relations in.
In addition to today's audio cop comments, we posted our earnings release and Investor presentation, which you can access on our website at www Dot Lazard Dot com.
This call will also be available on our website later today.
Before we begin let me remind you that we may make forward looking statements about our business performance.
Factors that could cause our actual results level of activity performance or achievements to differ materially from those expressed or implied by the forward looking statements, including but not limited to those factors discussed in the Companys <unk> SEC filings, which you can access on our website Lazard assumes no responsibility for the accuracy are complete.
These forward looking statements and assumes no duty to update these forward looking statements.
Today's discussion also includes certain non-GAAP financial measures that we believe our meaningful when evaluating the company's performance a reconciliation of these non-GAAP financial measures to comparable GAAP measure is provided in our earnings release, an investor presentation.
Hosting our call today are kind of Jacobs.
Resorts, Chairman and Chief Executive Officer, and having to resell Chief Financial Officer. They will provide opening remarks, and then we will open up the called the question.
I'll now turn the call Liberty Cat.
Good morning.
In the third quarter, we continued to navigate a mixed macroeconomic environment trade and geopolitical uncertainty persisted and global equity markets were volatile Nonetheless.
Financial advisory activity gained momentum our global volume of M&A announced now instruments for the third quarter and past six months increased significantly from a year ago, even as the markets volume decreased.
Our North American M&A business remains strong and our European announced now incidents have increased as well. These included a number of sizable UK transactions, despite the uncertainty around Brexit.
Other financial advisory practices remain active globally in restructuring we continue device on large complex assignments, our shareholder advisory practice is winning assignments around the world.
And it's an important component of our M&A advisory work, our capital and sovereign advisory businesses remain active.
Using corporations and government, some financing strategy and capital raising and asset management or EBIT average you went for the third quarter was 234 billion up slightly from the first half of the year at quarter end or you went much about 8% higher than the start up 29 team.
Institutional rebalancing and de risking have continued to affect our business as we experienced net outflows mostly in emerging market strategies.
Overall, our investment performance continues to be strong across a range of our platforms.
We continue to manage our from proactively with a discipline on costs and in the third quarter, we initiated business realignment to create greater flexibility to accelerate investment in our businesses.
In financial advisory future growth opportunities include the expansion of our footprint in North America, where we see a significant amount of white space and we are focused on building momentum in our non M&A advisory practices globally.
And asset management growth opportunities include reinvesting in key product areas, where we believe we can provided a net investment edge and the expansion of our card strategies.
Yes Gi.
And investment solutions globally.
Wide, we continued to make substantial investments in our technology and data science platforms, we're implementing new capabilities and tools across both asset management and financial advisory to enhance our competitive edge and drive growth.
Thanks to our scale and strong cash flow, we can make these investments through business cycles, even as we returned substantial capital to shareholders. Evan will now provide color on our results and then I'll comment on our outlook. Thank you Ken financial Advisory third quarter operating revenue of $304 million was approximately even with last years.
No.
This reflected an increase in completions across the Americas offset by a decrease in Europe and Asia.
Asset management operating revenue of $283 million was down 6% from last year.
On a sequential basis decreased 3% from the second quarter of this year.
Over January 3rd quarter was $234 billion down 3% from a year ago.
On a sequential basis average AUM was down 1% from the second quarter of this year.
We finished the third quarter with anyway, I'm at $231 billion, reflecting negative foreign exchange movements, a $4.4 billion and net outflows a $4.4 billion offset by market appreciation of $2.2 billion.
The net outflows were primarily from our emerging market strategies in both equity and fixed income the outflows were partially offset by net inflows in global equity strategies and in global and multi regional fixed income.
As of October 25th you I'm increased to $235 billion, driven by market appreciation of $2.2 billion and positive foreign exchange movement of $2.1 billion, partially offset by net outflows of $400 million.
[noise] looking at across our franchise.
In financial Advisory we continue to expect the second half of 2019 to be stronger than the first half.
Our current level of activity is higher than at this time last year, which bodes well as we enter 2020.
In asset management relative performance continues to be strong across most of our platforms. We expect to see ongoing pressure on equity flows in the near term.
