拉札德 (LAZ) 2026 年第三季法說會：顧問收入創新高，2027 年案源翻倍

重點摘要

• 得益於財務顧問與資產管理業務的客戶活動增加，Lazard 2026 年第三季全公司調整後淨營收年增 11%。
• 財務顧問業務第三季調整後淨營收創下 4.65 億美元的歷史新高，2026 年前九個月累計達 13 億美元。第三季營收結構中，併購業務占 61%，非併購業務占 39%。
• 管理層表示，以機率加權計算的 2027 年財務顧問營收管道（pipeline），略高於去年同期測量的 2026 年可比管道的兩倍。
• 資產管理業務單季管理費創下 3.21 億美元的歷史新高，年增 18%。前九個月管理費成長 22% 至 9.27 億美元。
• Lazard 預計將於 11 月初完成 Campbell Lutyens 的併購整合，在不計入潛在綜效的情況下，該業務預計將帶來約 5 億美元營收，並於 2027 年挹注獲利。
• 管理層仍以實現 2026 年資產管理業務淨流入為目標，並預期全年調整後有效稅率落在 20% 高段。

關鍵財務數據

除非另有說明，否則管理層討論的所有數據均為調整後非 GAAP 衡量指標。

業務與營運表現

財務顧問業務

財務顧問業務第三季營收創紀錄，主要由併購業務推動。美洲與英國不論在單季還是 2026 年前九個月，均創下營收新高。

Lazard 將此優異表現歸功於現有的銀行家團隊以及對高階人才的投資。過去三年來，該公司在北美聘用或升遷了 80 位董事總經理，涵蓋醫療保健、工業、消費品、媒體、娛樂與體育、科技，以及電力、能源與基礎建設等領域。

前瞻指標有所增強。按金額加權計算的利益衝突審查過關案件年增超過 30%，其中 50 億美元以上的交易案件增幅超過 85%。管理層表示，Lazard 在已公布的併購排行榜名次創下十多年來的最佳紀錄。

第三季財務顧問營收結構為併購占 61%、非併購占 39%。管理層亦指出今年迄今債務重組業務有所成長，並預期該活動將持續進行。

私募資本顧問業務

在獲得主管機關批准後，Lazard 計劃於 11 月初完成對 Campbell Lutyens 的收購。合併後的 Lazard CL 平台將涵蓋基礎建設、私募債權、私募股權與房地產領域的一級市場募資、二級市場顧問以及 GP 資本顧問業務。

管理層發現了供應商與 IT 方面的潛在成本綜效。營收機會則包括來自 Lazard CL 的併購轉介，以及來自 Lazard 私募資本團隊的募資轉介。這些潛在效益並未納入併購交易的承銷評估假設中。

資產管理業務

管理費達到創紀錄的 3.21 億美元，實現連續第六個季度的單季成長。2026 年前九個月的總流入資金達到創紀錄的 540 億美元，儘管第三季包含了 23 億美元的淨流出。

投資績效有所提升。截至季末，70% 的客戶資產管理規模在一年的時間跨度內表現超越其設定基準，67% 在三年時間跨度內表現超越基準，創下該公司五年來最佳績效。

量化股票、新興市場與全球上市基礎建設的需求最為強勁。國際量化 ETF IDEQ 自去年推出以來，資產管理規模已成長至近 20 億美元。Lazard 還計劃於下個月推出首批主動型固定收益 ETF。

管理層強調，公司專注於改善資產管理業務，但並非在任何情況下都承諾保留現有的公司架構。任何架構調整的決策都將以股東價值為依歸。

生產力與 AI

Lazard 正全面審視企業與後勤支援部門的工作流程與組織架構。該計畫包括流程自動化、集中化、工作流程標準化以及供應商合理化，旨在使費用成長與營收成長脫鉤。

該公司還在財務顧問、客戶服務與報告中擴大 AI 的應用。管理層預期，隨著銀行家生產力的提升，長遠來看將降低協理級等同人力與董事總經理的比例。

管理層展望

• Lazard 預計 2026 年下半年的表現將優於上半年。管理層亦預期下半年相較上半年的營收比例將比 2025 年更為強勁。
• 在強勁的「已獲委任但尚未撥款」業務管道支持下，資產管理業務仍朝著 2026 全年實現淨流入的目標邁進。
• Lazard 預計在不計入潛在綜效的情況下，Lazard CL 在 2027 年將產生約 5 億美元的營收，並可挹注獲利。
• 全年調整後有效稅率預期落在 20% 高段。
• 管理層預計自 2027 年起提供營運現代化計畫在費用削減方面的詳細資訊。
• Lazard 預計在 2026 年剩餘時間內繼續進行股票回購，同時在成長投資與抵銷薪酬相關股票發行之間保持平衡。
• 董事會宣布發放每股 0.50 美元的季股利。

風險與關注焦點

管理層表示，較高的利率並未實質放緩戰略客戶的活動，但確實造成了私募股權領域的估值差距。投資組合公司的持有人正等待更好的估值，而有限合夥人持續尋求分紅與流動性。

軟體領域的併購已從最低谷回升，但仍不如其他領域活躍。管理層表示，估值分歧在私募股權支持的軟體交易中尤為明顯。

Lazard 還強調了歐洲具有挑戰性的總體經濟與政治背景，不過其許多總部位於歐洲的客戶大部分銷售額來自該地區以外。

管理層認為獨立的前沿 AI 實驗室與部分新型雲端供應商面臨較高的財務困境風險。這種壓力可能會推升 AI 生態系統部分環節以及其他產業中體質較弱企業的重組活動。

Lazard 正考慮減少薪酬遞延並增加現金薪酬。此調整尚未敲定。若付諸實行，將加速費用認列，並使當年度申報的薪酬比率上升數個百分點，隨後兩到三年內的攤銷費用則會降低。

分析師問答重點

顧問業務管道：管理層澄清，2027 年加權業務管道是以營收為基礎進行衡量，並根據每筆費用收取的機率進行調整。該數據略高於去年同期測量的 2026 年可比業務管道的兩倍。

併購環境：戰略性交易繼續受到規模需求、技術變革、供應鏈整合與地理位置重塑的推動。管理層表示，當前的監管環境也在促使企業在窗口期依然有利時追求大型交易。

Campbell Lutyens 綜效：Lazard 預期，在合併後的私募資本平台與其併購銀行家之間，業務轉介將呈現雙向流動。管理層相信，這些轉介可能帶來超越交易原始承銷評估假設的顯著潛在收益。

利潤率潛力：管理層指出，實現 Lazard 2030 年目標並不需要仰賴營運效率計畫。相反地，如果營收實現成長且後勤成本成長較慢，該計畫將能創造額外的利潤率上行空間。

薪酬會計處理：若未改變遞延政策，管理層原預期第四季薪酬比率將小幅下降。較低的遞延率將透過加速會計認列來抵銷部分近期改善，但不會改變發放的總薪酬金額。

市占率：管理層坦言，Lazard 的成長動能可能反映出隨著新聘董事總經理的業務逐步擴展而恢復的市占率，而非整體併購市場的加速成長。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good morning, and welcome to Lazard's Third Quarter and First 9 Months 2026 Earnings Conference Call. This call is being recorded. [Operator Instructions]

At this time, I will turn the call over to William Murdock, Lazard's Head Strategy and Investor Relations. Please go ahead.

