Q4 2020 Lazard Ltd Earnings Call
Good morning, and welcome to Lazard for the year and fourth quarter 'twenty and 'twenty earnings Conference call. This call is being recorded good and see all the participants are in listen only mode. Following their remarks, we will conduct a question and answer session.
Instructions will be provided at that time.
And of course should be quiet assistance during the call. Please press the star key followed by the zero on your Touchtone phone and this time I would like to turn the call over to Alexandra Deignan lots as head of Investor Relations. Please go ahead.
Good morning, and welcome to Lazard earnings call for the full year and fourth quarter of 'twenty and 'twenty I'm Alexandra Deignan, the company's head of Investor Relations.
In addition to today's audio comments, we have posted our earnings release and on Investor presentation, which you can access on our website.
Our dotcom.
A replay of 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 and performance. There are important factors that could cause our actual results low 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 and the company's SEC filings.
You can access on our website Lazard.
As artist and no responsibility for the accuracy or completeness of 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 are meaningful when evaluating the company's performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measure is provided in our earnings release and Investor presentation.
Let's see how calls a day or Kenneth Jacobs.
Chairman and Chief Executive Officer, and other Musso Chief Financial Officer.
And they will provide opening remarks, and then we will open the calls and questions.
I'll now turn the call over to Ken.
Good morning today, Lazard reported strong results for the fourth quarter and full year 'twenty and 'twenty.
We achieved record quarterly operating revenue financial advisory had a record quarter with strong performance across practices and regions asset management's fourth quarter revenue increased 12% and achieved a record and year end level of day U N. We enter 2021 with significant momentum as we serve clients positioning themselves for a post pandemic recovery.
And financial Advisory our M&A activity progressed throughout 2020, our global announcement and volume increased 3%, even if the market is volume declined 10%, reflecting strong activity on both the U S and Europe.
In particular, our volume of French and U K announcements increased 34% and 37% respectively from the prior year.
A pre eminent global restructuring practice continued its work on a wide range of complex assignments in 'twenty and 'twenty Lazard ranked number one and the league tables for completed restructurings globally as we anticipated the pace of new restructuring assignments and Europe increased.
Our sovereign capital and.
And private capital Advisory businesses, all had strong years as we advise governments corporations and partnerships on financing strategy and capital raising.
Private equity secondaries business continues to grow and we're advising on a significant number of gross equity investments globally.
Continue to see opportunities for growth and financial advisory.
And have increased our pace of lateral hiring in 2020, and we recruited 12, new managing directors globally, plus two more in January of this year and.
In addition, we are promoting 15, new managing directors and financial advisory this month tenant.
And then began their careers here as analysts our associates and our ability to develop talent to organically remains a powerful competitive strength.
Our asset management business also had a strong fourth quarter with higher management and incentive fees, reflecting on growth and the performance of our strategies.
On assets under management, our assets under management increased by 31 billion or 14% from the start to the finish in the fourth quarter.
Our investments and new strategies and product extensions continue to create new avenues for growth our quantitative business achieved net inflows for both the fourth quarter and full year as did our global equities and our global and multi regional fixed income platforms.
We are also seeing and an increase and solutions.
Oriented mandates as we serve more clients with customized strategies, we continue to invest and asset management's growth through investment in people technology and distribution as well as the development and new funds and the scaling up of existing platforms and.
In 2020, and we introduced eight new strategies for clients across our traditional and alternative platforms. Three other strategies are from independent teams and we recently recruited.
As the asset management industry undergoes a wave and consolidation, we see substantial opportunities to accelerate our recruitment of talented investment teams, adding strategies that are complementary to our existing platforms. We also continue to build our talent pool from within this year asset management more main seven new managing directors and intangible promotion process for them.
Wide was arts and results record results for the quarter underscored the strength of our diversified business model, our global platform and our deep culture of client service.
We enter 'twenty and 'twenty, one with momentum across our businesses, we see substantial opportunities for growth and both financial advisory and asset management and are investing to capitalize on that ebb and will now provide some color on our results and then I'll comment on our outlook.
