Greetings, welcome to the Jefferies Financial Group investor meeting. A copy of today's presentation is available on Jefferies Financial Group's website, www.jefferies.com. If you wish to submit a question during today's meeting, please click on the Ask a Question button in the top right corner of the webcast page. Type your question into the Ask a Question text field located underneath the video player and click Submit. You may submit a question at any time. If you require assistance with a technical issue, there is a technical support chat button on the bottom right corner of the webcast page, which you can use to contact an operator. Before introducing today's first speaker, we are required to remind you of the following.
Certain statements made during the course of today's meeting or contained in the accompanying presentation materials may constitute forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, Section 21 E of the Securities Exchange Act of 1934 and/or the Private Securities Litigation Reform Act of 1995 regarding Jefferies Financial Group Inc., Jefferies Group LLC, and the respective subsidiaries. These forward-looking statements reflect the respective issuer's current views relating to, among other things, future revenues, earnings, operations, and other financial results, and may include statements of future performance, plans, and objectives. Forward-looking statements may also include statements pertaining to an issuer's strategies for the future development of its business and products.
These forward-looking statements are not historical facts and are based on the respective issuer's management expectations, estimates, projections, beliefs, and certain other assumptions, many of which, by their nature, are inherently uncertain and beyond management's control. It is possible that the actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Accordingly, readers and participants are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict, including, without limitation, the cautionary statements and risks set forth in the respective issuer's annual and quarterly reports and other reports or documents filed with or furnished to the SEC from time to time, which are accessible on the SEC website at sec.gov.
This information should also be read in conjunction with each respective issuer's consolidated financial statements and the notes thereto contained in the annual, quarterly, and periodic reports filed by such issuer that are also accessible on the SEC website at sec.gov. Any forward-looking statements made by an issuer herein are unique to that issuer and not to be attributed as statements made or endorsed by any other issuer. It is now my distinct pleasure to introduce Mr. Rich Handler, Chief Executive Officer of Jefferies Financial Group. Mr. Handler, you may begin.
Good morning, welcome to Jefferies Financial Group's 2021 Investor Day. My name is Rich Handler. I'm proud to be the CEO, and I'm looking forward to our management team showing all of you what Jefferies looks like today, what we believe the opportunity is going forward. We're entering our 60th year this month of Jefferies as a company, and I've been around for half of that period, believe it or not, and our team has managed the company for over 1/3 of our company's life. Kind of crazy. The last seven quarter results are outstanding and show we are at yet another level. This is mostly a testament, I'd like to thank the decades of hard work and commitment by thousands of our folks.
I really appreciate a lot of people took our company to the point where it is today, and this is a huge milestone. In fact, in my 31.5 years, Jefferies has never been in a stronger nor more exciting place or position of strength and opportunity. I mean that in terms of talent, culture, our competitive position, diversification, our client base, our capital, and our brand. I'd particularly like to thank our shareholders for allowing us to be both long-term in strategy while knowingly acknowledging we have always had a keen sense of urgency when it comes to execution. Building a world-class, full-service global investment bank is not easy. Many people have tried. Many people have had it and lost their way. Very few have had the consistency, drive, talent, humility, and perseverance to succeed.
It not only takes the right team, but it also takes the right shareholder base, bondholder support, and board of directors to allow a company like ours to be built. Fortunately, we have all three, and that has allowed us to navigate and weather the volatility and crosscurrents that permeate our complicated industry. The result, we believe, is an incredibly valuable, exceptionally unique, and important company that is in the very early stages of being recognized in terms of value. One promise I can make to all of you is that the entire management team will always think like owners. This means we must be heavily staked alongside of you as we are. It means our strategy must be well-articulated and be executed every day while staying true to our long-term vision. We are determined to build the best world-class global investment bank.
We're gonna further simplify and eventually optimize all of our non-strategic assets. We're always gonna prioritize and serve our clients. They will always come first. We will maintain the most secure and robust capital base that is required for all types of market environments. We'll be keenly focused on the appropriate risk-adjusted return on equity, and we will return capital to shareholders whenever prudent and available. Our firm is very different today than it was pre-COVID, but COVID is not the only reason why we have blossomed. It's even a major reason why we have blossomed. We spent the past three to five years before COVID investing heavily in our platform and setting ourselves up for where we are today.
In 2015- 2016, we repositioned our equity and fixed income businesses to align them more fully with our investment banking business. This meant further improving our ability to distribute and provide liquidity and quality research for all investors who look for alpha in our broad array of banking clients. As an aside, not that we're ever large in prop trading, but we also sought to further minimize prop trading. We've put a flag in the ground and declared that we were going to devote most of our time, energy, and resources into scaling and diversifying our investment bank. It's fee-based, 70% repeat clients, so it's recurring, it's scalable, it's higher quality of revenues and earnings. That meant hiring world-class bankers, building out Europe and Asia, and strengthening our global research capabilities.
We also began aggressively shrinking our merchant bank to the point where it is now the tail and no longer the complicated dog. We deployed that capital into Jefferies as well as returned it to shareholders. Back to thinking like owners, in the last three years, we returned $3.7 billion or 47% of Jefferies tangible equity to shareholders. Our remaining tangible equity is still $650 million higher than when we started. This includes repurchasing 125 million shares for $2.64 billion at a now attractive looking price of $21.20, decreasing our share count by 27% over the same period. Basically, the market gave us an incredible opportunity, we pounced for the benefit of our long-term shareholders.
Basically, we significantly simplified Jefferies, invested heavily in our core business, returned a large amount of capital, and scaled our business to a point where we feel confident we are very well positioned to earn more than an acceptable return on equity at Jefferies for our shareholders. Our plan is to continue what we started. This was all set up before COVID, and then the world changed, and for many reasons, our firm was able to pivot quickly and perform exceptionally for our clients, which in turn resulted in perhaps accelerating the benefits of our hard work we all did pre-COVID. There are a handful of important reasons why we were able to flourish during COVID. First, second, third, and fourth, and keep going, are our people and our culture. We value our people greatly. We trust them, and more importantly, they trust each other.
They're highly competent in what they do. They're committed to their clients and to Jefferies, and they truly care. We're flat, non-bureaucratic, and our people are nimble, humble, and have a passion to build their company. This is very rare in our industry today. After many years of hard work and dedication, we have hit critical mass in almost all of our core businesses, and the breadth, diversification, and capabilities rival firms much larger than ours in mass and people. Our technology is spectacular, and our support and infrastructure capabilities are as effective, if not more so, than many of our larger competitors. All you have to do is ask our clients. Not only is our technology serving our clients, but internally, we're using it to drive efficiency and productivity.
Our depth and breadth of management is incredibly robust with people who know our mission, understand our risk profile, command loyalty with respect from their teams, and is on a mission alongside us to build a company they are exceptionally proud of. Some of our competitors have stumbled, we have been always aggressive in opportunism when that is right, and that is one of the reasons why we've also been successful during COVID. We will never get arrogant, complacent, or lose our sense or purpose and drive. There are many reasons why I'm excited about the future, more so than ever in my history with the firm. Before I get there, let me just stress that the market changes often, and there are always risks, setbacks, and challenges.
Nothing goes up in a straight line and we must always be prepared for adversity as it comes when you least expect it. Some of our best moves have been accomplished when the markets are upside down, and it's gonna happen again. We need to stay healthy whenever that occurs. With all those disclaimers, let me explain why I'm really so excited about our future. Even with our exceptional growth these past two years, there is substantial room for growth and market share gains in 100% of our businesses at Jefferies. There are many sub-sectors of our banking industry groups that are wide open to us. There are adjacent products we just entered or are about to enter. There's regional expansion. For example, we're opening an office in Spain for banking and fixed income.
We're about to go to the Persian Gulf in Dubai for equities and a view towards banking. We're gonna build upon our tremendous foundation in Israel. We're also gonna build upon our solid foundation that we have now in asset management. Our people want to be at Jefferies for all the right reasons and more than ever before. Other great people in our industry also wanna be here now, and their clients want them to come. The depth and breadth and management of our team continues to evolve. In the last 12 months, we hired a new CFO. By the way, I know Peg is looking down at us with very tremendous pride, and we miss him every day.
We've hired a Chief R isk Officer, a Chief Technology Officer, a Branding and Marketing Leader, and we've transformed our HR offering and integrated it into all of our businesses. We've transformed our board of directors to a super talented, diverse slate that more closely reflects society and provide us with a range of voices and support. Our brand, while always capable of improving, has become an asset and one that we will continue to invest in. Reaching critical mass and size and ability to deliver ROE allows us more freedom to invest in our people from a career training, skill enhancement, ESG, diversity inclusion, quality of life, and long-term partnership perspective. We're clearly a top 10 firm and top five in so many of the things we compete in, led by investment banking, but we have a great position in equity, fixed income, and research.
We have more flexibility to invest for the long term than ever before. Our success in our main business means our merchant bank is no longer enough of a drag to harm us along our path to optimized value. That doesn't mean that we don't have a keen sense of urgency to further divest. It just means we can continue to get every dollar of value for our shareholders without a significant short-term penalty. We believe there's a lot of value that we intend to get. Our trading businesses have already returned to normalcy as volatility environments more along the lines of pre-COVID. The market shares we have made with our clients have stuck, and we don't intend to ever take them for granted. In fact, we intend to build upon them on a higher base.
Finally, one of the reasons why I'm so excited about the future is our investment bank is truly world-class. Over $4 billion of revenues this year is real. We have hit a new level of relationships, capabilities, and importance with our client base. We intend to build upon this. It's incredibly exciting. With that, I'm going to turn it over to my partner, Brian Friedman, and turn the rest of our team to give you all the specifics behind these themes. Hopefully, you'll understand why we believe we're so excited and what we believe to be the very, very early days of Jefferies true build-out. Thank you. Brian, over to you.
Thanks, Rich. As Rich just said, we're gonna try today to share with you our business through our eyes. I will provide a brief overview on our overall business and some of the recent developments, and then we will turn it over to the leaders of our various business areas, and they will give you a more detailed view as they see it. Next slide, please. You can look at this slide and say that what you're seeing is the picture of a growth company. You see the revenue compounding at a pretty good rate, and then you see the net earnings, not just compounding, but ultimately the margin expansion. If you now put this into practice on the next iteration of this slide, what you see is a picture of Jefferies through the last 3+ decades.
As Rich suggested, we have taken a very long-term view of building Jefferies. We have not hesitated from year to year to make investments, to make decisions, to persevere through difficult moments, to build in difficult moments. Some of the best growth that we have achieved has been in the face of adverse times. By taking that long view, we've been able to achieve the decade upon decade upon decade growth that you see in this chart. We believe that this is a sustainable strategy. As you're gonna hear, we believe there is still a lot of opportunity latent for us to take advantage of, and we see Jefferies as a continuing growth company. Our strategy has benefited from continuity, consistency, patience, perseverance. The next slide, please. With investment banking as the overriding driver, we have driven initiatives throughout our business to constantly drive growth.
Our business is one of delivering insight and execution, whether it's our investment banking business, our capital markets business or our asset management business. When we get up in the morning, it is about our ability to use our resources, our information flow, our experience, our team to bring to our clients ideas and insight that can help them succeed. Our second job is to execute to achieve their goals. This is true in the daily trading. It is true in corporate growth. It is true in capital raising. It's true in everything we do. The ultimate goal is to bring strong returns to our shareholders. We are focused, aggressive, but highly disciplined in seeking to do this. As Rich mentioned, there's been a step change in our results and our market position yet again. This is not a new experience.
It's not a surprise experience. It's the result of our efforts along the way. Sorry, I think there was a little interference there for a minute. What you've seen in the last seven quarters, and now we're on page six. In the last seven quarters, which started, as Rich mentioned, pre-COVID, is that we are at the next level in market position and results. Investment Banking is our leading business, our largest business, and the driver of overall growth across the business, while our equities, fixed income, and asset management business, at the same time, drive initiatives for their own direct growth and for the collective growth. In Investment Banking, we believe we are far from done. We entered this year with 226 Managing Directors at Jefferies Investment Banking and an additional 23 at Jefferies Finance.
