Good morning, and welcome to Lazard's Second Quarter and First Half twenty twenty one Earnings Conference Call. This call is being recorded. Instructions will be provided at that time. On your touch tone phone. At this time, I would like to turn the call over to Alexandra Dettman, Laggard's Head of Investor Relations, please go ahead.
Good morning, and thank you for joining us today on Lazard's earnings call for the Q2 and first half of twenty twenty one. I'm Alexandra Deignan, the company's Head of Investor Relations and Corporate Sustainability. In addition to today's audio comments, We've posted our earnings release and an investor presentation, which you can access on our website. A replay of this call will also be available on our website later today. Before we begin, let me remind you that we may make forward looking statements about our business and performance.
There are important factors that could cause our actual results, Level of activity, performance or achievements to differ materially from those expressed or implied by the forward looking statements, including but not limited to those factors discussed in the company's SEC filings, which you can access on our website. RevPAR assumes no responsibility for the accuracy or completeness of these forward looking statements and assumes no duty to update these forward looking statements. Today's discussion also includes certain non GAAP financial measures that we believe are meaningful when evaluating the company's performance. A reconciliation of these non GAAP financial measures to the comparable GAAP measures is provided in our earnings release and investor presentation. Hosting our call today are Kenneth Jacobs, Lazard's Chairman and Chief Executive Officer and Evan Russo, Chief Financial Officer.
Evan will start the discussion with an overview of our financial results. Then Ken will provide his perspective on the outlook for our business. After that, we will open up the call to questions. I'll now turn the call over to Evan.
Good morning. Today, we reported record operating revenue for the Q2 and first half of twenty twenty one, driven by strong results across the firm. 2nd quarter revenue was a record $821,000,000 up 51% from a year ago and first half revenue was a record $1,500,000,000 up 33% from a year ago. Revenue for the last 12 months was a record $2,900,000,000 This high performance underscores the strength of our franchise and the breadth and depth of our business. In Financial Advisory, record 2nd quarter revenue of $471,000,000 increased 61% from last year's period, reflecting broad based activity across sectors, market cap and regions.
M and A completions in the 2nd quarter increased substantially in the Americas, Europe and Asia, as did private equity transactions. Our advisory revenue reflects a growing percentage of financial sponsor activity. Our Global Private Capital Advisory franchise also had a strong quarter serving financial sponsors with new fundraising and innovative secondary market solutions. Our 2nd quarter Restructuring revenue was down from last year's elevated level and we expect lower levels of restructuring to continue in the second half of the year given the strong liquidity across Our Sovereign and Capital Markets businesses continue to be active, advising governments and corporations on financing strategy and capital raising. Overall, our advisory business is experiencing unprecedented activity levels.
Assuming current macroeconomic conditions, As we said last quarter, we expect that our financial advisory revenue in the second half of twenty twenty one will be higher than the first half. Asset Management operating revenue reached an all time high for the quarter and first half of the year with 2nd quarter revenue of $343,000,000 up 40% from a year ago. This reflected management fees on a larger base of assets under management as well as strong incentive fees, primarily from European Equity Strategies. Average AUM for the 2nd quarter reached a record high of 276 $1,000,000,000 32% higher than a year ago and 6% higher on a sequential basis. As of June 30, we reported AUM at a quarter end record level of $277,000,000,000 29% higher than last year's period and 5% higher on a sequential basis.
The increase was primarily driven by market appreciation and positive foreign exchange movement with $800,000,000 of net outflows. The quarter's net outflows were limited to our equity platform, particularly in emerging markets. These were partly offset by net inflows in our fixed income and alternatives platforms. Gross inflows continued to be healthy across our platforms. As of July 23, AUM increased to approximately $278,000,000,000 driven primarily by market appreciation of $2,500,000,000 partly offset by negative foreign exchange movement of $1,300,000,000 and net outflows of approximately $1,000,000,000 We continue to see demand for global and international equities as well as our quantitative and fixed income strategies.
