Lazard Ltd

NYSE:LAZ

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, and welcome to Lazard's Full Year and Fourth Quarter 2018 Earnings Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. Following the remarks, we will conduct a questions-and-answers session. Instructions will be provided at that time. [Operator Instructions]

At this time, I would like to turn the call over to Alexandra Deignan, Lazard's Director of Investor Relations. Please go ahead.

[Alexandra Deignan, Director of Investor Relations]

Thank you, Simon. Good morning, and welcome to Lazard's earnings call for the full year and fourth quarter of 2018. I'm Alexandra Deignan, the company's Director of Investor Relations. In addition to today's audio comments, we've posted our earnings release and an investor presentation which you can access on our website at www.lazard.com. 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 measure 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 some opening remarks, and then we will open the call up to questions.

I will now turn the call over to Ken.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Good morning. Today, we reported record annual results for 2018. Both our businesses achieved record annualized operating income despite significant market volatility. For the year, we generated record earnings from operations even as we increase our investments for growth.

These results underscore the strength of our franchise and the breadth and depth of our business. We are delivering highly differentiated advice and solutions to our global client base in every major region in the world.

Our Financial Advisory business generated record annual operating revenue for the fourth year in a row. Strategic advisory revenue grew 26% in the fourth quarter and 17% for the year. We gained market share in global M&A as our announcement volume increased 44% compared to the market's 16%.

In 2018, we advised on 51 announced M&A transactions valued at $1 billion or more, compared to 50 the year before. We advised on 5 of the 10 largest M&A transactions announced globally and 3 of the 10 largest completed transactions.

We continue to be a leader in global restructuring and debt advisory assignments. In 2018, we advised on many of the world's largest most complex restructuring challenges for corporate clients. All of our Financial Advisory practices are active and revenue in every major region was up in 2018.

Our shareholder advisory practice continues to win assignments in the U.S., Europe and Asia. Our Sovereign and Capital Advisory business continue to advise governments and corporations on financing strategy and Capital Raising. And private Capital Advisory has been a leader in the growing market of the secondary fund placements as well as new fundraising.

We continue to see growth opportunities across the business and have been building our professional base accordingly. In 2018, we named 10 new managing directors globally and recruited 10 MDs and four senior advisers in North America and Europe.

Our Asset Management business generated record annual operating revenue In 2018, we named 10 new managing directors globally and recruited 10 MDs and four senior advisers in North America and Europe.

Our Asset Management business generated record annual operating revenue in 2018 slightly higher than the prior year in a challenging environment marked by periods of high volatility. Our investments in new strategies and platform extensions continue to bear fruit. Our quantitative convertible and global equity strategies all achieved net inflows for the fourth quarter and full year. We continue to invest in the growth of Asset Management through the development and scaling up of new and existing platforms and expansion of our distribution globally.

In January, we launched our newest strategy Symbiotic Alpha which lends quantitative and fundamental investment techniques for proprietary insights on industries and companies. In 2018, we launched new funds and alternatives real asset, fixed income and international equities. We have reinforced our EST expertise with new global co-heads in New York and London. We continue to expand our Europe and Asian distribution including new offices in Amsterdam and Melbourne and we have brought on several new investment groups including a new SAI capability for our alternatives platform.

Evan will now provide color on our financial results and capital management, and I will comment on our outlook.

[Evan Russo, Chief Financial Officer]

Thank you, Ken.

Lazard's full year and fourth quarter results reflect the stability and continuing growth of our business. Full year operating revenue in 2018 was a record $2.75 billion, 4% higher than the prior year. Diluted net income on an adjusted basis for the year increased 10% to $4.16 per share a record level.

In Financial Advisory, we completed the year with a record $1.5 billion in operating revenue, up 9% from 2017. As we anticipated, the second half of the year was stronger than last year second half. The increase was driven by broad-based strength across our Strategic Advisory services especially in M&A.

Annual restructuring revenue declined from the prior year high level reflecting a more normalized level of activity for current market condition but our global franchise remain quite active. Financial Advisory fourth quarter revenue increased 19% over last year's fourth quarter reflecting strong increases for both M&A and our private capital advisory business.

In Asset Management, record annual operating revenue of $1.2 billion was slightly higher than last year's record level. For the fourth quarter, operating revenue declined 17% from last year's record level as global market volatility affected valuation across all asset classes.

