Good morning, and welcome to Lazard's Second Quarter and First Half 2019 Earnings Conference Call. This call is being recorded. At this time, all participants are in the listen-only mode. Following the remarks, we will conduct the question-and-answer 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 Head of Investor Relations. Please go ahead.

Good morning, and welcome to Lazard's Earnings Call for the Second Quarter and First Half of 2019. I am Alexandra Deignan, the company's Head of Investor Relations. In addition to today's audio comments, we have 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 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 up to questions. I'll now turn the call over to Ken.

Thank you. Good morning. Our second quarter and first half results reflect steady operating performance across our business despite challenging comparisons to last year's record period. We are well positioned for second half of 2019 with momentum in Financial Advisory and increased average assets under management. Financial Advisory revenue for the second quarter reflected a strong level of completions in North America, offset by fewer completions in European M&A and in Restructuring globally. Our advisory activity gained momentum in the second quarter as our volume of new M&A announcements increased by 14% year-over-year and by 30% from the first quarter of this year. This trend has continued in July. Notably, our European activity has picked up since the end of June with 5 announced transactions valued at $5 billion or more on the continent and in the UK. Our Financial Advisory practices remain active globally. In Restructuring, we continue to win advisory roles on large, complex global assignments. Our Shareholder Advisory practice is winning assignments around the world and has become an important complement to our M&A advisory work. And our Sovereign Advisory and Capital Advisory businesses remain active, advising governments and corporations on financing strategy and capital raising. In Asset Management, our AUM is up about 11% from the start of the year, and our average AUM for the second quarter was $237 billion. Institutional rebalancing and derisking affected our business in the second quarter as we experienced net outflows across our equity platforms. Our fixed income platforms achieved net inflows in the quarter. Overall, our relative performance has been strong this year. We continue to invest in the growth of Asset Management to the development and scaling up of new and existing platforms, expansion of our distribution globally and opportunistic hiring. In June, we announced the acquisition of a U.S. systematic equity team, which is our third addition in the past year to our alternatives platform. The team bolsters our growing data science, machine learning and artificial intelligence capabilities. To support these and other strategic imperatives, we continue to make substantial investments in our firm-wide technology and data science platforms. This is a multiyear initiative, which is accelerating our implementation of new capability and tools across both Asset Management and Financial Advisory to enhance our competitive edge and drive growth. Thanks to our scale and strong cash flow, we can make these investments through business cycles and even as we return substantial capital to shareholders. Evan will now provide color on our second quarter results and first half results, and I will comment on our outlook.

Thank you, Ken. Financial Advisory's second quarter operating revenue of $329 million was down 21% from last year's record level and roughly even with the first quarter of this year. This reflected strong results in North America, offset by softness in European M&A completions and lower Restructuring revenue globally in the quarter. Asset Management's operating revenue of $291 million was down 12% from last year. On a sequential basis, it increased 3% from the first quarter of this year. Average AUM for the second quarter was $237 billion, down 3% from a year ago. On a sequential basis, it increased 4% from the first quarter of this year. We finished the second quarter with AUM at $237 billion, about $2 billion higher than the start of the quarter. This reflected market appreciation and positive foreign exchange movement, totaling $7.7 billion, offset by net outflows of $5.2 billion. The outflows were primarily from our emerging markets and global equity platforms, offset by net inflows in fixed income. As of July 19, AUM remained at approximately $237 billion, driven primarily by $1.6 billion in market appreciation, offset by negative foreign exchange movement of about $900 million and net outflows of $800 million. Looking ahead across our franchise. In Financial Advisory, we continue to expect the second half of 2019 to be stronger than the first half. Our M&A announcement picked up significantly in the second quarter and continues through July, notably in Europe as well as North America. In Asset Management, relative performance has been strong across our platforms this year, but we expect to see continued pressure on equity flows in the near term, largely due to institutional rebalancing and derisking. Turning to expenses. In the second quarter, we continued to improve compensation at a 57.5% adjusted compensation ratio. Our full…