We expect to end this year at approximately 270 Managing Directors based on the hires that we've made to date, some more that we have in process, as well as promotions at year-end. We'll be at 270 at Jefferies and probably another approximately 25 at Jefferies Finance. That 270 represents a 20% increment on where we started the year. We start next year with 20% more MDs leading the way for our number one business in Investment Banking. Our equities momentum, you'll hear from Peter in a few minutes, Peter Forlenza, who leads that business, also has meaningful momentum and has continued to gain share on a global basis.
Our research effort in the U.S., in Europe, and in Asia is number eight or better on a value, you know, on a valuation basis for the quality and depth of what we're offering our clients. Again, third-party reports. Our fixed income business continues to strengthen and edge out into adjacent opportunities. Our revenues are not just diversified, but they are also lower risk. Our business is content-driven and not risk-driven. This is all exemplified in our recent results. Page seven, please. What you can see here is that the nine months of 2021, on almost all counts, approximate 2020's full year. That's what a growth company does. In the course of the rest of today, we hope you will appreciate the durability of our market positions and our business momentum. When you look at slide eight, you see another beautiful 30-year picture.
This is the growth in our investment banking business, our number one business. On page nine , you see the underlying detail of the last two and a half years. This goes through the middle of 2021, so it's 2019-20 20, and first half of 2021 compounded growth rate against the 2018 base. What it's showing is that in each of our businesses, we are delivering compounded growth well in excess of the industry growth rate from standard tables. It shows the market share gains that we've achieved and that they are across the board in our key businesses. On slide 10, we drill down further on the investment banking side, and what you see is that in 2010, Jefferies was number 17 in the global ranking, and today we are number eight.
What you see equally importantly is that we've moved to be number six in global M&A, the toughest business to penetrate, where the decisions are most distinct and at the highest levels inside all of our clients and potential clients. That leading the way for our business is a critical element in our existing success and our future potential. What you can see is that the industry, if you look at the bottom of this table, in the last 11+ years, our industry grew at less than a 4% compounded rate. Yet, Jefferies Investment Banking grew at a 27% rate, meaningfully, obviously, ahead of the norm. On slide 11, we address the sales and trading capital markets side of our business in a very similar picture.
Our equities market share has gone up by more than 60%. Our fixed income business has advanced by over 33%. Combined, they've advanced by greater than 70%. As you can see in the bar charts on the right, the last bar in each of the two boxes, we've been able to do this with incredible operating leverage as our headcount went up modestly. In a few minutes, Peter Forlenza in equities and Fred Orlan in fixed income will give you the background to how we've done this in a bit more detail. Supporting what we do, on slide 12, are the significant partnerships, three of them, that we have with great partners, MassMutual Insurance, Berkshire Hathaway, and most recently, Sumitomo Mitsui, SMBC, the large Japanese bank.
These three partnerships give us the opportunity to scale our business more rapidly and more consistently, and yet in an extremely risk-managed way as our partners share the upside and the opportunity, but also share the risk, allowing us to take a more aggressive posture in how we develop our business. Jefferies Finance is a leader in leveraged finance, one of our key businesses. At the joint venture is where we house our balance sheet and our risk. Chris Kanoff, Head of Investment Banking, will go into more detail on this, but suffice it to say that in the time that Jefferies Finance has been in existence, we have originated over $275 billion of loans for our clients, and this has been a key driver of operating opportunity for greater Jefferies.
When you look at page 13, you see our partnership with Berkshire Hathaway, which is Berkadia. That's one of the leading providers of multifamily finance and merger and acquisition services. In the last 12 months, we've originated $33 billion of loans to our clients, and we've completed $16 billion of M&A in the multifamily space. We're driving growth with a deep focus on our talent, our culture, and our technology, the exact same playbook that we use across Jefferies. Berkadia is a very valuable business with a meaningful long-term opportunity that we will continue to support and drive. On page 14 is our newest and what hopefully over time could become our most significant partnership.
Approximately five years ago at our Investor Day, in response to a question, we said that we could envision a strategic alliance with a global bank, we mentioned that we thought that it could really help drive our strategic growth. That opportunity has now come to fruition in our broad long-term alliance with SMBC. Among other things, they've announced their intention to become an approximately 5% shareholder in Jefferies. Our priorities initially were the recapitalization of Jefferies Finance with financial support from SMBC and an ongoing partnership to drive the growth of our leveraged finance origination capabilities. Second priority is to focus together on larger clients, investment-grade clients, where Sumitomo Mitsui has a meaningful set of relationships and a meaningful loan book. We're starting that effort with a focus on our largest investment banking industry, which is healthcare.
Through alignment, we hope to achieve meaningful incremental opportunity for SMBC and for Jefferies. Our third priority is to develop the cross-border opportunity coming out of Japan with SMBC's leadership position there, combined with our global capabilities across our business. We actually have a fourth initiative that is beginning to take shape, and we expect to broaden the daily contact and the activity that the two firms are working on together on a consistent basis moving forward. It will take time for this to generate material results that move our dial further. With the early wins that we've had, and we've already had a couple, we see our SMBC relationship as incredibly significant to our future. On slide 15, you see the growth in our asset management business, even though this too is in its very early days.
Our focus is on alternative asset management with a substantial focus on liquid securities and equities and the debt markets. It's a natural opportunity for us. It's something that we believe we can build and grow with minimal to no goodwill investment. In the last 12 months, we've generated $428 million of revenue from this business, of which $115 million were fees and profit share. Again, it's early, Nick Daraviras and Sol Kumin, the Co-Presidents of this business, will give you more detail that I think will give you a sense of both our strategy and the opportunity. On slide 16, as Rich said, the merchant banking business for us is now a legacy, our goal is to realize reasonable value in a rational timeframe. Our patience has been very profitable.
When you look at this today, the two overriding keys here are our oil and gas business and Linkem. In the case of our oil and gas businesses, primarily Vitesse, for sure, the prices of oil and gas are going in the right direction, and we expect will create opportunity for our interest. At the same time, Linkem is completing the implementation of 5G across its network, and that too should put Linkem in a position for further value creation and for strategic opportunity. Our real estate business, primarily HomeFed, continues to perform very well. Our major project in Otay is selling well, creating meaningful assets on the multifamily side. Most recently, we sold off a self-storage business that we created there on land that we own. We see continued optimism for what can be done at HomeFed.
The other significant asset there, the Renaissance Plaza project in Brooklyn over the next two years should see next steps in its iterations. I wanna single out for a moment Idaho Timber. Two years ago, we would have shown you a slide that showed a fair market value in the $150 million - $160 million range. In the last 21 months, okay, last year and the nine months of this year, we have received $155 million of cash from Idaho Timber. It's an example where patience and understanding where the opportunity is can really pay off. It's been an exceptional period for lumber. Idaho and its management team has navigated it exceptionally well, but it validates our continuing to hold the business as we think about the long-term destiny.
As Rich said, we are committed to merchant banking becoming less and less prominent in our story. We believe that will be achieved in relatively short order. If you look at page 17, it's just, in my view, validation of why we are patient. You can see that we, for example, took advantage of liquidity when it was available at premium prices, and we hope to do that again over the next periods of time. On page 18, we talk about the four initiatives that are overriding across Jefferies and fundamental to continuing to drive growth for us. The first of these is a very affirmative and thoughtful effort to drive talent development. Over the last four or five years, we developed curriculum for all levels within our business. We are training our people and cross-training them in all aspects of what we do and how we do it.
We're beginning a process toward individual career planning, but an immense focus on teams and individuals. Similarly, our Project Madison, which is now about four years old, is our effort to digitalize the front office of Jefferies through data management, through the use of artificial intelligence, and essentially a process to empower each individual to be able to be in the maximum position to deliver Jefferies consistently. On slide 19, the two other critical strategies that we're driving are around branding, where, as Rich mentioned, we appointed new leadership in the last several months. Our goal is to drive our brand to reflect our reality, the reality of our firm, the reality of our market position, the reality of the depth, breadth, and quality of what we offer to our clients and to the world.
As our business has grown at meaningful rates and sometimes hard to keep the brand up to that, we think we have a gap that we can close over the next several years, and you'll see us taking active efforts to do that. Finally, as Rich mentioned, we have been leading both inside of Jefferies and in advising our clients in all aspects of ESG. We are building a meaningful ESG research effort that we believe will be a leader in our business. We have brought diversity to our board of directors and are driving diversity across our team. We've built employee resource groups, and we are also driving transparency to assure everyone knows everything and all opportunities are available and shared. Finally, we've continued our long-standing focus on serving our community and those in need around the world.
In the last year and three quarters alone, we've raised $26 million and donated our own money as part of that to serve those in need, both in the U.S., in Europe, in Asia, in Africa, and in Latin America. Finally, on slide 20 is the summation of all of this. Rich pretty much touched on this, which is we are delivering shareholder value as rapidly and as consistently and as broadly as we can. In the last five years, our dividend has quadrupled, our cash dividend. In addition to that, as Rich mentioned, we bought back 132 million shares at $21.19, slightly over $4 billion back to shareholders in less than six years. As Rich said, we are shareholders. We are committed to realizing and driving value for all our shareholders. We are long-term with a sense of intense urgency.
I'm now gonna turn it over to Matt Larson and Teri Gendron, our Chief Financial Officers, Matt at the Jefferies Group level, Teri at the Jefferies Financial Group. Matt.
Thanks, Brian. Go to slide 22, please. There we go. Thank you. Most of you have seen our financial results as we published them throughout the year. I'll just spend a few minutes here talking about the results and making a couple of points. From a revenue standpoint, you know, when we stood here last year, we talked about gaining share and having significant momentum. I think as you look through the results, and Rich and Brian have touched on this, you know, that momentum and that share gain has really manifested itself in all aspects of our business, really and particularly focused on advisory and equity underwriting leading the way. From an equities market standpoint, you know, we continue to have momentum and gain share.
A lot of that has come from international cash equities, electronic trading, and global convertibles. From a fixed income standpoint, while things have slowed from an extraordinary 2020 standpoint, it's remained resilient, and we've continued to expand share in U.S. securitized products, EM credit, European CLOs, and other parts of our business. As we've talked about, having that strength of capital markets has really been an important foundational driver enabled to support the growth of the international Investment Banking business. Finally, albeit relatively small in the context of our overall results, we are gaining momentum in asset management with strong growth and underlying fee revenue from our existing platforms, and we continue to build out new strategies. From a non-compensation expense standpoint, again, in last year's pre-presentation, Rich and Brian talked about a couple of key strategic priorities.
One being investment in talent and one being investment in technology. You'll see those coming through in our results in the current year. Our tech and communications costs have increased moderately, and we've invested in core capabilities such as electronic trading, Madison, which is our digital client and analytics platform, as well as investments in our core operating infrastructure for things such as data center investment, cloud, cyber resiliency, and our overall data strategy. A large portion of the increase relates directly to the increases in revenues on the top line from things such as brokerage and clearing fees and IB deal-related costs. Our investment in our people has translated to an increase in professional fees related to the recruitment costs of the important growth in our investment banking businesses, as Rich and Brian spoke about.
We've continued to benefit from lower business development costs, but we expect that, you know, will start to increase as we have more in-person client meetings, conferences, and the like. That said, we don't expect to return to pre-COVID levels in the near term. From a compensation standpoint, you know, very simply, what you're seeing is the operating leverage come through that we always said would be available on a higher revenue base. Next slide. You've heard a lot about, you know, over time, Jefferies Group being the material driver of returns for our consolidated results. This slide demonstrates the progress, not only achieving a strong return on tangible equity, but also shows how Jefferies Group's returns are the primary driver and an increasing proportion of the Jefferies Financial Group consolidated returns over the past couple of years.
As Brian mentioned earlier, this converging trend should continue as we grow both Jefferies Group and exit the merchant bank. Next slide. You heard from Rich and Brian as well about how our business has evolved to be more fee-driven and less risky. This slide helps demonstrate that graphically, where over 70% of our business comes from less risk- intensive sources such as investment banking fees, equities commissions, and other fee-related activities. This is the overriding results of growing our global investment banking business, expanding a commission-driven global equities business, and repositioning our fixed income business. In just a little bit, you'll hear from the business heads and how their respective businesses are intended to grow and how it might impact us over time. Next slide.