Turning to expenses, we're maintaining our cost discipline in the third quarter. We conducted a review of our business that resulted in a realignment, including employee reductions and the closing of subscale offices and investment strategies.
The employee reductions involved approximately 200 people across financial advisory asset management and corporate functions.
Most of the realignment occurred in the third quarter and we expected to be completed in the fourth quarter.
These actions resulted in an expense a 51 and a half million dollars in the third quarter, which is excluded from our adjusted results.
Regarding compensation expense, we continue to accrue at a 57.5% adjusted compensation ratio in the third quarter.
Non compensation expense for the third quarter was $125 million, reflecting business development expenses and continued investments in our technology platforms.
Our effective tax rate in the third quarter as adjusted was 16.6%. This rate reflects the benefit from discrete items in the quarter on lower income levels.
Our effective tax rate for the first nine months of the year was 21.7%.
We continue to expect an annual effective tax rate for this year in the mid 20% range.
Turning now to capital allocation in the third quarter, we returned $130 million of capital to shareholders, which included $79 million in share repurchases.
The first nine months, we returned $733 million to shareholders, which included $430 million in share repurchases.
During the first nine months of 2019, we repurchased 11.9 million shares which included 2.2 million shares in the third quarter.
This led to an 11% year over year decline in our third quarter dilute diluted weighted average share count from 130 million shares to 116 million shares.
We expect to continue our share repurchase program utilizing our cash flow from operations.
Our total outstanding share repurchase authorization is now $437 million following yesterday's additional authorization by our board of directors.
We will now conclude our remarks. Thank you Evan overall, the global macroeconomic and macroeconomic environment remains constructive despite continuing trade and geopolitical uncertainties in the U.S.T. economy remains reasonably strong and consumer spending is healthy in the eurozone growth is expected to be modest this year and into.
2020 fundamentals for global equity markets are steady and credit conditions remain favorable the forces driving strategic activity remain in place technology, driven disruption continues to be a catalyst for M&A across industries shareholder activism continues to evolve globally and more than half of the capital deployed in activist camp.
Gains this year has an M&A thesis.
In Europe , our conversations with clients indicate.
Some pent up demand that could accelerate strategic activity over the next year Lazard strong presence in Europe does it should positions us well for this and asset management, our investment platforms are broadly diversified across asset classes styles and regions. The longer term outlook remains positive as our franchise continues to serve clients with innovative investment solutions.
That position the business well for the future.
In both our businesses, we have taken actions to align our operations with the growth opportunities. We see we continue to invest in our people capabilities and technology infrastructure, we remain focused on serving our clients well, while we managed the firm for profitable growth and shareholder value over the long term, let's open it up to questions.
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Well now take our first question.
Richard Thompson from Goldman Sachs. Please go ahead your line is open.
Okay. Good morning, everyone.
Just extended a little bit more on the deal environment in Europe I know on that you just said that the environment was pretty positive but in the release you talked about weakness in there in the region.
Activity does seem to be up a lot in the last couple of months. So should we just think about this is a timing issue in Q3 with activity picking up in Q4 or some other dynamics, we should be aware off.
[laughter] a lot packed into that question. So, let's just talk about our own experience. So far and then we talk a little bit about the market.
Our own experiences we've had a pretty significant pickup activity across the board on announcements in the second after the second quarter into the third quarter.
And now into the fourth quarter in both North American in Europe .
In Europe in particular, we saw real slowdown in activity in our on our and on our part in the second half of 2018 really beginning in June and throughout the rest of the year and that actually accounts for some of the softness.
No the advisory performance in the first half of this year and even into the third quarter. We've had very strong performance in North America. During the same period of time.
Yeah, the actual environment in Europe for deals is kind of mixed right now and I don't know, which statistics to really focus on but I think overall I'd say, our volume on announcement seems to be significantly higher than the market, but it has improved a bit conversations I'd say, our ongoing theres a little bit as I discuss.
Hi, pent up demand because there was halted acquisitions in activity in the second half of last year, but again, it's kind of a mixed environment because of the macroeconomic situation.
