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Text: I am Alexandra Deignan, the company's Head of Investor Relations and Corporate Sustainability.
Today's discussion also includes certain non-GAAP financial measures that we believe are meaningful when evaluating the company's performance.
Hosting our call today are Kenneth Jacobs, Lazard's Chairman and Chief Executive Officer; and Evan Russo, Chief Financial Officer.
Evan will start the discussion with an overview of our financial results, then Ken will provide his perspective on the outlook for our business.
After that, we'll open the call to questions.
Today, we reported a 15% increase in operating revenue for the first quarter with strong momentum in both Financial Advisory and Asset Management.
In Financial Advisory, first quarter revenue of $317 million increased 8% from last year's period, reflecting broad-based activity across the business.
Our volume of publicly announced M&A transactions is up significantly from last year's first quarter, with particularly strong activity in the $1 billion to $10 billion range, as well as in Europe.
The pace of new restructurings has moderated compared to last year, but we are experiencing increased activity in Europe as we expected.
Our Capital Advisory business continues to grow, both on a stand-alone basis, advising clients on capital structure, shareholder insights, ESG and capital raising, and as is important component of our M&A and strategic advisory work.
Our global private capital franchise continues to be in high demand, serving financial sponsors with new fundraising and innovative solutions in the expanding market for secondary transactions.
In Asset Management, first quarter operating revenue of $328 million increased 22% from last year's period.
This reflected management fees on a larger base of assets under management, as well as strong incentive fees, primarily from a European fixed income strategy and several alternative and local equity products.
As of March 31, we reported AUM at a record -- at a quarter end record level of $265 billion, 37% higher than last year's period and 2% higher on a sequential basis.
Average AUM for the first quarter also reached a record high of $261 billion, 18% higher than a year ago, and 6% higher on a sequential basis.
As of April 23, AUM increased to approximately $274 billion, driven primarily by market appreciation of $6.7 billion, positive foreign exchange movement of $2.7 billion and net outflows of $0.2 billion.
During the first quarter, $1.7 billion in net outflows were driven primarily by the emerging markets and equity platform.
However, we achieved net inflows in a number of strategies, led by convertibles, international and global equities.
Gross inflows in the first quarter continue to be strong across our platforms, rising for the fifth consecutive quarter.
Asset Management has a healthy pipeline of unfunded mandates, with growing demand for global and international equities, as well as quantitative and alternative strategies.
We continue to invest for growth across the firm.
In Asset Management, we are investing in areas where we see high growth potential, including strategies focused on sustainability and ESG, quantitative investing and alternative and thematic strategies.
We continue to launch funds and seed new strategies to meet investor demand.
We are executing on our strategy to expand our platforms with roll ups of investment teams.
Yesterday, we announced an expansion of our alternatives platform with the addition of a long/short team focused on the technology, media and telecom sector.
In Financial Advisory, we are focused on growth opportunities.
We plan a significant number of senior hires this year, and we have been intensifying our coverage of private equity sponsors.
Senior hires in our private capital and financial sponsor coverage teams in 2020 are already delivering increased contribution to our revenues in 2021.
At the corporate level, in February, we launched Lazard Growth Acquisition Corp I, a SPAC that raised $575 million.
We see significant opportunities in the stock market and are focusing on sectors where we have competitive industry expertise and strong networks.
Now turning to expenses.
In the first quarter, we accrued compensation expense at a 59.5% adjusted compensation ratio compared to 60% in the first quarter of last year.
Non-compensation expenses were 9% lower than the same period last year, reflecting continued lower travel and business development costs.
Our adjusted non-compensation ratio for the first quarter was 15.8% compared to 20% in the first quarter of last year.
Our effective tax rate in the first quarter, as adjusted, was 28.6%, in line with last year's first quarter.
We expect this year's annual effective tax rate to be in the mid-20% range.
We continue to generate strong cash flow, which supports return of capital to shareholders.
In the first quarter, we returned $237 million, including $49 million in dividends, and $123 million in share repurchases.
During the first quarter, we bought back 2.9 million shares of our common stock at an average price of $42.30 per share.
These repurchases effectively offset potential dilution from our 2020 year-end equity grants.
Yesterday, we declared a quarterly dividend on our common stock of $0.47 per share.
And going forward, we expect to use excess cash flow toward increased share repurchases.
Yesterday, our Board of Directors authorized a $300 million increase in our share repurchase authorization.
Our total outstanding share repurchase and authorization is now $439 million.
To summarize, our quarterly results underscore the strength and stability of our model and the continued high performance of our businesses.
Ken will now provide perspective on our outlook.
The global macroeconomic environment continues to improve, creating tailwinds for both our businesses.
Unprecedented fiscal and monetary stimulus and major economies is laying the foundation for strong economic growth globally in 2021 and into 2022.
While uncertainty still exists around the course of the pandemic, the vaccine rollout in the developed world is raising expectations that the health crisis can be contained.
This outlook, combined with recovery in the real economy, and improving growth forecasts is boosting confidence among CEOs, boards and investors.
The forces driving global strategic activity remain in place.
Technology-driven disruption continues to be a catalyst for M&A across industries.
The global drive to reduce carbon emissions is an emerging catalyst for strategic activity.
Shareholder activism is increasing after a brief pause in 2020.
Sectors that were battered by the pandemic are recovering and the proliferation of SPACs, alongside strategic and private capitalist added substantial dry powder to the M&A market.
This is as good as M&A environment as we've ever seen and we're as active as we've ever been.
Our Financial Advisory business is in an excellent competitive position, and we expect our pace of transaction closings to increase over the course of the next few quarters.
In Asset Management, low interest rates continue to drive demand for risk assets, including equities and corporate and emerging market debt, as well as alternative investments.
Institutional investors continue to seek sources of differentiated alpha [Phonetic], including ESG, thematic and alternative strategies.
Our Asset Management business is well-positioned in this environment, with a diverse array of innovative strategies and solutions for a sophisticated client base.
We entered the second quarter with a record level of assets under management and market conditions that are increasingly favorable for global active management.
As the health crisis begins to recede and beaten down sectors recover, we are seeing a greater emphasis on valuation-based investing.
Overall, we remain focused on serving our clients well, while we manage the firm for profitable growth and shareholder value over the long run.
Even as many of you work remotely in challenging conditions, you are making a real impact.
As we return to the office in greater numbers, the lesson learned -- the lessons learned during the past year will help us create a more flexible workplace that benefits the firm, and all of our stakeholders.
Now, let's open the call to questions.

user
q1 revenue rose 15 percent to $648 million.
aum as of march 31, 2021, was $265 billion, up 2% from december 31, 2020, and up 37% from march 31, 2020.
well positioned for year ahead with record assets under management, high levels of activity across financial advisory.
financial advisory operating revenue was $317 million for q1 of 2021, 8% higher than q1 of 2020.

assistant