William Murdock

Thanks, Chelsea. Good morning, and welcome to Lazard's earnings call for the third quarter and first 9 months of 2026. I'm William Murdock, Head of Strategy and Investor Relations. In addition to today's audio comments, we have posted our earnings release 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, achievements or other events to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, those factors discussed in our 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 them.

All financial measures we discuss today are non-GAAP adjusted financial measures. We believe these non-GAAP financial measures 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 Peter Orszag Lazard's Chief Executive Officer and Chairman; and Tracy Farr, Lazard's Chief Financial Officer. After our prepared remarks, Chris Hogbin, Chief Executive Officer of Asset Management, will join as we open for questions.

I'll now turn the call over to Peter.

Peter Orszag

Thank you, William, and thank you to everyone for joining our call today.

Our Lazard 2030 strategy continues to progress as we planned with strong underlying momentum across the firm very encouraging forward indicators and high internal morale and cultural live. Additionally, now that we have obtained necessary regulatory approvals, we are planning to close our acquisition of [ Campbell Lutyens ] and [ Montour ] third global business, was RCL in early November, creating the leading private capital advisory platform globally.

Turning to our results. Firm-wide adjusted net revenue in the third quarter increased 11% year-over-year with increasing client activity across both businesses. In Financial Advisory, we achieved record third quarter revenue as our investments in the business are starting to translate into results. Over the past 3 years, we have hired or promoted 80 managing directors in North America across focused areas of opportunity, health care, industrials, consumer, media entertainment and sports, technology and power energy and infrastructure.

As we emerge from the J-curve period via previously described, our existing MDs in the U.S., along with these additions, produced record revenue in the Americas in both the third quarter and first 9 months of this year. And our momentum continues to grow in financial advisory, which is reflected in an array of forward indicators.

Globally, our announced lead table position is the best that it's been in over a decade. Conflict clearances are up over 30% year-over-year on a dollar-weighted basis and up more than 85% for deals above $5 billion. Significantly, these comp clearance trends continued to show strength in the third quarter with year-over-year growth in the third quarter alone. Our weighted pipeline for 2027 is now 2x our 2026 pipeline at this time last year.

While the pace of adding new MDs in 2026 will be below the exceptional pace of 2025, we see ongoing opportunities to attract talent to our financial advisory platform. Since our last earnings call, we have announced 10 additional top quality managing directors in areas of strategic importance, including a new Head of Defense and emerging technology a senior banker returning with his team to Lazard in Paris and the expansion of our advisory business with a new senior hire in Switzerland.

In private capital advisory, we continue to anticipate Lazard CL will generate approximately $500 million of revenue and will be accretive to earnings in 2027, even before accounting for potential synergies. The Campbell Lutyens business is performing ahead of the assumptions that supported the acquisition, and we already see early signs of synergies with real estate, vendors and IT. Our private capital advisory group, along with the team at Campbell Lutyens together will comprise the leading global positions in primary fundraising and secondary advisory.

Lazard CL will deliver dedicated fundraising secondary advisory and GP capital advisory for clients across all asset classes in all major markets, infrastructure, private credit, private equity and real estate across the U.S., Europe, the Middle East and Asia Pacific. The more time our teams spend together, the more excited we become about both the cultural fit and the strategic opportunity.

With that foundation, we expect the broader connectivity between our M&A restructuring and Capital Solutions businesses to compound over time with clear potential for further upside. Conditions remain quite favorable for client activity despite the rise in interest rates and ongoing global uncertainty. In Financial Advisory, companies continue to pursue scale in mid rapid technological change to gain or defend leading sector positions and vertical integration is increasingly key to addressing supply chain shock.

A more constructive regulatory environment is supporting activity overall. And our forward indicators would be even more encouraging is private equity M&A were to become more active. The power of our renewed investment in our traditional large-cap strategic coverage alongside our expanded private capital efforts over the past few years is underscored on a year-to-date basis by our best league table standing in over a decade and our highest share of advisory revenue coming from private capital that we've ever had. We are confident that our ability to play to win for clients in both the largest strategic transactions and across private capital activity is promising for the future growth of our advisory businesses.

Turning to Asset Management. Gross inflows reached a record $54 billion for the first 9 months of this year demonstrating progress from our focused sales and distribution efforts. Our one but not yet funded pipeline is robust, and we remain on track to deliver positive net flows for the year. The work we've done under our new leadership team to strengthen the platform is reflected in the continued improvement in our investment performance. As of quarter end, 70% of client AUM was outperforming stated benchmarks over 1 year and 67% over 3 years, which is our best performance in 5 years.

Strong, consistent performance is the foundation of this business and this progress positions us well to compete for new mandates in the future. In summary, we remain firmly on track to achieve the objectives of our long-term growth strategy. Our progress is underpinned by our commercial and collegial culture and by our adoption of AI to transform how we work and deliver for clients. Based on a recent survey that we conduct annually, colleagues prided happiness working at Lazard and willingness to recommend our firm towers remain at all-time highs.

We are pleased that our employees identified the firm's AI tools training and pace of adoption as significant strengths that are improving productivity and reinforcing confidence in our opportunities ahead. I'd like to thank my colleagues for their commitment and hard work as we advance our Lazard 2030 strategy together.

Let me now turn the call over to Tracy, who will cover our financial results and provide details on our operational efforts, and then we will take your questions.