Okay. That's very helpful to the second thing is you had a number of senior management departures.
Over the last few months can you just talk a little bit about that is that part of the restructuring is that just part of the ordinary course of the business and what do you expect any near term.
Disruptions as a result since those departures in the business.
I think this is normal course, I mean, you you have the beauty of those art franchise is greater than any one person. This is a franchise, which.
Has gone through.
Change and generations on multiple times in comes out of each one of those in the stronger position and I expect it will be the saying this time.
Okay. Thanks very much.
Our next question comes from Devin Ryan from Jay.
Please go ahead your line is open.
Great Good morning, everyone.
Good morning first question here just on the asset management business in the restructuring that did I guess was announced over the quarter. How should we think about the financial impact on revenues and expenses and then is there a point where you would do more.
In that segment of some of the industry headwinds donor base or.
Do you feel like where you kind of more post some of those.
And in the quarter kind of your your where you want to be in the business.
Having you want take the first part numbers on the second so.
I mean with the business realignment that we've been talking about that occurred over the quarter. I mean really started a couple of a couple of months back where we start to take a hard look at our business given the current environment.
And the results and the revenue isn't really wanted identify.
Underperforming businesses strategy subscale areas and offices and individuals we took a hard look at our business.
Top down both sides of the business not just asset management really across the entire business and decide it really where we wanted to have opportunities for growth. So part of this was cost discipline being prudent in the environment, but the probably more important piece was to create flexibility to continue investing in areas, where we see significant opportunity. So we've spent time in.
In the in the past couple of quarters talking about where we've already started to focus our energies and our efforts and our resources.
Around some of the quantum strategies to build out there around some yesterday as Ken pointed out this morning as well.
In other alternatives platform build out some areas, where we see greater opportunity for the future and this part of what we're doing now is just really creating some flexibility to continue to make a stronger investments in that I'd say from a revenue perspective to your question, but the assets under management the subscriber strategies, we're talking about most than were pretty small.
We would expect there to be approximately maybe three to 400 million of AUM associated with all the strategies that were being closed down somewhere in that range likely to be occurring mostly in Q4.
Again, a lot of this is about self funding and thinking about how we can continue to invest for growth.
Okay, Great and then just a follow up on.
Our question some of the commentary around just the advisory backdrop I'm, just trying to get maybe a little bit more flavor for you kind of that the cadence of activity and how thats been evolving clearly the tone sounds better today than it did six months ago or a year ago.
You're trying to get a sense of how are we kind of back to something that feels more normal to you.
Is this a better backdrop and we've been in some time to assist you are kind of getting the pent up activity in Europe with the U.S. maybe.
Getting back on more normal footing here kind of post the fourth quarter disruption last year to try to get a little bit more flavor for you. The cadence there and then if you can just in your maybe touch on some of the non M&A businesses like restructuring and it sounds like activism defense is quite active so just little more detailed there as well.
Sure. Okay. So let me just speak into our individual performance I think just sort of feels like we've hit one of those moments in time or were probably outperforming the market a bit.
Certainly when we look at our announcements in the second after the second quarter into the third quarter now it feels.
Like we had a little bit better momentum than the markets do that's kind of nice that was not the case last fall when we saw things start to fall off.
So that's nice and that's kind of the ups and downs of the business.
I think overall I think the market for M&A is okay. It's not great. It's not also it's okay. It's an okay period and the factors that are driving it I think because if we think are the following first this underlying catalyst that is.
Disruption from technological change is really evidenced in almost everything that that is going on in the M&A environment today.
And is very pervasive throughout boardrooms and very much on on Ceos minds second is you obviously have.
This very strong activity around activism, probably more than half of the activist campaigns today are driven around a feat in M&A team. So that's that's another catalyst for activity a third one which is early I'd say, it's emerging I don't think it's quite as there yet in terms of driving activity, but it's something to keep an eye on his U.S.G.
Hi.
This has become a factor which is very important in Europe .
In investors' minds is increasingly becoming more pervasive in the US obviously, we're seeing it in our asset management business and you can see any investments. We've made there I think increasingly this is becoming a topic for boardroom discussions and ultimately, it's probably going to be a come a topic around portfolio alignment.
