Cohen & Steers (CNS) 17 Oct 242024 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, October 17, 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.

Thank you, and welcome to the Cohen & Steers Third Quarter 2024 Earnings Conference Call.

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

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

sequentially. The quarter average primarily million release was be today $X.XX to presentation. My the focus we GAAP in from results. everyone. due Thank to our the morning, compared compared as-adjusted reconciliation prior share remarks Revenue will was to per found $X.XX you, revenue of to and million $XXX and in can Brian, good earnings Yesterday, earnings $XXX of increase A AUM. on higher reported sequentially. results as-adjusted

in improved operating the million fee an benefits quarter. million and increase the revenue in fees. and, consistent quarter, to to in related our to and increase increase effective at basis compensation in fees AUM increase higher compensation were income $XX.X compared which an XX.X%. Total was to a as in service sequentially, funds. lesser in the open-end distribution benefits distribution expenses extent, compensation remained the the was and to Operating due The increase was XX compared ratio XX.X%. The was and quarter to during margin to with prior and points, line sequential prior due our our with service rate Our higher $XX.X primarily is

our effective Regarding was the for rate taxes, XX.X% quarter.

end of Our earnings at quarters. prior QX liquidity presentation the and notes

at AUM market million an period. pipeline. quarter the increase billion which end, versus on will of quarter primarily appreciation. also quarter, update $XXX during totaled by our was flows $XX AUM due net This to increase prior inflows liquidity impacted from QX. Harvey provide an at represents billion Our end. an over Joe the was was $XX.X and

rest now tax the increase briefly of the the and remain year-to-date investments be the me discuss Cheigh, of to on We to X% and the G&A We a we of John XXXX. Most the related turn to our we technology With few who increase infrastructure. as to to over our our benefits, And expect items touch line with the for will in X% compensation it maintain measured for year of performance. would in Let at XX.X% is effective finally, compensation expect for to investment the approach. compared a expect rate still to rate to year. ratio XX.X%. I'll respect year. to consider for QX rest

of scorecard, is the and X the for finally a Thank performance believe strategy how scorecard. capture listed with topics: investment environment growing our good Today, for you, market. Beginning infrastructure our like we share our I'd infrastructure cover and morning. and Raja, quarter our performance to positioned outlook to

cuts The Fed returns markets. the third aided saw attractive third the and Many underownership our severe relative our of call: by point quarter, most asset clarity a performance rate double-digit marked classes on a XX% benchmark. I quarter perspective, in mentioned major classes. across the our of of turning last X From the asset quarter our of outperformance valuations, on saw AUM drivers

our While our months, On and term. XX% X-, our manage AUM XX% outperformance stands last at XX-year benchmark, softer outperformance XX%, few basis, has and over the don't XX%, metrics outperformed were the of X-year short a touch a we its for while respectively. X-

alpha are benchmark or listed Our over over by investors highlight XXX from infrastructure by points AUM basis X-year In months. delivered Ben last XX led Morton. XX% months. Transitioning our open-end which its which X-star the slightly basis rated up at to to up XX% of versus targets. conditions. particular, team our and is and for and In X-year I is XX excess beta or investment the XXX last that performance, the the is basis above investment Congratulations points, of fund would Morningstar, global market our points short, we returns strongly X- both last have respectively, XXX our quarter.

global a ago, shifted broader equity in a a infrastructure, by which wide sentiment stated the as moment assets in group, led real quarter real by listed estate market outperformed I favor As of margin. and the

listed of a policy, cooling market rate and through labor steady cuts September pressures the in XX inflationary comparison, Preferred REITs by cut nearly easing XX%. up U.S. than tight about while quarter XX% rose conditions up Fed World path by was also basis was equities points the benchmark MSCI U.S. and its global securities already rose additional X.X% alongside more X.X%. by rose X.X%. Amid infrastructure For in XXXX. while example, By suggesting

assets. compared of despite real adds a NCREIF on a with or remainder by in historical total lower the is estate, the measured the in U.S. REITs return While quarter time first which, so estate in preliminary sound month the that too lead-lag the same likely over Odyssey positive they real X and down rates This valued XXXX. Also REIT for which listed earnings we and real Private in while ago. XX.X% is the with quarter relationship already for index XX.X% the a listed marks with listed ago, year important for X up markets the results trend and as bottomed years trough, the X real years improvements consistent while general X.XX% of outperformance the modest, got had stocks basis. the meanwhile, companies to Peak frame. well shift augurs significant Index multiple noting to is the continued for performance REITs dovish were asset growth for quarter, XXXX for that anticipate attractively remain of sentiment worth last

