Bloomberg Audio Studios, Podcasts, radio News. We're going to go to a really, really interesting panel right now.
Raymond J.
MacGuire, president of Lazard, one of the leading investment bank global investment banks, sitting down with us. We're going to listen in so Lazard, your partner Peter has set some big numbers for you guys.
I want to talk about how you're going to get to those.
But let's start with private equity overall and where it is today. I mean, it had glory days and then it really slowed down some, particularly when the interest rates got raised. Now it seems to be coming back to what extent is the fed industry it's actually affecting the rate of private equity deals at all? Or is it other factors?
So let's define private equity. I would probably expand that to say asset management, of which private equity is one of the verticals with an asset management. Today we see the asset managers starting with the likes of black Rock with I don't know, ten trillion dollars or so. You see the other ones who are now getting close to, if not above, a trillion dollars. Private equity is a subset of the asset management world. So we see many of the institutional investors as well as the family offices
investing in the asset managers. So their assets are growing and the expectations I don't continue to grow as investors are looking for returns that either meet or beat the.
Capital markets.
FED policy has slowed a little bit of the deployment of that capital, and until we see valuations come in line, my sense is that you're going to see, at least for the private equity side of it, different to how they're deploying other aspects of the overall portfolio. Private equity has slowed a little bit in the activity. In terms of private equities contribution to revenues on Wall Street thirty
to forty percent and growing. Expect that to be them to be continue to be a large component what's taking place in the capital markets and be one of the drivers.
It looks like there's a fair amount of capital out there to be deployed. Let's talk about the demand side, the need for it. It's took some big transformations. We're seeing such a we all talk about artificial intelligence all the time these days, and also you've got the energy transition. What are the things you're going to demand investment over the next five ten years.
That's a much larger question, and that goes to kind of a macro opportunities that we have, and I would put them in five categories. One would be generative AI in the drop down box, there is the amount of capital that we're going to need deploy in order to support generative AI data centers as an example.
Renewable energy or energy transition would.
Be another of a macro trend, and the drop down box renewable energy and energy transition is how do we invest in the infrastructure that's going to allow us to remain competitive? And energy transition all also be effective in how we go about entergy transition. The other is this has taken on a different nomenclature dependent upon who's communicating.
It's either ensuring cringsuring, deglobalization, or what I would call reglobalization, and the reglobalization means how do we invest in US manufacturing. Remember we peaked in US manufacturing in June of nineteen seventy nine, where one in five Americans worked in a
factory in the manufacturing base said eight. It's probably one in twenty and much of the dependence that we have in the manufacturing world for all the things that we do or dependent upon the supply chain, So reglobalization, that's going.
To be another factor. The other factor that I would look to is the.
Largest growing population that exists in North America's sixty five years and older. And so how we drop down box, how do we engage in healthcare for that demographic, how do we manage the transfer of wealth or not in the last of cybersecurity macro themes, and the investment that we will have to make from the private sector is investment that we also today see being led by what's taking place in Washington, the IRA as an example of the Chips Act, fundamental to how we compete going.
Forward, just where I wanted to go, which is the role of private versus public in some of that fancying because you mentioned the Chips Act, which obviously has a lot to do with generative AI government is a big player in that and also energy transition. Goodness knows, with
the IRA government big player as we go forward. As you look at from your point of view at Lazard, what it's the right role for the government, what's the right role for the private sector in supplying the capital that's needed.
It's going to have to be a partnership, especially for the elements of the macro transit. In order for us to compete, it's going to have to be public private partnerships, which were in many ways I think with the IRA and with the Chips Act, and look at a number of private enterprises that are involved in that with the support of the government.
So there's those partnerships.
And each one of these macro themes is going to have to be public private partnerships. As we reglobalize, how do we invest in the elements of that reglobalization. The way that we do that is through we need government policy that's going to be supportive, and then we need private enterprise to partner.
And across the spectrum.
You're going to see public private partnerships that lead our ability to remain competitive.
Where how does that apply cross national boundaries you talk about reglobalization, there certainly has been a readjustment, I think it's fair to say when it comes to supply chains, and we even have a competition perhaps going on with the United States and the European Union right now in some of these areas to what extent. Does this inhibit cross border transactions or does it enhance them?