In terms of businesses, where to invest where not to invest I don't think its today a factor.
Yet, but it's something that I think we all should keep an eye on.
With regard to M&A.
And then you have to three traditional factors I'm sort of steel confidence.
Credit and.
Equity valuations and I think in terms of CEO confidence frankly kind of mixed I think the geopolitical environment. The macro environment is you could just wanted a little bit of pause.
The trade wars have really made people thinking very carefully around.
Investment and also.
Supply chain ultimately that probably will have some implications from an M&A perspective, but it does give people some pause.
Overall, though you know this technology disruption the underlying pressure.
From shareholders and activists around M&A. Those are those are probably still positive catalyst from a confidence perspective.
When you think about credit.
Credit conditions are as positive as I think they've been.
Credit is still widely available. It said rates are very very low negative in some cases financing for certainly for investment grade companies is there is almost limitless so at the moment and.
For non investment grade still strong private capital private debt is still a widely available.
And sponsor activity still very high as a result of that and then finally on equity valuations is kind of a mixed picture. There is some sectors that look really overvalued are fully valued and then the other sectors that seem to.
See a bit undervalued, but of course, that's all relative to what people expect in the macroeconomic cycles. So my takeaway from all this is that the M&A environment remains reasonable constructive. It's okay. It's kind of it's going to I think there's going to continue to be a reasonable amount of activity and you know just from our own standpoint, I think our general feeling is we.
Feel much better or better today about the first half of next year than we did probably sitting at this time last year.
Okay.
I appreciate all the detail thanks again.
Well now take our next question from Stephens you back from Wolfe Research.
Hi, good morning.
So I'm wondering startup in the question for Hey, How's it going on that want to start with a question for Evan I. Appreciate you quantifying the 300 million to 400 million or you I'm strategies that will be impacted by the realignment I was hoping you could speak to the cost savings or maybe a resource free up associated with the collective head count actions at.
And noted that same vein given that the non comps for a little bit higher than we had expected I know you had talked about higher investment how should we think about the pace of noncomp growth as you try to balance some of those efforts to realign the businesses with the need to continue to reinvest to continue to drive gross.
Sure. So let's start the non competes for a second so the non comp the run rate Noncomp, we've been having probably the last four corners approximately hundred 25 million, we had about 125 million in this quarter.
That elevated spend that we've been talking about is the continued rolling in a lot of his technology.
Now as you related technology cost as they can start to continue to amortize down some of that cost comes into our financials.
Additionally, we had marketing and business development expenses this quarter as we're continuing to drive the client client marketing client pipeline ahead, especially in financial advisory looking as we said, we expect the non comp range to be a at approximately that level, perhaps even going a little higher due to the technology thats coming onboard for the next several quarters.
And I'd say that the the focus on the business realignment that we announced this morning, I think that won't have much significant impact on the non comp side.
Yes, it's a possibility as as we closed a couple of small scale offices, those don't have significant non comp against it but there should be a little savings as you get further into 2020 on that basis, but again overriding it had the big big piece of that is more the savings or the ability for us to continue to invest with the proceeds.
With the net available from the reduction in the head count So the head counts the bigger piece of it the non comp is a much smaller piece of it I'd say you know with regards to the financial advisory business I think the customer across the board you mentioned asset management, yes, a three to 400 million of a when flows I think.
The way, we're again thinking about this is more where can we create flexibility to continue investing for growth. So it's not really about run rate savings to us, it's where counterbalancing that is the recent continued expected growth in hiring that we're doing just to put that in perspective, we we expect to be at year end to be I would say approximately EUR.
Within 1% of last year's ending headcount. So we've been continuously hiring over the past year and frankly of last several years, but it's all about making sure that we have the right people in the REIT space is focused on the right efforts, where we see the greatest opportunity.
Thanks, having that's very helpful color and can probably the most detailed feedback we guide in terms of the M&A landscape, So I really appreciated.
