Lazard Ltd (NYSE:LAZ) Q2 2020 Earnings Conference Call July 31, 2020 8:00 AM ET
Alexandra Deignan – Head of Investor Relations
Kenneth Jacobs – Chief Executive Officer
Evan Russo – Chief Financial Officer
Conference Call Participants
Devin Ryan – JMP Securities
Brennan Hawken – UBS Group
Gautam Sawant – Credit Suisse
Jeff Harte – Piper Sandler
Richard Ramsden – Goldman Sachs
Manan Gosalia – Morgan Stanley
Good morning and welcome to Lazard’s Second Quarter and First Half Earnings 2020 Conference Call. This call is being recorded. Currently, all participants are in a listen-only mode. Following the remarks, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions]
At this time, I will turn the call over to Alexandra Deignan, Lazard’s Head of Investor Relations. Please go ahead.
Good morning. Thank you [Aliza]. Welcome to Lazard’s earnings call for the second quarter and first half of 2020. I am Alexandra Deignan, the Company’s Head of Investor Relations.
In addition to today’s audio comments, we posted our earnings release and 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.
Lazard 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. They will provide opening remarks, and then we will open the call to questions.
I’ll now turn the call over to Ken.
Thank you, [Ally]. Good morning. Our second quarter and first half results reflects steady operating performance across our business in an uncertain environment. Financial advisory results for the second quarter highlighted the breadth of our advisory services. As we expected, the pace of M&A completions and announcements declined in line with the market. However, strategic discussions with clients are increasingly constructive, especially in Europe as countries ease their lockdown restrictions. A strong quarter of restructuring and capital markets advisory largely offset slower M&A activity as we serve clients with immediate liquidity issues caused by the pandemic’s economic shock. We advised on a number of the largest assignments in the U.S. energy and retail sectors. We have also completed the successful restructuring of PG&E, the largest utility bankruptcy in U.S. history.
For the first half of the year, Lazard was the global leader and announced restructuring assignments by dollar volume. We are serving clients with expertise built over decades and through cycles and capital structure, capital raising debt negotiations, restructuring And exchange offers, all supported by our global platform and industry sector teams. Our sovereign advisory practice has also seen a significant increase in activity. We were advising countries in Latin America, Africa and the Middle East on debt restructuring, and we continue to advise governments in developed economies on programs to support the private sector. In asset management, our platforms benefited from the rebound in global capital markets during the second quarter.
Our assets under management increased 11% from the first quarter. While we experienced that outflows for the quarter gross inflows were strong. Our quantitative strategies continued to gain traction, as did our convertible and international equity strategies. We continue to invest in the growth of asset management through the development and scaling up of new and existing platforms. Recently, we announced the launch of U.S. and global sustainable equity strategies, which are receiving strong demand. Our sustainable equity strategies are built on the foundation of our long standing efforts in ESG integration, where we have the unique sector-based approach to materiality assessment. We see significant opportunity for Lazard in this space and are committed to further deepening of our ESG research capabilities and investment solutions for clients.
Before I turn the call over to Evan, I want to comment on the evolution of Lazard’s day-to-day operations during the pandemic. At the time of our last earnings call, virtually all of our people were working from home in response to the global health crisis. Since then, many of our employees have returned to the office with guidelines to maintain social distancing. We have adapted quickly to a hybrid environment with a number of our people in the office and others at home.
A silver lining to this experience has been the improvements in efficiencies, internal communications and other positive cultural changes that might otherwise have taken years to accomplish. As we move forward, we are taking steps to ensure that we lock in these improvements for the benefit of all our stakeholders. Once again, I want to thank our people for their resiliency and commitment to upholding Lazard’s standards of excellence even in the most challenging conditions.
Evan will now provide more color on our second quarter and first half results, then I will comment on our outlook.