Thank you, Ken Lazard and full year and fourth quarter results reflect the stability and continued high performance of our businesses are.
Our fourth quarter operating revenue of $849 million with a record quarter for the firm, 20% higher than last year's period.
Fourth quarter adjusted earnings per share of $1 66 increased 82%, reflecting the significant operating leverage and our model.
Annual revenue of $2 $5 billion was about even with 2019, representing a strong recovery from the volatile environment of 2020.
Our financial Advisory business had a breakout fourth quarter with record quarterly revenue of $509 million, which is 23% higher than our previous peak level in 2018.
The compelling story behind financial advisory and record quarter is that it was driven by strong contributions across our advisory practices and across regions are.
Our revenue performance demonstrates the earnings power of the diversified advisory business, we have built.
And asset management. The story was similar as we generated generated $336 million and revenue for the fourth quarter up 12% from the prior year.
And it reflected contributions across our global platforms with accelerating momentum and a year of extreme volatility.
Fourth quarter management, and other fees increased 10% sequentially from the third quarter, reflecting higher average AUM fourth quarter incentive fees were up substantially from the prior year, primarily reflecting strong performance and our alternative strategies.
Average AUM for the fourth quarter was $246 billion up 3% from last year's period and up 9% from the third quarter of 'twenty and 'twenty.
The sequential increase was driven by market appreciation of $25 $4 billion and foreign exchange appreciation of $5 $8 billion, partially offset by net outflows of $3 billion.
For the full year, we experienced net outflows of 11 $4 billion, primarily and our value strategies within emerging markets and local equities.
That forms with net inflows for the year included global and quantitative equities as well as our global and multi regional fixed income strategies.
We finished 2020 with AUM of $259 billion and as of January 28th AUM was approximately.
<unk> $258 billion.
The decrease was driven by foreign exchange depreciation of $1 3 billion and net outflows of $1 billion, partially offset by market appreciation of $1 $3 billion.
Looking ahead across our franchise and financial advisory client activity is strong across our advisory practices globally, and an improving environment.
Asset management is off to a good start in 'twenty and 'twenty, one with AUM well above its average level for 'twenty and 'twenty, we have a strong pipeline of unfunded mandates. We continue to see demand for both our quantitative and fundamental strategies across our platforms as well as growing demand for our sustainable and customized solutions.
Turning to expenses, our compensation ratio for 2020 on an adjusted basis was 59, 5% up from 57, 5% in 2019 on and awarded basis, our annual compensation ratio was 59, 8% compared to 57, 7%.
For 2019.
The increase reflected our investments for growth as well as the change and business mix. This year, we are maintaining our cost discipline, while we navigate a volatile market environment.
Non compensation expenses of $117 million and the fourth quarter was 10% lower than the same period last year.
Primarily reflecting a continuation of global travel restrictions and lower business development costs.
Our adjusted non compensation ratio for the fourth quarter was 13, 7% and the ratio for the full year was 17, 1%.
As business activity picked up and the fourth quarter, we saw a commensurate rise and non compensation costs, especially related to variable expenses.
Our effective tax rate for 2020 was 22% compared to 24, 1% a year ago for 'twenty and 'twenty. One we expect an annual effective tax rate and the low to mid 20% range.
Regarding capital allocation, our business continues to generate significant free cash flow, which supports our goal of returning excess capital to shareholders throughout the year, we have been consistent and returning capital through our quarterly common dividend and.
And the fourth quarter, we returned $51 million of capital to shareholders.
Yesterday, we declared a quarterly dividend on our common stock of 47 per share and.
And in 'twenty and 'twenty, one we have resumed our share repurchase program in order to at a minimum offset dilution from our year end equity grants.
Our total outstanding repurchase authorization is now $267 million low.
<unk> financial position remains strong with ample liquidity and balance sheet flexibility.
As of December 31, our cash and cash equivalents were approximately $1 $4 billion.
Ken will now conclude our remarks.