Tracy Farr

Thank you, Peter. Financial Advisory adjusted net revenue was $465 million for the third quarter and $1.3 billion for the first 9 months of 2026. This quarter's revenue includes pull forwards for transactions that closed just after September 30 that are in line with our 2-year average. Our record third quarter revenue was driven primarily by M&A with record revenue for the third quarter and first 9 months of the year in both the Americas and the U.K. reflecting investments we have made in lateral hiring, our exceptional existing talent and the strength of our franchise across our transatlantic footprint.

With sustained client engagement and momentum across the business, completed transactions include Corteva Agriscience’s on its $50 billion spend on Vylor. MasTec's $1.7 billion acquisition of Superior Group. And Humata Health on its sale to R1. Recently announced transactions included [indiscernible] merger utilities for a combined enterprise as of approximately CAD 72 billion. OCS Group's proposed GBP 3.1 billion acquisition And Vanguard acquisition, liability management and restructuring [indiscernible] Victoria, [indiscernible] and private capital advisory, recent attainment included single capital of equities and on capital on continuation no with capital management on the closing of its [indiscernible].

Turning to Asset Management. Adjusted net revenue was $330 million for the third quarter, $970 million for the first 9 months of the year. Management fees were a record $321 million for the quarter, up 18% year-over-year and $927 million for the first 9 months, up 22% compared to the same period last year. Management fees have increased in each quarter this year and Q3 marks the sixth consecutive quarter of sequential growth.

As of September 30, we reported AUM of $284 million, higher than September 2025 and approximately even with the prior quarter. During the quarter, we had market appreciation of $1.9 billion, foreign exchange depreciation of $0.2 billion and net outflows of $2.3 billion. Management fees -- sorry, during the quarter, we -- during the quarter, we had market appreciation of $1.9 billion foreign exchange depreciation of $0.2 billion and net outflows of $2.3 billion. Average AUM for the quarter was $287 million, 11% higher than the third quarter of 2025.

Client demand is increasingly visible in the strategies we have prioritized as our advantage, our quantitative equity platform continues to attract significant client interest. And we also have ongoing strong flows into our emerging markets and global listed infrastructure strategies. ID EQ and our international quant ETF and has grown to nearly $2 billion in AUM since launching last year, and we plan to expand our ETF platform with the advance of our first actively managed fixed income ETFs next month.

Turning to firm-wide expenses. Our adjusted noncompensation expense was $156 million for the third quarter, resulting in a non-compensation ratio of 19.3%. Our adjusted compensation expense was $562 million for the third quarter, resulting in a compensation ratio of 69.9%. Based on a constant deferral rate, we continue to take a conservative view to accruing compensation in the third quarter. And consistent with prior years, this quarter's accrual was unchanged from the first 2 quarters of this year. We continue to design our compensation programs to remain competitive and aligned with the long-term interest of our employees and our shareholders.

Earlier this year, and as we previously discussed, we updated our vesting is structure, and we are currently reviewing our deferral practices to reflect evolution in the market for our professionals and to enhance transparency for investors around awarded and recognized compensation. As part of our year-end process, we are considering a potential reduction in our deferral rate.

This would accelerate the timing of compensation expense recognition on an accounting basis. without altering the total compensation awarded, raising the reported compensation ratio by a few percentage points this year at reducing it thereafter. Our growth investments are paired with efforts to improve productivity and operating leverage across the firm. Let me share more detail on 2 initiatives underway to simplify our corporate and support functions and further embed AI across our work.

First, we launched a project earlier this year to modernize and simplify how the firm operates. Across our corporate and support groups globally, we've tea broad survey of workflows and organizational structures. We are now reviewing vendors to advance implementation, which includes process automation and centralization of certain activities. Shifting how work is delivered and staffed with a long-term objective to decouple expense from revenue growth. As we progress, we expect to provide specifics on how this effort will reduce expenses beginning in 2027.

Next, we are increasingly embedding AI across the firm to augment our productivity and expand our market. And financial advisory, AI is helping us create more opportunities for junior bankers to take on expanded responsibilities, as we continue to increase our number of senior bankers over time, this higher productivity will be reflected in a decline in our total associate equivalent to MD ratio.

In Asset Management, we have accelerated the implementation of Agentic workflows, client servicing and reporting with plans to increase the use of AI and automation across the business. We see ongoing opportunity firm-wide with AI to deliver better outcomes for our clients, see more opportunities for upward our margin over time.

Turning now to taxes. Our adjusted effective tax rate for the third quarter was 38.1%, we expect the full year effective tax rate to be in the high 20s percent range. Regarding capital allocation in the third quarter of 2026, we returned $88 million to shareholders including a quarterly dividend of $49 million and share repurchases of $33 million. We expect to continue buybacks throughout the remainder of the year, balancing investment and growth with further offsetting share issuances from compensation. In addition, yesterday, we declared a quarterly dividend of $0.50 per share.

Overall, we are confident in our outlook for long-term growth, and we are encouraged by the strong levels of client activity and the progress we are seeing across the firm. as highlighted in this quarter's results.

Now we'll open the call for any questions.

Operator

[Operator Instructions] And we'll take our first question from Jim Mitchell with Seaport.

分析師問答

James Mitchell

Tracy, I can't have to ask about the comp ratio commentary. So when you think about shortening some of the accruals, I think you mentioned that, that could affect this year's comp ratio, but should help next year. It seems like shorter deferrals would increase amortization even next year. So I just want to understand how you're thinking about the comp ratio trajectory, both in the fourth quarter and how that impacts both fourth quarter and next year?

Tracy Farr

Yes. I want to answer this but I should make it 3 points. First, when we think about this, keep in mind that the huge incentive here is to align this from an employee retention and attraction perspective. So I want to reiterate that first. This is really what it is. It's using more cash in the year and lowering the amount of deferral that you are granting. That helps on a number of fronts that helps effectively similar to a share buyback. It helps from a share dilution perspective. And it also improves the quality of that ratio over time as I think I've had some conversations with a host of the participants on this call.

Regarding the impact like year-to-year, in the year of without changing your total compensation on an order basis, that can win the same. But on an accounting basis, you're accelerating some of the recognition into the current year. Now what you're probably noting is that if you maintain that same deferral level, the impact of that isn't necessarily seen immediately, but it happens over a period of time. But that acceleration does come from somewhere.

And that reverses over a period of time, our current deferral policies, it probably reverses fully over a period of 3 years. But what that really does is it allows your comp ratio to decline more naturally over time. And as I mentioned before, the real benefit is an improved apology of the ratio itself, greater ability for management to manage the comp ratio within a particular year and a more attractive compensation policy for your employees.