Thank you, Ken. Our second quarter results reflect the breadth and diversity of our business in a challenging market environment. Financial advisory second quarter operating revenue of $293 million was down 11% from last year, but was about even with the first quarter of this year. As we expected, M&A revenue decreased compared to last year’s second quarter. However, restructuring revenue increased sharply based on new activity and the closing of several large assignments. Asset Management operating revenue of $245 million declined 9% from this year’s first quarter, reflecting lower average assets under management in the second quarter, following the broad market sell-off in the first quarter.
Average AuM for the second quarter was $208 billion 6% lower than the first quarter of this year and 12% lower than a year ago. We finished the second quarter with a AuM at $215 billion 11% higher than the start of the quarter. The increase was primarily driven by market appreciation and positive foreign exchange movement with $6 billion of net outflows.
The quarter’s net outflows were driven primarily by emerging markets and multi regional equities. These were partly offset by net inflows in our global and multi regional fixed income strategies. As of July 29, our AuM was approximately $224 billion, reflecting market appreciation of $6.5 billion during the month positive foreign exchange movement of $4.3 billion and net outflows of approximately $1 billion.
Looking ahead across our franchise. In Financial Advisory, we continue to expect a subdued third quarter based on the pause and M&A activity during the first half of the year, with more normalized levels of activity expected in the fourth quarter and into 2021.
In asset management, we are seeing a high level of investor interest and winning significant mandates across our multi regional, global and emerging markets platforms. And we are seeing demand for both our quantitative and fundamental products across our platforms.
Turning to expenses, in the second quarter, we accrued compensation expense at a 60% adjusted compensation ratio, compared to 57.5% in the second quarter of last year. Our full year compensation expectations will develop through the year based on revenues and business mix. Non-compensation expenses of $100 million were 22% lower than the same period last year, primarily reflecting lower travel and business development costs. Our adjusted non-compensation ratio for the second quarter was 18.3% compared to 20.3% in the second quarter of last year.
Our effective tax rate in the second quarter as adjusted was 23.9%. Our effective tax rate for the first half of the year was 26.3%. We expect an annual effective tax rate for this year in the low-to-mid 20% range. In regards to capital allocation, our business continues to generate significant free cash flow, which supports our objective of returning capital to shareholders. In the second quarter, we returned $53 million of capital to investors, primarily through dividends. This week, we declared a quarterly dividend on our common stock of $0.47 per share.
Lazard’s financial position remains strong with ample liquidity and balance sheet flexibility. As of June 30, our cash and cash equivalents were $897 million up from $793 million at the start of the quarter.
Ken will now conclude our remarks.
Thank you, Evan. I will provide some perspective on our outlook and then we’ll open the call to questions. The global macroeconomic environment has improved since our last earnings call, but remains uncertain. Central Bank interventions have helped to stabilize capital markets. Fiscal measures in the U.S. and Europe were partly offset an unprecedented drop in aggregate demand. However, the shape and pace of the recovery depend in large part on the course of the pandemic, and on additional governmental stimulus which remains unpredictable.
In financial advisory we expect to see increasing M&A activity as the year progresses. Client dialogues are improving in both the U.S. and Europe. We also expect to see increase restructuring activity in Europe as Central Bank and governments scale back their economic support programs.
In Asset Management Central Bank support has helped stabilize asset prices, that volatility is likely to remain elevated. We expected the massive dislocation in markets and dispersion of returns resulting from the pandemic should create stronger demand for active management. This combined with stronger investor emphasis on sustainability positions as well for the long-term. Regardless of the pace of economic recovery, Lazard is well positioned to weather this period of uncertainty with a diversified business model, a global client base, and unrivaled expertise in strategic advisory, restructuring, and asset management solutions.
Our business model is highly cash generative, and has proven its strength and resilience across numerous business cycles. We remain focused on serving our clients well, while we manage the firm for profitable growth and shareholder value over the long-term.
Now let’s open the call to questions. Thank you.
Thank you, sir. [Operator Instructions]. We will take our first question from Devin Ryan from JMP Securities. Please go ahead.
