Cohen & Steers (CNS) 25 Jan 242023 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers Fourth Quarter and Full Year 2023 Earnings Conference Call.

Chief Stadler; Joe Officer, and our Financial our John are Matt Officer, our me Executive Harvey, Officer, Chief Cheigh. Joining Chief Investment comments questions to answers want remind that of I you to include may our your forward-looking statements. some and our based including are us, outcomes our recent and and fourth those most materially described these differ currently a to full actual information release quarter reasonable in believe filings. on available on year and report We number Form could other due our statements to but of presentation, earnings annual factors, accompanying XX-K SEC We any duty assume no to forward-looking statement. update Further, solicitation constitute of none securities an the to offer sell vehicle. buy the or or statements of an fund of offer our any to investment other

financial measures is financial earnings measures SEC adjusted GAAP with in non-GAAP that, the as as results. over to measures non-GAAP meaningful are conjunction reconciliation contains at of that With to links non-GAAP believe website our be available. of the to financial reasonably turn in measures as performance. well and evaluating extent These our included A should in financial referred also presentation in we read our earnings our the Our release to are Investor The Matt. Relations presentation available www.cohenandsteers.com. the section and call I'll filings release presentation these

us for you, today. Thank Thanks Good joining morning, Brian. everyone.

results. previous remarks focus my our this calls, on as-adjusted will As morning on

revenue with in $X.XX prior per X reported under for results lower the as across quarter was from investment average to the $X.XX and types XX the prior $X.XX GAAP in of of assets third sequentially. of reconciliation through million quarter quarter million found year's share sequentially. of Slides The we was compared the quarter adjusted earnings of attributable $XXX.X decrease vehicles. earnings $XXX primarily presentation. million to be on year's the XX Yesterday, earnings on and compared and For XX can in Pages $XXX.X management the release with Revenue and all XX

to and basis partially million and points to quarter compensation with was fourth We when performance and to and amortization. revenue was balance actual due last employee reduction income quarter in points to by excluding have quarters. rate deliberate decline a the in and both a in $XX.X and and an lower $XX.X quarter prior third retention in primarily approach incentive take paid. our points fee million compared to Operating Driven compared quarter million fourth in and the with fourth quarter. year-over-year lower G&A $X.X in in operating for be in XX.X always compensation X.X% results been compensation service million distribution results, reflect increase fees, the decreased the in in quarter with $X.X $XX.X of offset our third employee XX effective fee fees of the million, decrease the benefits to shareholders. depreciation a expected was due by basis Expenses $X.X from higher third to Our decreased from quarter. amounts setting and to was fees with basis order compensation year-end This benefits quarter, operating would effective performance the third quarter year's quarter. XX.X% sequentially, XX.X XX.X% million margin compared the primarily

actual order will reduced third to a costs service implementation XX.XX%, associated amount reflect to our the with sequential in primarily last the new paid. adjustment. onetime fees to included distribution year, With the trade was the The third the recall in our funds. XX.X%. assets this the U.S. average open-end and due than G&A, of ratio points of by For XX G&A The under revenue was estimated was higher guidance driven completed primarily compensation lower quarter's system respect management basis for that adjustment quarter you decrease quarter that accrual increase to management in

million fixed The began than $XX the was the X.X% expense. depreciating quarter. $XX.X with corporate G&A and was sequential year, for X% provided in lower And when and amortization leasehold in we December This as increase amortizing XXXX. expected, compared year-over-year million majority our X% assets improvements and into we increase guidance of accounts the headquarters. depreciation we new finally, in For moved the last to

of to Our for primarily XX.XX%. in forth for effective of our increases corporate effective included cash and quarter's in presentation basis XX.XX% an to was full an the of the rate points rate, increase nondeductible and XX from the liquid due quarter last higher investments tax XX.X%, rate sets which adjustment Page U.S. guidance equivalents, cash the year was XX bring treasury earnings certain trailing seed and securities to X investments items. quarters. current The

of million million end not we revolving quarter, $XXX.X totaled million the on with $XXX $XXX.X compared year-end Our have at facility. at last our and drawn firm credit liquidity