You know, the way that we've grown the business over time and the investments that have been made have translated to what we think is now a new and increased base in our capital markets business. We've invested in such a way that the revenue creates a more meaningful and durable baseline. This chart here shows how equities and fixed income quarterly averages evolved over the last two years. If you look at 2018- 2019, on a combined basis, we averaged approximately $330 million in combined capital markets revenue, and that's grown to approximately $500 million over the past couple of years.
In calculating the more recent averages, we excluded our three highest quarters that we've had, which is the second quarter and third quarter of 2020 and the first quarter of 2021, which we think were disproportionately impacted due to COVID-related volumes and volatility. The primary growth has come from Asia equities, electronic trading and convertibles, as well as securitized products in the U.S., European credit and distressed, and the launch of our international CLO business. Next slide. You know, we've done all of this on consistent tangible leverage of about 10x-10.5x. Very modest level three assets, which we've been consistent in for quite a long time. A very conservative liquidity and funding position with excess liquidity of $9.2 billion or 18.3% of tangible assets. We maintain a long-term secured funding profile.
We have a sound long-term capital base, which we bolstered even further last week when we issued a $1 billion 10-year unsecured note at very favorable rates, which extends our average maturity from 10.2 years that you see on this slide to over 11 years, and allows us to replace $750 million of higher interest debt that was due January 2023. With that, I'll turn it over to Teri Gendron.
I'll be starting on page 28. On page 28, we're showing our consolidated operating results with our revenues categorized by segment. Jefferies Financial Group is substantially the investment banking and capital markets and asset management core businesses within Jefferies Group. Our recent merchant banking revenues have been exceptionally high because of the dramatic spike in lumber prices. Of our year-to-date revenues from merchant banking of $888 million, Idaho Timber, an investment with a book value of under $100 million, has contributed 50% of those revenues. No one can predict the future, we believe Idaho Timber will normalize over the upcoming quarters. As you heard from Brian, their substantial profit range from $30 million to over $50 million on a quarterly basis through the last two quarters of 2020 and the early quarters of 2021.
Our estimated merchant banking fair value has never reflected this unexpected spike. As our investment banking and capital markets and asset management segments continue to strengthen, we look forward to them comprising an even greater proportion of our consolidated results, except of course, for the larger impact, hopefully related to gains on merchant banking dispositions as they're completed. Looking at page 29, we're showing our consolidated balance sheet. It's substantially similar to what was just in that section, with the addition of the merchant banking portfolio and parent overlay, which contribute just under $6 billion of the $58 billion of assets you see here. On the asset side, the only balance is impacted in a meaningful way by merchant banking and corporate. Our cash and cash equivalents, of course, by our parent level liquidity. Loans to and investments in associated companies, where you'll find investments such as Linkem.
Receivables, which hold securitized auto loans of our Foursight Investments and other assets where we include our real estate, oil and gas assets, and to a smaller extent, our timber inventory. On the liability side, it's primarily other secured financings from Foursight and long-term debt that is meaningfully impacted. On page 30, we further illustrate what you heard earlier. Since we started our program of managing down the merchant banking portfolio and returning excess capital to our shareholders, we've cumulatively reached $3.7 billion in capital returns, 47% of our tangible book value at the start of the program. Throughout this, we've maintained low debt on a company-wide basis and ample liquidity. Currently, we have liquidity on a consolidated basis of $11.5 billion, $2.3 billion of which is at the parent level.
On page 31, we emphasize some key points on the progress we've made with the legacy merchant banking portfolio. Managing down the portfolio has provided a significant amount of excess liquidity, a large share of which we have returned to our shareholders. We've also enjoyed material gains in our past monetizations, which we hope continues to be the case in the future. The growth in our core business, simultaneous with the reduction to our merchant banking portfolio to less than $2 billion, has helped reduce volatility in our results on an ongoing basis. With that, I'll turn it over to Chris Kanoff, our Global Head of Investment Banking.
Good morning. Over the next few minutes, I will be giving you an overview of the investment banking department. Next slide, please. This is a straightforward picture of our business, but increasingly, the number of firms that look like this is shrinking. We believe today that we are unique in the world by virtue of the fact that we combine a number of attributes that differentiate us from our competitors. I'll go through these attributes quickly. One, we're global. We're full service. We're nimble and we're responsive. We are integrated with the firm's capital markets, research, sales and trading and other capabilities. We have sector depth, which is second to none. We have product capability that is equal to or better than any of our competitors. We're relationship as opposed to transaction-oriented. We think this is a critical differentiator.
When you put all this together, we bring exceptional insight, solutions and execution to our clients, which we think differentiates us from some number of very large commercial banks and many boutiques which have limited capabilities. Today, we operate through seven sectors, industry verticals, 1,200 professionals across 14 countries. We cover approximately 4,000 companies and over 500 PE firms, which we believe is more than any firm in the world. Next slide, please. On this slide you see the number of sectors that we cover. We think this is differentiating. Today, we cover 91 sectors, 22 of which are new since 2019. I point this out because it takes a sector, a new sector, 18-36 months to really develop and contribute to our revenue. We've got 22 that are just coming on. Next slide, please.
This slide gives you a picture of performance over the last five years and for the nine months ending August 31, 2020 and 2021. It further breaks out the revenue by our three major products, equity, debt and advisory. Our M&A practice is actually made up of M&A advisory restructuring and private capital advisory. As you can see, we had record revenue in 2020, the momentum has continued into 2021 with record nine-month revenue at the end of the third quarter. Our growth has come largely through increases in our number of MDs, actually more importantly, through the increased productivity of our MDs. If you look back over the last five years at revenue per MD, it's more than doubled. We think this has come about from consistency of our effort, increased brand recognition, our ever-increasing depth of expertise.
You go to the next slide. This is our picture of our global rankings. We've been investing in investment banking for the past 30 years, as Rich mentioned earlier. We're currently ranked eighth globally against all investment banking providers across the world. You can see on this slide we're nipping at the heels of Credit Suisse and Barclays. We're proud of that. We're the current number six and number seventh providers. In the U.S., we actually bump up above Citibank, and again, we're only a hair behind Credit Suisse and Barclays, and we feel like we're coming on. Over the past five years, Jefferies and the other five U.S.-based competitors, we've all increased market share.
We've really taken that at the expense of the European or European competitors, which honestly just not recovered from the financial crisis back, you know, 11, 12 years ago. If you go to the next slide. You can see further strength in our business. These are rankings looking at each of our major products. The first one on the left is the M&A ranking, which is number 6. As Brian mentioned, we're particularly proud of that. This is one of the most competitive pieces of business to try to access. It's the decision that's most important to the company. It's almost always directed by the CEO.
In the last 12 months, our average deal size has increased 49% from to $1.3 billion, up from $853 million. In addition, we signed over 113 deals compared to 39 deals that were greater than $1 billion. True momentum with that product. In ECM and leveraged finance, we succeed as a leader despite having to compete with revolvers and other services that commercial banks can provide with their immense balance sheets. In ECM, we rank seventh globally and in the U.S. overall. Importantly, we acted as a book runner to one in six U.S. IPOs last year, and we ranked sixth based on the number of book run IPOs in the U.S.
Our ECM business in the latest 12 months has more than doubled to $1.5 billion. We rank eighth globally in leveraged finance for single B and below issuers and sixth in the U.S. Great momentum in this business as well. For the latest 12 months, we were left lead on 117 deals. This is up from 83 deals the same period last year. That's a 41% increase. The increase in number of deals is reflected in our revenue, where our underwriting revenue has more than doubled to $921 million, up from $438 million in the prior period. Next slide. This is a slide I'm actually one of the slides I'm most proud about.
It's a testament to, I think, our strategy of relationship banking and the service we provide to our clients. These are returning clients, and they provide us with a so-solid base of business each year. At the same time, we are adding a meaningful number of new clients each year, which in turn fuels our growth and then adds to the base of business for the following year. Don't be misled by the flatness of this slide. This represents kind of the steadiness of our clients, and actually, the number of our clients has dramatically increased since 2016. At the bottom of the slide, you see examples of loyal clients, nine transactions for Truck Hero, 11 for QTS, 13 for Avantor, since the beginning of fiscal year 2016.
In the PE world, there to the right, we've completed 84 transactions for KKR, 71 for Leonard Green & Partners, 63 deals for Bain Capital since the beginning of 2016. These firms, as you all know, are sophisticated as they get in hiring investment banks, and we are honored that they select Jefferies over and over. The next slide, please. I wanna talk just a few minutes about our Jefferies Finance. This is our investment banking joint venture with MassMutual. We've had it in place since 2004. As Brian mentioned, we've completed over $275 billion of financing. That's across 1,250 transactions. In the latest 12 months, Jefferies arranged 167 deals, 96%, up from a 74% increase.
In connection with our recent strategic alliance with SMBC that Brian mentioned, we completed a recapitalization of Jefferies Finance and added $1 billion of liquidity. This increased capacity is gonna give us the ability to do bigger deals and more deals without necessarily increasing the risk to Jefferies. On this next slide, you see the financial performance of JFIN. For the latest 12 months, we recorded record revenue of $297 million off to the right there on the slide. Moving forward, JFIN strategy is to stay focused on core U.S. and European underwriting business and then further expand into large and midcap direct lending, which are significant opportunities for us. This next slide. Our priorities are around sustaining our growth in the short and the long term. First, we continue to lead with deep sector expertise and strong content delivery.
This is gonna differentiate us from our competitors. Our second priority is to capitalize on recently entered fee pools and strengthening our groups. Since the beginning of the fiscal year, we've hired 30 Managing Directors, 23 of whom are coverage MDs. We significantly expanded our coverage in the financial institutions sector globally and at the same time bolstered our healthcare and industrial sectors. Our third priority is to continue our select hiring of senior talent that will allow us to continue to expand our reach and capabilities. Although we have strong breadth and depth of senior talent, we are always looking to expand both our reach and our product capabilities for our clients.
A perfect example of this is in action is our newly formed private advisory group, which gives us a new capability to take to our private equity clients. Finally, our most valuable asset is our employee partners. In this competitive environment, retaining bankers and investing in their talent development is more important than ever. We intend to do that. In closing, as we start the final quarter of our fiscal year, our momentum remains very strong. Our new business levels remain high, an indication of revenue that we will book in the coming fiscal year. As we cultivate our internal talent, bolster it with the selective strategic senior hires and focus on several targeted initiatives, we're confident that despite competition from larger and smaller firms, we will continue on the significant momentum we have today. Now I'll turn it over to my partner, Peter Forlenza, our Global Head of Equities.
Thanks, Chris. Good morning, everyone. I'm going to take you through what I would describe as both the journey and the positioning of the global equity business here at Jefferies. Jefferies is now one of the 10 most significant institutional equity franchises in the industry. We're one of the few that has a truly global footprint across research, sales, and trading. You're gonna see as I walk through the next few pages, the expansion we have made over the last few years from both a product and a geographic perspective, and the market share gains that have ensued from that. We're excited about these market share gains and the global nature. It's not just Europe, where we began within a decade ago.
You're also going to see the results of the significant investments we made in the Asia- Pacific region in equities in 2019 when we hired more than 100 professionals throughout Asia, including opening an equity office in Sydney, Australia, to complement our existing investment banking team that was on the ground there. We also doubled down in the franchises that we had been building in Japan, in Hong Kong, and in India. You will see momentum across all of those businesses, which leads us to an exceptional platform servicing global institutions for our client base. Let's go to slide two. As you've seen in some of the other slides that Rich a nd Brian a nd Matt have shown, we're growing revenues while simultaneously gaining market share across all regions. We're doing this by expanding our product offering and getting more important to our existing clients.