Thank you Evan a few words on our outlook before we open the call to questions and the near term the macroeconomic outlook remains uncertain and based on the ongoing health crisis, However, fiscal and monetary stimulus and developed countries and the rollout of vaccines globally are driving expectations of a recovery by the second half of this year.
Both of our businesses are already benefiting from growing optimism and boardrooms and investment committees and so.
And actual advisory the forces driving global strategic activity and accelerated technology, driven disruption continues to be a catalyst for M&A across industries shareholder activism has resumed its growth. After a brief pause during the first half of 'twenty and 'twenty with create increasing impacting Europe, the rapid growth and spacs alongside strategic and private capital.
Add substantial dry powder to the M&A market. In addition climate risk is becoming increasingly relevant to company valuations and there's an emerging catalyst for strategic activity. Our ESG expertise is well entrenched and our asset management business and increasingly and our financial advisory business as well.
And asset management, the expectation of low interest rates for the foreseeable future as a tailwind for our business and investors need for income and return is driving increased demand for risk assets, including equities and corporate and emerging market debt as well as alternative investments and.
In addition, and institutional investors are seeking sources of differentiated alpha, including ESG nomadic and alternative strategies.
We are and an excellent position to meet this demand with a world class investing franchise and markets that reward deep fundamental research and our quantitative strategies are competing effectively in the market for low cost products.
We see substantial opportunities for growth across our businesses and we continue to invest and our people capability and technology infrastructure to enhance our competitive edge. We remain focused on serving all of our clients well, while we manage the firm for profitable growth and shareholder value over the long term and closing I'm gonna. Thank my Lazard.
Colleagues for their dedication and commitment during the past year and one of the most challenging environments environments and modern history. They rose to the occasion and serving our clients with outstanding financial advice and solutions and reinforcing this great franchise and I'm proud to work with that now let's open the call to questions. Thank you.
Thank you and if he would like to ask a question. Please signal by pressing star one on your telephone keypad and you figure.
And I think a speaker phone. Please make sure you're on mute function is turned off to allow your smith with each other brickman and.
And then burst I wanted to ask a question.
We'll take our first question from Brennan Hawken from UBS.
And good morning, Thank you.
Good morning, Thank you for taking my questions.
I was curious if you could talk and and Ken and I think you spoke a little bit about it in your prepared remarks.
Indicating that the pace of new restructuring mandates and Europe is picking up could you maybe help us contextualize Europe in the context of your restructuring business and then also maybe get a feel for how.
The restructuring and the size and the restructuring business is as a percentage of your advisory as we just think about the next few years. There was a competitor who who just said that the pace of restructuring rather should start to slow in 2022 or returned to normal it sounds like given your new mandates.
That you flag that wouldn't be the case for you, but if you could just maybe flesh that out a little bit that would be great. Thanks.
Sure. Let me, let me provide some context and maybe I think to that a little bit as well look restructuring in 'twenty and 'twenty was a very strong year for us and obviously for a number of our competitors as well for us at least a lot of other restructuring mandates in 'twenty, and 'twenty, where companies, which were already facing difficulties prior to that.
Pandemic and weren't able to benefit from the massive fiscal and monetary stimulus that.
And that we saw it and the first part of and the middle of last year and that that was the primary pipeline for restructurings in 2020, and again you saw that was a lot around retail and around the.
On the fossil fuels industry.
Uh huh.
The level of activity started to dip a little bit towards the second half of the year is financing became widely available.
We still expect going into 2021, a reasonably decent restructuring environment and defaults or obviously you do it at a low level right now and the United States.
Financings widely available, but still the pipeline is still okay for going into 'twenty and 'twenty one better than on.
Obviously, a normal kind of strong and in a year, we'd expect to see on a normal strong M&A year for us we expect our 2021 there'll be a pickup and restructuring in Europe. There was not as much in Europe, and the first half of 'twenty and 'twenty we.
And we expect the first half of 'twenty and 'twenty, one to be a little bit better in that regard.
More activity and then probably the second half in Europe as well.
And so that's that's kind of the context and you know frankly, a lot has to do with what's going to happen with rates over the course of the next year or so and availability of financing I mean, there are a lot of companies and to take it on quite a bit of debt. During this period of time and I'm just gonna be a need for similar refinancing as we get into next year and the year afterwards and a lot.