$XXX increase December market or Assets $X.X billion, $XXX of of billion due by XX, under appreciation million $XX.X were XX.X% of increase from net to billion management outflows was September $X and distributions an million. at XX. partially The of offset

of be billion, was from $X.X awarded pipeline mandates. net to unfunded partially will XXXX. appreciation of X.X% update our full increased Harvey by billion due flows billion. distributions the December providing assets institutional $X.X year, For an and The increase of billion of on Joe $X $X.X outflows offset and under or management market

Let me few consider to discuss for briefly a items XXXX.

being assets approach disciplined management, and revenue things average assets we As from compensation the the XX.X% a recorded combined equal, hires, replacement XX.X% all under projected resulting result in being XXXX. XXXX's year-end will with in XX.XX% the decrease from a management expect of towards above new revenue both managing from our approximately XXXX ratio to X% under in that increase to

reduce of estimated the in for accrual system. increase projected from quarter mentioned associated costs trade implementation Part the X% to our of the G&A XXXX. with adjustment the increase million from expect order management $XX previously We to X% stems the the to recorded third

The to as of expenses. our is with G&A entertainment and X%. Excluding to technology we as travel increase client-related London Tokyo and of to increase well associated offices majority that higher adjustment, relocation the costs and would the X% costs expect due

the As X quarter fourth associated depreciation corporate noted month headquarters December. past of into earlier, new included move our and the amortization this with

expect we approximate XXXX, For million. to depreciation amortization $X and expense

December, among listed The real rate them. a they billion terminated several account exiting institutional allocation remain will our that part XX.X%. large program, revision And in estate strategic a expect January $X.X informed tax finally, X. us asset client global late that We be client's of as will their effective to REITs was asset classes, at on

component. size, had its the with account Given lower-than-average a performance base fee a fee

over turn to Officer, to Chief our our like Cheigh, will I'd John discuss Investment who investment performance. Now it

environment are real performance the Thank investment on performance you, And quarter like relationship listed the private estate. our our scorecard; the Matt, viewpoint market phase, to and the cover summarize and good investors Turning performance? between in morning. correction to I'd what our Where classes. future? in like second, our I'd scorecard. And listed fourth we surprise Today, real last, asset estate might for first latest provide to

outperformed improvement. This versus our of drop shows by the X same global just XX%, X short-term remains longer-term which in to decided straight our When followed bringing up quarter's of a led XX% infrastructure, core at turning AUM term. XX% Within short X-star track perspective, records quarter real outperformance and that XX% by It first are to in global points. basis fund quarters preferred from of points past pullback AUM however, over year-over-year XXXX was from the points a XX% represented listed year. our markets is XXXX notably open-end as basis and XXX basis From XX% in a any rated Core XXX XX%. note outperformance core outperformed with last to Morningstar, year the international current a AUM strategy, a in by and point is strategies Shifting for years quarter XX% to for outperformed or and our over And our second the performance compared outperformed had preferreds XXX was last after exceptions. outperformance global quarter, quarter. the XXXX clients. row, core which XXXX, with the Of that we quarter low-duration outstanding basis time preferred a estate of whole, X- X.X%. strategies, relative last points, competitive by XXX that and fourth is the fourth being which fluctuations quarterly X full most periods. XX.X% with market X AUM which respectively. our for important up its has important outperformed X bonds For now the benchmark, The slight strategy environment. up equities our believe are of

that moderate has hot end expectation very been the would pivot are easing we tightening to eventual and of cycle Our an the the nearing and inflation cycle. that

for for the with third fell shareholder higher on and rate earlier, assets demand. strongest higher period infrastructure Tower during falling earnings and to moved commodity concerns were due outperforming year pivot months. assets companies estate real Real to role. real as the surged quarter. Listed the gains during in contrast growth global listed expect and joined which has the will led both outsized in liquidity rates, the Global production, strong reports credit U.S. be strong the energy about Commodities, fourth the hikes led asset rising. Midstream quarter NCREIF estate fell however, we to topic estate I modest, and and play buoyed market We were the until way our by have trail our real in a we subsectors posted combination continuing all and ODCE XX% Energy by by nearly by petroleum Gains in I supply estate mentioned significantly to preferreds estate, listed bottom real-time measured index. This Conversely, equities X% outperforming cycle. and vocal of a that expected hurt middle classes, new more will Given is leads a quite the asset believe asset on its that real as like prices tightening, been private return not end REITs, performance largest later. real occurs. in spreads the prices. an this recoveries more October the real rates the downturns Fed to pausing the with global U.S.-listed as ECB in recoveries class reasons preliminarily nearly interest end stark time and listed quarter softer pricing. XX complex on plus of first important private returned reported non-OPEC weakness a XXXX. class activism. appraisal-based in XX% real private U.S. during have entered the the OPEC bottomed speak estate believe interest as we which healthy