Management fees increased 2% year-over-year reaching a record level. In the fourth quarter, they decreased 6% sequentially from the third quarter of 2018, primarily reflecting the broad-based market decline. For 2018, our average management fee was 49 basis points down from 51 basis points in 2017. The decline primarily reflects the change in our mix of assets.

Market depreciation had the greatest impact on higher-fee strategies such as emerging market while at the same time we experienced increased demand for our quantitative and fixed income strategy.

Incentive fees for the year were $21 million compared to $46 million in the prior year. Fourth quarter incentive fees of $1 million versus $90 million in the fourth quarter of 2017 reflected our general long bias in a declining market environment.

Average AUM for the fourth quarter was $225 billion, down 8% from last year's record level and down 6% sequentially from the third quarter of 2018. The sequential decrease was driven primarily by market depreciation of $21.1 billion and net outflows of $3.2 billion.

For full year 2018, we had net outflows of $4.9 billion, primarily from our local and multiregional equities platform. Gross inflows remain strong across our investment platform, in particular in global, quantitative and convertible strategy.

We finished 2018 with AUM of $215 billion. But as of January 25, 2019, AUM was approximately $226 billion. The increase was driven by market -- $90 million and net inflows of $660 million.

Beginning this month we will start reporting AUM on a monthly basis. Given the institutional nature of our business, flows can be lumpy from month to month, but the average AUM is a good directional indicator. We will issue the monthly reports in our press release on or around the eighth business day of each month.

Looking ahead across our franchise. Asset Management entered 2019 with AUM of $26 billion lower than its average in 2018, which will create tough comparisons from last year's strong first half. However, the new year is off to a good start with AUM up $11 billion and modest net inflows.

In Financial Advisory our current level of activity is strong. However, given the global slowdown in announcements over the last few months, we had challenging comparison of last year's record first half.

Turning to expenses. Our compensation ratio for 2018 on an adjusted basis was a record low 55.1%, down from 55.8% in 2017. On an awarded basis, our annual comp ratio was 55.8%, up slightly from 55.6% in 2017. The awarded comp ratio accounts for all compensation committed to in a given year irrespective of deferrals.

Both our adjusted and awarded comp ratios were at the low end of our targeted range, reflecting our continued cost discipline even as we make significant investments in the business.

Adjusted non-compensation expense for the year rose 5%, reflecting our increased investments in the business, primarily in our technology infrastructure. For the full year 2018 our non-comp expense ratio was 17.6% remained well within our target range.

In the fourth quarter, non-comp expense was $60 million higher than last year's level. The largest driver was higher pension plan expenses, mainly resulting from new accounting guidelines and the increased technology investment, which we've highlighted throughout the year.

With our continued focus on revenue growth and cost discipline, we delivered operating margin expansion in 2018. On an adjusted basis, our operating margin was a record 27.4% for the full year, up from 26.8% in the prior year.

Regarding taxes. Our 2018 effective tax rate was 22.7%, down from 24.1% a year ago. This was in line with our expectation of an annual effective tax rate in the low 20s. For 2019 we currently expect an effective tax rate in the mid-20s.

Turning now to capital allocation. We continue to generate strong cash flow to support return of capital to shareholders. In 2018, we returned over $1 billion, primarily through a combination of share repurchases and dividend.

Taking into account shareholder feedback, we are allocating significantly more capital to share repurchases, leading to a reduction in the levels of our extra cash dividend at year-end.

In the fourth quarter of 2018, we opportunistically bought back 6.4 million shares for a total of 12.2 million shares repurchased in 2018. As a result of our repurchase program, our fourth quarter diluted weighted average share count declined by 4% from the prior year to 126.8 million shares.

Even after our high level of repurchases, strong cash flow in 2018 recorded an extra cash dividend of $0.50 per share. Yesterday, we declared dividend totaling $0.94 per share comprised of a quarterly dividend of $0.44 per share plus the extra cash dividend.

In 2019, we expect to continue our share repurchase program at a minimum to offset potential dilution from year end equity grants. Our total outstanding repurchase authorization is now $510 million following yesterday's additional authorization by our Board of Directors.

Ken will now conclude our remarks.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Thank you, Evan. A few words on our outlook before we open the call to questions. The global macroeconomic environment continues to have solid fundamentals for the near-term despite increased geopolitical risks and market volatility. While global growth estimates have been revised modestly downwards, CEOs and Boards have generally constructed in their outlook for 2019, many emerging markets and their currencies have been down in the recent weeks.