Well, what you're going to see is the friendshuring to which I referred. If you look at today, ninety percent of the manufacturing needs of this country are supplied by China, So friendshuring. If I look at auto manufacturing in our relationship with Mexico as an example, you look at biofarm and our relationship with India as an example, if you look at batteries in our relationship with Poland as an example,
We're going to have to cross boundaries. We're going to have to rely on those relationships that have historically been friends of the United States. As the global North and the global South at some point come together, We're going to have to make certain that we have relationships with our allies in order for us to.
Remain in the lead.
And we are in many fundamental ways in the lead, but where we are exposed from a supply chain standpoint, we need to be able to rely on our partners to reduce that gap.
There's a lot of talk about industrial policy and big investments for the US government and some money.
Goodness news has been appropriate a fair amount of money.
I'm not sure how much we've actually seen as we would stand in the business up on the screen. Yet I mean, talk to me, for example, about the Gateway project, which has been on the table here in the New York area for a good long time and still I'm not sure how much progress I've seen made. Is that a warning to us about the ability to actually get it done rather than plan it and even spend money on it.
So Gateway is a great example, as you all know, probably the largest allocation of capital by the US government where you going to see prime examples of public private partnerships. Why do I say that Gateway, as you all know, is a sixteen billion dollar project with seventy two thousand jobs, and so what that's going to require is one the training of a workforce to fill those seventy two thousand jobs, from.
Engineers to day laborers.
And we're also are going to need to make certain that from a manufacturing standpoint, that we have the industries that can supply the equipment necessary for us to go and drill.
Gateway is a great example of that.
In my expectations that you're going to have private enterprise that are also partnering with the government, and what the leadership of Gateway now is doing. With Chris colorI and his leadership, I think they've done an extraordinary job bipartisanship coming together recognizing.
That in order for the trade that takes.
Place domestically continue to be facilitated, that the Gateway project is one that is a high priority. If you also look at the implications on healthcare, Gateway in many of the communities that have not benefited so much or have suffered because of the emissions have taken place across some of the bridges and tunnels that it alleviates that. So Gateway is a great example of how the US government
has come in and supported infrastructure development. This necessary for US to continue to increase our growth in our overall economy.
Let me pick up on one of the things you've mentioned a couple of times is workers, the number of workers trained workers, because I think train workers want to grow as an economy, you need more laborers. In the recent past, it appears that we've been sustained to some extent by legal immigration, actually legal migrants being added as a workforce. What's the role of immigration in terms of the growth
of this economy. It's as you look at some of those huge projects where you need the workers and also the trained workers.
Well, apart from the political implication that first of all, we need to make certain that the workforce that we currently have as a workforce that is trained to be able to address the huge opportunities the demand for labor.
In my sense is that as you think about the IRA, and you think about projects flight Gateway, and you think about the organizations today that train the labor, that there's a tremendous opportunity for us to continue to invest in a unions as an example, how do we invest in that and how do we make sure that the union is supportive so they can go train the workforce, reducing the requirements that you have a college degree in order to do some of the work that's going to be necessary.
So workforce training is critical. By the same token, workforce housing is going to be critical. So for seventy two thousand people commuting into this geography, where do you house them?
That's going to be part of the overall thought process and part of the overall architecture is we think about projects like Gateway, and as I think about what gateways, the implications of Gateway profound and exciting in a reflection of what we can do when we decide to invest in this country and invest in the most important part of the country, which is the talent.
When we talk about things like generative AI as well as the energy transition, it's hard to have that discussion without talking about China somehow, because China has really put a lot of investment into those There's obviously national security issues of the China. At the same time, how can we get along if I can put it that way with China in terms of economies, so that we both get the best of it without conceding or compromising our national security.
So I would say when it comes to generative AI that we are ahead in the actual general of AI, the technology of generative AI, and if you look at who are the architects of that, they reside in this country. So I take confidence in that when it comes to
the energy sources that are necessary for energy transition. As an example, seventy to ninety percent of the raw materials necessary for renewable energy energy transition is refined by China, and so as we think think about that, we'll have to reduce our exposure to the supply chain and invest more, which is why I come back to what we're doing with the Chips Act and the public private partnerships that
reside there. Exists there and other examples out there. So I would say there is a reliance today that we have to reduce our exposure. But that comes to not China,
but China plus many, not China plus one. And I spoke about Mexico or India or Poland, or if I look at the global South coming from Tierra del Fuego up and the natural resources that exist there in the relationships that we are developing there to generate or to get our exposure increased to raw materials, the minerals, that's increasing, and I think there's an acknowledgement that we need to
increase that. Another example would be the continent of Africa fifty four to fifty five countries, depending upon how you decide on one country. We have not invested there. That's where many of their raw materials come from. They exist there. The two challenges that we have when we think about the continent, there are two threshold challenges. One is the
rule of law, the other's currency. We ought to be able to come with a structure that allows for us to invest private capital to invest on the continent in friendly relationships there so that we can access the material.