That make sense?

James Mitchell

No, that's very helpful. And maybe just on Broad point view, I think Peter has mentioned Campbell Lutyen's deal is a little bit ahead of what you're expecting when you announced the deal still on track for $500 million next year. Can you just maybe dive into a little deeper on what you're seeing is the biggest synergy opportunities with Campbell Lutyens, whether revenue or expenses are both?

Peter Orszag

Yes. So I think it is both. And I mentioned some of the areas, vendors, IT, et cetera, that in the script on the cost side with a little extra scale. But on the revenue side, there is a significant amount of opportunity for -- in one direction, M&A referrals, so from Lazard CL to our M&A bankers. And then in the opposite direction from our private capital coverage efforts into the fundraising business. So there is a by-wheel or circularity there that's very positive. Campbell Lutyens in its prior instance did have a JV with a different investment bank that produced a notable level of M&A referrals.

We anticipate even though we didn't assume that in underwriting the deal, that we will be able to at least match in all like we had significantly beat that level of M&A referrals, and that would be a significant uplift to the business.

Operator

Our next question will come from Steven Chubak with Wolfe Research.

Steven Chubak

So maybe to start, just given the constructive public backlog and forward indicators you alluded to with the weighted pipeline being more than double year ago levels I was hoping you could clarify whether that backlog commentary is on a revenue or volume adjusted baseline and speak to any impacts on mix and how that informs the revenue growth outlook for next year?

Peter Orszag

Sure. So let's separate the -- well, actually, they're both on a revenue base. But the weighted pipeline being double what it is slightly more than double what it is for next year, what it was for last year -- for this year at this time last year, sorry, so just to be reside.

Pipeline as of today, October 22 for 2027 is slightly more than double what the 2026 pipeline was weighted pipeline as of October 2026, 2025 -- October 22. -- sorry about that. But hopefully, that's perfectly clear. And that's a revenue basis weighted by the probability of each fee being collected. So to give a hypothetical example you have a deal that will pay to make it up $100, and we estimate dots that it will close at various different points that will close during 2027 at 50%.

And so that metric, it would be counted as $50 on a probability-weighted basis. So that's that indicator. And then we've also provided numbers on the fee weighted comp clearance trends and those fee-weighted ones are revenue based. In other words, new mandate comes in and it's $400, that would get counted at $100 as opposed to just counting new consoles. On account basis, we're also seeing very, very significant increases in total clearances that are especially in the larger transactions. But I think the more relevant thing is the weighted pipeline that I gave you and then the fee-weighted console clearances because obviously, cost of clearance at a $5 million fee a much different thing than the comp of clearance of the $50 million there.

Steven Chubak

And just for my follow-up, I did want to ask on the impact of higher rates, both on conversations with sponsors and strategics. You noted that you're seeing the pipeline momentum. But to what extent is that impacting the willingness of some of those clients to initiate deal processes here?

Peter Orszag

Yes. Look, I think, let's just start with, obviously, in theory, higher rates should discourage deal flow in practice. We're just not seeing that being a very significant factor right now. And I think the reason is that most of the imperative for transactions on the strategic side, especially on the alternative private equity in a second, is coming from the need for scale and is rapidly changing technology space, the desire to secure your supply chain vertically when you're subject to this new supply side era that we have spoken about and the desire to kind of reconfigure your geographic footprint in the wake of the fracturing of the global economy.

Those are all such powerful forces that an increase of [ 2034 ], whatever number of basis points on the long end of the yield curve doesn't really materially affect your desire to get those transactions done, especially when you realize that the regulatory environment, particularly in the United States, may never be more auspicious to acting on what you've always wanted to do. So we're continuing -- I mean I think that explains along with the investments that we've been making and our emergence from the J-curve period why the forward indicators are so, so strong. And again, I've been reading some of the commentary about deal flow slowing. That is not what we're seeing for ever.

On the private equity side, situation is a little bit different. We've all been waiting for the M&A from private equity to pick up. And I think that's just the interplay of 2 things, 1 of which is exacerbated by the rise in interest rates, which is a disconnect on valuation. The owners of the portfolio companies continue to await better valuations. Obviously, a rise in rates doesn't help on that front. But against that, you've got ongoing pressure from LPs from investors to get some cash back and to have liquidity events. And it's really the interplay of those 2 phenomenon that will drive when we see a significant uptick in private equity M&A.

I would say that would only -- that has to happen at some point. And that would only further accelerate the forward indicators that we've shared with you. I'd also note that in meanwhile, while we're all waiting for [ Gadea ] a little bit on that private equity M&A moment. It is helping to drive additional activity in our secondaries business. So the Lazard CL leg of Lazard is further spurred during this moment in which the valuation disconnect component of the M&A CSAW is causing some degree of continued delay in significant private equity M&A activity.

Operator

Our next question will come from Alex Bond with KBW.

Alexander Bond

Wanted to follow up around the large past strategic outlook and activity levels there. So as you mentioned, Peter, it sounds like that the industry expectation there is for volumes to remain strong heading into 2027. But maybe if you could just expand upon what you view is driving your recent progress in this area.

You spoke again to elevated on clearances for deals above $5 billion. But maybe how are you thinking about the opportunity to grow share here further in this area? And also how you think the ramping of the newer cohort of MDs can impact growth in this area specifically?

Peter Orszag

Yes. Well, look, I think let me back up for a second. One of the things that we wanted to do over the past 3 years. We've already talked about the J-curve, but the other component of that, that we needed to address is the business model, especially in the U.S. having a duality to it that often was not the case in the past. So in the past, the U.S. business was very geared to only the large cap public company M&A. And what we saw was an opportunity for a walk and to go and not only continue that excellence in large-cap work, but also really significantly expand our private capital coverage and be able to do both.

And so what you're now seeing is that we're emerging from the J-curve period and you are seeing that duality of the excellence in large-cap and our private capital coverage coexisting. So we're walking into a [ dome ], which was always possible, but we just had not -- we had not been doing that as a strategic matter. I gave you some of the statistics, but I think it's underscored by best year-to-date lead table positioning, which really speaks to the large cap side of things in over a decade and also in the third quarter and year-to-date, but in the third quarter, our share of revenue coming from private capital is at an all-time high.

So it shows that duality. What's driving the large cap side of leatable positioning. It is, I think, a combination of renewed efforts at client networking and expansion of our network, so out with clients incessantly and the additional talent that we've been bringing on to supplement the world-class entities we already have. We said that this would take a little bit of time to ramp. But we can see it in our internal data in terms of new meetings then showing up in [indiscernible] clearances then showing up in announced transactions and so on.