returned by fixed income our during of both core beating X.X% quarter, credit-sensitive slowing basis rate XX Lastly, optimism combination nearly points. as the its economic security and a benchmark Preferreds strategy and rallied supported inflation classes. preferred

issuance so-called retire about Bill the income easily into new investment that than demand $XX legacy confidence success more Coco of want alone, he the Scapell, in on billion team the new building the addition, is above our Income preferred absorbed that made August in in average both bank's our of Suisse with Cohen in On of In dedicated forward banks, leadership new will securities. track improved future. financial a a have organizational preferred picked Credit with investments security long-term X client an the environment. March. up first importantly, us securities of the Europe announced year team in leader great to the amid activity demonstrated joined Europe Fixed U.S. business, November level, Team and was & us to capital and his XXXX by since and built great XX the the structure. after take and and to of and totaling a contingent & for securities Steers. Most was service supply recently in market capital system record as will the Bill The contingent we healthy and including preferreds We UBS the Preferred merger late Head and has Cohen years thank launch issuance in and Steers in for Bill Securities

than years Zaharis-Nikas real extremely and XX to better securities Elaine on industry the tenure After provide Steers. & I given We Preferred more also last Income Elaine's after from partnership announced We Fixed Cohen April been that and reputation promoting on gears. or be and view Shifting of X. Today, our we'll believe mentorship. build succeed ahead than either base positive, estate. is announcing there the preferred at week, at no experience, of Elaine, CNS feedback Securities in client to promotion Elaine's our wanted has one

of First, we real XXXX, reaccelerate peaked. will after U.S. in effects Inflation a a sustainable XXXX. prices have be has almost real in that likely view, way abate. uncertainty. tightening slowing In greatest paved once rental estate low In listed for markets rates believe share the of our slower asset than will in XX% growth prices. listed have estate the experience, in since at of the moments interest our peak rents put REITs Book bottom rates end price of decline interest the in and XXXX bottomed. Yes, a

companies XX CRE return for of believe financial enable in in for last disconnect the early has forward seem typically average far, the will XXXX, private our occurred most critical of nearly equity REITs, this years. Credit distress construction a For decade, industrial, cycle. will into to window In business benefits of apartments over in typically, capital this XX.X% it and that is on and with this of year impact may world hiking to the is GDP, medium-term X-year earnings the cost we positive and on XX%, but impact Joe. me capital tighter full and cycle after in savings Fed cycle, the investors. in lower The a example, acute is than drive that, of of which XX percentage believe and the and local an a asset this nearly the to pullback and understand was interest advance dynamic marginal NAV We rate past much call X fresh rate of less take buyer. stated able for smaller market markets and multiple types months, will have impact construction can equity means the meaningful a early listed has market. already to private players fallen the over half advantage potential REITs potential and XX private environment. supply, open the interest In their X discipline, a few loan global rates real estate over is should turn be and means of small in this The buying points this private the issues the REIT plus now drop the supply the XXXXs markets in private higher This research important are XXXX fundamentals. only in horizon. decline XXXX we because more will In the tighter the be REIT positive research tailwind times, thus both take bottom should we've let of compelling contrast, another repriced the potentially and assets rental of growth setup this to year world, for the estate have reiterate in begin for This market. debt out last private opportunity, values the was, low on highest the real still to less a we to advantage to second and acquisitions. growth. see it acquisition of months our years With which been listed XX-month believe end legacy and higher of norm. X buyer, XXXX. but capital and between point and This crisis magnitude for this believe return a next To play believe wake REIT and underappreciated buyers, and the on of XX capital U.S. where listed X of has leverage developers. a shown and for We remains X- cost loans strong of vintage crisis. overbuilding I will following them We listed self-storage as the XX private counterintuitive. benefits Listed likely is has what to activity, and published twice

in of longer Today, majority cycle, fourth The transitioned of which dynamic. morning. John, a put on interest peak for to priorities talk business wrapper XXXX. anticipation was for the rate year-end. a and XXXX, rate you, then steeped it The into good quarter Thank the psychology, review I'll about our driving interest appreciation trends, higher in