Hey, Great. Thanks. Good morning, everyone.
Hey, good morning, Devin.
Maybe start of the question just on the restructuring strength. So you’ve seen honestly very strong ramp in deals and we can track some of that from the outside. We’re trying to get a little bit better sense from kind of the sizing and timing perspective and then how you guys are thinking about the opportunity there. If we look back, you used to provide some of the detail around the revenues. I think the prior high was about $375 million back in 2009. From the outside, it does seem like you’re tracking ahead of that. So, I just wanted to get some more perspective around kind of how you’re thinking about the upside case or just even what you are seeing in that business today. And then also, just from the timing perspective, you have a view of it does take longer to close restructuring, typically, but we are seeing, I think some deals closing this year. So just trying to think about the glide path between 2020 and 2021.
Sure, what I give you the overall themes in the restructuring and has Evan talked a little bit about the scale and timing of some of the closings? Okay. So look first, our franchise and restructuring is really quite powerful. It’s been through several cycles. It integrates not only a very I mean, I think market leading team and restructuring, but it also is able to draw from the rest of the firm both the industry groups and geographies to complement activities in the restructuring group. And that’s been one of the secrets to our success and our ability to ramp up in this area over the course of time.
In terms of this cycle, we saw a very strong activity in the first part of this year, largely driven by companies, which already were facing challenged liquidity positions in balance sheets prior to the pandemic that were accelerated by the pandemic. There’s a bit of a low right now. But our sense is that given the withdrawal of some of the stimulus activities, an unevenness of the recovery particularly in the U.S., because of the breath of the pandemic in the south and west, and now into the Midwest and the likely pull back on some economic activity that was generated in those states, when they reopened, we’re likely to see a pickup into the Fall and Winter this year.
So overall, the activity levels we think are going to be historic in that regard, and probably continue through next year. Evan you want to just go into some of the more detail there.
Sure. Happy to Devin. So when we think about the restructuring, sort of pipeline output rest of the year. So as we said, we are very strong Q2 some of that was closing for restructurings, we’re working on from the beginning of the year, that closed in the second quarter of this year, I think the significant activity that we picked up new mandates towards the end of Q1 into Q2 really play out over the course of the next three quarters.
So it’s really Q3, Q4, and then Q1 of next year. I think that’s generally the timeline that you have to look at. I’d say predominantly, you’d probably have a bigger skew towards Q4 than Q3 and that business at this point in time. But this is all very, very fluid. These transactions, as you alluded to, can move very, very quickly. And in many cases, they’ve moved faster even through the bankruptcy processes than one might have done historically.
So timing is a little bit different. I think this time around than it was last time around. You’re seeing active restructuring assignments closed quickly in the context of liability management and other types of financing solutions that are going on. And then the sort of bankruptcy longer term restructuring cycle, some of them are going a little bit quicker, some of them will go a little bit slower. So I think you’re going to see it play out over the next two to three quarters. I think every transaction is kind of different. There isn’t much of the same.
I’d say in terms of the scale and the size. I think as you talked about, the last, as Ken mentioned, this could be a very big cycle. I mean, it’s still in the early phases of knowing how that’s going to play out. I think we certainly have a very strong belief in the business right now. And certainly what we saw and the level of activity that started at the end of Q1 into Q2 of this year. As we’ve said, for our business, historically, restructuring revenues as a percentage of the total financial advisory could range anywhere from 10% to 40% plus percent in some of the real deep recession and heavy type of restructuring scenarios and I think we’re certainly gearing more at least this year and a little too early to know for next year, but certainly looks like it could build into that sort of higher end of those ranges for the for the for the next year, year and a half.