Thank you, Evan. I'll provide some perspective on our outlook, and then we will open the call to questions. Overall, the global macroeconomic environment remains constructive. The U.S. economy is strong. The environment in Europe is stable, although uncertainty around Brexit persists. Fundamentals for global equity markets are steady, and credit conditions remain favorable. The forces driving strategic activity remain in place. Technology-driven disruption continues to be a catalyst for M&A across industry, and shareholder activism has become a global phenomenon. Our business -- our advisory business is well positioned in this environment with the most sophisticated capabilities and deep insights into local markets, reinforced by expertise from global sector and specialty teams. Our longer-term outlook for Asset Management remains positive as our franchise continues to demonstrate quality, innovative products and consistent investment strategies. Our investment platforms are broadly diversified across asset classes, styles and regions with more than 40 strategies, each managing over $1 billion in assets. We see opportunities for productive growth across our businesses, and we continue to invest in our people, capabilities and technology infrastructure to enhance our competitive edge. We remain focused on serving our clients well, while we manage the firm for profitable growth and shareholder value over the long term. Let's open the call to questions. Thank you.

Operator?

Thank you [Operator Instructions]. And we take our first question from Devin Ryan, JMP Securities.

Great. Good morning, Ken and Evan. How are you guys.

How are you Devin? Thank you.

Well, thank you. I guess first question on just the comments on Europe. Just love to get a little more perspective on what's driving the pickup there, whether it's primarily Continental Europe and then just whether you're thinking about 2020 activity relative to 2019 as a potential for recovery, just given the slow -- low bar that we've seen this year.

So first of all, this has really been since the end of June has picked up for us. I think, as I've said, it's 5 deals over $5 billion over that period of time. And I think it's 13 of our 16 public announcements in July come out of Europe. So actually it's been a pretty significant pick-up. That said, I think it's a little early for us to know exactly what's driving it and the sustainability of it, but it feels better. The tone feels generally better. I think there's been some pent-up demand because of the dramatic pull-off in activity over the course of the last 12 or 18 months, so I think the pent-up demand. I continue to believe that the catalyst for activity across M&A markets is really driven by this technology disruption. And my guess is when you peel the onion on this activity in Europe, it probably continues to reflect that trend, and they accelerate a little bit. We're hopeful that this is going to continue. Obviously, it has a really significant impact on our business in a positive way if it does, given the record activity levels in North America this year for us so far. And it would be good to see Europe contributing to that going forward. And I think we'll -- some of this will be reflected, hopefully, in the second half of '19 results, but I think also a part of it will drift into 2020, which is a good thing.

Just a follow-up on the NOL and the, I guess, the strong cash flow that will generate over the next couple of years. If we fast-forward several years here, how does that play into the thought process around the C corp conversion, just thinking that you will execute a vast majority of that probably 2 years down the road?

So Devin, it's Evan. Let me take that. I mean look on the C corp question -- talk about the NOL for a second briefly. So what we have is, as you pointed out, a very large beneficial NOL that we have here both in the U.S. as well as globally. And that, we expect that to remain for the next several years. I would say that, that should runoff. And it will depend on a lot of factors, depending on where the benefit associated with the revenue increases come from geographically as well as other deductions we're going to have. And so it's hard to predict how fast that NOL will roll off, but it's still very, very significant, as you can see in our notes. It's at least 3 or 4 years out before that will roll off, specifically here in the U.S. That will play then a lot into our thinking. As you know, that's just what the cost side of the equation for us. The NOL sort of gets in the way of us getting benefits associated with conversion to a C corp and really that creates a pretty strong negative double taxation for us relative to our very, very strong non-U. S. income, which will create a -- create a double taxation effect there. I think we also -- we continue to analyze and review what's going on in the C corp structure. Obviously, we continue to think about it and review all -- any new regulations and guidelines that come out as they get released. But what's important to remember is what we point out that there are also some other factors for us relative to others who have taken the C corp route. So what's important to remember the significant differences between Lazard and those types of companies. One of the biggest benefits that people talk about with regards to a C corp is index ownership. And the others, the alternative managers and other TCPs that have converted to C corp have 0 index ownership. And they have no index eligibility. And they were hoping to achieve that as part of the process of becoming C corp. I think it's important to remember Lazard today already have approximately 19% or 20% of their shareholders in index ownership or made up of index ownership. We're included in major indexes, the Russell, the CRSP and lots of other, Dow Jones, S&P, other indexes. So now there are significant differences to us on the benefit side that's also important to remember. But specifically, when you look at it, we're going to continue to analyze it as we go, as the NOLs roll off, the equations could change, but the near term we have to continue to watch it and do what makes sense and do what makes economic sense in the best interest of our long-term shareholders.