We've always had a strong core U.S. business, but you can see the investments that I've referenced that we've made in Europe and in Asia over the last few years that are driving significant market share gains and revenue growth. What I'm most excited about is that we see continued opportunities for share gains and expansion of product in all regions. Thank you. Could we go to slide three? This is probably the most important slide that I'll go through, and that explains our strategy, which focuses on really three pillars: unique advisory, differentiated distribution, and leading-edge execution capabilities globally. What does all this really mean? Let's start with unique advisory. Brian referenced that now we have a top eight research platform judged by external surveys on a global basis. In some regions, we're inside of that. What does that really mean?
The first part of it is, look what's unique. We are now covering more small and mid-cap stocks than anyone else globally. That is important to our investor client base. You can see the breadth of that coverage on the left side of this page. If you go to the right, you'll see the significant growth in research content that we are publishing on a daily basis. We are quite simply touching our clients with more unique research than ever before, and there's tremendous growth of that. We've also continued to invest in a market-leading macro and strategy product, led by both David Zervos and Chris Wood, to name a couple, who are highly impactful to the market.
We've also, and Rich and Brian re-referenced this, we've recently been building out an ESG research team that is advising both our investor and issuer client base on what is an increasingly important topic across our industry. Differentiated distribution. What does that mean? Well, for us, we believe it's having what we see as the largest sales force in the industry on a global basis. Why does that matter? Well, having the ability to have a larger sales force gives us the ability to just cover more accounts. We touch more institutional investors than others in the industry, and that then leads us to have the ability to bring unique interest into our capital markets transactions, which is important to our issuer clients.
We also believe what we have is the most senior sales force in the industry, which gives us the ability to find the right investors for our capital markets products, our IPOs, our follow-ons, and our convertibles, which in turn gives our issuer clients a much more diverse shareholder base. We also believe that we have inherent leverage in our product. We have all of this great research. We have chosen to not just focus on the top 200 investors around the globe, although we do extremely well with them, but we distribute our product to a much more diverse investor base. Cutting-edge execution. This is something that Jefferies is invested in. You've heard me speak about this over the years.
We have a market-leading electronic trading business that we have now exported globally, and you can see that reflective in our share gains in the bottom part of the, of the page. You'll see in the Americas, we've had 72% growth at a time that the market's grown by a little more than 55%. In Europe, we've grown 134% at a time the market's up 4%. In Asia, we've grown more than 500% at a time that Japan is up 9% and Hong Kong is up 200%. You can see it's this investment in technology that gives us the ability to transact very efficiently globally. Could we go to the next page?
Here on this slide, what you'll see is that on the left side, we have recurring revenues from a vintage of clients that would predate 2016. What it doesn't show here is that those clients that we had are doing more business with us. We're gaining share. Very often that is clients that were historically very strong relationships with Jefferies in the U.S. are now, the way I would phrase it, inviting us in to be a more important global partner for them. Also if you look at 2019 and onward, where you'll see that we were able to generate revenues from new clients, I would argue this probably looks different than most or any of our peers in the industry, because as we were expanding through Europe and particularly in Asia, we were opening up new clients.
This is a key to how we are gaining share. On the right side of the page, you'll see, and Matt and Brian referenced this a bit, that we have a trend of really fee-based income that is commission-based on the equity side, both from checks that we may be getting from MiFID, but more importantly, from our execution capabilities. Let's go ahead to the next page. I've been talking a bit about regional and product diversification. I just wanna hone in and show you a little bit around this. You can see in 2011, roughly 80% of our revenues were coming from the Americas, really the U.S., a nd only 21% internationally. You can see that between 2011 and 2016, we took that to 30% and 70% approximately between international and the U.S.
I was asked a question, I believe it was about five years ago, if I ever thought that Jefferies equities franchise would potentially grow that to 40%. You can see that we are now there. I believe that is going to continue to grow again as we continue to diversify from a regional and a product perspective. On the product side, on the right side of the page, what I would highlight here is Jefferies began its journey 60 years ago on the foundation of high-touch U.S. cash equity trading, and it's always going to be core to what we do. Importantly, though, we do much more than that for our client base.
We've invested over the last decade into much more sophisticated solutions and the ability to provide those to our clients so that now high-touch cash trading is really only about slightly more than 40% of what we do. It's these sophisticated solutions we're going to continue to provide to our clients. Let's go to page six. I'm only going to highlight a couple of things on this page around our market share and some of the recognition we've received from outside surveys. The first one I'm going to repeat from last year is that Greenwich Associates did an ad hoc survey coming out of the height of the COVID crisis, evaluating which broker provided the most value at the height of the COVID pandemic market crisis. I'm proud to say that Jefferies came out on top.
I'm not just proud that we received that recognition. I think it's worth highlighting why we were viewed as the most adding the most value to our client base during that time. It's really around two things. Rich and Brian speak about it all the time. It's our people. We have had a consistency in our staff. We have a senior staff. In times of stress, clients go to who they trust the most. It was also the investments that we had made in technology over the preceding decade that enabled us to go remote in a very stable fashion, and that was recognized by the clients. You'll see that now, right below that, we're recognized as a top electronic trading provider in both the U.S. and in Europe.
I've used this phrase before, we're now being invited into Asia by the largest institutional equity investors in the world. On the right side of the page, you'll see our market share gains between 2016 and 2021. You'll see great momentum in the U.S. with still the opportunity to grow more. You'll see tremendous market share gains, particularly in the U.K. Importantly, you'll see that across all of these markets, and Asia in particular, if you run the same playbook that we have in the U.S. and in Europe, you can project market share gains that we would see, we expect to see. I'd also like to highlight our convertible franchise, which is an investment that we've made over the last five, six y ears in the U.S., but also in 2018 when we made a significant investment in both Europe and Asia.
You can see that we are a market leader in those markets. In fact, in Asia, if we have folks that are out ill or on holiday, it actually affects the market. We're actually that important to the market. The message here is we've done well, we're gaining share while at the same time expanding our products suite, and you can see that we have the opportunity for continued market share gains across the globe. Let's go ahead to the next page. With all of this, you'll see you've seen why we're excited about how we are currently positioned, but also most importantly, that we still see the opportunity for meaningful market share gains and continued expansion of impact to our clients from both a regional and a product perspective.
With that, I'm gonna turn it over to my partner, Fred Orlan, to speak about fixed income.
Thanks, Pete. Moving over to the fixed income overview here on slide 51. The story of our current business began six years ago when we got together at the Investor Day meeting and detailed how we were embarking on a journey to refocus our business on building long-term client relationships and being less capital dependent. Bringing the story to today, our execution of this strategy, as you'll see from our results, has led to significantly higher revenues and produced better returns for all of our stakeholders. Going forward, we're very excited and confident about our future and the durability of our franchise, given the success we're having in building and enhancing our long-term client partnerships, our geographic expansion, and the strength of our culture that reinforces our mission and differentiates us from our competition, which we'll talk a little bit more about.
Looking at this page, you can see that we have all the ingredients necessary to provide our clients with comprehensive coverage that, similar to the investment banking and Equities businesses, is built on differentiated insight and execution. We lead every day with the quality of our people, our culture of teamwork, and the way we all work together within the individual groups that are on this page, but also across the entire Fixed Income division, as well as the rest of the firm. For the next few slides, we'll review our results, the expansion of our European business, the growth of our client franchise, and finally, we'll go over some of our strategic priorities. Turning to slide 52. You know, we're very pleased with our results this year, which not surprisingly are down a little less than about 19% from last year.
As we expected, as, you know, the Fed-induced liquidity has started to drain out, yet we're still up 60% from 2019. These results over the last two years are strong evidence that the enhancements that we've made across our business have created a more durable franchise. As you look across the page, you can see that not only have our revenues moved significantly higher, but we've also been more consistent and more profitable, as evidenced by the percentage of profitable trading days, which is now at 95%, and also the amount of capital we're using, which has hardly increased at all over the past four years. Additionally, risk has moved up only marginally despite adding many more businesses to our lineup and is down significantly as a percentage of revenue.
We didn't need to take more risk to drive our revenues just to support the growth of our franchise. These statistics are a direct result of our commitment to our culture of discipline around all of our financial resources, especially keeping our balance sheet fresh, liquid, and turning over quickly with inventory that's relevant and applicable to driving the day-to-day flow with our clients. This is exactly what we set out to do six years ago, and it provides a great foundation for continued profitable growth going forward. Turning to the next slide 53, I'd like to talk about how we're pushing our opportunity curve higher by driving improvements across our franchise every day.
What I mean by this is we can't control the market environment that we're in at any given time, but we can certainly make sure that, for example, if the same environment as 2019 were to come around again in 2022, that we would deliver far superior results because we operate at a much higher level. One example of why we're so confident in this claim is the success we're having in building out our European fixed income platform. Under the leadership of Fred Jallot in London, we've transformed our business into a scaled up client flow business model across fixed income there.
As you can see from our results in 2020 and 2021, we've shifted this curve with Q3 LTM revenues running at 2.25x that of what we achieved in 2019 and earlier. We followed a similar script in the way we built out our team in Europe with high quality talent bound together by a collaborative culture with a strong emphasis on building long-term client relationships. It's also interesting to note that 35% of our European team has joined us since the beginning of the pandemic, and thus we know we have a lot more to accomplish there as we further integrate all of our people there. Just turning to slide 54.
Another reason we're so excited and confident in our potential to keep shifting our opportunity curve is the quantifiable progress we've made across our client franchise. You can see we've significantly expanded our market footprint over the past six years, which is driving the momentum across our business. Just as a footnote, all the data on this slide come from Greenwich Associates. If you look at the right-hand side of the slide, there are a few metrics that I think really tell the story. We've substantially grown the number of clients we trade with across fixed income by 25%. Said another way, we have a 25% bigger client footprint than we did when we started this mission.
In the U.S. credit markets, we've expanded our relationships with the core most active clients by 75%, which has translated in a 300 basis point increase in market share with these most active and important clients. This is very significant as these clients also provide the most important market intelligence, which leads to better management of our balance sheet. Now, these macro statistics are the results of improvements we've achieved across much of our franchise, and you can really see the impact on the seven businesses that we've highlighted here in the middle, where we've dramatically increased our market share over the past six years, as you can see, with the median increase being a multiple of 4x . Now, these businesses are 50% of our revenues, so obviously that gives us a lot of confidence in the future.
It also doesn't include our securitized markets businesses, because Greenwich didn't measure those for us. And Matt alluded to those such as, you know, CLO origination and trading and some of the other businesses in securitized markets. And also the improvements in our leverage credit trading business shown here, such as par loans and high yield, and the distressed business, and also the complementary businesses in Europe, are also consistent with the market share we've taken in our investment banking franchise, specifically with the private equity sponsors. Who are not only important investment banking clients, but are also significant fixed income clients given the sizable growth that has occurred in their asset management divisions over the past few years, and we expect that to continue to grow.
Finally, according to Greenwich, as you look at the bottom, we're now firmly a top 10 overall fixed income franchise ex derivatives, despite not participating in some areas that we deem not to be optimal for us to compete in as of yet, but may be so in the future. With this said, let's talk about our strategic focus going forward on slide 55. Our, our future success, like I say, is grounded in the quality of our people and the distinctive culture which we leverage every day to drive the momentum and the durability of our fixed income business. It's partnering with clients which requires a team mindset and the sharing of relevant information, both market and client specific, across all of our businesses to help identify opportunities as well as manage risk holistically across fixed income.
It's also about delivering all the resources of the firm, which can be, for example, banking advice or access to equity insights and execution to help our clients achieve their objectives. When we do this well, our clients trust us with their most important trades. I call this driving quality share over simple market share, because these are usually higher margin situations and leads to repeat business with those clients. As we talked about earlier, we're aligning our businesses globally and leveraging the success of our U.S. business abroad, especially in Europe. While we've achieved quite a lot in Europe already, our opportunity is still much greater. Simply just having more time to integrate our talent, you know, into the global team will be accretive, and we're still seeing great opportunities to add new business lines.