Terrific, color. Thank you guys. And then the just a follow up, dig in a little bit more on some of the M&A commentary and really the question is around just the tone and what you guys are seeing and I’d appreciate, there’s a lot of uncertainty. So it’s hard to be and maybe completely confident of what the future holds here. But we’ve been hearing a little bit of a different commentary across earnings calls here, this season where I think some companies are maybe a little more cautious, some are feeling better, and it does seem like firms with global platforms and maybe they’re levered to some of the larger companies seem to have a little bit more positive outlook than U.S. the markets or smaller deals. And so I’m curious, the outlook and how you would frame kind of maybe between whether it’s global Europe, U.S. in a large transaction, small transactions, financial sponsors just a little more flavor there it does feel like we’re hearing maybe some different outlooks from some companies.
Sure. So first, I mean, there are a lot of cross-wins here and inconsistencies across geographies, industries, size of transaction. So as you said, it’s a little hard to get a grip on overall trend here. That said, it feels to us, like dialogues have clearly picked up from the first — the end of the first quarter. The dialogues are more constructive, meaning that there’s more likelihood of activity taking place.
Financing for deals has improved, particularly for sponsor deals, it’s not anywhere back to where it was, but there is financing that’s becoming more available and some of the terms are actually becoming resembling more like what we’ve seen in the past. And, clearly the sectors that are going to be most active in our judgment are the ones that have been least affected by the pandemic directly.
So technology bio pharma as examples are least affected may even benefit to some extent from conditions associated with the pandemic. And in those sectors we’ve seen dialogue pick up. The sectors that have been most impacted travel, leisure, retail, not much M&A dialogue, my guess is as the year progresses, we may see a little distressed M&A dialogue there, but typical dialogue no.
Sponsor activity, sell side activity I should call if I call sell side activity, which is usually a measure — if one thing we look at to measure whether the markets picking up. On the smaller mid-size transactions is starting to feel a little bit better for us in both Europe and in the U.S. and Europe. It’s a little bit more across the board. It’s not segmented into one sector, but that also reflects a little bit more of the consistency in terms of the opening on the continent. And in particular, in the U.S., it seems like sell sides which had been postponed at the time of the pandemic, particularly in the sectors I described earlier, seemed to have restarted. Some of those are even nearing conclusion.
And there seem to be not — I wouldn’t say an enormous number but a group of transactions starting up now that that are starting from scratch. So overall, it’s there are a lot of cross-wins. It’s complicated. But it seems more constructive than it was a quarter ago. On the larger transactions intermittent again, but I think again, it will probably be more segmented in the industries which are — have been less impacted by the pandemic.
Okay, terrific. Well, thanks for taking my questions. I’ll hop back in the queue.
Thank you. We take our next question from Brennan Hawken from UBS Group. Please go ahead.
Good morning. Thanks for taking my questions. I’d actually like to follow up on some of those comments from Devin’s question, Ken, you gave a little color on some of the differences between the Europe and the U.S. in the small deal market? But when we look at the broad market, which is much more impacted by big deals we’ve seen and I think you made some reference to it in your opening remarks in the call Ken less bad trends on announcements, right? I mean, the market is definitely down and soft for me. But it looks like Europe is hanging in better. Can you please talk about the, what you’re seeing there, what sort of early trends you’re seeing? How sustainable you think that divergence might be? And how we should think about it in the medium-term, based on what you’re seeing so far?
Sure. So look, this is early. As I said earlier, it’s hard to generalize trends from a couple of weeks, months of activity here. But generally speaking, the outlook in Europe feels a little bit more consistent to us at the moment than the U.S. Europe is — Continental Europe in particular has just done a better job of dealing with the pandemic, and coming out of confinement than the U.S. has. And so the recovery from coming out of the pandemic has not been interrupted, the way it has been in the U.S.
And as a result of that, if you’re sitting there as a CEO or in a Boardroom, you have a little bit better ability, at least within Europe to be able to predict, you feel — you may feel a little bit more confidence about your ability to predict economic conditions going forward. That said, there’s still a lot of uncertainty everywhere.