Understood. Thank you very much, guys.

We take our next question from Steven Chubak from Wolfe Research. Please go ahead.

Hey, good morning. So why don't we start off first with a question on some of the non-comp commentary. It sounds like we got something incremental there, Ken. So I appreciate some of your insights in terms of the efforts to build out to enhanced capabilities on the Asset Management side, improve your platform. I was just hoping to gain some better understanding in terms of the level of non-comp inflation we should expect in the second half. And in the coming years, how will these investments actually drive tangible benefits in terms of revenue growth and efficiency? I just want to try and assess what sort of benefit you guys could see from those incremental investments that you're making.

Okay. Evan, maybe you should get the comp part of this, and I'll talk through some of the benefits.

Sure, absolutely. So yes, so the non-comp in the quarter of $128 million, Steven, as you pointed out, up a bit from last year's level. As we said, the increase reflects the elevated investment spending that we've been talking about over the past few quarters, specifically and particularly in our technology space as well as some other occupancy and other professional fees. A lot of them relating to new teams that we're bringing on the platform. So as we said, we expect to see the noncomp at or about this level, at the elevated levels for the remainder of the year, really for the next few quarters, as some of the newer technology projects roll on and they start getting amortized.

Okay. In terms of some of the benefits, we kind of break them into a few areas. So first are tools that just help us on a day-to-day basis do our business better than we've done it in the past and allow us to communicate, collaborate much better. I mean this is table stakes for me. You just have to do this. So these are tools like Symphony and Slack and Bosch and also the investments in our ERP system. These are the kinds of the things which I think to be effective as a modern enterprise, you just have to have. And so that's kind of table stakes basic investment in IT. The second is creating efficiencies in our business. This is the trading platform consolidation in Asset Management. As an example, again, some of the ERP investments that we've made. And then third is new capabilities, and this is the one which I think is the piece that is potentially the most exciting in terms of our business. If you think of the Asset Management business fundamentally it's a prediction business. You're trying to predict what is going to happen to a particular security over time relative to some objective function that being performance relative to the S&P or some other index globally. And in the -- and the tools for the prediction business are fundamentally changes and shifting, and that's really basically what all of the efforts around data science, machine learning and artificial intelligence are all about. It is effectively trying to improve the tools around prediction. And much of what we're doing in -- some of what we're doing in terms of our technology investments is really to prepare ourself for that new world. That new world can exist in many different ways. One way…

And just a follow-up for me on the Asset Management trends. I was hoping to get a little bit better insight in terms of what drove some of the recent acceleration in outflows. It sounds like the relative performance that you guys are generating is okay, but the outflows appear to have persisted in July. I know, historically, you've experienced less volatility inflows, just given your institutional event. So wanted to get some better insight in terms of what you're hearing from clients and maybe how long the institutional rebalancing that you say that could persist.

Sure. Even, you want to...

Yes, sure. so look, in the quarter, we talked about net outflows across the emerging markets platforms offset against net inflows predominantly in our fixed income and our listed infrastructure business. I would say that EM platform, as we talked about in the past, I mean, we saw some net outflows in this quarter specifically related to the value part of our EM platform as we talked about value is at a favor relative to growth, the quality. The value's been under pressure for a while. And outside of our -- outside of value, the EM platform continues to do great. And as you mentioned, now importantly performance across the EM platform has actually done quite well this year with above benchmarks really across the platform. And I would say really across the Asset Management business, about three quarters of our strategies, some of our largest strategy on a 1-year basis are above their benchmark. So I think the performance has done really well. I think as we pointed out, some of the EM is really just a shift from value since derisking and rebalancing.

Very helpful color. And just one final one for me just on the balance sheet leverage. It's nice to see the commitment to repurchasing shares at these levels. You noted it should continue to the second half. You've also increased your leverage somewhat to support that increased repurchase activity. I was hoping you could speak to what levels of leverage you're currently comfortable operating with and what sort of constraints, liquidity or other, we should be mindful of as you execute on that buyback plan.

Sure. As you mentioned, look, we took out some additional leverage over the last 6 months to sort of resize the capital structure relative to the size of the business. I think we feel pretty good about where we are on a leverage basis, from a capital structure basis today with the amount of leverage we've taken out. And as you said, we've used that for share repurchases pretty heavily over the last couple of quarters, and we expect ongoing continued share repurchases out of the cash flow of the business. And as you remember, we also changed our tilt away from special dividends into more share repurchases last year. And at these price levels, we -- certainly, we expect to see that continue.