And you're starting to see the progress that you had been anticipating manifest itself the first stage really does show up in those league table results because those are the forward indicators of future revenue from the large cap side of things. And what we're pleased by and why I think this is why I wanted to go in a little bit more detail is that, that's happening at the same moment that we've got a lot of muscle on the private capital side of things.

So it's -- the lead capable progress is not at the expense of our private capital coverage effort instead in conjunction with it.

Alexander Bond

Okay. Great. All makes sense there. And then maybe just as a follow-up, I believe last quarter, you all spoken to the expectation for higher than favorable -- higher-than-normal favorable seasonality for advisory in the second half of the year. Is that still the expectation? And then also, I'm not sure if I missed this earlier, but if you could just speak to what percentage of revenue is coming from the non-M&A side and advisory in 3Q, that would also be helpful.

Peter Orszag

Sure. So with regard to the first question, we continue to expect the second half to be stronger than the first half and the ratio of the second half this year to the first half will be stronger than in 2025, which I think is what we said on the prior call. And then I won't get the exact statistics, but I believe it's approximately 60% M&A and 40% non-M&A in this quarter. And if that's a little bit of , I believe that's right, we will get you that exact number.

Operator

Our next question will come from...

Peter Orszag

Hold on a second, I can do that precisely. I'm sorry, it's a little bit off that approximately correct for year-to-date, but you asked about the third quarter alone. And in the third quarter alone, it was 61% and 39%, so it's still approximately correct. [indiscernible] That was my memory side. It's a little off.

Operator

All right. Next, we have Devin Ryan with Citizens Bank.

Devin Ryan

Want to start with a broader expense question. So I appreciate some of the moving parts on areas like the deferred comp schedules you talked about. So I know some of that's still evolving? And then, Tracy, you talked about some of the incremental work you're doing on just broader kind of expense savings. And I expect we'll hear more about that. soon here. But as we think about all the work you're doing, is all of this necessary just to get to the Lazard kind of 2030 goals that you've laid out here? Or does this create even more capacity?

So I know some kind of like 6% or better comps. So there's -- it could be something better, but like is this necessary just to reach those levels?

Tracy Farr

Yes. Happy to address that No, I think the answer directly is no. When we look at Lazard 2030, remember that the vast majority of what Lazard 2030 is about is growth. We are so focused on investing in high-growth, high profitable areas of the business. And you see that with the econs, you see that with the inflection that you're seeing in Asset Management. You see this with the investment that's been made over the last 3 years in the financial advisory business that we talked a lot about last quarter with the J-curve.

The points that I'm making on the margin and these programs around comp expense and others is really a companion to that focus on growth. And here's where I want to go with this. the real theme is that when Peter and I looked at the business, we saw that there was more ability to drive operating leverage in the business. And when you are focused on revenue. You have to be careful that your organization is ready to achieve that revenue growth while maintaining discipline around margin. And that's what I'm really focused on is trying to augment the way that we work, where we work, how we work in the back so that as that revenue is delivered, we're not -- or I mentioned in my prepared remarks, this decoupling of expense from revenue growth. That's what those initiatives are focused on.

So to answer your question more broadly, no, it's not required to 2030. But I guess I would agree with you that as we decouple expense from revenue growth and that revenue growth is delivered, actually, I think there's greater margin potential than what we've necessarily embedded into the 2030 expectations. 2030 remains a revenue growth story, but we're trying to prepare structurally the business to deliver enhanced margin as that growth materialize.

Devin Ryan

Appreciate that, Tracy. Very helpful. And then maybe a bigger picture for Peter, just on the M&A backdrop and trying to kind of connect the regulatory environment to what you're seeing with clients. And obviously, heading into midterm here, but I think bigger kind of collections around what potentially could change in 2028.

And so, how much is that playing into conversations and an urgency to get deals into the market over the next year just because something may change and clearly, there is a window now, and that window may not be the error in the other side of 2028, which I would think in theory maybe kind of get people over the hurdle of some of the macro uncertainties just because they know don't move now, they may not be able to move. So is that playing in at all? If it is, but where are you seeing that? Is that intensifying in any areas? I'd love to just get some thoughts on that piece as well.

Peter Orszag

I think that is a factor. I think even without that, the technology piece and the need for scale that I mentioned and the vertical integration in the geography would be driving a lot of transactions. But I think that is a factor. And I think it's 1 reason why you're seeing disproportionate activity in the largest deals, above the deals because this is a moment where you can plausibly get those through that may be more challenging in the future. Now with regard to hypothetical future environments that could come into place in early 2029. Just 2 or 3 comments on that.

The first is that I mean, obviously, there's an election you have to see what happens. So that's stopes point. But the second is that historically, we've seen larger shifts from administration to administration in the Department of Justice wing of the antitrust regulatory environment than in the FTC. And that's almost by design because the FTC commissioners are bipartisan, and there's sort of more stability that tends to come from that side of things. So it will partly in that environment, depends on whether you're a DOJ filer or an FTC filer.

And then finally, and perhaps most importantly, the world is changing. And in Europe, you see a shift in the antitrust environment towards promoting European champions in this new world order. And I think even in an administration shift in 2029 if that hypothetically happened, this new perspective that you need to weigh the traditional antitrust concerns using curtail indices whatever, against the desire to have frontier firms in each sector that are of a sufficient scale to be globally relevant might change things going forward.

But in the meanwhile, people do see this window that is certain as opposed to the interplay of those various doctors that I was just mentioning that are hypothetical 2029. And it is the seizing the moment factor I guess, reinforces the underlying motivations that I think are primarily the ones that I mentioned.

Operator

Our next question will come from James Yaro with Goldman Sachs.

James Yaro

Could you just help us think through the restructuring outlook from here? And whether there could be upside optionality to growth given the more challenging economic backdrop as well as higher interest rates globally and perhaps also over what time frame? If you do think this will happen, that could occur.

Peter Orszag

Sure. I guess I could take that. Look, I do think we've seen on a year-to-date basis, growth in our restructuring practice. We think that will continue. And then when you look at the environment, I have said before, I think the risk of financial distress among the independent Frontier labs and/or some of the neo cloud providers in the AI ecosystem is elevated, and that would have ripple effects in the need for restructuring throughout at least a significant part of that ecosystem.