$XX.X Our prior in with AUM both and the at yield. our in appreciated billion compared XXX. and treasuries infrastructure listed $XX.X towards quarter, begin S&P billion Preferreds with and ended quarter asset estate the the line of outperforming the $XX.X performed XXXX the Reflected to classes in billion listed real end high year-end AUM, the year.

Our year relative regime to corporate improve. of helping good strong navigate we business look the continues last feel remains phase XXXX. macroeconomic change infrastructure about next performance the investment activity clients and forward in We and investments made to

in the for billion, X.X% rate $X Looking had firm-wide fourth and total XXXX outflows outflows $XXX net at year. of we decay flows, organic quarter, of the million net to bringing

the in billion and year. the mostly drove funds. harvesting and strategies which interest For Preferred fourth explain helped the for $XXX in the were mini largest and the redemptions outflows and loss rate the million throughout quarter million year the in year X open-end outflows the drove billion and outflows, quarter driver for half open-end of $X.X strategies. have persisted the preferred from out The were high totaling banking funds $X.X the crisis several environment Tax quarters. and with first quarter out year, $XXX of the year the for

Another international the global real driver segment QX. with of QX and flows in out. $XXX Recapping client was outflows estate million

had to funds million, million were advisory the and had open-end global Japan subadvisory of million XX% In real to outflows and out Japan estate. for of attributable to attributable U.S. open-end addition deeper preferred for securities U.S. $XXX By fund net low-duration attributable had strategy, fund out. with accounting sources estate subadvisory out estate, these million preferreds CSI, LPX, $XX fund real $XXX million. XX% $XXX our a into $XXX million outflows and million flows, $XXX our Delving to out, XX% bit $XXX ex had real accounting the

LPX's its flows yield comparable While the by strong, challenged in of XXXX was bills low to risk-free treasury the continue zone. performance be X%

saw defined had million. $XXX by contribution million. X modest $XX from also had inflows terminated fund of outflows new totaling funds portfolios model-based accounts $XXX and Non-U.S. DCIO. million, Advisory totaling We offset accounts X or

to In order of All the but subadvisory will of due their attached a $XXX multi-strategy Account, Japan Daiwa, trend the quarters a clients. its to estate accounts the Savings from terminated program, client past allocation our portion Japan's be existing taking we and in fund account, a to sub-advise. called has and one by overlay. new over allocation had Individual of vehicles in retirement funds $XXX a to million a been or implementation million delayed baby Nippon majority sub-advisory, program positive the large NISA. strategic real were of In portfolio partner, maintained, global participate new profit by outflows where the we adding couple the of due eliminations asset be outflow replaced tactical will broke with

back the $XXX increased added million from million to continues for $XXX quarter. confidence in are was unfunded was majority X into at Fed mandates with assume overall third to X will real quarter, from trend decisions. the from and not they the X of $XXX Tracking mandates, long the on and XXXX, the changes strategies accounts, The more million asset provide funded new estate. billion region end to expectations Consistent with compared pause in of that at for improve international fund. half million a the pipeline one dispersed X to us global last X allocation the in Our pipeline as both in $X.X activity with have been removed mandates year-end the prospect shift policy $XX EMEA across enough in

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years XX% be optimism. for though. percent AUM XX% for supports X years X at always We Our and of outperforming my can better,

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tighter with capital more issue see regulatory acquire and preferreds. and alpha As banks from stiffer capital sellers as particularly such, attract as opportunities, potentially requirements could begin rates to conditions additional push refinancing credit properties to contending we to

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Our continues stronger. franchise real to get estate

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require Some of initiatives will these incremental headcount.

clients On driven growth I of by headcount we've year. the the will the any improving environment. is modest strong results Bill and years. on a investor great more an organic delivered his will our would retirement team this whole, incremental Head preferred and by be for congratulating be Bill later Scapell, close over

the We legacy forward. high lines and team in in you please the questions? could Julian, carrying listening. confidence you have Elaine Thank open his for for