So that’s probably the incremental difference. I think economically, again, while both Europe and the U.S. have been hit very hard by the pandemic, in the confinement, Europe is experiencing lower levels of unemployment. And for the most part, workers, consumers came out of the confinement with their savings relatively intact. So the ability to spark economic activity after that was greater. In the U.S., we have a different picture because of unemployment and we also have a different picture because of the unevenness of the pandemic across the U.S.
And as a result of that, we think there’s going to be a more uneven economic activity as we go into the Fall and perhaps the Winter. And again it’s — you can’t declare victory anywhere right now. You could easily backslide in Europe like we’ve seen happen in parts of Asia. As far as economic — deal activity is concerned, a lot of deal activity just comes down to three fundamental factors I mean, as we say equity valuations which are rich, but inconsistent again in technology and bio pharma vary, things have gotten expensive and other parts of the economy there, you haven’t seen that kind of rebound.
On financing conditions improving for deals, obviously, financing conditions for companies seeking longer term financing for their own businesses has been quite good because of the Central Bank interventions. But the deal markets improving but not anywhere back to where they were before. And then with regard to what we call confidence, that’s which is a key factor there, it really comes down to your ability to have some confidence with the economic outlook, it doesn’t have to be great, but you have to have some degree of confidence about what’s going to happen and in some estimate, some sense of narrowness around what the potential outcomes could be. And that’s still a challenge in some industries and others, it’s improved. And I think where you see it improved or in economies or environments where it has improved, you’re going to see a pickup and deal activity.
Okay, thanks for all that Ken really appreciate it. My follow up, I’d ask, we’ve seen the French Government put on a dividend restriction for companies, does that have an impact on your subsidiary dividend ending up to the parent or is that restriction just for public shareholders? And if it’s — if it is a restriction, do you think it’s going to have any impact or is it manageable?
It has no impact on us.
Thank you. That’s simple enough.
Thank you. And now we will take our next question from Gautam Sawant from Credit Suisse. Please go ahead.
Hey, good morning. I wanted to know how has the economic backdrop and pressure on M&A revenues impacted competition in the marketplace for talent? Are you seeing there’s no opportunity to achieve senior bankers? And are there any specific industries that you’re focused on.
So, I think actually, second quarter was a pretty good quarter for us for hiring I think we added, [indiscernible] five or six hires during that quarter. But it’s too early to tell. I think that was just — those were things that either were opportunistic at that moment in time and things that we had in the works. It’s too early to tell usually you don’t have a real feel for what’s going to happen with the market for talent until you get closer to year-end or after year-end. And I think we’re, frankly speaking given the ups and downs of this market, I think everybody’s pretty far away from that at the moment. But I would expect that when we do get to year-end, depending on performance growth and performance of different firms, big firms, little firms, you’ll start to get a much better feel for that move in talent.
Thank you. Now we’ll take your next question from Jeff Harte from Piper Sandler. Please go ahead.
Hi, good morning, guys. A couple for me one, on the kind of Capital Markets Advisory, Could you remind us how big a business that is for you guys? And give us some kind of indication of how strong the quarter was in that business? And I guess I’m kind of thinking at it from the perspective of it was a really good quarter for public debt and equity underwriting to that kind of flow over into the Capital Markets Advisory?
Evan you will take that?
Yes, sure. So, well Capital Markets Advisory, as we put it all together. It’s sort of one advisory business as you say, we don’t call out the specific components. And the reason for that has to do with the fact that Capital Markets Advisory in many cases can be linked to restructuring type of work. It can be linked to regular M&A type of work and others. And so this was a quarter where we were helping lots of companies Think about their financing strategy, think about their financial strategy in conjunction with their strategic activity or strategic ambitions, as well as helping them with liquidity in many cases as part of a restructuring mandate or and thinking about it in the context of overall capital structure advisory.