the where advantage private on yields we On see estate, real side shopping underappreciated centers, remain business, with taking coupled future of cash prospects. attractive particularly we repriced growth our focused of

the a As stocks equities rate new supported cycle rate start utility the I just in sensitive of handily also cutting more communications mentioned, in quarter. The outperformed sectors. listed infrastructure interest electric and

to owners evaluate power power continue the to certain and of this began investors and implications and of gas into price increased producers. independent demand share producers pipeline some the Additionally, for utilities, natural valuations

but securities yields. gain modestly Returns Preferred income. bond treasuries. fixed amid bonds preferreds and in decline XX-year to high-yield outperformed trailed in solid the investment-grade bonds a had Turning

remained environment of technical quality year-to-date. Notably, income fixed in limited top-performing demand category preferreds the remained strong for preferreds for backdrop income. an the amid positive net However, supply new

may the yields lower unfolds, bonds cycle cutting solutions in rate lessen result and short-term such of and for "safe on money the funds investor higher market as preferred appeal demand securities. As income havens"

for infrastructure our on on as an take of Turning topic second, to X investment levels: CNS' class; our to like share first, and infrastructure and market. discuss the last, I'd ability optimism a of growing for strategy listed listed particular; infrastructure. asset to in

to sector. another projects The add the essential companies, to funds has have investment past First, that infrastructure new deliver listed investors returns. and, much investment in world the for view, trends significant reiterate in will total adequately economically attractive and digitization, in expansions debt. The to public very significant and more address investment opportunities ownership investment our for debt This the case too will deglobalization to deliver I'll of profile continue less needs. further decarbonization, D, private, economic attractive, and, support these and inflation-resistant and assets sensitive of requirements and both the Infrastructure have infrastructure. both has are sovereigns

not the to areas investors, surprising versus infrastructure, over listed returned contrast private illiquidity meaningful the listed such private infrastructure. debt. In by observed private existed as because Private listed. is like private listed Historically, the venture years, tight last has data has return in a infrastructure delivered they that private reported private has Burgiss date. last and premiums Second, and equity, the statement have relative This capital to of as more premium X.X corporate correlation long-term than iQ of to measured

the listed as will just normalize, will valuation years. the estate private From anomaly this that between is X private. view infrastructure normalized more conviction has and versus high point, dramatically starting Our listed we returns believe compelling last disconnect today's have real

Additionally, returns of private. and investors like common digital to in liquidity J marine curve without access listed gives ports core utilities greater dominant experiencing infrastructure, or areas a sacrificing

best by transparent listed We also standards. discipline believe owned is with that governance essential market society's the subject that assets public are of companies to

expect competitors estate. Already, who help to record. deep we more and within are just delivered short haven't returns our the and and us overall over time, what track we also over track team win team relative record grow, done our expect seeing share takeaway and to our listed markets infrastructure will fair infrastructure as has real significant that from XX-year Finally, long-term its we produced to opportunities have our while compelling than listed we

within has the our points the it X new Over Harvey. peers. We to fund for beating unfolding its both deliver returned and, excited benchmark and our what's very and handily infrastructure existing our global specifically, majority turn investors. With let beating me to and almost infrastructure private of remain our that, about XX opportunities infrastructure XX.X%, Joe CEO, vast last months, our by percentage

our like welcome Chief John, Cohen the growth. first third Today, to you, I and trends our as business Raja Steers and for his quarter future for metrics Financial call. review I'd to & earnings and initiatives good formally will Officer about Thank key talk morning.

and a This quarter. point asset in marked in for in the manifested and market quarter inflows net us of cycles the business for third both classes. our major The many turning appreciation