Also, we're applying the same team-focused strategy abroad with our international clients, many of which are global, and therefore it has a reinforcing impact on our U.S. business as well. Also, I'd just say this focus is fully consistent with our partners in Equities and Investment Banking as we've made significant strides in those businesses in Europe, as you just heard from Chris and Pete . We're very excited about the progress we've made under Fred Jallot 's leadership and the results which are benefiting our fixed Income returns globally with more potential going forward. Of course, we'll maintain our consistent discipline around risk-taking and the efficient utilization of our resources and the productivity of our balance sheet. As I mentioned earlier, we focus on keeping the balance sheet fresh, liquid, and turning over quickly with relevant in-inventory.
Finally, supporting all of these priorities, and underpinning the future success of our business is capitalizing on the significant investments that we made in technology, especially in our Madison platform that Brian mentioned, as well as e-trading. For us, Madison helps us be more efficient in the way we connect with our clients. For example, it utilizes AI to prioritize what and when we should be showing a certain client a specific asset based on their previous tendencies. We're improving our ability to make every client interaction more relevant and valuable, and therefore being more efficient with our clients' time, as well as our own people. In e-trading, we're connecting to more and more of our clients electronically, providing more liquidity and trading efficiency than ever before.
We're beginning to see the benefits of the development of algos and other data we collect through these interactions, which will be a source of progress going forward. With these priorities in mind, we're very excited to continue along the successful and exciting journey to increase the durability of our fixed income business and consistently shift our opportunity curve higher by always striving to find ways to support our clients and to provide the best possible returns for all of our stakeholders. Thanks very much for listening, and I'll now pass the Zoom over to Nick and Sol in asset management.
Thank you, Fred. I'm Nick Daraviras. I'm going to give you an overview, a history, and an explanation of our business model and results while my partner, Sol Kumin, in a few moments, will give an update on our recent activities and our strategic priorities. Put simply, we would like to build the partner of choice in alternative asset management, both with institutional investors globally and with high-quality pedigreed, talented portfolio managers. This manifests itself in a number of different ways. And in fact, our flexible business model is part of what allows us to partner with these different portfolio managers in the ways that are, you know, best suited to their stage of development or business model.
In most instances, we provide seed capital, acceleration capital, or some other form of strategic capital to the investors with whom we partner. Again, this can take a number of different forms structurally. In some instances, the managers become employees of ours, and they run divisions for us which are wholly owned and consolidated. In some instances, we start joint ventures, we jointly control these businesses. In others, we provide seed or acceleration capital in exchange for a GP stake or a revenue share in the business going forward. All of this, you know, does lead to, you know, our financials having different components in them, which I'll walk you through in a moment.
It does allow us to be flexible and find partners who are seeking, you know, a partner like us who can provide both capital but also strategic reach and infrastructure and in many cases, marketing. Next slide, please. Here, I'll give you a brief history of our development. If you look back to 2017, we entered that period with a quant-heavy portfolio of seven strategies managing $9 billion of AUM. Some of this were legacy strategies that developed within our sales and trading operations. It was around this time that seeing the opportunity set to partner with quality managers and to grow within alternative asset management that we made a more concerted effort to focus on this business and to support it, so we could source attractive opportunities.
Some of this consisted of dedicated resources internally. Some of this consisted of mining the reach of the Jefferies, broadly defined, so that we can find both investors and partners. Some of this was the decision to launch a dedicated marketing effort with the hiring of a head of the global effort in 2017 and growing that effort to 22 people within marketing and investor relations today. That dedicated marketing effort has led to another advantage in that not only can we use that effort to raise assets for our managers, but it's an attractive competitive advantage that when sourcing new managers with whom to partner because they can see the value we bring to them just beyond our capital.
I think what's important to note about the way in which we built this business is that we're not paying enterprise value for any of these entities. We're partnering with these businesses often by providing the investment capital as well as, you know, infrastructure and operations and marketing support if they need it. In all instances, they take the marketing support. But it's a bit of a different model than others, and it's allowed us to grow with many different types of managers. Looking at this slide, one of the things that you'll note is the cadence we've developed. This is not by design, but it, you know, we've in essence been building by adding a new manager roughly once per quarter.
You know, each year we subtract one or two managers. The reasons for closing certain of these strategies varies, but it's, you know, can be tied to performance or an inability to attract third-party capital and in some instances, just a decision that the business model they were pursuing was not viable. You know, we continue to grow. If you look at particular the AUM growth, I'd note that it's tied more and the acceleration in that AUM growth, it's tied more to the maturation of strategies from prior years than it is to the addition in any given year. Typically, it takes a few years for our marketing and other efforts to kick in such that the AUM at newer managers becomes a significant piece of our overall base.
Next slide, please. This is our current portfolio. I certainly won't walk you through all of this. I would just highlight that it is a diverse offering. It covers multi-managers and multi-strat, equity long-short, credit, quant, private capital opportunities. I think it's, you know, it's important that with this diverse offering, we're able to have meaningful conversations with investors, where we can be a solutions provider rather than simply, you know, someone coming with a singular product offering. This has allowed us to develop relationships with our client base that we hope to continue to expand. Moving on to the next slide. This is where I'll describe our business model. You know, there's really three components to the revenue.
The easiest to understand probably is, we invest capital into the strategies that we support, and we earn a return on that capital. We utilize SMAs where possible. We utilize some portfolio leverage to be as efficient with our capital as possible. That is what you see in the line here shown as JFG Investments. I'll note that the underlying equity within there is, in the period that we're discussing here, averaged about $1 billion. Second, we have wholly- owned divisions, those are the managers where they are employees of ours, and we fully consolidate the returns of the manager. I don't mean of the investments in it, but the fees recognized by that manager for third parties.
In this chart here, it's the line shown as third-party investments reflects the AUM in those managers. Those managers tend to be some of our earlier stage, seeded managers. Third, we have our, well, it's actually a variety of different structures. We have the joint ventures, the revenue interests, GP stakes with affiliated managers. Those are the instances where we don't have a controlling interest in those firms. We're not consolidating the managers fully, but we're recognizing some portion of the revenue or the profits from those firms. You know, I think if you look at the chart on the left, you'll see that's actually where we've seen our most significant growth over the last few years.
I'll mention also when you think about how we recognize our revenue, there is a bit of seasonality to it because of the lumpiness of performance fees that are realized on a calendar basis by most managers. What this leads to for us is, you know, at the calendar year-end, when managers crystallize their gains and hence performance fees, we realize our portion of that, whether it be through the revenue share or through our profit interest, in what is our fiscal first quarter. There is a bit of a lag to when we will recognize gains from any particular period.
The other component, though, that is worth noting that even when you think about the amount of AUM that we show as average for the LTM period, that also is a little bit misleading on a timing basis because it includes the performance fees that we recognized in Q1 of our fiscal year. All of those relate to the capital that was in place with our underlying managers in 2020. It actually is capturing the performance of an AUM base that is, you know, as we sit here today, now, you know, began, you know, 21 months ago. The gains that we've booked there from a performance perspective are probably closer, are driven closer to a base of $10 billion of AUM rather than the $20 billion that we have in third-party capital today.
If we look at those pieces now, you'll see that on our investments in our managers, you know, I've referenced that that was supported by about $1 billion of equity capital. In the LTM period, we've made a little over $300 million. With our wholly owned subsidiaries who are managing about $1 billion in third-party capital. We made $15 million in fees. When we look at our affiliated managers, where we have rev shares and profit interests, you know, off of the AUM there, in the LTM period, we made $100 million in fees.
I think it's also key to note that when you think about that section, the revenue share and profit interests from third parties, that is very high margin revenue because we are taking from either the top line or only recognizing our portion of the profit. There's very little direct expense associated with that revenue. At this point, I will turn it over to Sol.
Great. Thanks, Nick. I'm gonna walk you through just a couple things on this slide here. This really shows the stuff that we've done over the last year. As you can see, we've been pretty active, as Nick just touched on, adding a bunch of new strategies and in some cases, subtracting some where it was the right decision for us to make. I'm gonna walk through and just highlight about five or six of these that I think will be just most relevant for you. You know, the first one is that first one on the sheet there, which is Hampton Road. This was a partnership that we got into in December of last year.
A TMT manager, very well-known, long-short business, good use of capital for us, and a manager we're very excited about. He's just finished his first 12 months officially in business with some really good numbers, and he's got some great momentum on the capital raising side. We're very excited about this. The next one there would be Monashee Capital, which is February 2021. This is a firm that we partnered with two years ago, that had a core strategy in the equities business. They've basically filled up their capacity in that business, and they've done a really nice job expanding their capacity by adding a converts business, and an investment grade credit business. What we're highlighting here is in February, they launched a crossover strategy, which has also been very successful raising capital as well.
They've been a great partner and have done a really nice job. It's a business we're really looking forward to helping them build. If we fast-forward here to June of 2021, there's a couple things that are worth noting. A firm called Point Bonita that we that we helped put in business with a really talented PM, focuses in the credit space, doing some lending. We set out to raise $500 million of founder's fee. It was during, you know, during COVID for a first time fund. Our marketing team, along with the PM, did really a terrific job here. We closed the $400 million pretty quickly, $500 million, sorry, we continue to raise money here at even higher fees.
We're excited about what we're building there. The next one, the same month, was a long/short business based in Hong Kong called SVI. Excellent track record the last few years. We just recently launched that business as well. June and July, we have tried to find a new way to raise some capital in Europe on the UCITS side. Both Weiss and Solanas, two businesses that we're involved with, both have launched UCITS. We're really going after a different type of investor than we have traditionally with our marketing group. So far, they both have started well, and we're excited about that. Lastly, just this past month, we launched a quant business.
We hadn't been in the quant business for a few years now, with a business called Manteio Capital. This is a really talented group that came out of Credit Suisse, we're looking forward to continuing to build a business with these guys. You can go to the next slide, please. This will talk a little bit about our capital raising momentum. Look, it's been generally challenging to raise capital in a COVID environment, right? Investors wanna sit down with you, look across the table from you, especially with some first-time funds. We've actually done a pretty good job, you know, despite the environment that we've been in. Our group's raised over $2 billion so far this year. That's coming primarily from Monashee Capital, Schonfeld, Weiss, Point Bonita.
We've got a really strong pipeline here for the next three, four months of the year, and that should carry us into the first half of next year, especially as things are starting to open up and we're able to start traveling a little bit more and sitting across the table from people in person, which has mattered a lot with first-time funds. You know, we have a few strategies that have started to really gain some market momentum. Two credit strategies in particular, 352 Capital and FourSixThree Capital, as well as the business I mentioned earlier, SVI, which is a long/short business in Asia. All three have had good years and have started to raise some money, and we're excited about that.
The last part here would be Kathmandu and Riposte, two businesses we've been involved with for a little while now. Also, really good performance here over the last few years, and we're receiving very good interest from investors and expecting to raise some money here in the next few months, and early into next year. The last part on this page is just talking, and Nick touched on this a little bit, our marketing and distribution effort. That team's now grown to 22 people on the team. Obviously, we have people based in Hong Kong, London, New York, and they cover all over the U.S. We're really covering, you know, almost all the big investors around the world. It's an important part of our business. I think it's part of the value proposition for managers to partner with us.
Obviously, you know, adding dollars to all of our strategies is a big deal. That team has really come a long way in the last few years, and is doing a really nice job. Last page, please. Great. I just wanted to touch on just what our basic strategic priorities are, and none of them should be surprising now. I mean, you know, number one for us is obviously focusing and continuing to grow our fee-generating business on third-party assets. You know, I mean, it's what we focus on when we're trying to partner with people and build businesses. You can see here that our assets of that the underlying assets are up 55% over the last 12 months, which is great.
I think Nick touched on this a couple slides ago. We've done about $115 million of, you know, fee-generating revenue, and $100 million of that comes on just very low direct costs that are associated with that. The second thing is just continuing to add quality strategies. We've got a good pipeline. Obviously, our seat at Jefferies helps. We have a tremendous amount of things that we can leverage from this entire firm and platform. We communicate with all different business lines at the firm, and it's a really big strategic advantage for us that we continue to take advantage of. The last part is just, you know, earning a, obviously, a good return on our capital, right?