We are investing for growth across the firm. In asset management, we continue to invest in people, technology and our distribution effort, as well as the development of new and existing funds and the scaling up of our platforms. In the second quarter, We launched an investment grade convertible bond fund, our 5th long only strategy in the convertible space, an area where we are gaining significant traction. In addition, this week we announced the senior hire to build and launch an investment strategy focused on sustainable private infrastructure. We continue to see substantial opportunities to recruit talented investment teams adding strategies that are complementary to our existing platforms.
In Financial Advisory, we are driving growth with an elevated pace of strategic recruiting. Year to date, we have made more than a dozen senior hires, including several high level senior advisors to increase the firm's breadth of revenue sources and connectivity. Now turning to expenses. Even as we invest for growth, we are maintaining our cost discipline. Our adjusted non compensation ratio for the 2nd quarter was 14.5% compared to 18.3% in last year's 2nd quarter.
Non compensation expenses were 19% higher than the same period last year, reflecting increased business activity over last year's depressed levels. We continue to accrue compensation expense at a 59.5% adjusted compensation ratio in the 2nd quarter. Regarding taxes, our adjusted effective tax rate in the second quarter was 25.2%. For the first half of the year, it was 26.7%. We continue to expect this year's annual effective tax rate In the Q2, we returned $161,000,000 which included $111,000,000 in share repurchases.
We expect to continue our share repurchase program, utilizing our cash flow from operations. Our total outstanding share repurchase authorization is now approximately $339,000,000 Ken will now provide perspective on our outlook.
Thank you, Evan. The global macroeconomic environment continues to strengthen and market conditions remain excellent for both our businesses. Even as the course of the pandemic remains uncertain, business conditions in most of the developed world are normalizing. Economic recovery continues to be underpinned by unprecedented support from central banks and fiscal policy. As CEOs, boards and investors look past the short term uncertainties, They are increasingly confident in the longer term outlook.
The forces driving global strategic activity remain in place. Technology driven disruption continues to be a catalyst for M and A across industries. The global push to lower carbon emissions is an emerging catalyst. The pandemic is driving structural changes in the real economy, shareholder activism continues to evolve globally And there is an abundance of private capital being put to work alongside strategic capital and SPACs. Our advisory business is in high demand in this environment.
We are serving clients with the most sophisticated capabilities and deep insights into local markets reinforced by expertise from global sector and specialty teams. In Asset Management, we entered the second half of the year with a record level of assets under management. Low interest rates continue to drive demand for risk assets, including equities and corporate and emerging market debt as well as alternative investments. Institutional investors continue to seek sources of differentiated alpha. Our Asset Management business is especially well positioned in this environment with a diverse array of innovative strategies and solutions for a sophisticated client base.
We see significant opportunities for productive growth across our businesses and we continue to invest in people, capabilities, technology infrastructure to enhance our competitive edge. At Live Edge. We remain focused on serving our clients well while managing the firm for profitable growth and shareholder value over the long term. Lazard's people are returning to the office and meeting clients in person with greater regularity, which is boosting spirits across the firm. Even as we hope for a continued lifting of quarantines and travel restrictions, we have proven our ability to serve clients in both fully remote and hybrid environments.
In closing, I want to thank all my Lazard colleagues for their perseverance and dedication during these unprecedented times. They are serving our clients with outstanding financial advice and solutions and they continue to be remarkably productive. They are proving day in and day out that Lazard's greatest asset is our people. Now let's open the call to questions.
We'll pause for just a moment to allow everyone an opportunity to signal for questions. We can now take the first question from Devin Ryan of JMP Securities.
First question just on Europe And what you guys are seeing there, I guess, near term and then also kind of the bigger picture, maybe longer term opportunity. And I guess where I'm coming from here is, If we look at European M and A volumes kind of post financial crisis, they dropped by roughly half And never really fully recovered. And it sounds like you're seeing maybe what feels like a more durable recovery there and more in the early The innings of that or at least that's what it feels like. And so I'm just kind of curious how you would frame the potential for recovery in Europe and if there's any that you can provide whether it's productivity of European Managing Directors relative to North America or kind of The level of upside that you think we could see to the extent there is a more sustained recovery there?
So the shorter answer is yes, we're seeing a significant recovery in Europe right now and across the board. It's not limited to one country. We're pretty much seeing it across the board in Europe. It's a pretty healthy recovery because it's not really driven by just A couple of big transactions. There is obviously a fair number of reasonable sized transactions, but we're seeing an enormous amount of sponsor activity, which we're playing a significant role in.