Great. Thanks for taking my questions.

We take our next question from Richard Ramsden from Goldman Sachs. Please go ahead.

Hi, good morning, guys. I thought it would be helpful for you guys to touch a little bit on how the change in rate structures globally have changed your outlook for some of the different businesses? Obviously, there's been a significant change over the last 3 months in the U.S., but expectations have changed globally. Does it, in any way, impact your thinking about activity in any of your businesses in the second half of the year?

Okay. So on the advisory side, what I'd say is, in the U.S. -- let's start in the U.S. The economy remains reasonably strong. The outlook perhaps has softened a little bit, but generally speaking, it's reasonably strong. Consumer confidence is high, unemployment is at all-time lows. Credit conditions are quite robust at the moment. And so the kind of unusual facilitators of M&A, which is equity valuations, credit conditions and CEO confidence on equity conditions, it's a little more mixed because you've got perhaps some concerns around economy but at the same time stock prices -- the stock market is reasonably strong. So it's okay. On credit conditions, it's fine. I mean it's not fine, even robust. And CEO confidence generally has held up. You've got obviously some concerns around the trends around globalization and trade, but on the flip side of that, as I mentioned earlier, this catalyst around technology is really a driver of M&A activity broadly. In Europe, the cutting of rates and the liquidity conditions continue to ensure very attractive credit conditions. And with regard to M&A, again same trends around disruptions CEO confidence is probably more stable now than perhaps it was over the last 12 or 18 months. That's something to keep an eye on. So generally speaking, Europe, at least, feels like it could quite take the trend for 5 weeks, but it feels a little bit better from an M&A perspective than it had. One of the key drivers also of our business has been the activity around shareholder activism, where I think we carved out a very strong position for ourselves in the U.S. and, I think, an extremely strong position for ourselves now in Europe as well. And then turning to the assets -- Asset Management side, I'd say the bottom line is that these very, very low interest rates, negative interest rates just created an enormous demand for risky assets. And over time, that should help our Asset Management business relative to others perhaps. And I think that positions us well going forward in that particular business. The key question is what's the better DCB may be seeing in the economies globally that the markets aren't achieving today or that we're not seeing that could have a negative impact on activity levels, but at the moment, it still feels pretty good.

Okay. And then perhaps as a follow-up. As we get closer to the U.S. presidential election, do you think that could have an accelerating impact on activities just given the uncertainty or you think it's a push?

You know what I think it's too early to know. A lot of it will depend on how the election unfolds itself, what the economic conditions are like at the moment, those moments and the time. how markets adjust. Today, if you -- if the markets always are telling you everything they know about the elections. Right now, this isn't the issue of the markets. That could change over the course of the next year. But as a -- markets tend to see through these events pretty well.

Thanks very much.

We take our next question from Mike Needham from Bank of America. Please go ahead.

Hey good morning. The first question I have is just on -- first question is on the restructuring business. I think you had mentioned it was a little bit lighter in the quarter. But just thinking about this over a longer period of time, how is that business performing relative to kind of when energy is more active? Is it -- has the business been reasonably consistent? Has it fallen off a little bit? Thanks.

Since -- we're not at the same levels of activity that we were during the restructuring the energy business. I guess, really, '15 to '16. But unusually, in a strong M&A market, we continue to have reasonably active restructuring pipeline and business levels. I mean, that's -- this cycle, the Restructuring business has been operating at a higher level than any previous cycles in a strong -- relatively -- obviously, what has been a very strong economic environment and strong credit conditions. And again, I go back to this point on technology disruption. Just as that has been a driver of activity in the M&A world, I think it also has been a continued driver at least of a steady level of activity in Restructuring world. I mean you could argue technology was the driver of the shale revolution and probably some of the overcapacity that drove the turned down in 2015 and '16. And I think you could argue that technology is obviously behind what's happening to the retail sector. And we're going to continue to see that spread to some other sectors, I think, over time. So I think we're going to see a higher than what we have been used to level of activity in the -- in strong credit condition markets. And I suspect that if credit conditions change, that business will have a very strong period of activity following that. Evan?