Dunn [Operator Instructions] Our John from Evercore ISI. first come from question will

talk instincts a little channel, given cycles, and the preferred REITs on and seen rate in about you with in are wealth gross more react? What expectations. 'XX in where past have we you sales people how Could U.S. maybe your for redemptions

I in flows to we're We've last already not preferreds. the and Both this pivot And the come for important going with articulated cycles. near channel, wealth say selling, the early John changed Toward loss the tax tone report about so have we positive. noted, for first we we is of February, expected. policy to year some an return sentiments And which seen our a until as continue back. the couple the is year, of month in some talk saw be I investors prior to our would Fed is reach far we has end catalyst those that We've and around changing and asset cycles year and classes. of expect new seen in both those

that X time Japan, of some typical you. big Got you distribution that? then a Maybe delayed had think in around July around, shorter we pop X cycle this REITs cut, think gains. XQ, could do was than the be is time generating if a response to this presumably months But outflows, you do there on

again, as what Japan. Japan. flows I hard really really the was planning of comment difficult a think to predict the year, predict and resumed, in Relative we it's in but particularly your anywhere around into happened and and it's distribution positioning more cut the then the the end period short really, tax program.So around very, around I in flows year, last very to inflows redemptions of mentioned, going NISA the to had

money. we campaigns really fully terms term, doing quarters, And them activity we're of like education, and supporting that couple on capital a past the marketing industry That's optimistic from try of management more the market. in cash that's longer cautiously that about. partner, very to rejuvenating of Japan the on around said I'm our it's I've front. sitting lot a big invested, to get something and Daiwa As in asset this and is program

comes from Beatty Adam UBS. from question next Our

maybe versus Appreciate maybe in have there historical valuation. growth in a and fundamentals or follow-up, a as the market Wondering, effects obviously could experience John's you what estate the try far. out real trajectory terms the might if parse mentioned comments of you. and in But We've some that bit little recovery in so be around valuation the and on you seen rent outlook. lagged dynamics some fundamentals

rate reasonable, cuts at So point, the how important assuming this from And here? got just wondering, expect? are a that peak at also, which those how playing would we've and point, versus be see out this seems rates plateau you you timing

Okay, questions. are this Those good is John.

So values. drives real first, what estate

course, in will, I they and We supply demand big you a that because, expectations. about REITs of a the combination demand your cost of to the think of XX%. decline of if capital and to point, trough drive supply of your capital, Of of peak point, of equation. a And to fundamental was course, it's cost primarily had side shock,

print cost something had as like GDP side. seeing a definitely really, morning. slowing X.X%. seen the of just normalization. capital what reported this solution much a That either just in a for that fundamentals. much concerns we're in was terms GDP so, of staying in But that the for being And We Fed overtightening about said, short longer see more the pivoting we've run, or of higher from to We

Some of And are places normalize. that's that's lot where on of rents were to the the demand like supply months they're side and industrial and some XX to side. growing ago. apartments XX a starting flyers now just high The former on been

capital, would XX, terms in on Fed's there'll which a big a driver. big, So, of what it's of capital of to course, fundamentals, market, where the think a will equation, XX of my slowing months be I call, months actions, be fundamentals fundamentals of terms availability fundamentals the fundamentals huge XX of XX cost over public career more average best relief from I and ago, eventually in mechanism. And be the to or next probably the so. better-than-average we're like then a improving this and the look, is in discounting months But

We will lower are of are a that around eventually and of think reacceleration interest corner. rates "voting market machine." I the both discount that rates are ideas be so, And fundamentals the is to ahead going those lower, get

you. normalizing slowing Yes. decelerating or Very between to appreciate helpful. the really long-term below trend have what I No, distinction versus

then So now? with wondering situation U.S. U.S. but more in follow just many who CNS, geography, And like I'm familiar how compare right you Europe with that's the would excellent. on markets, just

interest rate central bit Japan different. and that, besides banks, going the somewhere they Generally, along part, on. mean, were cycle is say globally, pausing I one they'll different. China I'd a tightening be probably is little and about bit a little for develop most now there's way, they're cutting. But the