So it’s a hard sort of thing to pinpoint. But certainly there was a lot of activity relating to advising companies this quarter, around their financing needs and the ability for them to take advantage of what was certainly on a global basis very active underwriting very active capital markets, primary issuance across all different types of products. And so a lot of our time is spent with clients on those things. I would say it’s not, we don’t break it out specifically because it’s really part of so many different types of discussions that we’re having in so many different types of situations.
Okay, it didn’t, work from home kind of travel restriction environment. How is a kind of a lack of face-to-face activity impacting the ability of the – more strategic advisory to move from conversations to actual announcements so kind of in general, but I’d be interested in North America versus outside of North America if there’s any differences.
Sure. Well, it’s kind of interesting is on the continent, for the most part, activities or behavior is back to where it was prior to the confinement, that is people are largely back in the office meetings are taking place in person in a lot of geographies. So, that’s — so that’s first. In the U.S. and U.K., for the most part people are assuming confinement, and most activity is still conducted over video, at least in our case, almost everything is conducted over video.
And to just give an indication, we haven’t had an enormous amount of M&A activity in the market, not only us, but the market as a whole, since the pandemic unfolded. But you’ve seen deals take place. We have processes underway which are effectively virtual. And we expected that will become not maybe completely normal, but it may become the new normal for the better part of the next year or so. What was kind of intriguing to us was, we were actually kind of skeptical about the ability to undertake these vast restructurings, which are in fact quite complex, both in terms of the pressure around time number of people that are involved due-diligence, the court proceedings when they get into court, and these went along without a hit using videos. So I expect that people or jobs I mean, there may be things which are more difficult to do this way, but there seems to be an adjustment taking place.
Okay, finally, with a nearly 7% common dividend yield, we get asked a lot about the sustainability of that dividend. Looking at cash on balance sheet and operating cash flows, I mean, they remain quite strong. So they kind of sit on the outside, I mean, how bad of an environment we have to get into realistically before you’d expect maybe the dividend kind of payments to come into question.
Yes, sure. So, as you say, look, we have a significant cash-build. This quarter was fairly significant a little over $100 million from the end of last quarter, we’re sitting with approximately $900 million of cash at quarter end. So as you’re right, I think we — from a cash perspective, on balance sheet perspective, I think we’re pretty strong at this point in time. As we said last quarter a dividend is an important part of our capital management strategy, consistently with our capital management policy to return all of our excess cash to shareholders which I think we expect to continue to do. Of course, we’re going to be mindful of the environment and the volatility and the uncertainty in our forward outlook for the business. But currently, I think we’re very comfortable with the dividend, as we announced this week.
Okay, thank you.
Thank you. We will now take our next question from Richard Ramsden from Goldman Sachs. Please go ahead.
Hi, good morning, everyone. I just wanted to ask a little bit about the non-comp expenses and the non comp ratio. Obviously appreciate, [indiscernible] is probably down to close to zero. But in European comments, he talks about the fact that you do think that some of these improvements in terms of people working more efficiently and working from home may stick, so can you just talk a little bit about how you think that could lead through into long-term improvements in the non-compensation or the time or is it too soon — or is it too soon to conclude on that?
Sure, Evan you want to take this, it’s just been —
Yes, sure. Yes. So I mean, look, it’s a great question. And I would say you’re probably more right in the way you captured at the end, which is — it’s a little bit too soon to know the longer term impact. And the — in the short term, as you say, correctly travel this quarter was practically at a standstill. And so there was a significant benefit in this quarter relating to travel and entertainment. And that comes through in our marketing and business development line items, you can see which led to pretty low non-comp in this quarter.
For the second half of the year, as Ken was describing earlier, with regards to picking up of activity levels, we expect to see some continued marketing and business development improvement and so a little bit higher on that line item as we continue to get more towards normalized levels.