Has to do with availability of capital and whether or not those particular that particular industries or and recover.
Great Thanks for that color.
Okay.
Thank you I think on next question from Devin Ryan from GMP Securities.
Okay.
Great Good morning, everyone.
Good morning.
Hi, So just a question here on investment.
Investment banker productivity and I appreciate maybe it's more of an output than and and input but.
How are you guys thinking about that.
And the potential for productivity moving forward I. Appreciate you know last year, you know some businesses, we're probably hitting at a higher level and they've been out and a wild wild with others. As you mentioned, we're probably more depressed and started to accelerate and so I'm trying to just.
Contextualize and all of that together and the potential.
Perfect productivity relative to 2020 and also you know it does sound like there's a large promotion class as well so how that affects things and I forget I. Appreciate it's maybe maybe more and output, but how you guys think about the potential for productivity gains.
Hey, Devin if they have and let me let me let me address that so starting with the way, we think about productivity and I agree with your statement. It's it's more of an output than and input and the way to think about that is really in the context of our portfolio on any point in time, you've got existing long standing bankers, we have here who are.
Very very productive you've got the incoming classes you mentioned that are going to take a little bit of time to reach their full productivity. So it's sort of over a lifespan that you think about productivity. You also have differences geographically and the actual pre.
Production Youre going to get out of any specific M. D. But you also have to think about it and the context of the different types of products and services that we've been building upon and building out over the last few years and so it's it's sort of not the same as always right. We our bankers have more tools and their tool chest today that they can they can utilize with <unk>.
Clients to generate fees and so ultimately what we're seeing is a further opportunity to expand the revenues that they are going to be generating on a productivity eventually productivity per banker and per M. D. Certainly that we're seeing across the franchise and so that's a continuing evolution, we're going to continue to see that to grow are you you've heard us talk.
A lot about the different products and services, we've been growing and adding to over the last few years and you saw that play out I think a little bit over the course of this year when even when the the M&A transactional market took a stall sort of at the beginning or middle of the year, you saw some pretty healthy numbers and revenue across the business and that wasn't the only driven by our one area of product.
Revenue of the restructuring some of it was through capital markets capital raising all sorts of capital structure advice as well as shareholder advice and other types of advice that we provide companies. So I think it's sort of a portfolio approach depending on what is and the environment that day. Our goal is to provide as many capabilities as we have so on.
Our bankers have a and a great set of tools to utilize with their clients to help them to help our clients first but also to generate fees for the firm.
Okay, perfect I'll leave it there.
Thank you and I'll just take a next question from Michael Brown from J P. The other Hugh.
And Mike and good morning, guys.
And so wanted to start on the asset management business, you know and certainly have seen the consolidation trend are heating up and and.
Certainly I would about in your prepared remarks.
And in your remarks, you said the opportunity and recruit talented teams and comprehensive platform and also is looking more attractive.
Can you expand on that where are you kind of focusing on on growth. What are those areas that you are targeting here.
Sure.
So obviously, there's quite a bit of change going on and the asset management landscape.
One of the things we've identified as a significant source of opportunity for us.
Is the landscape of smaller firms call it smaller asset management firms.
With a couple billion 3 billion or less under management a smaller teams are hedge funds and then they have long only strategies that could have a couple of hundred million under management. There are literally hundreds and thousands of these firms out there.
Increasingly it's difficult for many of these firms to raise money because of the additional complexity around compliance narrowing of managers that are and and capital users.
Trust their capital with cyber technology.
And and so we see and opportunity to.
Pick up these teams we've had a lot of success with that last year, and we think there's a lot of opportunity to do it going forward and for US. The key is finding teams that sit on our platform are making sure that we've got the capacity to.
And really help them raise capital and also make sure that they fit in and plug and play into our capabilities from a technology standpoint, as you know we spent quite a bit and the last few years in terms of upgrading our technology platform and part of it was to accommodate.
This kind of growth. So we're pretty excited about this and as you can see we did.