In Financial Advisory technology-driven disruption continues to be a catalyst for strategic activity across the industry. Shareholder activism has become a global phenomenon with record number of campaigns launched in Europe and Asia-Pacific last year. We are well-positioned in this environment with the most sophisticated strategic and shareholder advisory capabilities and deeply established presence in local markets reinforced with expertise in global sector and specialty teams.

In Asset Management, institutional investors are increasingly dividing their portfolios between low-cost passive strategies and high valuated asset strategies. We have built our investing franchise an expertise in markets that will reward deep fundamental research and we continue to invest in people and technology to reinforce that investment edge.

We see opportunities for productive growth across our businesses and we are allocating our resources accordingly. We are aggressively increasing our investment in our technology infrastructure and data science capability to enhance both our Asset Management and Financial Advisory businesses.

We continue to hire strategically while developing and promoting our outstanding performers. We remain focused on serving all our clients well while we manage the firm for profitable growth and shareholder value over the long-term.

Alex, we'll open the call to questions.

[Alexandra Deignan, Director of Investor Relations]

Operator?

[Operator]

Thank you. [Operator Instructions] We'll now take our first question from Richard Ramsden from Goldman Sachs. Please go ahead, your line is open.

[Richard Ramsden, Goldman Sachs]

Okay. So, good morning everybody. Could we just start with the capital returns? So, conceptually how should we think about the change in the composition of capital returns? Should we just think of this as opportunistic and where the share price is? Or does this represent more of a broader shift in philosophy of capital returns?

[Evan Russo, Chief Financial Officer]

Sure, hey Richard, it's Evan. I'll take that one. So, as we mentioned, we returned a significant amount of capital to shareholders in 2018 and we've always taken a balanced approach to thinking about how best to return that capital to shareholders.

Our philosophy remains the same in terms of making sure to return all excess capital to shareholders and the question is how to do that. And we've always taken a balanced approach between dividends and share repurchases. As we mentioned last quarter, we took into account some of the shareholder feedback when we came up with our view this year based on the share price and the market availability that we said we were going to tilt towards more share repurchases as we did and we bought back a significant amount of shares 6.4 million shares in Q4 as we mentioned at the same time reduced our special dividend. So, clearly, we are tilting more towards the share repurchases to take advantage of markets and we look forward to continuing to stay focused on returning the capital to shareholders in the most efficient way possible.

[Operator]

We'll now take our next question from Brennan Hawken from UBS. Please go ahead. Your line is open.

[Brennan Hawken, UBS]

Good morning. Thanks for taking the question. So Evan, I believe you indicated in your comments that reported revenue and restructuring was down on strong last year. But could you comment on the outlook? Ken, I believe you indicated that continued technological disruption feeds into not only strategic M&A but potential for restructuring. There was a large – there is a competitor of yours that has a prominent restructuring business that in their call highlighted activity picking up in APAC on the back of some of the trade disruption. So, how should we think about the outlook for restructuring? And is it reasonable to continue to believe that we could see – or is it reasonable continue to expect decent M&A along with a pickup in restructuring for a time like we saw a couple of years ago? Thanks.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Yeah. So great question and one we thought a lot about over the course of the last several years. First, this has been an unusually – an unusual period for restructuring because we've been in a very strong macroeconomic cycle now really since 2014. And we've had more or less pretty good restructuring revenues during this whole period of time. And it's been choppy. Obviously 2014, 2015 and 2016 were strong. 2017 still pretty good. 2018 more muted. But it's still been, I would say, higher than one would have expected a – this strong a macroeconomic environment. And so our view has been and will continue to be that a driver of that has really been technological disruption. And I would argue 2014, 2015 in the oil and gas arena in part was really technology-driven like a revolution in shale driving down – driving production but also driving oversupply.

And I think what you've seen sweeping across both the retail sector and now other areas as a result of the technological disruption taking place in e-commerce amongst other areas is – has had an impact on industries that then leads to restructuring. So I think we're going to see an elevated level of restructuring. It maybe choppy for the foreseeable future as long as this catalyst has been the economy technological disruption is playing out. And I think it's going to play out for a very long time. In fact, I think there are areas that haven't been touched yet, that will be. So, that's kind of one observation.