We wanna start being able to recycle capital, which we're doing. That will continue to be a big focus for us going forward. That's it. Thank you very much for your time today. I'm gonna return this now to Brian and Rich, we're gonna open it up for Q&A. Thanks.
If you have questions, please click in the upper right-hand corner of the screen, Ask a Question, to present questions. In addition, we have live questions that will come from our equity research analyst. We'll start by asking Mike Brown of KBW if he has questions.
All right. Great. Thanks for taking my questions. Rich, Brian, team, great to see everybody. Thanks for the day. Appreciate the time. I guess, you know, across all of your businesses, which one or two within Jefferies Group have the most wind at their back today? If you think about advisory specifically, you've done $1.3 billion of revenue to date. A full year record with 4Q. Looks like it's shaping up well from what I can see in the public realm. As we look to next year, you've been really active on the hiring front. The environment remains really conducive for M&A activity. If that continues to be the case, should we expect to see revenue growth in advisory next year?
The simple answer, Mike, is yes. Similar to what we said about, you know, the last couple of years and the last several decades, there's both potential for market growth. If you look at the M&A market, the average M&A deal, the average deal probably has a six, seven- month gestation period. To the extent that middle of last year, middle of 2020 M&A origination slowed down, it accelerated into the end of 2020, and it's accelerated across the 2021 year. Right now there is a backlog looking forward and it's at the highest levels it's ever been in the M&A world. There's every reason to think the overall market in M&A will continue to be strong.
You have the Jefferies story, and I'd go back to what we cited, which is we will enter next year with close to 20% more MDs in investment banking than we began with this year. Our opportunity to take greater share in a growing market, we think is real.
I would just add that I agree with Brian's point about banking in general. In addition to the people that we've added and our existing people and the recent people who are getting up to speed and their high levels of repeat business, it's the incumbencies that we have in respective organizations that are basically it's business for us to lose as opposed to having to go in there and pound the table every day. We're very adamant that we, you know, will pay attention to all these clients, so we're not gonna lose those relationships. I don't want to take away from the fact that we've made major investments in fixed income and equities over the course of the last two years in particular.
Many of the people who've joined us haven't been in our offices, quite honestly, and there's a lot of integration and a lot of upside there. It's clearly more market dependent. I'll go back to my original point, where I started off. We have room for growth everywhere in our organization. I saw the slides. Perhaps our convertible bond department is hitting against as a market leader, but I'd much rather be storming the castle than having to defend the castle. We're kind of storming the castle across every one of our businesses at Jefferies, and it's a very good position to be in once you hit critical mass.
Thanks. I appreciate the thoughts there. I guess as a follow-up to that, you know, you're clearly hitting on all cylinders on the hiring side and the headcount growth is really been impressive. Probably the more impressive piece this year has just been the comp leverage you've been able to show. With the hiring activity that you expect, is it possible that you can continue to show comp leverage here or like, how do we balance what you're expecting to do on the hiring side and, you know, how that could ultimately play out in the, you know, comp leverage or comp ratio, however you know, think is the best way to think about it?
The way to think about it is, I mean, it's not a never-ending game, at some point, the compression has to decline. There is just huge operating leverage. Our support infrastructure is highly scalable. If you think about the nature of investment banking, it is, you know, relatively high-ticket business. It's not a huge number of ticket. The number of deals we do in a year is in the thousands. There isn't a need to scale our operating infrastructure remotely at the level that hopefully the business can scale. On the trading side, again, there's a lot of efficiency from technology, et cetera. Our core support function is highly scalable. Within the operating front office businesses, there is some e-efficiency, some productivity gains, some scaling opportunities.
The answer to your question is, in 2022, if the direction of travel continues as it is, we have opportunity to get some further improvement. Again, I'm not gonna tell you it's a never-ending compounding opportunity, but definitely into 2022, we don't see why we can't continue to improve on that.
I would just add to that. It's taken us a very long time to get to critical mass, and it was quite a journey. When you have critical mass and you stick to it, you do get operating leverage. We have the ability to pay our people fairly and competitively and generate good ROE for our shareholders now. This is something that we haven't been able to say until the last couple of years. I believe that we're at an operating level across the board where it's sustainable. Obviously, there'll be market conditions that come and go. But having the position that we have today is we're a much different company today than we were a few years ago. It took us a long time to get to where we were a few years ago.
If I could just sneak in one more, I'll let others ask their questions. When I look at slide 30, it implies nearly $1.6 billion of excess liquidity, so liquidity at the parent above your above your target. Is that the right way to for us to be thinking about excess capital, like, and the amount that's available for capital return? Two, can you just provide us an update on how you're really thinking about capital allocation and, you know, specifically capital return here?
Well, first, remember that we've begun a tender offer for the $750 million of notes at the parent level that otherwise would mature in 2023. Potentially up to $750 million of that excess will be used to retire debt. As I recall, I think that is give or take 6.5% debt. As we shrink the merchant bank and as we look at the convergence of JG and JFG, that's the right thing to do and something we feel very comfortable about. Beyond that, there's no question that as we grow the core business, we'll need some additional capital, although the earnings generation of the business may well take care of it. There will be, should be excess capital, and we will continue to drive return of capital. Rich?
I would just say, you know, the fact that we're tendering for those bonds is a big statement. It basically says that we are on our path to further simplify our company. It should be viewed as a very bondholder-friendly statement. It should also be viewed as a position for us to, as we monetize, you know, return capital to our shareholders and invest in Jefferies. I mentioned at the start, one of our key priorities is to do both of those things. As owners, and you can see that as we've been scaling our company, we haven't been taking on excessive amounts of risk or using excessive amounts of capital.
We are throwing off a lot of cash, and we have plans to throw off a lot of cash, given that there will be dislocation in the market. You know, over the intermediate and long term, our businesses are very cash generative, and we believe we have upside in the merchant bank. There will be lots of opportunities, we believe, going forward, to keep doing what we've done the last few years. We're committed to doing it.
Thanks, Rich. Thank you, Rich. Thank you, Brian.
Thanks, Mike, for the question. I'd like to open the mic now to Chris Kotowski at Oppenheimer.
Good morning. Can you hear me?
Yeah. Hey, Chris, before you speak, we have to give Chris a shout-out. He's been on our story for longer than any person besides Brian and myself. Thank you for your patience, Chris. You deserve a medal for hanging in there with us.
Yeah, well, I once had an institutional salesperson who told me that being early is just another way for saying you're wrong. I'll take being early. I guess, you know, following you for a while, your growth seems to come from a different place every year. You know, in the great financial crisis, it was picking up some of the wounded, you know, companies here. In the last couple years it's been Europe, then it was Asia. Just looking at, like, page 34 with all your industries, you know, you seem to be pretty globally covered now. Where's the white space as you see it? Does continuing to grow the banking franchise, is that gonna entail driving more and more into investment-grade land?
Which, you know, historically you're more middle market, non-investment grade.
The answer, Chris, is yes, and yes. The white space continues to be surprisingly almost everywhere. The example that I use is our healthcare investment banking business, which is our largest sector today in Investment Banking. For example, in the last 12, 16 weeks, we've added two Managing Directors, one in the U.S., 1 in Europe. We are targeting several more hires. These are all effectively white space, incremental opportunity hires in the industry where we have the highest revenue per sector and we have the highest penetration. As much as we'd like to suggest that page 34 is comprehensive, and it is big, there's a lot more to go in sectors. Over the last couple of years, we've shown there's a little more to go in products, and there's absolutely more to go in geography.
If you look at our equity business, in the last three years, we doubled down in Asia. We continued, as you saw in the numbers, to grow in Europe. We just hired four people in the equities business in Dubai, opening an office there. We just took our Global Financial Institutions Investment Banking business from five managing directors, and this is something we've wanted to do for a long time. We've gone from five to, I believe, now 13 this year. We created this year a private capital advisory business where we have six dedicated managing directors. Fred Orlan talked about what we've done in fixed income. Our fixed income in Europe particularly is far from its potential. When you actually look at the white space, there's a ton of white space.
I mean, I find it fascinating that on the one hand, we've achieved critical mass, we've gone to where we've gone, and in some ways, there's more open opportunity than we've ever seen. A lot of that has to do with our own momentum and strength, but a portion of it has to do with the fact that competitors. Despite the strong market, some of them are shrinking, some of them are changing their focus. Whatever the case, it's given us more opportunity, and we're gonna keep going after it.
I would just add to that what's important, and Chris, you noted that it seems to come from different places at different times. It all comes back to having our house in order. What that means is having a culture of our people, having a consistency of our plan, watching our risk real time, being long-term in nature, and being incredibly opportunistic and being willing to pounce. You know, you have to have all those things on a consistent basis, and then it's amazing how lucky you wind up getting if you can keep all those things together, which are not easy. We've had our missteps historically, so we're not perfect.
As long as we can keep that direction and the whole platform and the team pulling the same direction, we're gonna have opportunities to take advantage of people who wanna come to our company or groups or teams. It's been accelerating, not decelerating, and it's very exciting if you're sitting in our seats.
Okay. Another question I'd have is, you know, regarding page 40 on JFIN. You know, you look at it, there are three kind of loss years, 2008, 2016, and 2020. Right, I mean, it's obvious, it's leveraged loans, and whenever credit spreads widen out and they're stressed, you know, they seem to take some hits. I guess part of that is inevitable, but I'm wondering just as you go forward, you know, with credit spreads at an all-time tight, you know, more likely to widen before they tighten again, how do you protect the bottom line of JFIN, or is there a way to make it less cyclical than it has been historically?
You know, if I could point out one thing there, this is the leverage lending business, and if you're gonna be a significant player in the leverage lending business, you have to be there for your clients. There's just no way around that. The question is, how do you set up that business? How do you capitalize it? Is it long-term capital, or is it short-term capital? Do you have high-quality underwriting standards, or do you not? Do you have the ability to weather the storms or not and do you have enough diversification or are you completely concentrated? The fact of the matter is, we've been doing this now since 2004-200 5. As you've mentioned, we've been through a number of cycles. It's all but impossible not to limp through a downside of a cycle.
If you size it appropriately and you have the staying power to weather the cycle, and you're confident in your underwriting standards, and you partner with your clients, and you're there day in and day out, you wind up building a world-class underwriting platform, which we have done. That is fundamental to our business. We have great partners, and we share some of the risk, and we share some of the upside in association with that risk, and it's sized appropriately. I will add that right now the diversification in JFIN has never been better. We have high-quality sponsors. We're cognizant, as always, that when spreads are tight, there's not a great way to hedge this that's effective, and that's really been our strategy. Brian, you wanna add to that?
No, I would just keep in mind that those modest losses represented a couple of deals in each case that were in process where syndication took longer, and we had to sell at prices below where we might have expected. This isn't the case of a large balance sheet that is swinging in the wind. You know, we have a lot of agility when we deal with issues. You know, the three years you cite together represent about $100 million of after-tax income, of which only 50% comes back to Jefferies. We're talking about an immaterial amount of money in the aggregate.
If you look at 2021, and this is something we've disclosed previously, but in talking about, you know, Chris talked about sort of the level of activity this year and the $190 million of nine-month pre-tax that you see there. I believe that is after about $60 million in one-time costs that are associated with the recap. The earning power of JFIN has broken out meaningfully and further gives us fuel should we ever have to go through a more difficult moment.
I would just add, because Brian reminded me, some of these hits were mark-to-market hits that we did not take because we had the staying power to keep the positions. Some of them, we did sell them at reduced prices because we wanted to balance our overall health of the organization. It's a very hands-on approach in partnership with a really good team, in partnership with MassMutual, soon to be SMBC. It's a great business for us. It's taken us, you know, a decade and a half to get it here, but it's a very enviable position to be in.
Okay. I have a couple more. Should I go or should I let other people go?
You go, Chris. What do you got?
Okay. One is just on Leucadia Asset Management. Like, you know, in recent months and quarters, we've seen a bunch of companies in the public eye, like Dyal and Petershill, you know, other companies that, you know, invest in asset managers doing some similar things to what you do, but in a fund vehicle. Is it, I guess, what do you see as your competitive advantage in attracting, the people to your platform that way? Is the best way to do it, you know, on your own balance sheet, or would it be that better done in a, in a fund vehicle itself as well?