Three last year, he's got a pipeline of things to come and you know several of our.
New strategies and we launched this year would reflect some of those investments.
Okay very helpful. Thank you.
Thank you and if you take our next question from Richard Ramsden from Goldman Sachs.
Okay. So good morning, everyone, maybe I could ask a question on operating margins and so you saw obviously, a significant improvement and the non core margin and the fourth quarter and for the full year you are towards the lower end of the range.
How should we think about the trajectory for that and the first half of the year. So if we see a mobile and revenue environment at the Richmond office is slower which seems to be the case should we expect that you will operate towards the low end of all of your 16% to 20% range at least for the first half of the year or other investments that you're planning on making that are going to keep you closer to the middle of that range.
Hey, Richard and Kevin Let me, let me start with that Ah I think with the way you think about it as you pointed out and non comp. This year was obviously at a lower level and this reflects the lower teeny and business development as well as some other discipline on cost and we had through through the course of the pandemic and really the heightened when we saw this.
Slow down at the beginning of this year, but a large driver of the decline in non comp. This year truly came from lower tier and a offsetting that as you mentioned was the continued focus we have on technology, which was it was up year over year and we expect that to continue to grow as we continue to invest and technology for some of the reasons that Ken just mentioned before but also here.
That we think are super Super important to us. So I think as you think out non comp for the coming year, I think you're starting with a lower teeny base, if I kind of look out hard to predict where that goes but certainly Q1, probably Q2 is going to be at a much more diminished level, probably similar to where we were at the end of 'twenty and 'twenty I guess.
Our all hope is is that where the economy goes back to normal and the environment goes back to a more normalized pace as we get into the latter half of 'twenty and 'twenty and 'twenty 'twenty, one and so it starts to creep back up more towards normalized levels, but I think the way the way, we think about as you're starting from a lower point, you're certainly getting some cost savings associated with T and E. Every.
Quarter, It does grow a little bit and it's hard to predict where it's going to be going forward longer term I would say, it's going to it's going to ramp and probably a little more slowly and ultimately if you kind of think out beyond 2021, we expect that there'll probably be some additional benefits and tea and <unk> to persist probably maxes out at somewhere of 70, and 80, 80% of pre COVID-19 levels.
So we simply develop new ways to engage with our clients and new ways to execute transactions. We've learned that a lot of efficiencies to be to be gotten from things that we're constantly traveling for and we can do now by video which is more efficient for clients as well as for the transaction themselves and ultimately we hope that you know client interaction is Chris.
And for our business, it's a hallmark of who we are at Lazard and we're going to continue to to get back on the road to meet face to face with clients. It's probably just the pace and the frequency Youre gonna change, which will create some efficiency. So I think longer term I think there's certainly benefits on the non comp side and the shorter term, there's definitely benefits from lower travel and the first half of this year.
And probably drifts back up as you get towards the second half of the year and you know technology investments is going to continue to remain a focus for us we're focusing on efficiencies to create a better work environment for our people, creating better remote tools are continuing to invest as Ken said before and the infrastructure the edge and the creation of edge and our business and of course security.
And and look I'll leave it with and it's important to remember and and.
And I don't think we can stress this enough and we think done right technology investment is is going to lead to a enormous competitive advantage and ultimately should lead to long term value creation. So I think it's going to be continue to focus we're going to continue to reinvest some of the savings of tea and into that but hopefully it will be somewhere and the lower part of our of our.
Our range, maybe towards the middle and of our ranges and we get through the year.
Okay. Thank you that's very helpful. Thanks, a lot.
Thank you. Our next question comes from Stephen Ju back from let's see day search. Please go ahead, hey, good morning, Hi, Stephen.
Other question on capital and manage that shall we.
Think about 'twenty 'twenty, one as more of a catch up year for share repurchase activity given more ltd repurchases. This past year, and a strong capital and cash position at year end and no near term debt maturities and should we expect the pace of buyback to accelerate and it's getting back that hundred million share count. So your ultimate goal.