Yes. So the only thing -- I would also add, Mike that we called out Restructuring. We're really talking about completions in this quarter relative to last year. The first half of last year, we had a really, really strong first half of Restructuring, specifically in the second quarter. We had lots of completions that happened in that quarter. So it's really more of a relative basis to Q2 of last year. When we say that the restructuring is certainly not at trough levels one might expect, as Ken said, given the availability of capital, the availability of credit and valuations around the world. And so there are really bespoke situations happening across lots of different sectors. We're very excited about the recent pickup in new clients, new mandates we received just in the last quarter. Obviously, this will take some time to play out. But they are really selected over lots of different sectors. There's really left the theme than there used to be, as Ken said, a lot of it is technology-driven. Sometimes, 2 and 3 derivatives away from that, that's driving the transaction. I think the real question is when that -- we continue to see if this is at a higher point than the lower trough that you might expect at this point in the cycle, when the cycle turns, there could be much more significant activity.

Great. Yes, that does make sense. And then just one clarification point on share repurchases. Are you planning to use kind of your free cash flow for purchases going forward because the share price is kind of at such a low level? I think you still had been paying the special fee at the end of the year. Thanks.

Yes, so look, I mean -- look, as we said, when we tilted last year to a lower special sort of more balance it out with a little bit more share repurchases, given the attractiveness of the stock, I think it's too early to tell. We'll figure that out as we get towards year-end and figure out what the excess cash we have that we've been generating. And we'll know then how to think about it, how to balance those 2. But obviously, we're leaning more towards share repurchases, as you can see the significant amount of shares we've been buying back very aggressively over the last 3 quarters. Some of that from our recent note transaction, but it's really pulling cash from around the systems to take advantage of the attractive prices.

Yeah, okay. Thank you.

We take our next question from Brennan Hawken from UBS. Please go ahead.

Hi, good morning Evan and Ken. Thanks for taking the question. One, first, just to start off sort of clean up. And apologies if you touched on this. Were there any pull-forwards from July in the 2Q advisory revenue?

Yes. So Brennan, this is Evan. We don't disclose the full forwards -- they're not really material for us. I would say, look, there's always a couple of transactions that close post quarter end. I think we're getting back into that routine where every quarter, you are pulling forward some into the previous quarter. You're asking -- I mean there were handful of larger transactions that certainly closed in the beginning of this quarter. You can see them, so probably a little bit larger than usual for us, but again not material in the grand scheme. And it's kind of becoming more regular way.

And then I think, Evan, in your comments, you flagged some risks due to rebalancing -- institutional clients rebalancing and such in the Asset Management business. Could you maybe help us with the magnitude that you expect there? Is this something that you think is going to be a potential near-term risk here with 3Q? Or is this something that's -- you're already starting to see happen given we just passed midyear, and so July is already there. Just helping us to kind of think about that, at least, for the near term for modeling purposes could be helpful.

Yes. Look, hard to predict where how -- what pace is this. we're just pointing out trends that we're seeing in Q2 and really since the end of Q2, some -- a couple of larger accounts thinking about derisking, pension plans and others that are fully funded, we're seeing some of that go, some of the corporate pension plans that are getting close to fully funded status are taking their risk down. Here seeing a little bit of that rebalancing. I think we expect that to continue as -- for those same reasons if markets remain strong. Hard to know. I think we're seeing some of that in the inflows that we've seen both quarter to date as well as in the second quarter.

Great. Thanks for taking my questions.

Thank you. We take our next question from Michael Brown from KBW.

Hi, good morning.

Hi, Michael.

Yes. It's great to hear the recent pickup of deal activity in Europe. But I was just wondering if you could kind of give a little color about some of the other trends. Cross-border activity has been really weak this year. And so kind of just what are your expectations there? Is it expected to remain weak? And then on the financial sponsor side of the business, I mean with high valuations globally, kind of what are your expectations for the outlook on the financial sponsor side of the business, too?

Okay. Cross-border activity, I think, has been weak for some time now. I wouldn't be -- I would be surprised if we see an enormous pickup in activity, at least coming from outside the United States into the U.S. And that is in part just driven by the persistent politics of doing big visible deals in the U.S. by non-U. S. companies at the moment. I think, unfortunately, that's the world we are living in. That said, I think regional activity, as I said, is more robust. It feels more robust, 5 or 6 weeks does not make a trend, in Europe right now. And so that should continue with, you believe, the factors I talked about, in other words, credit availability, the technology construction, the pent-up demand, those are all positive catalysts for activity in Europe. And I think the activity levels in the U.S. for all the reasons we talked about before we should continue. And then the second question you had was...

