It’s just you have to have that as a tool in your pitch as to what to do with an asset. I don’t think it is generated by lack of M&A. I think it was generated by it’s a good solution for an asset manager to retain an asset they like and crystallize the carry and restart it. It’s almost like if you lay out what a contiguous fund accomplishes, it’s a dream for an asset manager in private equity. They crystallize carry, they maintain the asset and you get to go forward again. So, it has some real positives and that I think will continue to be a product that is important and grow.
James Yaro: That’s a great color. Thanks a lot.
Operator: Your next question comes from Steven Chubak with Wolfe Research. Please go ahead.
Brendan O’Brien: Good evening. This is Brendan O’Brien filling in for Steven. To start, I guess I just want to touch on recruiting. You added four new MDs in 1Q, which is a pretty active start to this year. And, while you’re unlikely to match last year’s recruiting level due to the SVB hires, I just wanted to get a sense as to how the recruiting environment has evolved and if we should still expect another relatively active year on this front relative to history?
Kenneth Moelis: No. I don’t think we have no plans to duplicate anything like last year. The energy hires that we did, which is three out of the four, were in process for a while. I actually think we kind of signed them up last year and we announced them when they’re going to leave. So, we almost look at that as part of last year’s move to fill in some gaps we had in technology and energy. And, I’m very excited and energy transition. So, very excited with where we ended up. If you look at that team, it’s a spectacular team, very excited with that. Now, we’re not going to nowhere, but we still have some spots we’d like to hire. If people became available, we would do it. But, I don’t expect an SVB type of situation to occur.
We didn’t plan for that last year. It happened. We moved, and it ended up leading to us to have a view, that was 14, I think, of the MDs out of a total of something in the mid-20s. Even if we did the non SVB part, that to me, that would be aggressive. I don’t even anticipate that many external hires. I think this is a year where we’ll fill in where we can. We’ll pick off, some really quality people if they show up, and we’re going to focus on the clients for this year.
Brendan O’Brien: Got it. That’s helpful. And, then I guess turning back to the capital markets business, it’s been quite active for you over the past 18 months, given the lack of capital availability through the credit and equity markets. But, with the reopening of equity markets or equity issuance and debt markets, I just want to get a sense as to how that’s impacting the outlook for that business and whether you think you could continue to see growth there.
Kenneth Moelis: Yes. I’m very bullish on that. We took one of our best bankers and put them in charge of it. I think these are big chunky checks. Again, if it’s plain vanilla distribution of an IPO, that often goes to one of the big banks. But it’s almost M&A. I mean, the idea of putting a billion dollars into some position in a capital structure, it usually involves our, what we consider our clients, the PE firms or the private credit firms, which is very one-off bespoke conversation. It often entails things like negotiation of governance and exit rights and all kinds of things that are just not conducive to a plain vanilla distribution. And, oftentimes also discretion and secrecy and people like a lot of people that might involve conflict of interest with your senior lender, and that causes people to not want to have their senior lender involved in that.
So, this is all right. And the fact that it’s available is fantastic for our business because, yes, we were having those conversations a year ago, but the capital wasn’t that available. It was very hard. You might have had a perfect position to put a capital, but the capital didn’t want to move yet. They were very worried about 7% federal funds rates, and there were all kinds of issues around how bad this was going to get. The fact that capital is now in motion and looking for those opportunities means I think our hit rate on marrying up a problem with a solution will be a lot higher.
Brendan O’Brien: Great. Thank you for taking my questions.
Operator: Your next question comes from Ryan Kenny with Morgan Stanley. Please go ahead.
Connell Schmitz: Hey, good afternoon. This is Connell Schmitz filling in for Ryan Kenny. So, just going back to your outlook, so your commentary seemed a little bit more reserved than last quarter, given last quarter you called for a coming resurgence in M&A. So it’s, like, better get a sense of where you are within the merger market. Can you go back to your Formula 1 red light analogy? The last time you talked about that, you said we’re at the fourth of five red lights, but now we have the rate outlook has changed. And, you had made this comment off of the back of Powell’s November comments. So, you just give us an update on where we are with that? And then as a follow-up, on the 2Q comp ratio guide, can you just speak to what kind of revenue environment you’re expecting on a sequential basis that gets you to a similar comp ratio? Thanks.
Kenneth Moelis: Okay. Let me start. So, I don’t know the exact words I used, but I will tell you that our pipe is stronger, our new our NBRC activity is stronger than whatever I said at that point. So, I didn’t mean to, look, I think we’ve all been waiting for recovery in M&A and I don’t want to overdo the, rah-rah. It feels like, it’s coming and our pipe is higher than it’s been at any time at an equivalent point in time, which the first quarter is usually your lowest point. To my comment on, it was in last November when we talked about the, the Fed comments right then led everybody to the six rate cut predictions. So, I thought, okay, we got four likes. I think it’s four likes, right. I was losing track of my Formula 1 expertise.