Thanks, David with regards to cash and as you mentioned look we were at an elevated cash position. This year and we ended the year with about $1.39 billion of cash which is up about 150 $160 million from where we were at the same point last year. Okay. I think it's important to remember.
As you know is that this point is generally the high point of cash that we have at this point and time of the year, it's right before we pay out year and compensation. So ultimately.
The cash levels will come down after Q1, but ultimately as we said we're going to be continuing as we announced we're going to continue to buy back some shares and the first part of this year or two and two at a minimum offset the dilution from the year end compensation awards and will thereafter to be using some of the excess cash to buy back shares I think as we've said before we.
Continue to want to take a little bit more of a conservative approach to capital management in this environment as we sort of come out and the pandemic certainly the volatility tells us we should be a little bit more prudent than we would normally be to to the last dollar of the way we manage the balance sheet and we'll probably be running it on a slightly higher cash levels and we've had in the past, but I would expect and we're going.
Continue to buy back shares more than offsetting dilution as we get towards the middle of the year to a two to take down the share count from where we started the year.
This year by the end of the year.
That's great. Thanks, so much for taking my question.
Thank you we'll take our next question from Jeff Harte from Piper Sandler.
Hi, Jeff.
Morning, guys, congrats on a nice quarter.
And circling back to operating kind of margin and leverage a bit. So I mean, it was a record advisory quarter, and maybe a record quarter and a 27% operating margin is good.
And I look back kind of to the beginning of 2019, and it's been kind of low twenties. As we look forward can you get back to the mid to upper 20% operating margin range and I guess, if so whats the timeframe and what what gets you there.
So Jeff I think the way to think about margin is really over the core it's all going to be related to revenue growth right. When you think about where we have historically gotten margin benefits on both the comp and certainly on the non comp side. It comes from a rising revenue and environment for us and so when we put together a good store.
Your revenue, you're generally going to see better margins than you've seen in the past and more importantly, when you put together two or three years in a row. Then we can get to a more of the levels that we've seen and if you kind of look at 17 and 18, when we were at the higher and if our margin targets for our firm so really it comes down.
And on to revenue growth, it's offset by the investment cycle. So if you're if you're investing more heavily that will weigh in a little bit on to some of that margin, but ultimately it's going to be driven by the revenue growth that we're going to produce not only on a one year basis, but on a couple of year basis.
Okay. Thank you.
Thank you I'm going to take our next question.
Some didn't Mitchell Seaport Global Securities.
Correct, Okay, Thanks, and good morning, Hey.
Just maybe on Europe going back there I appreciate the comments on restructuring, but how are we how are you thinking about the M&A environment. Overall I mean, if you think about Europe and the last 10 years, it's really lagged the U S.
Now that we have I guess and theories some greater clarity on Brexit do you feel like that's poised for some pent up activity or or is it just.
A depressed area just trying to get a sense of the European outlook. Thanks [laughter].
Sure so you're.
Youre right I mean relative to the U S. Our activity levels and the U S had been much more buoyant over the last decade and in Europe.
And U S has exceeded its peaks and southern Europe is still a.
Lagging that you know.
Our expectation is it should be a pretty constructive environment for M&A over the next couple of years and Europe for the same reasons as the U S. Maybe perhaps at a slightly less levels and buoyancy again, and you've got low interest rates, you've got actually more reasonable equity valuations and Europe.
I think you have and improving confidence level, but not so much optimism, but about one's ability to kind of have confidence and their predictions about the future, which is a real driver and the same technological disruption and that is.
Sweeping across industries in the United States is happening in Europe as well. So the factors that underlie M&A are very similar in Europe, and U S and I'd, even say on that last factor the technology disruption and that's probably even more acute and Europe.
And then it is and the U S. A and then on top of that yes, Brexit helps a little bit there is more clarity.
About the structure of the market book and the U K and on the continent, and and you're likely to see over time, some regulatory changes that make it a little bit easier to have champions on the continent and that could drive some M&A activity as well, but that's got to be balanced against some of the elections that are upcoming and some of the national nationally.