And even apart from them induce additional financial distress at the lower performing parts of the marketplace. But what I'd say so, yes, I'm not going to give you precise timing because that's a full earn in terms of trying to predict exactly when, and this is not a high-frequency business, we're kind of playing underlying trends. But I would also say, I think one of the things that's different today than was maybe the case 20 years ago is everything I just said is true, but it will disproportionately affect maybe outside of the AI world, disproportionately affect the sort of bottom 20% of firms in each sector.

And one of the things that's fascinating is you've just seen this massive explosion in the dispersion across firms in performance. So what's happening at the top of the sector, the frontier firms is dramatically different than what's happening amongst the laggards in the sector. And so I think what's new is that you may well see significant restructuring activity coincided coincidental with significant M&A activity because those leading firms want to continue being at the frontier and inorganic growth is one vector to do that. And yet at down at the bottom of the distribution, there's a lot of distress and need for restructuring. So I would just highlight that I think that's a little bit different than prior cycles.

James Yaro

That's very clear, Peter. I think you have a bit of a unique lens on Europe. And so I hope perhaps you could comment on the European backdrop for your business and how this is -- or has evolved more recently, especially in light of the again, increase in rate structures in countries in France as well as the geopolitical questions in your proximity to that content.

Peter Orszag

Sure. First, we are sitting in the U.K., and so I would just note since U.K. is part of Europe, even though it's not part of the EU, that we had a record third quarter and a record first 9 months of the year in U.K. Advisory, so that speaks to the strength of our franchise here more broadly across Europe, obviously, the macro backdrop is challenging. The political backdrop is super challenging with highly polarized electrics and frustration in the political system that you see not only in France but across most of Europe.

And yet, there is still significant M&A and other activity. And the reason for that is that you have to distinguish the macro and the micro, macro backdrop, not so great. We could talk more about that if you want to, but it's not overwhelmingly auspicious. But most European companies that we're dealing with have the majority of their activity in the majority of their sales outside of Europe. So they happen to be headquartered in Europe, but they're global herbs. And I think that explains the disconnect between a lot of activity that we're seeing out of Europe and the macro backdrop in Europe that's less promising because the firms that we're dealing with...

Operator

Our next question will come from Mike Brown with UBS.

Michael Brown

So Peter, just looking at the industry data, we can see that the software M&A has been challenged this year. I'm surprising given a lot of the AI uncertainty and disruption potential there. But we've seen a few deals coming through. So maybe can you just provide a pulse check on this sector specifically? And maybe just if you could kind of dissect the large versus small end of the space with strategic versus sponsor back deals, and maybe just talk a little bit about how you see that progressing now that we've been living in this kind of AI world for a while. Is it kind of a better outlook from here, so maybe where you would have thought last quarter.

Peter Orszag

In software specifically?

Michael Brown

Yes, exactly.

Peter Orszag

Okay. So I would say -- I kind of agree with your characterization, which is I think things are better than when the when the shock hit the software system. As you know, we have a leading franchise out of Boston with the Head of our Tech remark Dolan in exactly the space. And I think you would say it's there's more pockets of activity relative to the absolute bottom, but I don't -- I would not characterize this as being an extremely active area.

And so the tech group as a whole continues to cover that space, but is partially pivoting to other areas in the meanwhile. One of the benefits is we can skate to where the puck is or is going within our sectors. And I'd say with regard to private equity in the space, the same forces that I mentioned before are at play with the push and pull of challenging valuation causing a delay in liquidity events, coupled with the desire for LPs to see some cash on the back end.

That's probably more severe in the software space than elsewhere because the valuation disconnects relative to what maybe had been expected a year ago are more severe -- and admittedly, the rise in interest rates further exacerbates that. But it's not all dark. There is some activity in that space, and we continue to operate actively.

Michael Brown

Okay. Great. Well said. If we just pivot over to the asset management side of the business. Fundamentals there continue to really progress in the right direction. And it does seem like there has been increased strategic interest in scaled asset management platforms really across the industry. Can you just talk a little bit about how you think about the business continuing to create value for Lazard shareholders today?

And these avengers aren't really getting full market appreciation, maybe can you talk about how you think about the alternatives here to kind of unlock some of that value for shareholders?

Peter Orszag

Sure. I'll take that and then maybe Chris can weigh in on some of the underlying trends and performance. But on the structural question, I'm going to repeat what I've said before, but I think it is worth repeating, which is -- we have a great new leadership team, including Chris and also our Chief Operating Officer and our Chief Investment Officer, very strong, by the way, that also came across in our internal survey appreciation for the quality of that leadership team. We believe we can add a lot of value as we continue to focus our product and strategy and where we think we have a right to win and where we can scale the strategies can get operating leverage out of that scale strategy rather than having a long, long tail of subscale products and strategies.

Continuing to expand the number of active ETFs we have, where we've had very successful launches of roughly a half dozen and there are more to come. So bottom end investment performance that I already mentioned on a 1- and 3-year basis being about 5 years, which I think reflects this renewed [ Reger ] under our Chief Investment Officer or excellent portfolio managers. But I've also said we're a public company, and there's no absolute blind insisted on the current structure.

We will do what is in our shareholders' best interest. And as a public company, that means being open to whatever the best or the most value-added approach would be on behalf of our shareholders. So there's -- it's a question of value and [indiscernible] and we believe that we can continue to improve the performance of this business, and that's what we're focused on doing for right now.

Chris, anything you want to add?

Christopher Hogbin

Thanks, Peter. I might just add and look, we're really focused on trying to strengthen this business. That is -- you'll have seen the -- a number of the changes we've made in the leadership team with a Chief Investment Officer, a new Chief Operating Officer, Head of AI, a Head of Product, the Head of Corporate [indiscernible], risk leadership.

So really trying to strengthen the team. The bedrock and foundation has to be around our investment platform and delivering consistently strong performance. So it's good to see that coming through with the numbers Peter cited. And then that -- we can deliver that and as we deliver that, you start to see that in client flops.

And for the first 9 months of the year, we had record flows of $54 billion to give you a bit of flavor around that. it's really in the areas where we're delivering strong consistent performance. So that's our advantage platform, the quantitative equities. It's our emerging markets platform is our Japanese equity capabilities, a number of our fixed income strategies, some of our alternative strategies like convertible arbitrage strategy.