Sponsors.

Sponsors. Look, from our -- for our business, we are well -- we are significantly under-indexed to sponsors, and that's an area of, I think, a lot of opportunity for growth for us, particularly in North America, and something that we think is going to continue. There's just an enormous amount of capital that is flowing into the sponsor arena, and that capital has to be deployed. It's getting -- it has been deployed pretty aggressively over the course of the last couple of years. We expect that will continue to be the case going forward because once you have the catalyst, private equity investor, timeframes, time limits, and there are expectations that you are going to deploy it. Credit conditions remain very favorable for the sponsor universe. And so that's also a catalyst for deals. Pricing, obviously, a little more challenged, meaning it's pretty high due to the equity markets, but at the same time, I think some of the return expectations of some of the longer-term investors in that business, not necessarily private equity firms themselves but the people putting the money into the business may have gone down a little bit and part of it is the alternative with regards to what you can do with your capital. Just given the credit conditions and very, very low interest rates make this still relatively very attractive. So the trends, I think, in the sponsor business are going to be powerful going forward and represents a really significant opportunity for us.

Okay. Thank you, Ken.

Thank you. We take our next question from Jeff Harte from Sandler O'Neill. Please go ahead.

Hey, good morning guys. So we're getting the message of expectation of a second stronger half in advisory. We can see it in the visible pipeline kind of rebounding as well, but kind of your optimism there, to what extent is it things you know are going to happen, kind of, things in the pipeline versus dependence on the, kind of, a continuation of, kind of, the improved announcements in the second half.

Look, I think it's a combination of all the things we're are seeing. I mean, look, as Ken said, we've seen a pick-up in announcements, certainly larger transactions. A bunch of those will hit this year, hopefully. And some of them may actually slip to 2020. But we're seeing more dialogue, more conversations generally and just even a lot on the smaller transactions, the flow of things we're seeing coming through the pipeline continue. That's giving us more optimism that the second half looks great. Obviously, you can see the pipeline of announced transactions has gone up of late as well. So you can track that. So I think it's certainly momentum that's building in the business. A lot of it, as Ken said, relates somewhat to Europe as well. So it's really broader than just the U.S. We're starting to see some pickup, and that's giving us some optimism, but the first half is also a little weaker because of the weakness in Europe and the weakness in restructuring. So I think we're therefore being a little -- feel a little bit more optimistic about the second half.

Okay. As we think about revenues being better in the second half, how should we think about comp expense leverage kind of against that? I mean you average to what $359 million a quarter in the first half. Do you think of that as kind of a dollar floor, and to the extent, revenues pick up? How much leverage is there?

Yes. Look, I think it's a little early. It's really a little early to figure out where the final year-end compensation is going to come. As you know, we accrued at 57.5% on the comp side. So far this year, we think that's, sort of, the right level for where we are in the business with our expectations for the full year, but it's going to depend a lot based on some of the -- some other revenues coming in back half of the year or actually closes year and also some of the additional investments we're making. As you know, we're focused on rewarded comp, and that's the appropriate measure we do a bottoms-up at the end of the year to figure out what the right level of comps should be. But we think where we are is good, but too early to tell we'll know more probably in the next quarter.

Okay. And finally, on Asset Management, when you're looking at incentive fees, what products are most typically tied to for you? I'm just trying to get a feel of the specific markets or benchmarks we should kind of be tracking outside to get a feel of how incentive fees may come out.

Yes. So this quarter -- I mean we had a few quarters with lower incentive fees, and core incentive fees picked up a bit, relating somewhat to some incentive fees in our private equity business. Just about 15% of our funds have incentive fee components to it. Over the last few quarters, we haven't seen much on the incentive fee basis and we haven't been near high watermarks and some of the levels to achieve that yet. We're feeling better about being near those high watermarks. Obviously, it's too early to tell. As you know we generally see a bigger push-up in incentive fees in Q4. I think the quarter was a little bit more related from a private equity investment.

Okay. Thank you.

This now concludes the Lazard conference call.