And we're also seeing a fair number of midsized M and A by strategics as well. And we think this is going to continue. 1 of the key drivers in Europe, which is going to underpin a lot of the activity there in the years going forward is going to be the decarbonization that's going on in the economy generally. I think European companies are particularly attuned to this and are repositioning Quite quickly to take advantage of, in some cases reposition in other cases, what's going on in the economy. But generally speaking, It's a healthy recovery.
At the core of it is probably the sponsor activity, which is across Europe right now. We've got strong private debt markets, which are helping that thrive and this should continue for a while. On productivity measures, I'd say the fee levels in Europe are still not where they are in the United States, but at the same time, I'd say our productivity numbers Looking more and more similar to what we've seen in the U. S. And that's the first time in a long time.
Yes. Okay. Terrific color. Thanks, Ken. And just a follow-up on capital return and capacity, nice to see healthy buyback In the Q2, it sounds like there's still an appetite there.
And I don't know if there's any other frameworks to think about kind of capacity For capital return and preference between buybacks or even thinking about your specials as capital Hopefully, build throughout the remainder of the year.
Evan, you want to take that? Of course, of course.
Yes, I would say To the second part of your question, Devin, we're definitely more focused on share repurchases than we are on the special dividend as we have for the last couple of years. In which we've put more capital to work in share repurchases. And as you said, look, we bought back 2,400,000 shares in this quarter. We were trying to do is sort of spend down the excess cash. We sort of hinted to that last quarter that we were going to try to buy around $100,000,000 We spent about $111,000,000 buying back shares Quarter on top of the 2,900,000 shares we bought back in the Q1.
So obviously getting a lot of share repurchase done earlier in the year. As we said, we're going to continue to focus on share repurchases throughout the rest of the year through the excess cash that we're generating in the business, probably more leaning towards the Q4 time Given the amount we already bought back this year, but we'll see. It depends on cash generation, the excess cash flow in the business. And as we always do, we'll return it back to shareholders.
We can now take our next question from Manang Gossalia from Morgan Stanley.
Hi, good morning.
Good morning.
Yes. So clearly a strong quarter here by any measure. Can you give us a little bit more color Maybe what drove the advisory revenues this quarter? Obviously, M and A is firing on all cylinders, but how much did restructuring and Capital Markets Advisory contribute to the strength this quarter?
Sure. So this was an M and A quarter, clearly. Restructuring is off compared to last year and the restructuring climate is more muted than obviously it was at the beginning of the pandemic, given the very strong credit conditions. And it's probably going to stay that way over the course of the next several quarters unless We see some weakness in some of the sectors that we're counting on a recovery, a strong recovery that could be travel, leisure, etcetera, interrupted By the pandemic, but generally speaking, this is an M and A this has been driven by M and A and the rest of the year should as well. What we're seeing in the M and A markets is just at least for Lazard, it's broad based.
We're seeing it across geographies, U. S, Europe. We're seeing it across industry groups, Virtually every industry group firing and what's particularly gratifying right now is the breadth of the origination at Lazard across the firm. It is Historically, like most places, you get a lot of concentration. Here, I've never seen it this broad at Lazard in the whole time I've been And that's very gratifying and very encouraging.
I think one of the areas where we've seen a big pickup in activity, which we expect into the future is in sell sides and in coverage of private equity. And that's something which we pivoted to, say about a year and a half, two years ago and it's really starting to pay off right now.
Great. Just maybe as a follow-up to that, How is the macro environment factoring in the client conversations? Europe, as you noted, is rebounding nicely, but There's heightened concerns around the delta variant and in the There are concerns around antitrust and the likelihood that tax rates will move up next year. What's To the level of, I guess, urgency you're seeing from clients in pushing deals through by your end?
Okay. So look, each of them have different what I would describe is almost clientele effects. And the antitrust discussion, this is not new. This has been hanging over the sophisticated part of the market now From several months before the election, post election and obviously getting a lot more public attention now. But There really aren't a lot of surprises about the choices that have been made in terms of antitrust roles in this administration.