So there's a real sort of breadth around that. And then look, we also see a lot of white space around our business, right? We are largely a public markets active manager, but there's a lot of white space. That's exactly why we hired in our Head of Product and Head of Corporate Development for the business to really help us chart that course ahead. And we see a lot of upside potential from here. Meanwhile, continuing to operate the business as effectively and efficiently as we can so that we can deliver better margin for our shareholders as well.

Peter Orszag

Just to reinforce this, I'm going to again repeat other things I've said. I think perhaps sometimes in the past, people had the perception that there was a dogmatic insistence about these 2 businesses being together. We believe that we can continue to create significant value, as Chris was suggesting with these 2 legs and then with the third leg of Lazard, but it's not a dogmatic insistence. It's an empirical question of, if they put it math on where the value is the highest for our shareholders.

But we're very excited about the pathway forward and all the things that Chris and team are doing, and then we're also very excited about the new third leg of Lazard that will come into existence in early November.

Operator

Our next question will come from Gabriel Angelini with Bank of America.

Gabriel Angelini

Peter, I think we're about 3 years into Lazard 2030 now. And when I look at the valuation, I don't think the stock is reflecting the progress and the optimism that we heard in your prepared remarks. And when I speak to investors, we're hearing some skepticism around whether the turnaround is taking longer than you had expected or whether Lazard might have missed part of the current M&A cycle. So how would you respond to that? And what would you say that view is missing?

Peter Orszag

Well, I would agree with you that I don't think we're getting credit for the progress, but those CEOs would probably say that. I would say the following. I think the changes that we had to make, both in terms of our Managing Director bench, which was essential to improving the commercial and collegial duality that we talked about and the business strategy, especially in North America to cover both large cap and private capital was going to take time.

Relative to our internal plans relative to those or 2030 plan that we laid out internally. We are, if anything, a little ahead of schedule, but definitely on track. So there's been no than at least we expected. Obviously, we -- I can't speak to any outside expectations, but I think emerging from a G curve where we had upgraded 40% of our Managing Directors over roughly a 3-year period is actually pretty good, but I understand others may have different expectations about the timetable.

We can't control that. All I can say is we are emerging from the J-curve period, seeing lots of very positive forward indicators. And relative to our internal planning, we are definitively on schedule, and we intend to remain so. And then with regard to missing the M&A market, I also just don't really see that. I mean, again, our weighted pipeline for next year is twice what it was as of this time last year. So that's not consistent with missing any window.

Gabriel Angelini

Perfect. And maybe as a follow-up to that second point. I think when we look at industry-wide data, it does look like volumes are decelerating, but you've mentioned several times now that you're not seeing that same deceleration -- is it fair to think about this as Lazard back to your more natural market share of those MDs that you brought on or ramping? Or would you argue that the industry backdrop remains as constructive as it was, say, 3 to 6 months ago?

Peter Orszag

Say it's probably the former, but I don't really know because obviously, we have insight into our own deal flow, and we're reading the same reports about the overall market that you are. So I don't have anything differentiated to say outside of our own experience, but I think our own experience is suggesting significant momentum, again, on schedule. And whether that shows up as a constant share of an expanding wallet or a larger share of a stagnating wallet overall. I don't know, but I'm we're really focused on our internal operations and tracking and accountability and client coverage and all the things that go into continued momentum, and that's what we're seeing.

It may well be diabothesis that you suggested, which is we take a larger share of a market that's not growing as rapidly as it was the best, I don't know.

Operator

Our next question will come from Brennan Hawken with BMO Capital Markets.

Brennan Hawken

Tracy, you spoke to the shift to greater cash. It's consistent with some comments that we've heard you make more recently, so not surprising. But when we think about it from a framework perspective, and we think about those a few percentage points that we'd be adding to the ratio. What should be our starting point? Do we take the year-to-date comp ratio as a starting point? Or do we take last year's ratio and add a few percentage points to that. What's like the best frame of reference?

Tracy Farr

Yes, it's a fair question, Brennan. I think you understand the dynamic well and I understand your question. Well, the way I would answer this is on a like-for-like, no change in the deferral policy to date. Our remarks throughout the year would be consistent that we would have expected a decline towards the end of the year on an adjusted GAAP comp ratio. I think that would have been modest, a few points, but that would have been modest. And then I would reiterate what we said before, which is that if we were to make a deferral change and I'll come back to that in a minute just on magnitude, but it would accelerate.

And again, I want to make sure this is really clear. I know you understand this for others on the call. this is purely an accounting recognition concept. I've mentioned before to you and to others that I'm very focused on comp discipline on an awarded basis on an actual economic basis. This is an accounting concept that would accelerate some of that today and would help us managing, again, that share dilution concept. Any impact that would be a few rigs. And you can think of that on kind of a year-to-date accrual basis. I think that's a good basis. I would just reiterate that were we not making that change? Or should -- or if we didn't, you would still see that kind of contraction or decline in the fourth quarter on a modest basis.

Does that answer the question? And the only other thing I would add to that is, this is one of those situations where we talked about wanting to manage share dilution and we've talked about share buybacks, so we need to continue that into the end of the year. And so as far as the total magnitude, it's hard to comment now and so I won't I'll just flag that duality of like focusing on both, whether it's share buybacks or whether it's decreased deferrals, so increased cash. economically is very similar, and we're trying to solve more than one opportunity with this, and we see it as a great opportunity and the right time to make that change.

But does that answer the question, Brennan?

Brennan Hawken

I think so. Why don't I sort of paraphrase and you can confirm that I'm understanding. So it sounds like what you said is -- and totally get you, yes. When you switch -- when you increase cash, you are increasing the expense in the year in which it is earned as opposed to amortizing it later. So totally understand. it sounds like what you're saying is like-for-like basis, not changing the methodology, we would have seen, I think you characterized it as modest improvement in the year-to-date ratio as we come in the year-end. However, given the change that you guys are making, no change to award it, understood. But on an adjusted [ comparation ] basis, there's going to be an offset to that improvement that you guys would see from the accounting change. Is that fair?

Peter Orszag

We just know -- it's Peter, that we have not finally decided to do this. I think Tracy said, we're considering it. So we'll have more to say about that in the coming weeks before year-end.

Tracy Farr

But otherwise, directionally, burden, I think it's commonly accurate with Peter's [indiscernible].

Brennan Hawken

Understood, understood. And of course, you don't know the revenue that's going to come in the fourth quarter. So that's a [indiscernible] okay.