there's think fundamentals Australia, U.S. whether as of globe a say bit parts strong I'd and a fundamental Europe it's So, from were of the side, other hot cycle. global the in never as or I the rate

now they're Europe So XX-some-odd strongest the years, quite were decelerating. never again, strong. Asia U.S. seen in were I've if and fundamentals that and

deceleration. I fundamentals interest the lower never So, they're kind having getting same frankly, the still that and of on had they're from but relief rates, they upside beta think not

in more the peak fourth in XX-some-odd, market REITs U.S. but they're be cycle. hiking every up the markets even dynamics think the but U.S., idea rate in a of quarter different, more to bit as similar than again, were think Europe I I is so. the because this a going are of up maybe European

markets on optimistic markets. well both as very we're U.S. So, international as

could, sense. whatever. it's going and if very in track the product. your it's Appreciate likely good, about record is whether into I channel, That then It's maybe but market just Obviously, or REIT it. Joe. wirehouses wealth RIAs compelling Thinking And for long-term or makes a maybe wealth. more CNS one also crowded a

product, of gatekeepers. wondering you're differentiation the the some just of maybe So those how pitching to

Yes, to much range that's drive wealth the levels. XX% the to today firms to question. higher private crowded. range. X% the to the sure in But of aspirations, I'm allocations in and getting the are targets strategies as are great They're know, more It's some of you XX% a alternatives as

very that's I think are it. optimistic, the but those way they talk about

it along time. start going fall arranged nail seed had But deploy of the come because capital. for terms In to timer investment sitting performance. a particularly on to waiting waiting we it's critical of delivering capital and for differentiating, cycle our we've to been we're talked it's private about us. investment-wise. as We've it to first I think some market And to been how for to us, the we've in history educating

focused you that able to on solely one get So, to need show a to the we're on be And requirements platforms the portfolio. of that. wirehouse is

unique we different. until and now So, able how hopefully, supplement week, to gatekeepers, show other it's strategy the acquisition, one to this haven't is But do with to be been We'll begin and able we'll that. that properties. our

types REITs some are we've that, different that are what nontraded have. we other mispriced and to tried property to So identify believe than

alpha package to advice then our with liquidity way to about going use different our to it going through more and asset source source. are tool a the also estate optimization than it a make And an in real allocation listed we're rather We portfolio this markets strategies.

think using the equity trying line their wealth going firms both of advisers help portfolios view be able includes to about private alone. firms Not capabilities. are build to and our that that build to that the listed So, really when businesses what talk we it's important to That's are to with going are it. private private better to up you wealth They're do that. all trying do, and

over to playbook well to worked us that's So we're go for years. XX going the

question [Operator ISI. Evercore from from comes next Instructions] John Dunn Our

Just in of is some closed-end chance any given constructive market, seems be couple window? next maybe a that where the fund could to the over there there be it more loosening years, of

the should be. through historical follow cycle interest its you to If rate there conclusions,

has what view been for Our the than higher we've past be experienced rates years. XX that will

cost difficult So that need the you positive spread closed-end to able a to of market on capital. anytime going something soon. little think more be is fund your it's debt But happen will we make in that things not to generate a because

that years, it's couple the the Before R&D the not for, couple in some of ideas front, closed that planning of we next had for window we're but something past years.

more one maybe me. And for Okay. then Great. just

levels then For are the geography? do type maybe advisory wraparound channel, and by quick institutional can client you a demand how by of

in unfunded represented. which representing have didn't I that Well, are pipeline. this, domicile maybe strategies we pipeline, but But interesting. mention articulated one that really billion X is our $X.X have I'll with pipeline. start of I we what countries

Philippines, East it includes Taiwan, country in Canada. the Korea, So, Australia, a Germany, Middle and

most the for we listed back the that's they comments Middle and in that the that the happened ago, international think goes Several assets see of I we've that calls pipeline ever world. in expanding around it had, how years year make to the it past interest East. real on

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call I for to over further no like closing to queue. would in questions back Harvey Joe the have We turn remarks.

to for Great. to moderating. forward our in you look everyone, quarter. progress thanks on April talking we and And Julian, the for in first thank listening, you

conference call. your concludes participation. Thank This you today's for

now may You disconnect.