And so This heightened focus is something that I think has been anticipated by many of the larger companies and you can kind of see it in The nature of the deals that have either been interrupted obviously, but the ones that either haven't taken place or for that matter even the ones that have place probably more of awareness about a more difficult environment for consolidating very visible, very big transactions. That's where the focus is likely to be on the regular way stuff that we're seeing, the activity that's really driving the M and A fee pool right now. There that's not likely to have as this kind of enforcement is not likely to have as much impact there. But look, it's something that we all have to pay attention to. With regard to the Delta variant, obviously, that's a great concern from a health standpoint globally.
But one thing that is Increasingly apparent is that all of them in the developed world, the major economies are just getting and businesses and people are just getting better and better at adjusting to these Interruptions, this is going to be something we're going to be living with for a long time and I think increasingly businesses are adapting to that. There are going to be parts of industry, I'd say Travel, leisure, entertainment that are at more at risk than other parts because of this, but that's a concentrated part of the economy. I don't think it's going to be as broad based. But Obviously, if we start to see another variant that starts to interrupt the ability of the vaccines to be effective, That's a different landscape. But for now, it's manageable.
And I forgot the third question you had. There were 3 parts to it.
No, no, that was it. I appreciate it. This is great color. Thank you.
Good, good.
We can now take the next question from Steven Chuegak from Wolfe Research.
Hi, good morning.
Hi, Stephen.
Hi, Ken. I was just hoping to dig a little bit deeper into some of the comments you made relating to sponsor activity. Some of your competitors are perceived to have more exposure to this area, but I think it's pretty evident based on the backlog trends and some of the deal announcements that you have a really strong sponsor Franchise. I was hoping you can give some context as to how you stack up relative to some of your peers and just the strength of your relationships with With some financial sponsors, given how much activity we're expecting in that space?
Okay. So look, I don't really have A detailed view of how our peers line up there and I'm not really I don't usually like commenting on them. So I'll focus my remarks on us. First of all, we've always had a very strong sponsor business in Europe. That's been an area where probably our sponsor revenues have historically matched the market revenues.
And especially the case on the continent, it strengthened recently in the UK. In the U. S, even though we were very early Sort of the mid market sponsor universe with our foray our acquisition of Goldsmith Agio about a decade ago, I think we were up till about a couple of years ago under indexed relative to the fee pool there. And over the last couple of years, we've been pivoting Quite a bit of attention and resource to covering that market in the U. S.
And it's really starting to pay off. And that's something which I think We'll continue to drive activity going forward. In addition to that, obviously, we have a very strong fundraising group. Our private capital advisory group is really one of the premier groups on The Street. And that combined with our focus on private equity, that group, which has given us tremendous insight into what's happening in that market and has been really at the cutting edge and pioneering many of the transactions that are taking place in the secondary market.
Of these continuation funds has really given us a boost in this marketplace as well.
Thanks for all that color, Ken. And My follow-up, I just wanted to ask on the STACK capital that needs to be deployed. You talked about that as a potential tailwind activity. Some investors are just growing increasingly skeptical that the significant amount of SPAC fundraising that we've seen is just chasing a dearth of quality targets. And I was hoping you could just share some of your own perspective on how you see that unfolding and maybe the implications for No, the SPAC is being used as a vehicle more broadly, as a way to engage in M and A activity.
Sure. So the SPAC market is going to evolve. I mean, we've already seen the evolution of the market over the last several months or so. If it survives, which I think it will, there will be a lot closer, What I'd say scrutiny of it by regulators and by market participants, but assuming it Continues to evolve and survives, which I expect it will, it's going to become more institutional in nature. The players that are going to be most successful are going to be the ones with The most sophistication, the most resource, the best ability to do due diligence and such.
And I think that's going to improve Both the quality of the deals that get done and it will also shift over time I think the targets. I think what we're going to see over time Is the shift in targets to be something that looks a little bit more like what's traditionally done in the IPO markets? You'll see probably more Established companies, you'll probably see corporate carve outs. You'll probably see the SPAC being used as a vehicle to allow a couple of 2 private companies to merge or a joint venture to get public. And I think this is the direction it's going to head if it survives, which I think it will.