So I appreciate that. One more, Tracy, because you had some interesting comments on efficiency efforts that we're going to learn more about I think in the coming months here, it sounds. Can you give us some texture on where you believe there is the most wood to chop. So we discuss this since you've taken the reins. I know you are very excited about this opportunity to make the organization more of lean need. But when you think about some of the areas where you think low-hanging fruit is always a bad term, but like maybe the most ripe opportunities would be for these efficiency efforts.

Tracy Farr

Fair question. I characterized it on a number of part is thinking about where and how we at part of that is around centralization I think that's probably centralization and standardization of the workflow is probably one of the most -- using your term, the lowest hanging fruit.

Lazard has this amazing global. And not only is it global, but it's local. So where we operate amazing connectivity to our clients. That said, historically, that geared itself in kind of the corporate functionality, and that's not necessary to super client delivery. And so I think some of the centralization and uniformity that we can deliver delivers a lot of cost savings and frankly, delivers better delivery to our front offices and frankly, to our clients.

So I'd say that's one. Another is vendor rationalization. We see a lot of opportunity in that area. That's partly that in our non-comp expense accrual. Relative to some of the expectations around inflation. So I would say those are probably 2 of the biggest areas. Technology remains a huge opportunity, but it's probably lag some of the process of order flow redesign.

Operator

Our next question will come from Connell Schmitz with Morgan Stanley.

Connell Schmitz

Peter, I know this is largely addressed, but for more clarity, I'd like to dig more into the potential for the upcoming U.S. midterms to catalyze M&A given your expertise here. Can you speak to the credibility behind the notion that a Democratic suite could ultimately act as a near-term propellant to large transformative deals ahead of a potential shift in the reg environment [indiscernible] or is this just not much of an impact, given you've already described a pretty robust deal-making environment and deals really aren't waiting for the midterm?

And then Tracy, as a quick follow-up. Can you help quantify the level of pull forward in the [indiscernible] this quarter versus last quarter?

Peter Orszag

Sure. My question, I'd say the following. I don't think that the midterms will have any effect on the existing regulatory environment. And I know you -- this is not what you were suggesting. Some people, however, have thought that. So I just want to clarify that. I think your question is kind of 1 layer beyond that, which is does -- if a blue wave happens, does it further accentuate the need to get deals done before a potential presidential election in 2028. Maybe at the margin is the answer because it would reinforce the odds as of now that the White House would switch parties in 2028.

In other words, this blue wave doesn't happen at all, which is an unlikely scenario at this point. it may take some of the timing off of when the White House may switch and a massive Blue Wave would probably reinforce the odds or the perceived odds that the White House would switch. Then leading us to that next stage that I've already talked about with regard to the DOJ, FTC, et cetera. I would say though, a couple of factors make this kind of why I said at the margin. One is the desire to get deals done now is pretty strong. And so a little bit of extra emphasis there, I think, is an accentuating factor but doesn't materially change things all that much.

And secondly, we're still pretty far out from a presidential election. And so while the midterm outcome may affect the perceived odds of the White House moving one way or another in it probably doesn't move it that much. And that's why I think it's a great question, and it's a subtle question, but I think it's probably pretty marginal.

Tracy Farr

And on your point around pull forwards, I would say pull forwards for the quarter, and I think a couple of mine, they were broad-based really concentrated, as I think people might expect, frankly, I think it was not concentrated in any one transaction. I reinforce this concept that sometimes fees associated with a particular transaction. spread across multiple periods.

So I think that sometimes can be difficult to get a reach or on. But to help on the quantification, I would just say that Q3 pull forward. It was really -- it is slightly below what it was year-over-year on a quarter basis and very, very much in line with $2 million or $3 million kind of like an average over the last year or 2. So again, nothing exceptional, kind of an average amount of pull forwards and frankly, less concentrated than what I think people might assume as far as any [indiscernible].

Operator

We'll take our last question from James Yaro with Goldman Sachs.

James Yaro

So Tracy, I think we are getting a couple of additional comp deferral questions. So just 2 more clarifying ones here. I know you've said that you have not made a final decision on changing the deferrals. But is this part of the explanation for the persistent 69.9% comp ratio each quarter of the year so far. Or is there something else? And then number two, could you just speak to the timing and magnitude, if you decide to make the deferral impact in light of your 3-year comment? In other words, would that potential change only impact 2026? Or would there be impacts in 2027 and 2028 as well?

Tracy Farr

Okay. I understand the follow-up question. So the definitive answer is no on it factoring into kind of the 9% accruals throughout the year on that explanation, I would just guide you to our, frankly, our last quarter's comments around J-curve revenue growth, the comp expense line and the investments bent. So that doesn't drive any of that. reinforced what Brennan's question was that on a like-for-like basis, we would have otherwise expected a modest decrease in the fourth quarter to your point around its timing and I can't speak to magnitude for the reasons that Peter mentioned.

We have not made that definitive decision. We'll give you some bring more to think about it though. I can't answer the final question. So timing, we would naturally go through that in our normal compensation year-end that has yet to happen, which is why we can't exactly but over the next quarter, we will be able to give that color. On timing impact, should we do it? Regardless of bank to 2 when does it show up. It accelerates some of that -- the amount has increased cash or the amount that you otherwise would have deferred that you're now paying in cash.

That is an immediate recognition on a GAAP basis in the current year. It doesn't in fact, impact the total awarded compete [indiscernible] that -- the way to think about that is each year, when you eventually roll off of the prior amortization of higher default periods in the past, here, you're recognizing kind of 1/3 of prior year's amortization. And so it's kind of this vintage of amortization that happens.

Where this will really benefit the firm in the future is, one, the ratio itself, the quality improves, but 2 to 3 years from now, what will happen is you're now -- your amortization build includes much lower deferrals from the current year next year at that. And so it creates this kind of embedded approval in your comp expense line over effect over the next 2 to 3 years. So that's when it the reversal of that effectively is as future periods require less amortization of current year deferrals, if it makes sense to them. And the only framework I'll give you around magnitude is, again, I go back to the purpose of this is to improve the quality of the ratio and to attract better talent and improve like the overall quality of our compensation program for our employees. One of the metrics that we look at is just where our deferrals relative to market. And you can do a little bit of research on this, and I'm happy to talk about it.

But one estimate of magnitude is if we were to get our gross consolidated deferrals closer to average market participant that would be the target over a period of time to try to achieve.

Operator

Thank you. Ladies and gentlemen, this now concludes Lazard's Third Quarter and First 9 Months 2026 Earnings Conference Call. You may now disconnect.