The second on APAC, we pay very close attention to that. Actually the restructuring – doing restructuring, if you're thinking in China not so easy – there's all kinds of issues around domestic license and things like that that have to be addressed. I think the balance of the activity will likely to be in the U.S. and Europe. And I think we are quite well positioned for that. And this year, we're already involved in I think two of the most notable restructuring assignments out there Sears and PG&E.

[Brennan Hawken, UBS]

Thanks for the color.

[Operator]

We'll now take our next question from Jim Mitchell from Buckingham Research. Please go ahead. Your line is open.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Hi, Jim.

[Jim Mitchell, Buckingham Research]

Hey, good morning. Maybe just getting back to the buyback. I guess, first, it seems like maybe more of it was towards the latter part of the quarter, just wanted to confirm that. And then as we think about 2019, do you have any -- in your mind do you have $510 million left in the buyback? I guess, you said that through December of next year.

But do you feel like there's any constraints in terms of the speed at which you do that? Can you still be opportunistic like you were in the fourth quarter, if you feel there's an opportunity? Like, just trying to think through, if there's any, from your perspective, liquidity constraints on putting that to work quickly.

[Evan Russo, Chief Financial Officer]

Sure. Hey, Jim. It's Evan. Yes. For the first one, we bought back, as I said, 6.4 million shares in Q4. It was pretty spread throughout the quarter, although, obviously with the volatility we saw towards the end of the quarter more than the beginning of the quarter. I think we probably had larger repurchases during that period of time, but generally it was pretty much spread throughout the quarter.

And what we did was we basically saw that there was volatility and good volumes going through and so we're able to kind of speed up on some of the repurchases we had planned to do in Q1 and Q2 of this year. I think going forward into 2019, look, we still, as we said, we still have the buyback, as we always do. The compensation-related shares that we're issuing out into the market and that we'll do really in the course of the first couple of quarters.

There's no liquidity constraint in us buying back those shares. We set the authorization higher, just to give us flexibility for things we might want to do throughout the coming year. But obviously, we're going to buy back what we need to for compensation, as well as all excess proceeds and we'll do that as market allow us to over the next couple of quarters.

[Jim Mitchell, Buckingham Research]

Okay. Thanks.

[Operator]

We'll now take our next question from Devin Ryan from JMP Securities. Please go ahead. Your line is open.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Hi, Devin.

[Devin Ryan, JMP Securities]

Great. Hi. Good morning. Great to see the strong buyback activity. So question here on the operating margin. So right now you guys are at the low end of the comp ratio target range and you're in the middle of the non-comp target range, so kind of a two-part question.

I guess, first, in a scenario where market's remained reasonable and we have some revenue growth? Is there any comp ratio flexibility left from here, given kind of where you guys are? And then two, just on non-comp expenses, can you remind us how the pension plan accounting affected results? Just trying to get some sense of the dollar amount there, if possible.

And then, there's also obviously some seasonality in the fourth quarter, but at the same time you're investing in the business. So just trying to think about the trajectory of non-comp expenses over the course of 2019, obviously assuming the fourth quarter is not a good starting point as a run rate.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Okay. Let me take the first part of that question. I'll let Evan take the second part. On a room for more margin improvement which is really a combination of leverage you get off of compensation through revenue growth and the same thing off of non-comp expenses.

Look, in an up-market revenue environment, generally speaking, we've been able to accomplish some operating leverage, operating leverage out of compensation and out of non-comp expenses. So yes, we see strong revenue increase or reasonable revenue increase. I think we have the ability to continue to improve margins.

The only qualification I give to that is we are seeing more and more opportunity around investments, partly in terms of people that drive our core business, partly in terms of teams and add-ons to the Asset Management business.

And we clearly made an investment and we'll continue to make an investment in technology-infrastructure to support what we think is a significantly changing landscape with regard to the tools we use to drive the Asset Management business and I think ultimately that is going to have a real impact on the tools we use to drive the Advisory business as well. So, that will be my qualification there. Evan you want to--?

[Evan Russo, Chief Financial Officer]

Yes sure. So, on the non-comp question, with regards to the pension that we called out, with regards to non-comp, so yes, as you know the pension guidelines -- I'm sorry can guidelines changed for non-service pension costs run through the non-comp line? We called out Q4 because one of the components of that related to withdrawals of pension plans where you now have to recognize any unamortized gains and losses immediately when you have withdrawals out of the plans. And so we had slightly more than were normal into Q4, hence that led to approximately somewhere between $6 million and $7 million of additional costs in the non-comp line for Q4.

