Cohen & Steers (CNS) 18 Jul 242024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded Thursday, July 18, 2024.

I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.

to Call. & welcome XXXX Second and Conference Earnings you, the Steers' Cohen Quarter Thank

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

should referred read also includes results. meaningful measures non-GAAP These in as Our GAAP are presentation measures, conjunction our financial to be we performance. financial financial non-GAAP believe measures with that adjusted in our evaluating

at to filings call I'll release included presentation are SEC financial that, Investor is extent and non-GAAP the in these links available. to of Matt. turn our over section measures as of the in to as reasonably and earnings reconciliation earnings website Relations the the www.cohenandsteers.com. With A available presentation well The our release

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

results CFO, Before we financial like XX. be going Raja our I'd will call, welcome joined reviewing new to the our forward. begin on earnings on Dakkuri, us who June calls Raja the

of earnings and year's reconciliation the the Yesterday, focus sequentially. adjusted per in can on with GAAP through XX the of remarks XX $X.XX be quarter we results A Slides our Pages As found as-adjusted earnings and release prior results. quarters, will on my $X.XX compared presentation. reported share of on $X.XX of to in earnings previous XX as XX and

the was million with $XXX quarter Revenue to million in year's from sequentially. compared the the under $XXX.X assets prior primarily lower first The was $XXX.X in million quarter quarter revenue in and average decrease due management.

was quarter, rate fee effective XX our the the with rate Our in consistent in points second first quarter. basis

in million in the with quarter XX.X% the our and XX.X% million from quarter. decreased operating year's slightly Operating income compared quarter $XX.X to $XX.X last million prior $XX.X was sequentially. And margin

The as an and remained with were G&A the expenses in line when decrease in And as to in primarily benefits. in the revenue quarter to for well as increase with at compensation the second sequential benefits in in decrease the first fees. ratio due partially in Total XX.X%. quarter increase compensation decline a compensation increase essentially and revenue professional by as was was G&A recruitment higher offset costs the flat compared an was

Our quarter, for prior effective rate consistent XX.X% second our was guidance. the tax with

current XX equivalents, cash U.S. seed and in forth treasuries Page presentation the quarters. investments for investments and our earnings of corporate sets the liquid trailing cash and X

with totaled quarter quarter. $XXX.X liquidity million compared end million at firm Our last $XXX.X

stock of have proceeds closed The $XX.X April. registered And from our $XXX which our drawn credit million not facility. recently offering, completed million second revolving in quarter amount included net we on

institutional pipeline million, of by on Joe $XXX distributions a provide $XXX billion June and at partially was $XX.X will million. of awarded of and $XXX to market million due update offset X% Assets decrease of or XX, under unfunded $XXX an were decrease XX. March about outflows Harvey from management of The our net mandates. appreciation flows million

briefly we for the benefits, new and of things we compensation the a year. few me and that at replacement respect measured and disciplined With a to strategic consider XX.X%. Let equal, initiatives so to half remain of the to revenue maintain talent acquisition second all hires compensation items the would approach being for ratio discuss expect to both to

expect X% G&A we We still year to to in X% $XX the for the XXXX. recorded million increase from

an accrued reminder, reduce implementation adjustment with order a As our XXXX G&A system. of trade the associated to costs management included

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

Thank scorecard energy trend and I'd then taking global this we for and shifts, you, of interest like this are including our good like Matt, demand how to I'd first and drive Last, recent investment our within classes. and cover our morning. should investment we how advantage Today, quarter, the market discuss the performance favor asset discuss strategies. rising portfolios believe our investor environment to which into

our scorecard. to Turning performance

perspective, Morningstar, is XX% stands quarter, XX% AUM now our total fund its benchmark, a From AUM and X-, the up or of our our last our quarter. X- X- is respectively. XX% of outperformed from performance XX% second its which from quarter. competitive a rated of previous modestly open-end X-star our On exceptional XX%, the at while AUM X-year benchmark, For XX% XX-year XX%, maintaining and outperformance basis, by outperformed

an longer-term getting better. performance long-term acceleration Our AUM and simply, and Put basis last weighted short- our compelling, we year over keep our are alpha the XXX-plus numbers. has been versus points,

timing second rate XXXX. market Equity more hand, saw the On same. Transitioning gain precise X.X% amount the to the over treaded XXXX and Global of quarter and for of investment was conditions. interest the cuts one a and daily of market

including the small mid-cap Equity during of large-cap in select stocks. remained quarter and the market, momentum value, the behind leaving stocks, majority concentrated highly growth