Well, two different questions there. From a, you know, how are we different from them? We are partnering with management teams earlier in their successes, although generally proven managers, and they're partnering with us, we believe, in part, to get our resources, including as Sol was detailing, our extensive marketing and sales resources. We have a meaningful support platform to help them grow their businesses, which is different than the business of buying stakes in already proven businesses. It's kind of the before the fact and the after the fact. We are before the fact, and we're not paying a premium for an existing business. The, the second thing I would point out is that, you know, how you get your capital is a matter of optimization.
Where I thought you might have gone is that if you take the valuations that are being accorded to those businesses and applied it over time to what we're doing at LAM, it will get very interesting. Ultimately, what we own in the future over an extended period of time does look a lot like what they own. We just got there in a very different way. The potential value that's inherent in what we're doing is at LAM, to some degree, is proven out by what these other models are doing now in the public markets.
I would just add that, in many cases, we have long-term histories with the managers that are coming to meet with us. We have thousands of people at Jefferies who have covered them at other firms, who have known them throughout their past lives. There's a high degree of trust. There's a high degree of value add by knowing that you are a strategic partner of our full investment bank. Clearly, we have the capability to help them raise capital and the brand association. It's a very friendly start for people who feel like they need a strategic lift. We're also good long-term partners with people.
I would also add that the difference between us and some of the other funds you were talking about, if you think about it, we're really getting in there, as Brian said, we're getting in there, wholesale, early, adding value versus paying a fair value on a retail basis on a, you know, mid-teens ROE, where you have limited shareholders who are your LPs. It's a very different business model. Theirs is a great model. I think ours is very exciting and more conducive to what we do because we're actually adding value to them right from the start.
Our goal is to be partners and own businesses, right? We're not looking to make investments and then capitalize. We're looking to own businesses that grow and become ever more valuable.
Okay. Then, last for me was, any additional color comments on Linkem and HomeFed, and just the questions are, Linkem is one of the few remaining legacy Leucadia business that you still seem to be putting money into. I guess, you know, how long do you expect that to go on? Then on HomeFed, you know, my view, housing market's on fire. San Diego is a delightful place to be, and lots seem to go for hundreds of thousands of dollars. Home lots seem to go for hundreds of thousands of dollars there. Just the revenues we've seen out of HomeFed just don't seem to relate to that. You know, when do we see that, I guess?
The answer is it's happening now at Otay for HomeFed. You have to be realistic that even in a market with a huge appetite, the absorption rate is not endless. We're putting on the market, you know, you know, close to 1,000 lots a year. You can't put 3,000 on the market in terms of the ability of the market to buy those lots and absorb them. We're working with a range of home builders, so we're trying to hit a couple of different price points and a couple of different approaches to the market. We're trying to maximize the single family. I would say the interesting development is the multifamily, where we are acting as the developer. We're building multifamily from the ground up. We're just really getting going in that business.
That could be a meaningful business for us. We're going to syndicate some of that and manage third-party capital. One of the things we've said is over time, some portion of HomeFed could well be part of our asset management strategy, and that is beginning to develop. We had built a self-storage unit facility, and we had thought about that in a similar vein, but then we got an offer that we found incredibly attractive. I think you saw that. I'm losing track of time, but I think that was booked in the second quarter. You actually have begun to see some pops from Otay, but it's early, but it's not far off. It's coming now in this next year or two.
There'll be, you know, particularly the multifamily will start to ramp up in terms of the scale of it, and you'll start to see us transact on it with syndications, et cetera. I think you're gonna see more HomeFed bleed into us.
Linkem?
Yeah, Linkem is.
Period of investment?
Yeah. Linkem, the period of investment isn't over, but a big piece of it was getting through the 5G implementation. You know, if the ultimate question is, you know, when might we realize? The answer is we're closer. You know, we're reluctant to put a date on it, but we're getting a lot closer.
Okay, fair enough.
I don't think you should read any of our knowledge or intimate detail on any of these companies as meaning we're not looking to optimize the right way. We know the assets. We know them incredibly well. We're hands-on. There's a lot of value there. No one wants to do it faster than we do, but we wanna do it prudently, and it's our money, so we're gonna do it the right way.
Okay. That's it for me. Thank you.
Thanks, Chris. And Chris, if you want to buy a place in San Diego, call us. Sounds like you're excited about it.
Thanks, Chris. Let's turn it over now to James Yaro from Goldman Sachs.
Hey, Richard, Brian, can you hear me?
Sure.
Yes, we can.
Okay, great. Thanks for taking my questions. I think it's clear that the SMBC partnership is a significant growth avenue for you. I just wanted to drill down a little bit into the mechanics of the partnership. When you talk about deals in which you leverage SMBC's balance sheet and your expertise, could you just clarify exactly how such deals would work and how this would impact your balance sheet, if at all?
The couple of examples. One is in the leveraged finance world. Jefferies Group, the investment banking side, is originating leverage loans. Those loans go to Jefferies Finance. At Jefferies Finance, we have limitations on how much aggregate we will have at risk at any one time, you know, how much commitments we'll have outstanding. We have single transaction limits. It's not unusual for us to originate an opportunity that is bigger than the capacity or the appetite of Jefferies Finance. Historically, we would look to third parties to potentially take on portions of that risk. Now, the first call will be to SMBC. SMBC has an interest in expanding its participation in this market. Essentially, we have the opportunity to see SMBC come in as a preferred partner in our leveraged finance flow.
Our doing larger deals, first of all, brings revenue to the Jefferies Group level. Secondly, it further satisfies and strengthens our client relationships. It's more often than not associated with M&A activity that we are otherwise engaging in. It's really part of a holistic and virtuous relationship. The ability to do more deals, larger deals is what SMBC brings to the leverage finance. On the investment grade side, SMBC, by the nature of its business, has a meaningful investment grade revolver and term loan portfolio where they've historically lent to good quality companies that are both Japanese companies operating in other parts of the world, as well as domestic companies, in some cases with businesses back to Japan, in other cases simply with good domestic U.S. and European businesses.
As you may be aware, a number of the commercial banks have been able to benefit by having revolver credit out to companies as an entrée to value-added services. We will be the provider of those value-added services over time. We're starting, as I said, with the healthcare industry. With the healthcare industry, we're gonna take our expertise initially actually in healthcare services, call jointly with SMBC on some of their key clients and see if the warmth that is created by their relationship can carry over to additional business. It gives us an opportunity to do more large cap business. It coincides with other efforts we have to do more larger cap M&A business. As we have the depth of expertise and our brand strengthens, we think that's one of our avenues to growth.
Going back to the question before about white spaces, one of our white spaces is large cap and public M&A activity.
That's super helpful. Another one that I receive a lot from investors is just how to think about normalization in investment banking and trading and the trading businesses next year. I appreciate the guidance on advisory growth for 2022, and you've talked about trading being back in more of a normal environment. I was just hoping you might be able to add additional color on how trading is performing relative to the summer sort of slowdown period. I think more importantly, what you would term as sort of , "normalized revenue" in the underwriting businesses.
If you go back to the slides that Matt Larson was using on page 25. I hope everyone heard what he said, which is, this is the quarterly average for the last seven quarters, but excluding the three best quarters. We took out the second quarter and third quarter of 2020, and we took out the first quarter of 2021. We think we're giving you very much, you know, in the range of normal is what these bars are. There's a good argument that the normalization is there, but for three quarters and just take them out and look at the rest. Furthermore, as you just said, there is a sense that the summer was slower, maybe just traditional summer, if nothing else, maybe exhaustion from the last, you know, 18 months. The fourth quarter is more constructive.
I don't wanna say anything more than that. When people keep asking about normalization, the answer inside of Jefferies is we're kind of past, we think, that normalization. It doesn't mean there aren't forces at work, but we're not sure that they're the forces of coming out of COVID or coming out of the period of the liquidity driving the market or coming out of the period where SPACs were at the boil. We're past all of that.
I would just add, Now we're focused on growth. we're focused on who are we hiring? How do we get the people that we did hire up to speed? How do we fill in the white spaces that we still have? How do we integrate the whole thing, how do we build upon this? We're not sitting here thinking, how do we, you know, how do we hold on to what we did before? I mean, we understand that there were a couple of quarters that were extraneously wonderful from a financial services position as opposed to horrible for humanity position. we're back to regular business. The only thing that's really not normal for us right now is we're still maybe a third of us are back in the office versus all of us.
It's not as You know, we're focused on how do we build upon 2021 and 2022.
That's really helpful. Just one last one for me. If you sort of take a step back, you know, now that we are back to more of a normal business environment, what level of return do you think your business could potentially generate sustainably, especially as you wind down the merchant bank?
Well, as you wind down the merchant bank, and then you have to make some guesstimates or assumptions about what happens to excess capital. You know, start with the return at Jefferies Group. It's been diluted by the excess cash as well as the merchant banking, which unfortunately has value. You know, there's incremental value being created, but it's not being recognized on a periodic basis. We're just gonna have, for the most part, gains, you know, one-time gains that'll generate cash. The expectation I think that people can reasonably have is that we can sustain a very attractive return through the cycle. We're showing that at parts of the cycle you're gonna have exceptional returns.
I wouldn't necessarily perpetuate what we're generating now, but we're showing that with the critical mass breakthrough that we've gotten through in this last year, the highs are gonna be higher and the lows are gonna be higher than they were in the past. We think that's real. Again, we're not gonna get down to a narrow number prediction, but, you know, we do feel much better about it.
I would say we've never given earnings guidance. It's never worked in our industry, in our opinion. There's too many crosscurrents. Our statement that our merchant bank is no longer a drag on the overall platform for us to achieve a very reasonable and acceptable return for our shareholders while we return additional capital to shareholders, that's a big statement for us. It's probably as bold as we'll make.
Okay, thanks a lot.
Thanks, James. Next question comes from one of our participants, a gentleman named Rick Newell is asking, i s Jefferies using restricted shares for compensation? And if so, how dilutive is that practice, taking into equation the amount of shares being purchased annually by the company?
The answer to that is the dilution over the last six, seven years probably averaged less than 2 million shares a year in RSUs being issued. We had a modest amount of stock options issued in the last year. The dilutive effect itself and recognize that the cost of it goes through our P&L as part of our ordinary compensation, so it's effectively paid for in the operations. The thing to recognize is that offsetting a little bit of our buyback was the fact that we issued 10 million shares when we merged in the minority interest in HomeFed. In addition, we have about 4 million shares underlying the preferred stock that's been outstanding for a long time.
It became dilutive. Also recognize that when you see the number for total shares outstanding that's in the deck, that's not the same number as is used for calculating fully diluted earnings. For example, the 4 million shares that underlie the preferred also contribute when they become dilutive. Similarly, options are in that number at their gross number issued, when in fact there's a substantial exercise price, so it therefore nets down to a much smaller number. It's we think very, you know, minor dilution on an annual basis, but it's in the eye of the beholder.
I think it is minor, and I think the comment from Rick was when, who used to work at Jefferies in the 2000s, it was a much higher percentage of compensation in the form of restricted shares, and that's no longer the case.
Okay. Next question comes from Ben Noll. In his last annual shareholders-
Sorry, Mike, you faded out.
Mike, we lost you there.
Sorry about that. In his last annual shareholders' letter, Jamie Dimon named longer term banking industry challenges, some of which are relevant to Jefferies. In an industry that's grown just 4% annually through the last decades bull market, what do you see as primary industry challenges in the banking segments you operate in, and how are you addressing those challenges? Is investment banking a weaker industry going forward?
I mean, I would say our challenges, for the most part, are ourselves. Are we going to fall into the slippery slope of not valuing our people? Are we gonna fall into the slippery slope of not retaining and attracting the best people? Are we going to get arrogant and start putting on excessive amounts of risk? Are we gonna diversify into businesses we don't understand? Are we gonna become cavalier about risk in our balance sheet? Are we gonna neglect our clients? Quite honestly, I believe if the answer to all those is no, which I firmly know is not dependent upon myself or Brian, but it's ingrained in our organization, I think Jefferies is in a very good position. There's clearly technological changes. We will deal with them. There's regulatory changes. We've dealt with those. There's geopolitical risks that everybody has.