And it is proven that there are parts and aspects to the SPAC process that make it a great complement to the IPO markets, But it's got to mature a little bit. And I think that's what's underway right now.
That's great color, Ken. Thanks so much for taking my questions.
Sure.
We can now take the next question from Richard Ramsden of Goldman Sachs.
So good morning, guys. So Ken, we've heard from a number of your peers that this is a particularly competitive recruiting environment. So I was hoping that you could Share your perspectives on the economics of recruiting advisers today and how that's evolved given that presumably they're more expensive, but they're also More productive. And look, has any of the dynamics in terms of recruiting advisers changed in any way your thought process around some of your expansion plans? Thanks a lot.
Sure. So let's break this into 2 parts. I think one part is on the more junior bankers and the second is on the more senior bankers. I'd say the market for younger bankers, middle level bankers is as competitive as I can ever remember it. I mean, this is probably Not too different from what we all experienced at the those of us that were in the business around the time of the dotcom.
Part of it is driven just By the demands of investment bank of the investment banks and how well people are doing at the moment, part of it is that there are just a lot of other opportunities in the That are drawing people away from our industry and part of it is just kind of the reaction to the pandemic being shut in, being cut off, Some of the attachments to firms are less than they used to be. So this is a tough environment, both in terms of getting talent, retaining talent. My guess is that will translate to some extent into expense over time. On the more senior front, I think it's differentiated between different firms. We've done so far this year, I think it's more than a dozen senior hires, many of which haven't yet been announced.
But we're finding that our platform is actually quite attractive right now and that we're doing it in a way where we think the economics make sense. And we see a lot of opportunity to expand right now and we're not having that much difficulty Attracting talent. Now that could change, but for the moment, it's pretty good in that regard. I can't speak to others' experience at the senior level, but that's been ours.
Okay. Thanks a lot. And then perhaps just as a follow-up to that. I mean, presumably at this stage, the 59.5% comp accrual you think reflects The pressure that you're seeing in terms of the cost of talent?
Evan, do you want to take that?
Yes. Look, as you know, Richard, the comp ratio of 59.5% is our best estimate and we have to look at that every quarter. And we'll see how things develop As the year progresses, but as you know comp decisions for us, the big part of that really happens in Q4. That's really where we have The best picture of the way the full year is going to turn out. And the full year always depends on revenue growth offset by the pace of investments, as you're saying.
So As we're continuing to invest significantly into the firm, we're seeing this as a really great opportunity for us. As Ken was Just mentioning a really terrific opportunity to take advantage of the market, the marketplace for Lazard and just to bring on an accelerated number of hires. And so that goes into the figure and we'll see how
Okay. Thanks a lot. That's very helpful.
We can now take the next question from Brennan Hawken of UBS.
Good morning. Thanks for taking my questions. First, just on the advisory side, given some of those comments about the recruiting environment and whatnot, Where was the advisory MD headcount now or at the end of the quarter? And Do you have a pipeline or an expectation you've added a decent amount of talent? Are you largely done with the ads for this year?
Or do you think that there's still more coming?
Evan, you want to take that?
Yes. So we had 180 on MDs in the Financial advisory business at the end of the second quarter, obviously, that's up significantly from where we were at year end. I think we're about 171 at Point in time. And as we said at the beginning of the year, we're targeting 10 to 15 net increases this year, obviously, Through the promotes that we do, it's obviously a significant portion of our growth that has been in the past years as well as especially this year with our significant promote class in As well as the external hires, as Ken mentioned, we've been very successful at bringing people on. So I think we're on track for that.
As Ken said, we'll see if we can get there Through the end of the year, but we've made significant progress. And I think that that's our hope to achieve that. And we've made some significant progress already by mid And there's a few people that will come and go through the end of the year. And obviously, there's some of the hires that we've been haven't been announced yet, haven't really joined yet. So they'll come in as well.
So we're on track and I think the 10% to 15% number still is our best estimate for the year.
Got it. Okay. Thank you. And then I believe, Ken, you flagged a lift out in your commentary. And this was a big theme that you had mentioned Earlier in prior calls, what's the updated view on the market for lift outs and bolt ons and asset management?
We hear a lot about the competition for talent On the banking side, not as much on the asset management side. So is it as intense there? Or is that maybe a more attractive or fertile field, so to speak, to Pickup people and capabilities.