U.S. global listed and REITs and indices modestly classes infrastructure all Our negative equity-oriented lag all the asset quarter. continued global to for cap-weighted with

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last of trailing have asset For and our X in business. example, infrastructure The XXX But U.S. for listed positive annualized, underperformed annualized. absolute been global about X,XXX X equities prospects over these forward disappointing. make returns very by basis equities classes has that points our us there underperformed U.S. factors years, by have asset classes are REITs global the basis key the points

a the the to performance First, asset asset have the valuation look has in changes by contraction part cases, bottom difference historically some decile valuations seen equity in or, attractive or equities in expansion the the just valuations to the some normal classes. small classes our quintile Today, majority or while of valuation. underperformance relative history. measures, in are relative of of history, growth more differences versus been multiple in of our resulted versus multiple somewhere Earnings

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the sell-side valuations, sufficient attractive classes. for under and most shift the real believe represent survey, we markets the while trillions are our seek middle view, further outperformance. return higher a of have since preconditions major money underweight believe which investors on XXXX, January with In We ownership in been to coupled returns. estate a financial to for of currently Fed the one cuts or significant available will According asset in global of crisis. was market dollars sitting funds opportunity the the sidelines they money Third, our drive

and classes valuation value are our the to of we for take relative natural a trailing into of performance, believe Given yield. market a strategies attractive rotation capital and their lagged our fresh opportunity advantage asset

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defense continue We and teams focused playing investment on cycle are funds last their private that on other believe to redemptions. and portfolios

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electric appliances vehicles electricity of it white investment the adoption ] coupled changing and Increasing opportunities the says on paper title road investors needs. energy This transition, energy see of will our narrative is growing about The the significant for expand number new existing from here. of We addition. electric recent [ further with best.

of consensus The rise well area superior behind energy energy the not we XXXX. global that enough to energy requiring we will have mainstream global First, made fund at these meaningful responding energy that to of and roles world's though positioned becoming Thesis this even rising efficient, demand we demands. proposing future demands from parent a active an this least gains be electricity growth. believe in through investment energy centers resulting both global Last believe and in from is management. power economic will of alternative this offset in the only year. diverge to play more Rising year, conversation. We since future ability strategy the fund population traditional outcomes from generate energy there that as a is March consumption is in economy and more in energy launched the creates data traditional that alternative will be

quite client-facing this potential both deliver been Our and investors, have wealth excited feedback has in markets. positive and teams institutional been the to strategy to

a just one that story of steep Meanwhile, think portfolios electric power acceleration in is our and the rare world's markdown this favorable driver of for discount the from at growth. is maintain investment global own demand a companies opportunity see a will need infrastructure. second infrastructure, at backdrop of build, will midstream At opportunities provide benefit trades or supply is in same and part grid tens the infrastructure nearly those enterprise The multiple. we that listed power we dollars The power include generators. half for operate trillions and years and that demand our where of wider to that generation, invest that seek a demand to and the to operate tailwind is power incremental for pipeline infrastructure companies energy equities time, come. This to historical its power listed

X believe next the basis remain and XXX with an more since the more over reminder, resource years We see discovery the equities, the natural underinvested will for will last in about demand for tailwind very performing area agribusiness, natural over believe than on years an and XX points We track within has third decade X points and era be will resources that this scarcity create mining a by of focuses right power XX major and and over exciting last where inception The area basis a energy. management. ago, as returns we which, sectors: world record that than resources as a metals natural absolute is XXX-plus years. active

comment, call over Thank that With turn the you. let to me final Joe.

the good review will quarter for I current trends, Thank Today, metrics business positioning future. our morning. second and initiatives key and and then John, discuss you, our growth

asset stock in classes second the quarter. lagged the market Our

to facing to reallocation out. In they the terms as to challenges obligations of continues portfolio funding react of in markets to continue change our flows, regime are some related and play clients broader

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was environment rates. second averaged most X.XX%. treasury by the expectation quarter, XX-year macroeconomic For longer interest of dominated for the the yield higher for The

XX-year potential to end, back inflation since flows. cuts we to That saw turned year cycle, finally declining. later combined indication, of onset the any has the of this our focus strong with If rate now continuing shift quarter this the outflows after trend XXXX patterns investment flow with in organic yields are treasury ease. to growth. could The portend longer-term However, for performance, the is, on easing our a from our