I think that’s probably going to be more skewed to Q4 and Q3 as you can imagine, given were a month in and still have any uncertainty in the environment that we’re living in and still pretty lower levels relative to where we’ve been historically. And with regards to longer term, I think look as we should do is we’re trying to figure out how we take the best of what we learned from the pandemic and all the ability to use technology, the ability to change the patterns of behavior with clients, the ability to interact more efficiently with clients in different ways to potentially have a lower impact on our non-comp over a longer period of time. But I think it’s, it’s a little bit early, but we hope to sort of take forward those learnings that we have from today and bring it with us as we define sort of the post-COVID world. And I think there’s going to be more to come on that discussion in the in the coming quarters.
Okay, thanks. And then as a follow up. Can you just talk a little bit about financial sponsor activity, how that’s evolved over the course of the quarter? And how active you think that could be as we head into the second half of the year in terms of the driver activity?
Sure. So clearly, the activity level international sponsors is improving as the year progresses. As the financing markets improve for deals and for those kind of sponsor deals, we should see an improvement activity there as the year progresses. The — frankly, the area that we’re really intrigued by is public to privates right now, there just seems to be increasing likelihood that we’re going to see a pickup of activity there, both in the U.S. and in the U.K. And that’s something we’re keeping an eye on.
Okay, thanks very much.
Thank you. And now we’ll take our next question from Manan Gosalia from Morgan Stanley. Please go ahead.
Hi, good morning. I was like — can you talk a little bit about your — the conversations you’re having on deals are already in the pipeline coming into this downturn? What percentage of completions in the second quarter were related to deals have already in the pipeline pre-COVID and I was curious for the deals that were already in your pipeline that have been put on hold. Can you talk a little bit about how engaged your clients are, they’re pushing to get something done as soon as people can travel a little bit and we get some more certainty in the environment. Basically, I’m just trying to assess how much of a Fall/Spring effect you could have once on deal closings once the environment changes?
Sure. Look second quarter, any activity that closed in the second quarter was probably all related to things that that have — that started last year. Very new things happen that quickly in the M&A side restructuring actually is only different in that regard and such. Right now, what we’re seeing is a combination of the two things one is there and it’s not across the Board and I wouldn’t and again, I say there are a lot of — as I’ve said consistently there a lot of cross-wins, but there are a number of processes which were postponed with the onset of the pandemic that have started again, and we would expect to reach completion now.
That’s a function really, first of the financing markets again, opening up. And also people becoming a little more confident with the outlook. I wouldn’t say completely confident, but a little more confident. And again, it’s going to be centered on industries which have had less impact from the pandemic. And then second, which is, I think, somewhat encouraging is — there have been new processes that have started over the course of the last several weeks that were not envisioned to pre-pandemic. I mean, these are literally new assignments that are picking up and starting right now.
So what’s going to be interesting to see is through these conversations accelerate, and then the pace at which new conversations begin. I don’t think I’m as worried about the virtual due-diligence as much as I am about that just the potential for dispersion of outcomes on the economy. It’s more around the certainty or the ability to project or predict what the outlook is going to be for your business or for your industry that is going to drive conversations here less has to do with the weather. you’re going to be actually able to travel or have a virtual — rely on a virtual conversation here. I really think it’s the substance of one’s confidence in the outlook.
Got it. And then on the asset management side, last quarter, you mentioned that you were surprised by the level of RSP activity that you’re seeing. And you also said earlier on the call that you’re seeing some strong growth and flows, can you talk a little bit about how you think that should impact that goes to the rest of the year?
Well, look, it’s a little unpredictable in the institutional side because of the actual funding of mandates, but the level of unfunded mandates right now is running very high on a historical basis for us, that’s encouraging. How — when exactly they fund is a little bit less certain, the demand, particularly for some of our products — our newer products in the sustainable areas encouraging as well as in the [quantum], some of the global products. So overall, it feels pretty constructive. We still have some pressure on the EM products in terms of outflows, which has been with us for some period of time here, but on the other side of it, there seems to be an increasing demand for a lot of the things that we’ve got to offer right now.
Great. Thank you.
It appears there are no further questions at this time. This now concludes the Lazard conference. Thank you.