All the helpful. Inside you provided there are two areas I really want to dig into further that you didn't touch on maybe the same extent one is restructuring given some of your competitors are citing a better restructuring backdropped wanted to see whether you're seeing something similar recognizing that credit as you noted it is still widely available and the second piece is the election impact feels like that.
As an area where investors are concerned about the election uncertainty weighing on CEO confidence you did note that that was waning somewhat but didn't speak to that specifically I didn't know if that was coming up in any of your conversations at all.
Sure. So on let me just touch on restructuring and also on steroids shareholder advisory little bit. So there is probably the two and capital raising three.
Three areas quickly restructuring you look credit conditions remain strong so we haven't really seen or shift yet in the restructuring cycle, but you know this yeah. We have seen as a result of technology disruption quite a bit a change in different industries. I mean look we had an enormous restructuring surge in 2015 that was really good.
In which was really technological in nature, we've seen an enormous amount of activity in the retail sector, which again is technology, driven and I think we're going to see that in other sectors. As time goes on its just something to keep an eye on again my point on history before US sustainability, you come back and you think about the impact of droughts.
That is you look at the impact to that on fires on the west coast that that is actually led to a major restructuring in PS UGI where were quite.
Active.
And.
My guess is is that will be a theme going forward, but overall the environment is continues to be active but we haven't seen credit conditions shift yet. So I don't think you're going to see the pick up until you really see that happened.
In terms of shareholder advisory that's just gone from straight to strength with us.
For us it's become a very important way to distinguish ourselves and distinguish our advice.
And it's also been away to really build new client relationships and so we're really seeing that as an important growth vector for us and one we've really spent a lot of.
Effort to build out and really distinguish.
And then capital raising.
Our capital a private capital advisory business has been very active and that just reflects the amount of focus there is on the alternative sector and ways to raise money for those kinds of activities and where it I think in et cetera that so those are three really great businesses for US right now two of which are really active.
And the other which I think is extremely well is obviously well positioned to any of that we get a shifting credit cycle.
And the U.S. election.
So that gives you want me not going to let me on that one.
Well look I honestly I think it's too early to tell I mean, you know I'm not going to.
Pick a candidate, but I think you can make arguments on any side of that one to think about how it could be disruptive to the geopolitical or the macro environment.
I think generally speaking the market prices elections pretty well in pretty early.
So we'll see what happens.
Except for the most recent one of course.
Notwithstanding but I.
And sort of.
Yeah. Good luck is something that I'm going I think dodged the politics.
Fair enough.
Okay. Just one more for me I wanted to just get a sense given that.
I recognize revenue seem reluctant until these quantify some of the direct expense savings, but you Didnt noted, it's about a 7.5% head count reduction.
Should we assume average comp per employee when conducting that type of analysis or because the head count number is roughly the same verses. The started the year that we shouldn't see any meaningful dollar direct dollar expense savings actually fall to the bottom line.
Yes, I think thats the right way to look at it I mean, I think we're looking at head count staying basically flat year over year again, a lot of this is is really us just putting our ships in the areas that we want to continue to focus on so we've continued to higher this is us just creating room, creating flexibility to continue investing for that growth that we don't.
We're not seeing this is a net.
Investments investments savings.
You could about 7%, it's going to be approximately 200 employees.
So call it somewhere 200 employees off off of our base.
So somewhere in that range and again, it's across all three businesses and most of those headcount cuts really come from the savings we have from closing of the subscale offices, which is a couple of those as well as some of the strategy. So very directly related to the areas, which we are taking were coming back.
Great. Thanks for taking my questions.
Thank you.
We will now take our next question from Jim Mitchell from a Buckingham research.
Hey, good morning.
Hey, maybe just a question on on flows.
Appreciate sort of the color that in the near term still dmone under pressure, but you're trying to grow.
Some of your other products, how do you see.
When do you see that crossing over where maybe the outflows start to slow in the and the growth from the other investments start to out flows any any kind of sensor help on that.
Yes, sure Hey, Jim its Evan.
Let me start that look we called out you know the yen platform was a big part of the net outflows in the quarter specifically in the value part of our platform, we've talked in past quarters about value being out of favor relative to growth in quality and I think we're continuing to see that strength that trend. So value is certainly under pressure.