[Devin Ryan, JMP Securities]

Okay, great. Very helpful. Just a quick follow-up here. Just kind of the outlook for European M&A, a lot of moving parts right now with some of the economic data and Brexit clearly creating some uncertainties. So, just love to get a little bit of perspective around the tone for business in Europe, how you guys are feeling about your positioning there? And then any additional color on outlook in Europe just given some of those moving parts?

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Yes. So, great question. So, market position, obviously, very strong. I think the challenge for Europe is twofold. One is you have Brexit which is going to -- I think for the first -- have more of an impact on the U.K. M&A landscape this year until it's resolved than it has over the last couple of years. So, we can expect that to happen.

I think you've already seen that in the second half or certainly in the fourth quarter of last year into the first part of this year. On the continent, there were surprisingly activity is still -- was good last year on the continent and it's going to -- surprisingly is okay so far this year. But there is, I would say, more geopolitical macroeconomic uncertainty again country-by-country in Europe than is the case in the United States. I think the U.S. feels more constructive as a whole than Europe does. But again in Europe, I think, the -- probably the market most at risk is in the U.K. right now.

[Devin Ryan, JMP Securities]

Got it. Okay. Thank you.

[Operator]

We'll now take our next question from Michael Needham from Bank of America. Please go ahead, your line is open.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Hey Mike.

[Michael Needham, Bank of America]

Hey good morning. I was wondering if you can provide the quarter-end share count just for modeling purposes given how much in buybacks you guys did in the fourth quarter.

And then also just if you wouldn't mind discussing performance for your larger strategies in the Asset Management business over the last two months. It seemed like EM debt was down a decent amount in the fourth quarter, but I think EM equity had actually been doing pretty well on a relative basis heading into the downturn.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Evan?

[Evan Russo, Chief Financial Officer]

So, I'll figure out on the share count. Yeah, so at year-end fourth quarter, we had 126.8 million shares on a weighted basis for Q4. Given that the buyback you could probably assume that it's another two million shares off of that was really the ending share count for the full year if you take out the weighting component of that for Q4.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

And then on performance, I think your assessment on -- look compared to where we were I would say end of second quarter into the third quarter performance has improved pretty dramatically in the emerging market equities platform. I think we've closed gap pretty significantly in terms of the underperformance.

And then I think on the currency and emerging strategies we also had -- we've had improvement in one, not quite as much as the emerging market, equities and the other is pretty close.

[Michael Needham, Bank of America]

Okay, great. Thank you.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Generally speaking it's been a good few months. I mean the strategies we've done was you would have anticipated them to do in an environment like this, which is pretty gratifying actually.

[Michael Needham, Bank of America]

Got it.

[Operator]

We'll now take our next question from Jeff Harte from Sandler O'Neill. Please go ahead. Your line is open.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Hi, Jeff.

[Jeff Harte, Sandler O'Neill]

Hi, good morning guys. Actually my questions have been answered, so I'm going to pull out of the queue.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Okay.

[Operator]

We'll now take our next question from Steven Chubak from Wolfe Research. Please go ahead. Your line is open.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Hi, good morning.

[Steven Chubak, Wolfe Research.]

Hi, guys. So just wanted to start off with a broader M&A question. Certainly appreciate all the nuance color you gave, Ken, on the advisory outlook across the different geographies. Merely since I've grown accustomed to hearing your thoughts on the key ingredients for M&A and how that informs your outlook. I was wondering if you could speak specifically to what you're seeing and hearing in terms of valuation, financing and confidence levels across the C-suite.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Sure. So let's split it into two markets U.S. and I'll try to generalize Europe again as I said before there's a little bit of a difference between countries in Europe. So, I'd say U.S. valuations more reasonable than they were last year, certainly in several sectors much more so. Technology is an example.

That said, I think that partly reflects some concern around earnings going forward. I'm not sure that all of the consensus earnings for companies quite match what the buy side or market participants are anticipating.

So valuations still more reasonable but with that cautionary note. Financing spreads widened a little bit, but generally speaking the investment-grade market is still very strong and the non-investment-grade market is still open for business, but a little bit weaker than it was last year but still open for business.