We think it's a remarkably attractive time to be doing what we're doing. There's obviously been a lot of displacement as
a result of
the changes in asset management over the Decade, last several years in particular, had been passives, pressure on concentration of managers, pressure on fees, correlation of markets and asset classes. And so consequently, if you take a look at the landscape of smaller hedge funds, hedge funds with Only a few $100,000,000 or less under management, asset managers, loan only asset managers the same way. There's just 100, if not 1,000 of them out there today. And we have, I think, a unique platform out there. We're neither for a $1,000,000,000,000 plus Asset manager, what we're doing doesn't move the needle.
For a smaller asset manager, oftentimes they don't have the breadth of distribution, the capabilities around IT, compliance that are all increasingly necessary to scale your assets, especially to an institutional base. So what we're seeing is a great flow of smaller asset managers, smaller hedge With capabilities oftentimes both long and short that are potentially attractive to our platform. And our goal is to kind of add 1 or so a quarter, Build a portfolio of these capabilities. Hopefully, we'll be able to scale most of them, some of them, But there should be a few that will do very well. And that's a source of both growth for us in the future.
We can pick these up, I think on very reasonable terms, it's a source of growth for us in the future and also it brings capabilities to the firm that otherwise would take an enormous amount of investment. And so it's quite an attractive approach for us right now. And we're seeing a great flow and we expect to continue to see that for some time.
Great. Thanks for that color, Ken.
Sure.
We can now take the next question from Jeff Harte from Piper Sandler.
Hey, good morning guys. A couple on the asset management side. I guess, first of all, We continue to see outflows, granted that the trend has been better. But at what point in time do the Outflows kind of turn into inflows? And when do you think or do you have a feel for when the emerging market kind of equity outflows may come to a stop?
Look, if I could pinpoint that, if I could tell you that, it'd be wonderful. But look, a couple of things in this regard. One is they are abating. The trend has been a little has obviously gotten a little bit better. 2nd is performance in a couple of the challenge funds has really improved over the last couple of months as have For a lot of value managers, so that this has been a better time for some of the strategies that have some of the strategies or particular strategies that have been under pressure.
So hopefully that will abate some of the pressure there. And then obviously, it's sort of the law of larger numbers, which at some point, It just becomes less of a contributor to what's going on. I mean throughout this period, our gross inflows have been robust. And we obviously have a number of strategies,
which we're
that we've launched and that are doing well. I mean, one of the ones that we alluded to in the transcript was the or the earlier remarks was around converts, which has done remarkably well for us over the last several years and has been an area of real growth and there are a bunch of others that are in the pipeline that we hope to get the same from.
Okay. And sticking with asset management, when we kind of look at fields, I guess, 2 things. 1, the Calculated management fee yield from the outside at least picked up this quarter after it had been kind of ticking down for a while. Is there much to read into that beyond maybe mix? And I guess The second leg of it would be on incentive fees.
I mean those just keep coming in so strongly. Should we be thinking of that as being a more sustainable Higher revenue line as opposed to just good performance the last few quarters are we driving surprisingly good upside?
Evan, you want to take that?
Yes. Look, on the basis points, fee rates, Jeff, I would say the majority of it as it has been for the last couple of years, The largest movement that you're going to see there quarter to quarter always is driven by sort of the business mix, the asset mix, sometimes the vehicle mix that's going on there. As you start to see some of that move around, you're going to have that change quarter to quarter over time. But as you said, I mean, as the portfolio shifts, you're going to see Changes, it's sort of an output, not an input. And so, we've seen a lot of change over the last couple of years in our asset mix.
As alluded to some of our higher fee platforms have come down a little bit relative to some of the things we've had significant strength in, such as quant and fixed income You've seen the growth we've had there. So that's just naturally going to change around the basis points. With regards to incentive fees, I would say, yes, it's our 3rd Straight quarter where we've had significant incentive fees. I mean, it's across a broad range of strategies. But as I said before, it's driven by a couple of European equity Folios that were very, very strong this quarter, pretty idiosyncratic.