That said I think we'd like to point to the positive performance I'd say that yeah. This quarter, specifically it was pretty it was pretty lumpy.
We had a few larger accounts that sort of pulled out to two larger accounts that.
That made some changes in the quarter that had a bigger impact on the net flows. So I think we're starting to see getting close there, but again, it's lumpy and it's kind of continuing to trend and so.
The real question for us the value part versus growth is been a big player that shifting and de risking rebalancing that we just sense that on the institutional side will continue for some period of time.
Okay, and any can you help us anyway, whether it's a gross or net flows on sort of the other strategies that have been doing well.
They've been.
And the billions hundreds of millions in terms of net flows.
Look on the net flows basis is probably a couple it's hundreds of millions and billions on some of the other strategies and one which they we saw some of the the net inflows. Okay. That's helpful.
Just maybe one question on on the advisory side.
You've restructured to reinvest I guess, one do you see net and be head count starting to turn positive next year.
And where I guess, you mentioned North America.
Any thoughts of.
Most opportunity there.
So the short answer to that is yes on the debt Indeed, count turning positive and then with regard to where I think you're going to see it in two areas one is.
Some of the product efforts.
So again shareholder advisory PA.
Some of the capital advisory businesses, because decent been just really powerhouses for us to too.
Five client relationships.
Then second Theres, probably some incremental investment in the U.S. and then also some places in Europe , as well, where we see opportunity.
Theres a lot of white space for Lazard.
We see it in the large cap space.
Where is which is our real sweet spot, but we also see it.
In.
Some of the.
Mid cap and obviously, the private the private equity or the sponsors space as well. So there's a lot of white space for us right now.
Okay. Thanks for answering my questions.
Our next question comes from Michael Brown from KBW.
Hi, good morning.
I wanted to ask about.
Just wanted ask about capital return so the buyback activity was a little below our expectations this quarter, but obviously we saw the.
Increasing authorization from the board.
So one you kind of why hold back on the buyback this quarter and then I guess, how should we think about the pace going forward and if I could just tag on one more there.
Is there any chance at the special.
Kind of come in at near last years level, which is around 50 cents.
Hey, Mike its Evans, let me take that yes. So Q3, we repurchased as we said 2.2 million shares in the corner I think year to date as we said we bought back almost 12 million shares. So certainly the pace fell off we were at a much higher elevated pace as you know due to some of the also refinancing in excess proceeds we.
That we put to work. So we've we basically at this point put put forward and put to work all the excess proceeds from the recent issuance we had the excess the excess cash that we raised during that the refinancing period. So yeah. I mean, we expected to slow down as as we've said, we're focusing on continuing the buyback with.
With excess excess cash flow generation through the year I'd say with regards to special comedy special versus share repurchases. As you know I mean, the every year, we sit down that we always say at the end of the year and we look at what excess cash flow looks like I think as we've been calling out the last couple of quarters, given the significant value we've seen a stock we've been utilized.
Using a lot more of that excess cash flow generation through the year.
For share repurchases and so I think our plan is to continue to do that with the with the cash flow generation.
Okay very helpful. Thank you.
And then just switching to advisory.
You know where there any deals I kind of slip this quarter into the fourth quarter and then.
I appreciate all the economy environment right now but.
I really appreciate some additional color on maybe how the fourth quarter is shaping up and kind of whats your views as to how the year will end.
Sure. So look at with regards to the third quarter I'd say look there is always deals that come and go deals closed earlier, a faster than expected always always hard to predict that though has been that way in our business and I suspect that always will continue I don't think anything specifically pushed out this quarter I I'd say a relative.
To some of the other quarters, we probably.
Pulled into Q2 from Q3 more than we pulled in from Q4 into Q3.
So a little bit a little bit of that happened in the quarter, but with regards to Q4 I look I think our view is we continue to think that the second half of this year will be stronger than the first half understanding that we starting from a lower base in the first half of this year I think we're we're talking about momentum as we talked about a deal as Ken talked about the deal announcements.
For us specifically starting to pick up more significantly at the end of the second quarter into the beginning of the third quarter.