How do we go about doing that?
So you have to solve those two threshold challenges in order to attract private investment into those markets.
Ray, what does ZE mean for Lazard? What does it mean for Lazard? Because as I say, Peter and you have set some pretty aggressive goals in terms of growth, What are the opportunities all of what you just said presents to Lazard? And for that matter, what are the challenges as well?
So for the opportunity, I think there are probably more opportunities than there are challenges. As you all know, we've been around now this is one hundred and seventy six year. We pride ourselves on being the trusted advisor to the most sophisticated corporate and sovereign leaders. If you think about much of what's taking place in sovereign restructuring, we have been in the lead of that. If you think about what's taking place today and renewables, and you saw announced
transaction between Rear Beyond and Volkswagen, we led that. And there are numerous examples historically and today where we have been out front both on behalf of senior managements and boards and also on behalf of necessary important sophisticated sovereigns.
So we have played a leading we're on.
The expectations going forward will continue to play a leading role. We're onboarding talent to add to the existing galaxy of stellar talent that we have and it's exciting to be if I want to be anywhere, and I've chosen you want to be anywhere you want to be at Lizard because we're at the forefront of a lot of what's taking place in the world.
Onboarding talent is that one of the key gateways for you. How hard is it to find the right talent for what you need to do to grow?
Well, we're looking for eight players, so you know, wherever we can find them, we're looking. We're looking aggressively to help build on the tradition. I think if you think about storied brands and transactions and sovereigns around the world and who's been involved in that, we've been involved in that, and we are looking for talent. We've onboard a number of talent today. We've had talent that's covering the sovereign wealth funds, covering the sponsors it's covering many of the
large and sumer products companies, covering the healthcare space. So the largest spaces out there are technology, healthcare, and industrials, and we're onboarding amongst the best talent that exist on the street. That's a high priority as we go forward and achieve Peter's vision of twenty thirty.
Ray you mentioned you don't want to tell with the politics of immigration, so this is not a political question, but it does get to that we have an election coming with November, So what extent does that really take some of the wind out of the sales of companies. Likelyis right, because companies are saying, let's just sit in our hands right now, so we figure out what happens.
You know, I think companies are trying to trying to decide where they fit geopolitically and geoeconomically. Strategy, the strategy sessions are now in full force. The elections will have some impact as people digest the results of the election, but I'm not certain that history is demonstrated that's going to have such a material impact.
Now.
The policies that are going to be necessary to address some of the micro challenges are clear. Micro I would say policies to address education, policies to address notwithstanding the fact that we have some of the lowest historical unemployment rates in many of our communities, you've got pretty high unemployment rates, policies to address healthcare. So those policies will have an impact at a local level, and we need
to address those. So the administrations, whichever administration is is is it.
And since you at that point, will have to address those.
Finally, we tend to focus on the United States and New York here when we're situated here, which is often a mistake. You're a global firm, You're dealing with global clients. What about the level of geopolitical uncertainty? It goes well beyond the elections here, and we've got elections coming up ovi see in France, in the UK, there's so many elections, a lot of which were surprising, particularly for incumbents. How is that affecting deal making?
Is to say, there's.
Just more of a geopolitical risk that you have to take into account than you did before.
You know, we have a geopolitical risk team and they are in demand in a large part because of what you've said. Corporations and sovereigns are trying to digest the implications of the fifty semi election that are taking place around the world.
We see the pauses taking place in France. Now we see the.
Scenario plane, and that's taking place in the US. Having said this, as we go through all the geopolitical uncertainty, which today is a country to which the world continues to look as the United States of America. So if I look at that, and I look at some of the policies that are being implemented in the allocation of capital to the future, I couldn't be more excited about what's in front of us and what's ahead of us.