Fed This per If straight perspective yield of inflows, outflows, quarters straight by less that experienced this rates current policy quarters monetary our the more up our rate is XX normalizes by the XX X in as from averaging relative We extremes, then, curve XXXX, second of to attractiveness performance. it with over $XXX the flows supported the level our quarter. could to higher X.X%, million of Since asset points. funds flows first per cycle, is interest be rates classes quarter. $X.XX which our and had and influenced Fed possible XX quarter took less we rate a until billion at basis of by hike averaging had increased net

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a new competitors competing our mandates. success have well had for from as taking as As at result, we share good

Our excess with return basis weighted return year XXX X-year XXX quarter. points was past basis last was The the points average compared basis excess points. over XXX

has performance recent So higher. trended

compared points basis the XX points overall us helps last performance are basis our rates, XX same quarter with This year. which fee maintain

past the manager fee of compression. several have Over asset traditional peers years, rate our many experienced

income from funding obligations to profiles, pressures more and building allocations the portfolios continue private associated owners fixed Asset menu constraints amidst attractive market inflationary commitments. and face a liquidity the challenges efficient range These dynamic and return balancing to of changing on challenges considering capital more environment. opportunities from risk

at and Japan compared $XX Global million of million by offset million redemptions. and majority the Estate in in strategy, $XXX active with net were segments flows. from U.S. the fundings million were million, the Looking had outflows outflows quarter subadvisory into real subadvisory The outflows ex were had which had Institutional of firm-wide of $XXX in of of By inflows quarter. inflows. We of outflows first and billion had $XXX $X million segments. Both Japan estate. second Subadvisory advisory securities outflows. net preferred $XXX Real $XXX with had

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are inflows Reforms yet has to resulting active date. the in called greater inflows steady in retirement seen passive to program strategies NISA country's modest than but

awarded from quarter and change million. there $X funded the $XXX of last Our mandates pipeline average totaling were clients compared was newly one million X with billion billion. a quarter, $XXX X accounts, from $X.XX billion and from unfunded $X X-year last Tracking

the the who which of relationship. strategies an is accounts, global real strategic million The the client estate eliminations majority mostly U.S. expected of are be in a in with redemptions, estate. is and pipeline provider Offsetting of X will across and real of which clients' X OCIO pipeline $XXX from allocation lost X global

real We we of the is and plan class. and which plan. billion mandate REITs new we are $XXX their invest future. I investors continue in listed helpful allocated Of recent is a believe funding to well our growth allocations to representative $XX for for share an million REITs allocated estate. to new the size, this it asset while would the be to represents of points many just XX have in that that, positioned institution. this capitalize in real billion Asian asset believe opportunities we've to we The under and thought real overall basis innovate for to have they listed been potential opportunity estate on classes We $XXX

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fact, cuts into are rate X fall this In in year. pricing next and starting markets

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and cycle. my aided are underallocated Our multi-strategy world persistent. in rate investors Also, in more instruments REITs is strategies, a the preferreds asset be our inflation-sensitive should portfolio, in underweight by where very be will inflation to as core real view,

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X We key in had leadership the quarter. additions

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CFO as and Steers. the retirement to Matt turning With call. celebrating Stadler's and Cohen XXth Matt's we are Raja nearly This final earnings contributions complete, was to transition & to

this XX over critical as tight hard in Matt. the Please join in contributions years, us. for back to to was know passionately on CFO Julianne, factors, Executive you business. and I'll our For account His a turn focusing cheering financial in I but business as leadership made greatest Matt. Thank call running well Matt point, farewell Committee asking you, an believing in to operator, We numerous questions the me the be retirement. to necessary wish At saying Q&A. facilitate and ship, he'll member. felt

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

update preferreds. shift? in Congratulations, a management Maybe wealth Matt. wealth the from of push then just redemptions the those that. demand starting private Thanks the private on channel also versus pull conversations and public you to for management Are markets? for the on you more us U.S. little channel. for see of And doing and XX% REITs Can

Sure.

maybe start add me things John and can Let here. some

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into continued open end to inflows we've refunds. our However, see

core of institutional the we have of Now, version estate real call our what most our flows from -- come strategy. our

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[Operator comes Instructions] next question Our from UBS. Adam from Beatty

Congrats I'd kick of Matt. and uses with about to it question perhaps, to Fittingly, off a sources capital. like

You did maybe seeding funds. some offering. have the recent mentioned Joe

be of just else capital wondering some So whether the the maybe table might not and deploy on that valuations around. given how M&A just or you might

stock very well. Also, your has done

was So you take having maybe of to about and dry that wondering initiatives. future then some how think I issuing might maybe for advantage powder shares more some

Yes.