Whether or not you know how its Q4 turns out will largely depend on whether or not those deals hitting Q4 or more likely in 2020. So that's why we're talking about really the momentum going into 2020 being stronger at this point in time.
Okay. Thank you for taking my questions.
Our next question comes from Brennan Hawken from yes.
Hi, Brian .
Hey, good morning, Thanks for taking the question.
Hi, most might have been answered at this point I just have one follow up.
You guys have spoken a little about the realignment here.
And certainly appreciate that you want to sort of.
Shift around and so fun for growth and that it makes a lot of sense I guess, what I would say is a deal do you really think that you're doing enough right.
To paraphrase can I think you had said basically that you guys lagged earlier. This year now you feel better you feel like you've you've you've sort of outperformed so maybe you brought it back to back up to sort of net neutral and the environment is is okay. We all can see.
Magnitude of pressure on the asset management business, which is certainly significant.
And you know when we look at the blended margins.
Versus your business mix, you know certainly feels as though your wagging tiers. So why not press harder why why just stop at what's happening with.
Looking at.
Strategies that don't.
Have underperformed or aren't looking is good for growth when I try to realign the real estate footprint, reducing complexity in on the corporate side.
Just incentive targets do something to drive margins higher.
Why stop with just what you've done so far.
Provocative, but figured why not throwing out there.
Hey, Brad it's having a look it's a great question looking as we spent a lot of time as we said I think I think you're right. We were focusing on is the areas where we thought.
That we didn't have as much opportunity to create more value through those smaller subscale strategies and funds and so it's sort of sort of taking off you know we continue we continuously especially on the asset management side.
Looking at new strategies, creating new opportunities and at some point in time, you really have to just because it's an evolution you have to keep thinking about which ones do we not see as much opportunity and where do we think the opportunity should be in the future and I think weve.
We did a hard look across the business decided which ones. We still think have good opportunity in there and the other ones that we just didn't think were strong enough. We took the opportunity to kind of back. So I think we're kind of went down that path I think it was a it's a fairly substantial.
Moving our part at this point in the timing or we're not we have a lot of great opportunities within the platform a lot of even this on this on the smaller ones here, we think cap rate opportunities in the future and so for US. It's just about where we're going to put the chips.
Let me just add to that outlook.
I think one of the things, which is always tough is saying what are your true comps on whether its advisory on the asset management side, and it's pretty simple I mean on the advisory side, where the only independent global platform that comes with an enormous number of benefits for our clients.
And in terms of our ability to generate the.
The kind of returns we doing this particular business, but being global also means that not every market is going to perform well at the same time.
And.
And.
And so what you're trying constantly to do is to balance.
Decisions between wanting to maintain global which is absolutely essential and really differentiating in terms of our franchise.
Certainly as the only independent that is global.
With making sure that you can also balance activity levels, which may be booming in one place North American may be slowing another I mean parts of Asia Europe at different points in time, what you want to be sure of though is everywhere and you do have chips.
You have adequate expectation of a good expectation that theres going to BPP pool and door, it's really critical to the to the infrastructure. This system. That's our positioning Thats, who we are on the asset management side of the business.
We have.
Positioned ourselves I think extraordinarily well in strategies, which are better positioned for the change in the secular olin environment than virtually any other long only as active equity asset manager Thats, the positioning that we have and.
Investing in those strategies and growing them out is something that is that is something that we want to do and that's going to that takes investment.
You don't watch your strategy and have success in a year. It usually takes five years and not every strategy is successful and we have a really good history of growing these businesses internally and as we've said before half are half our strategy investment or half or a web is a AUM that came from things that didnt exist 10 years ago, and that's something that is very.
Special about Lazard. So you know it's a global platform comes with some additional cost perhaps but at the same tide makes it.
Unique in the marketplace. It gives us tremendous durability is larger than any one individual.
Thats very special and on the asset management side of the business. It gives us the ability to invest in scale in areas, where we really mean can make a difference that's where we are.
Okay. Thanks for all the color and let me be dead horse.
There you go.
This now concludes Lazard conference call.
[laughter].