And CEO confidence levels surprisingly constructive in the U.S. after the events of the fourth quarter. I am again a little bit pleasantly surprised by the positive sentiment in the U.S. The constructive sentiment I would say in the U.S. around the macroeconomic environment even though growth forecasts have been pulled down a little bit.

In Europe, a little bit more mixed. I think valuation again the same story more reasonable than they were last year. But again this issue in terms of whether consensus has caught up with really what the market is expecting.

The second is on financing and the investment-grade find probably a little more choppy in Europe on the non-investment grade than in the U.S., a little bit thinner market.

And then finally on sentiment more mixed, I'd say the big global multinationals probably not too different from what you find in the U.S., but more domestic-oriented or European-oriented companies probably more concerned. So I think that's kind of a summary.

[Steven Chubak, Wolfe Research.]

Very helpful color, Ken. Thanks for that. Just one follow-up for me on the competitive landscape among the independents. On the advisory side, it looks like this year you continue to take pretty significant share from the Bulge bracket so continued good momentum there. By middle of the year relinquished some share to some of the large independents. And I know some of this is attributable to the geographic mix, heavier gearing to cross-border and international. But I was hoping you could speak to some of the factors that may have impacted the performance and specifically those factors within your control and just curious if there are any industry verticals where you may have less scale relative to other independents and could look to make additional investments?

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Sure. Great, question. I think the first part of your observation is actually correct in that we continue to take share overall in the market. And that obviously means that, if the independents are growing share, it's probably coming from the bulge bracket, so observation number one is correct. Observation number two is clearly – and I would point out Evercore has obviously had a blowout quarter. Congratulations to them. That was impressive. And I think part of that is driven by the fact – specifically every quarter, but I think independents generally in the United States is that they're focused their business has been in the U.S. which has been by far the strongest M&A market now throughout the cycle and while we've had a great run in the U.S.

I mean this past quarter I think we were up 61% in strategic M&A in the U.S. – that strips out restructuring. And I think we were up for the year 31%. So it was a very good year for us in the U.S. as well. I think part of this was just driven by the mix of business. We have obviously historic and very strong franchise outside the United States. I think having this global franchise is invaluable. It just hasn't been as robust over the last couple of years as it has been historically in the past. So that's probably the second observation.

And then as far as whitespaces are concerned I said this repeatedly on a number of these calls that I think for all – of the independents and including us in the United States is the biggest whitespace. It's continues to be the market with the biggest people, the most disciplined around fees the most public companies. And the real key is getting great people hiring them and then getting them up online and getting them in a position where they're driving revenue. And I think that's both the – that is the opportunity. I look at that as a real positive area for us going forward.

[Steven Chubak, Wolfe Research.]

That's great color, Ken. Thanks for taking my questions.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Sure.

[Operator]

We'll now take our next question from Michael Brown from KBW. Please go ahead. your line is open.

[Michael Brown, KBW]

Hi. Good morning, guys.

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Good morning.

[Michael Brown, KBW]

Yeah, Just a quick one for me on the flows and fee rates. So the inflows that you've seen in 2019 so far, I understand we'll get a lot of information in the monthly AUM disclosure. But I was kind of hoping to get a preview to kind of understand which flows you're seeing inflows in and wondering if you could share how those fee rates on those funds compared to the funds you've experienced the most outflows in the fourth quarter?

[Kenneth Jacobs, Chairman & Chief Executive Officer]

Evan, do you want to take this one?

[Evan Russo, Chief Financial Officer]

Sure. Yes. So, look the theme so far quarter-to-date, which is, I guess, only a few weeks and hard to really get any definitiveness out of just a couple of weeks of data. And we always want to remind everybody that even monthly data given the institutional nature of our business, I mean, the flows are going to be lumpy as we pointed out, we expect that to be, and we'll provide some guidance as to some of the past movements that we've seen on a month-to-month basis.

But Mike to your question, I mean, so far it's been pretty broad-based. We got net inflows so far for the first 25 days into January and it's been broad-based across many different strategies and platforms. I would say our fixed income strategy continue to see inflows on that front, but some really across the Board emerging market multiregional and even some of the local strategies and quant as well. So, I mean it's really similar to what we've seen at the end of the year as we saw throughout most of last year, so a continuation of that. And again, on a fee basis, it's really the same as what we've seen heading into the end of last year.

[Michael Brown, KBW]

Great. Thank you.

[Operator]

Ladies and gentlemen, this now concludes the Lazard conference call. Thank you for your participation. You may now disconnect.