Let Matt can maybe me start and add.

our be can inflection cap on for has rates and that talked value. linked done this well, yes, So and point very market stock a small about to leadership interest John as and and shift, the

in the And we've a nice so rally stock. seen

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take don't light a then which the as relates and a with time, it's in to inclusion overnight uses going as So we And be have acquisitions context up ever mind. strong now, but primarily to ETFs market's thought and it thinking And as stock launching advantage about of any it up sheet. be where -- be opportunistic policy as of around, we good been. -- the at that it's shore the XX% insurance they're right active balance this would capital, and of in went organic. to And bouncing just the trade,

active private As more our we have with and of right of estate you opportunity REIT growth-oriented And know, ETFs. now, firm. been plenty real with organic an that we've business

Yes. it. the And Got co-invest. taken private on point

Just maybe to shifting over a little bit subsectors. real estate

As energy, then a open-air Joe about centers. lot shopping John and mentioned obviously, talked

here, maybe change broadly, in about just concern and less areas you're well. like -- thinking as centers, any to of estate data the centers context And bit real data different wondering I'm a little about, how regime potential robust. the then subsectors? being growth On about a allocating

the obviously, Sure. big been of performance I the different lot there's over listed reasons. in XX market months dispersions mean, for last a

next to just really, the up in the has just to it's data think and drivers which a supply centers. center course, lot up wholesale because be driven ingredient there's of continue rents years, the of to business, for demand, going is necessary difficulty rents of I absence few an the meaningfully, drive frankly, point, over mainly going in which because, is wholesale power, your there's meaningfully there's to fundamental data sourcing

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example, moved it's laggard So many the time over but been the on was and few between big portfolios years, we've for to big tower last a frankly, will, capitalize you for our returns, darling, dispersions over if which years. sector, a

big and for REITs continue a data a see centers very be very also So us, as we tower opportunity. big to opportunity

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And there's health areas. so a have in much are is what's driving lot bigger market, lot data portfolios much small in very of really as of about, of our expect, the tailwind growth. And of been bigger parts still like you'd areas those earnings part a care REIT of towers, office and conversations parts a centers,

from Mac question comes Our Gabelli. from next Sykes

insight, the note of as team to and and mean, Matt to the well course as there. coverage been and you firm. -- it's me thank over I I a years industry of reiterate, to want been just many my that's great I would the support

So together. you, them and I'll had questions. just ask X wishes. Matt, best thank I

product On up, the there, are changing versus we specific I preferreds, that catalyst cetera? and wondering on there And IPO pretty on coming there funds? et is any the in your you're REITs if provider then I purging opinion this side, was areas big targeting? opportunities ETFs, that fund you're closed-end a active have know closed-end

Sure.

several in happen positioning will is incumbent our it ETFs, in all And the active strength with of that and will launch other question REITs today, about preferreds, complicated really phases. strategies investment-wise. the we of all just we lead that strongly product that have. one talked a light As peers we core John area with But which we include our will relationships very about one and and feel

we'll it's and as slow, and evolving market the that's how the we'll start how different rapidly, We'll And see So then we'll evolves. evolves start. medium. but technology not --

that we But many out of SEC long ETF try will know firms to classes going of have but with lead so to share funds. -- time, to lawsuit open-end filed a period get play a strength. our this with the over You is

As And positive to a of hasn't have leverage One the the with to to debt feature is on while, have it's a it rates right the high. to your been to new so create closed-end of funds majority closed-end in cost a traditional is cost been closed-end portfolio the of interest spread borrowing. now, and of there hard component fund issued a relates funds, it. reason your relative

that is big a headwind. still So pretty

closed-end -- it's income-oriented which are different has the you'll the and an funds. investing how in differentiating strategy And different as going than isn't to find closed-end do trade very been aftermarket. different. in very a market, typically factor to play funds relates position very and trying that Pershing it's What it they're style, that investment And is to closed-end traditional Ackman fund market Bill his to but

see we more on get until interest would we up, front. but for I love don't some to it that So market open relief rate happening the

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

you quarter. Julianne, taking next to for thank great to and We to us listen day. time Have you, everybody, to thanks, look Well, reporting forward today. a

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

You may now disconnect.