All the things that occur in the world are gonna affect the financial services industry. By and large, investment banking and giving advice and being the preferred advisor to great companies and helping people invest in quality companies and quality securities, I think that's gonna be around for a long time, so I'm pretty optimistic about our industry. I think even though the industry is growing at a small amount, I think we're disproportionately gaining our market share, and I feel pretty strongly about us being in a very good position.
Okay. Next question comes from Todd Slaska. What happened to the plans to make HomeFed an investment vehicle in Leucadia Asset Management?
I kind of touched on that before. Like many things, it takes a little longer than you wish. We're heading in that direction, and we think we may well get there in the next year or two. So that plan hasn't gone away. It just always takes a little longer.
A couple of questions from Nizami Shirinov at RBC. Do you expect revenue growth you achieved during the pandemic to continue? If not, what division do you think has got a year-on-year growth in the future over others?
I mean, you kind of answered that, Brian, already.
Yeah. I mean, I was just gonna add one thought to it, which is Rich cited, you know, the risks we have internally that we have to work on, and he also cited, you know, the macro crazy issues that exist in the world, and they're pretty epic. All that being said, by historical cycles, the economy would seem to be in the beginning of its recovery or maybe a little past the beginning, but far from the middle or the end. Generally, that bodes well for our businesses. In the last year, you've had an awakening of the equity capital markets business, the IPO market, to a level we haven't seen arguably in 20 years. Cyclically, that's very favorable. I've been in the M&A market for a good couple of decades, as everyone can measure.
The M&A market has kind of grown forever. It goes through brief periods of quiet, but it tends to rebound and, you know, it, you know I thought the M&A market was crazy busy 35 years ago, and it's multiples of that today, right? The M&A market has developed because we're not in a high-growth world. We're in an overall low-growth world, and companies that wanna win and wanna drive strategy have to bolt on, have to add on. You know, you can see it in the way we grow. We just tend to do it with hiring rather than acquisitions. You know, the forces favoring our industry are pretty meaningful, favoring it positively.
Okay. Another question from Mr. Shirinov. When the Fed stops quantitative easing and yields start to go up in the future, how will that impact Jefferies' businesses?
I mean, look, I've been through lots of rising interest rate environments. It's gonna cause a dislocation. It depends if it happens gradually in a managed taper or if it happens immediately in a shock. My guess is the political forces will have this in a managed basis, and we'll have to navigate it as we've done in past crises. It's gonna create challenges, and it's gonna create opportunities, both on the fixed income, equity, and banking sides. We'll have to be, you know, nimble. We'll have to have our risk, you know, close to home, and we'll have to be able to provide liquidity for our clients and serve our banking clients. It's just another one of the things you deal with when you're in financial services.
Okay. A question from Jason Aldridge. Are you seeing a long-term fundamental shift in M&A and capital markets due to the ever-increasing presence of private equity and venture capital?
I mean, look, you know, I think one of the reasons we are in such an enviable spot right now is our relationships with sponsors and private capital and the amount of assets that have gone to those investors and the dynamics of them buying companies, optimizing value, merging, raising capital. There's a lot of alpha generation that the world's allocators have decided that private capital is very useful for, and we're pretty much a linchpin intermediary in helping them do so. I think it's a great position for us to be in, both on the sales and trading side and on the banking side.
A question from Adrian Hope. A short question. What might go wrong?
That's something we think about a lot, right? I mean, I worry way more about what we don't know than what we do know, okay? I also worry much more about what we can control than about what we can't control. You know, look, we live in a world where lots is uncertain, lots is fragile. We focus on what we can affect. We focus on what we can see. We constantly look for what's behind the corner that we're not seeing. Adrian's another one of our former significant employees. We miss him. He's a wonderful man, Adrian lived it with us.
I would just add everything can go wrong. Okay? We worry about it every single day, I could give the rest of this conference call, I could give the list of things, I don't wanna bum anybody out. I think everyone should realize that we are cognizant of our ability to make mistakes. We're cognizant of our ability to, you know, guess wrong. That's why we have a great team around us. That's why we don't have a bunch of yes people around us. We want transparency. We want a sense of urgency. We want all eyes and ears open to alertness. That's why culture is so important, so we don't have anyone doing something stupid within our organization. We worry about it all.
Question from Christopher Reed at CUNA Mutual Group. Many of the areas in which you have built significant trading market share are less liquid and can be more volatile. How do you think about risk management involving trading inventories? Are you focused more on crossing trades? Do you position limits help you limit the risk exposure? What is the average ticket size in emerging markets credit?
Well, Fred covered a fair amount of this when he indicated that, you know, we are focused on the liquidity of even our illiquids, that we're focused on position sizes. You know, we control for each of these elements. The tickets in businesses like emerging markets are not generally large tickets, and the positions that we will hold from time to time tend not to be meaningfully concentrated in any way. If you use our convert business or our EM business as examples, while on the one hand, they tend to be less liquid, by being leaders in those businesses, we have great advantages. We are in proportionally more of the flow. We have more depth of relationship. We have more ability to offset trades with other trades that we're taking.
In a way, the fact that we are more scaled in some of those businesses is a competitive advantage and it's a risk management advantage.
I would say in aggregate, our level three assets, our risk metrics, our aging, the things that we look at on a daily and weekly basis have not materially changed from a risk perspective in, you know, since the mid-2010s.
Okay. A question from David Sisman. How important were SPACs for results over the last 12 months, and what is your view on sustainability of the SPAC market over the next few years?
We have a very good franchise in SPACs. We did a lot of transactions, a lot of quality transactions with great sponsors and great investors. If you don't do a SPAC, it's not like SPACs just arrived, and it's a whole new revenue source that we didn't have otherwise. A SPAC is another You know, if a company is gonna do a SPAC, and there's no SPACs, they might do a dividend recap, they might do an M&A transaction, they might do an equity transaction. There's a bunch of different tools that are being used in the capital markets, and SPACs are one of them. If SPACs disappeared, and by the way, the third quarter we just finished, SPACs were all but dormant during that quarter, and we had a record quarter for the, you know, for that period.
Although there was some legacy gains that we had from prior periods. It's not going to be the driver of whether our investment bank is successful or not. I believe it got overheated. I believe people who shouldn't have done SPACs did SPACs with projections that were probably too unrealistic and overly optimistic. As Wall Street generally does, they make too much of a good thing until it's a bad thing. That will correct. I think the regulators will figure out a way to make it a more responsible product and will be another option for companies to do as they try to manage their capital structures. Either way, it's not gonna have a material impact on our overall growth in investment banking.
Okay. A question from Tim Piechowski at Alpine Capital Research. Can you speak to the fair value of Vitesse given the recent run-up in oil, and how do you believe JEFF will monetize its value over time?
It's worth more.
The answer is clearly that it's worth more. I'll note that the oil, you know, what drives the value of Vitesse Energy is not the narrow what is oil selling for today? The question is: What are oil futures in 2022, 2023, 2024 selling for? That's been a little stickier in terms of the move up, although there's been a move up. For example, 2022, I haven't looked at it in two days, but is averaging close to $70, maybe slightly over now. The answer is, it's coming our way. We need the higher prices to sustain for another period of time in order for it to filter into some of the out years, which will in fact help raise the value of Vitesse Energy. It has raised the public market valuations of oil and gas.
It's just beginning to filter into the private market valuation. The answer is a little bit of patience, but it's coming our way.
I think the conclusion is, it was smart for us not to prematurely sell that asset.
A series of related questions from John Green relating to the rationale behind the recent tender offer. The exit cap rate to buy back the bonds is approximately 60 basis points, which equals about a total break-even yield of just 1% of the maturity date of the July 31, 2023 maturity. JEFF is trading below book value. If you think JEFF will be worth 1% more than today in two years, why did you decide to buy back the $750 million in debt instead of spending the money to buy more Jeff shares? Do you expect the ratings upgrade to an A after the buyback? Did that figure into your reason for the buyback?
Okay. Let me address this one. First off, we're trading at 1.3x tangible book. That's what we look at, which by the way, we think is yes, a very attractive price for our stock given what's going on in our company. The tender was done, you know, to shrink our float in the parent because we're gonna work on our strategic opportunity to further simplify our company. We felt it was an appropriate price for our bondholders and give them the opportunity to get some liquidity earlier than they might otherwise have. If they don't want to, they don't have to. None of this had to do with whether we buy shares or not.
The share buyback has to do with our relationship with the rating agencies, with our RAC ratio in the case of S&P, which we hope to have some relief on, and we're gonna make that determination based upon market opportunities. It was the right thing for our bondholders. It does not affect our ability to buy back shares. I'd love for to have the rating agencies rate us A because of it, but I'm not gonna hold my breath waiting for it.
Yeah. We can't spend that money pending maturity. As maturity is only a year and a half out, we have to start holding those funds anyway. Sending them back early is not a change in our long-term liquidity profile.
We have another question from Ben Noll. Congratulations on the success recruiting the MDs. In the face of industry challenges, recruiting and retaining junior bankers, particularly women, will you please speak to the changes you're making to your company's culture, if any, to improve your competitiveness in these challenging times?
Okay. That is a great question and a very valid question. We've been working very hard, particularly with women, but across the board with all groups of diversity, trying to get this company called Jefferies to be their firm of choice. We have made remarkable progress at the most junior level with our analyst recruiting. We've made very good progress at our most senior level at the board of directors. We are working, you know, real-time with passion and vigor to rectify the problems throughout the middle of the organization. That means having education, training, mentoring, quality of life, our diversity and inclusion groups. It's been a big part of why we've been so successful throughout COVID. It's a very big part of our success as an organization.
If we cannot get the diversity inclusion question right in our company, we'll not anywhere be close to going to achieve our goals that we believe in. Brian, you want to add anything?
No. The only thing I would add is this issue has gotten, you know, a lot of focus. It needs to be recognized that we had a meaningful uptick in industry activity in the middle of the hundred-year plague. It's been a little difficult to give our young people the absolute best experience we wanna give them. It's getting better every day, This is something that with focus, the broader industry, I think, will do a better job, but we at Jefferies for sure will do a much better job.
We have a question from Biswajoy Biswas from PwC India. How and by what time are you planning to wind up the merchant banking business? How would winding up affect the AUM and the company revenue since it contributes about 15% annually to quarterly revenue?
I'm pausing for a moment because I don't think it would be contributing 15%. I would say that on a trailing 12-month basis, the merchant bank was probably barely 10% at most of our consolidated revenue. That was inflated by the fact that Idaho Timber was realizing exceptionally high prices for its lumber. As Idaho Timber's pricing, you know, the market for its products normalizes, that revenue. I don't think it's relevant on a revenue basis. Trying to answer the question, as we mentioned earlier, there are two or three key significant businesses, you know, really Linkem and Vitesse oil and gas, where that's where the decisions are going to be most significant. Most of the other businesses will fold into Jefferies Group or otherwise find their natural homes fairly readily.
You know, something we haven't maybe said clearly is that, you know, prior to now, for a couple years, selling beef was what everybody asked us about, and we found the right time, we were patient, and we got an exceptional value. Similarly, we're gonna achieve, we hope, reasonable values again. The movement of the merchant bank from being a separate line item and a separate, you know, focus can actually happen more readily than the list would suggest. If we have the direction on one or two of the key assets, then the direction on the entire complex will come very clear very quickly.
Thank you, gentlemen. There are no further questions.
I'll just conclude. As I started before, we are incredibly appreciative of our shareholders who have been patient with us, and who allowed us to execute the strategy. We're appreciative of our bondholders who've given us the capital to help us build our company. We are appreciative of our clients who have been incredibly loyal. I'll say most importantly for this phone call, I wanna thank all of our employees. I know a number of you are listening, and you are shareholders, you've done an amazing job through a very tough period of time. Both Brian and I, the rest of the team, we're all in your debt. Thank you very much. Have a good day, everybody.
Thank you.