Isn't been protectionism that goes with that but overall, we've seen a very buoyant market in Europe for private equity that has been quite active both on the continent, and and and the U K. So.
So I think a lot of the features of what drives the market and U S. As in Europe, Obviously, we're a big beneficiary of a pick up as you saw and even last year I think as you know roughly a 35% increase and both our U K and and.
And French announcements and you know.
That should continue over.
Over the course of the next couple of years.
Alright, great. Thanks.
And you were taking on the next question from Jeff on Savant from Credit Suisse.
Good morning, and can you provide us and update on the opportunity and launch additional ESG focused product or customized part for clients and if and incorporating ESG and financial advisory will help you differentiate activity from your peers.
Okay. Great question, its a real focus of ours at the moment on both sides of our business.
Let me come at it first from asset management.
We have been I think one of the leaders and driving sustainability and our investment practices on our goal is and the first thing and make sure that all of our fundamental managers have access to the tools that allow them to evaluate.
Evaluate and to price and to research.
Companies and and you stay on the impact of ESG, and the investment and and and and and make it part of the investment process that point and that's part one part two is the launch of our sustainable funds, which we've done.
And then making sure that we're constantly upgrading our expertise in this area on the asset management side of our business on the advisory side. Many of the capabilities, we have and asset management or and understanding that we have and asset management reporting over to the advisory side of the business are our shareholder advisory practice has incorporated and many many of.
These insights into on the advice would providing companies and the tools, we're using to help guide companies and their conversations with shareholders and increasingly we expect this is going to become a very important part of the advisory function for companies when thinking about acquisitions taking into account climate.
Any of the issues that are raised by climbing and valuation and it can become increasingly important in the future. We're thinking about how it impacts cost of capital across industries and in particular companies and is going to become increasingly important in the future. We think this is a.
It's a very important area for focus going forward.
Thank you.
Thank you and now we're taking the last question from my non go Saudia from Morgan Stanley.
Yeah.
Good morning.
And you have.
And just have today and you know you said on the pass as well that you know a significant number of unfunded mandates across the asset manager and thoughts on and I was wondering can you give us some sort of a comparative update on and you know maybe what percentage of a prior quarter message had been found that or you know what your pipeline looks like relative to five quarters.
And and any comments you can make on that you know what are your gross central has looked like Oh, yeah. This quarter relative to prior quarters and no other kind of it's Ben thanks.
Yes, and then on I think with regards to I'll handle the second part first you know with regards to gross flows gross flows remain pretty pretty active pretty strong for us. This past quarter I think we've seen that a higher level of gross flows for a couple of quarters now where it's trending it's trending well, what's nice about it and there's also the diversification.
All of that those flows itself coming into a lot of different products on a gross flow basis, and we're really starting to see a bigger a bigger pool of number of our funds starting to see some gross flows I think when you think about the pipeline going out we're still at an elevated level, we have a nice group of unfunded mandates.
You saw some of that come through in Q4, when we had several months of positive net flows and you saw something that buildup starting to wear off and starting to starting to come through the pipeline itself, we're still at a and what I'd call more of an elevated pace, perhaps not as much as we were a quarter or two ago and it's also a little bit more spread out in house and with a lot of it some of them.
And as into Q2 or into more of the middle of the year from what we know of today, but it's it's a very active environment. We're involved with a lot of new situations and new with new investors looking to put some money to work and different strategies a lot of the various strategies that we're focused on on a lot of interest and our quant and thematic type products that are that have been going on as well as.
Some of the other areas around sustainability. So I think we're seeing very you know a lot of interest and putting capital to work and different types of funds. We're certainly seeing a little more interest and the value part of the equate on investor base, as well, which we hadn't seen for a little bit part of the early part of last year, certainly when we started to see a lot of money coming out of value which portrays.
Good for us longer term given the concentration of value funds that we have in our REIT and our portfolio. So I think overall I think it's the diversification of the of the mandates that we have the size is still pretty good but it's a pretty diverse group of funds of unfunded mandates that we have.
Great. Thank you.
Thank you and no further questions at this time. This now concludes the Lazard Conference call you may now disconnect.