Despite cost-cutting measures taken last year, more asset management jobs could be on the chopping block at Lazard Ltd. due to growing pressures on profitability caused by the coronavirus pandemic, analysts say.
Pauline V. Bell, an equity research analyst at CFRA Research, New York, said if the firm's financial performance continues on its current trajectory, "in Q3 or Q4, I definitely see them doing further (job) cuts in their asset management unit and cutting down on the number of investment strategies."
The firm is likely to be positioned for "a resurgence in M&A in 2021," which would make it harder for Lazard to reduce head count within its advisory business, Ms. Bell added.
"The place where they do have that flexibility is asset management. I see asset management being the most vulnerable," Ms. Bell said.
Despite some analysts' concerns, Nathan Paul, the New York-based chief business officer at Lazard Asset Management LLC, said in a May 6 phone interview that the firm currently had "no plans to lay off staff" and was "focused on ensuring that our employees and their families remain safe and healthy" amid the pandemic.
In October, Lazard announced that it was closing three financial advisory offices in Mumbai; Lima, Peru; and Perth, Australia. The firm's asset management unit, which generates nearly half of the company's revenue, separately closed six investment strategies that accounted for $300 million to $400 million in assets under management and eliminated about 7% of its workforce, or about 60 people.
Lazard had $193 billion in assets under management as of March 31, down 22.2% from Dec. 31 and 17.8% lower year-over-year, the company's first-quarter earnings release said.
Ms. Bell said continued outflows also are a concern, particularly from Lazard's emerging markets strategies. Lazard had $27.7 billion in emerging markets equity AUM as of March 31, down 31.8% from Dec. 31 and down 38.6% from March 31, 2019. Assets in emerging markets fixed-income strategies declined 20.6% to $11.4 billion for the quarter and dropped 25.4% for the year, the earnings release showed.
Evan L. Russo, chief financial officer of Lazard, said during the company's April 30 earnings call that $4.9 billion in firmwide net outflows in the first quarter came primarily from emerging markets equity and debt strategies, and some local equity strategies.