It's hard to kind of talk through this and sort of give you an indication of how that's going to turn out from quarter to quarter. The outlook for us really always depends on the market performance. 20% of our AUM have the potential for incentive fees. And so that all different types of strategies that will come into the mix. Most of them most of these incentive fees will generally crystallize or potentially get Realized in Q2 and Q4 as you know historically.
So I'd expect Q3 to be a little bit lighter, but we'll see where market performance goes for the rest of the year and hopefully pick up Trend a little bit in Q4 and hopefully I think it speaks to the performance of a lot of our funds and how well they've done over the last couple of years. Okay. Thanks, guys.
We can now take the next question from Jim Mitchell from Seaport Global.
Hey, good morning. Maybe just circling back to the investment spend, you guys obviously have a very Platform, but you're accelerating hiring. Can you maybe just kind of discuss where you see the most kind of white space for new hires? You've obviously spent a couple of years on financial sponsors, particularly in the U. S.
Where else do you see opportunity?
Okay. Let's talk advisory first and then turn a little bit to asset management. On the advisory side, Look, the focus is going to the focus has been on areas where we see What I would say is exceptional growth over the next couple of years in either because of the specific industry segment or alternative because of some dynamics around capital flows and such, or to plug a hole, an area where there's a particular weakness in our franchise where we need to upgrade or we see an opportunity to upgrade. So the areas which in some ways are obvious are financial sponsors, obviously, things around alternative Capital, this is just becoming an increasingly important part of the capital flows in the M and A world. And so anything to do with that is going to be an area of interest to us.
Obviously, the sectors where we're going to see accelerated growth, that's biopharma, technology, The shift to a carbon free world, how you play that renewables, I mean, these are all areas where we're seeing Growth Business Services in particular is an area where there's a lot of activity because it covers a wide range. It's very segmented and such. And so having expertise in there is important. Geographically, I think we're pretty balanced and there if we see particular areas where there's a lot of growth, yes. We've added capabilities over the last couple of years in some of the emerging growth fundraising areas where we think there's a lot still a lot of opportunity Going forward, some of the capabilities that complement our core M and A franchise, The shareholder advisory business, ESG advisory, I mean, these are all areas that continue to be interesting growth areas for us.
Turning to asset management, there are probably 3 or 4 areas where we've seen opportunities for investment. 1 is Expanding our ability to penetrate the more professional part of the retail channel, that's something where we're We'll be underrepresented relative to the strength of our traditional institutional platform that's somewhere where we're doing hiring, Complementing some of our core strategies in quant and traditional strategies in quant and thematics And adding capabilities in ESG as areas that have been important to us, those are all areas of strength and we're just building on that. And of course, what I alluded to before about some of the investments in these new platforms through a roll up of some of these smaller hedge funds and asset managers, where there's a lot of opportunity at the moment.
Yes. So that's a long list. I appreciate that. Just maybe one follow-up on European Restructuring. I think you had talked about how they had been a little bit lagged in the recovery.
There might be a little bit of a lag in the Restructuring business, but given the capital markets environment, it seems like that's probably not the case. So just how are you thinking about restructuring overall?
Do you see
a second wave at some point? Everyone has a different opinion. I'm just curious of yours.
Yes. Look, in the near term, as long as the macroeconomic Environment stays as robust as it is and you have credit conditions staying as strong as they are. The restructuring environment is going to be muted, save for a few sectors that are having that have a difficult time recovering either because of a resurgence in a pandemic in an area that interrupts travel, leisure, entertainment and such. Balance sheets are actually quite complicated. Capital structures are quite complicated.
So as we start to see In the macro environment in the future, if we see a softening or you see some kind of interruption in the credit markets or the markets generally, Then the restructuring activity should pick up pretty significantly and probably pretty steeply because of just the complexity of capital structures. But for the moment, I think or at least for the 4th year, next few quarters or so, I think the restructuring environment is going to be pretty muted. It's going to be concentrated in areas where there's A particular threshold of pain, but that's not going to be a general pickup. I mean the other area to keep an eye on is what happens because of de carbonization to certain industries, that's something to keep an eye on because I think that's going to proceed a lot quicker than people expect.
Okay, great. Thanks.
This concludes the question and answer session. Thank you, everyone. This now concludes the Lazard conference call.