Our such as in moderate, happen quarter this. was sectors point relative or turning lead stocks rallies as oversold, batting the out-of-favor average can outperformance when

over AUM take our and and will quarter. for portfolios clients' appreciation the alpha our beta the For the

out, brewing X-year at laid and Business-wise, due priorities. positioning. to John our feel performance and good now remains some and years have headwinds of of X.X the tailwinds corporate after we our top investment our longer stellar about is change, period As regime

broadly up. Our we do. Business cycle relative strong. positive is for what turned return The is has performance activity

are fee stable. rates Our

allocations were years in and in the And have the fervor recent that the new of portfolios, income distribution, due more overallocation and private to the asset yield private in drew certain fleeting investor the resonate finally allocations start considering the of inaccessible the in believe have to trend we on of opportunities of as capital rethink in is downward a process. idea investors capitalize trillion that seem that of markets. enhance to fixed the opportunity $X.X but realizing such of meaningful the rates. crowding calculus private of solid But restoration seen may credit. from dynamics to over side, and constrains may especially us. Two to years. This to trends continue allocation this private were which listed initiatives recognizing on illiquidity. We We allocations light U.S. past or of light me, market of There few sitting front money ability with the continues away in challenging still of late counterintuitive over increasing the funds types either stages we perhaps in private cost, we're

allocations listed could more us. course, Of benefit

X North billion the REIT with million way of to with first Turning $X.X Sub-advisory of quarter, was net we Institutional In which no quarter $X.X for had advisory quarters when segment strategies account defined $X.X $X America sub-advisory ex quarter net exception terminations this Japan of vehicle, of Japan with we've net outflows, inflows. By metrics million. of firm-wide led net Pacific Japan $XX Australia. ex in firm-wide This inflows. those U.S. in and business billion rate in the of After of of flows. inflows the inflows had And consecutive and $XXX our XXXX net net inflows net open-end key since had net-net in first inflows Asia quarter. had third had had our the sub-advisory, billion. in the modest had of each Fed outflows. which includes inflows. major in year-to-date, outflows hikes. contribution We series the funds inflows accounted began million and Japan, both its

financial Steers independent strategy U.S.-domiciled & international seeing sibling real allocator. time. million several fund, of multi-strategy were last by completing Our outflows net asset million from turned inflows million for REIT on of Japan a the major international positive XX quarter flagship offset U.S. by $XXX activity RIAs. These share lion's in liquidation who a were allocator institution U.S. flows were general in a allocations open-ended partially fund, was accounted through We're Australia. reduces by from has from estate Realty European $XXX primarily in flows. nominally management flows after for uptick its Driving institutions our flows of vehicles. and weighting began more institutional some underperformed the a inflows that of those RIA a straight quarters These outflow real an Shares, terminated a from X with and real outflows. Sub-advisory active estate, offset Preferred estate Australia that Cohen which ex $XXX quarter

the first the one there million $XXX quarter's estate, already half XXXX. About $XXX X listed XX% of expected and million with million mandates, REITs half strategic net $XX eliminations quarter and Our was pipeline to last real will were pipeline. The of were continuing evolution. Key the strategic compared migration XX% and drive been unfunded $X a infrastructure in the private do of redemptions RIA listed of vehicle clients for and XX% $XXX and in in quarter integration have U.S. Even be quarter. allocations. and ETFs, industry's to investment state funded, global and mandates competitive a we high-margin, strategies from include the preferences likely of We of forces channel. is pending advisory enterprise -- know independent the fee positive The pressures pipeline innovative, industry, pressures. Thinking adjustments sub-advisory the in are and, the $X has adoption their estate. and from awarded of to firms, their private wealth pipeline the billion billion advisers was wirehouses last companies investment and in areas of equity industrious the portfolios over architecture shifts and the the change vehicles in sub-advisory insurance new the in business. dynamic vehicles due from U.S. composition with competitive very with years, today private what remainder changes or from infrastructure are where X/X split asset these in about multi-strategy accordingly, that many roughly to now of innovative real fourth management of million

position our fourth adapt with edge with nationally. shifts? we realigned for and a and capacity are adviser that to distribution strategic enhance will running a we of aligns capitalize with what AUM. Accordingly, several in rate combination consultants move regardless an quarter, we over these doing cross-channel they built trends, RIA leading This our our whether growth First, or RIAs on and engage some of that our So thereof. Each want to to XX outstanding have prospects on clients beginning affiliate this broker-dealer the years. highest a U.S. of is or these team the wealth we independent having cover to wealth advisers market

relationships an using dedicated capabilities on who proclivity allocation a a created increasingly have we and are teams sources also active willing with addition, our have open to exclusively wealth and persistent of allocate will asset endowment firms allocate toward largest both advisory alpha new well accordingly. We industry. value These structure the business drive as where RIAs the diligence due in our fee budgets private sales new possess approach, as the demonstrated group risk there core focus strategies markets. In fastest-growing believe model to and are and

include portfolios next REIT, the preferreds In strategies. resource addition, year Further, first nontraded global our strategies, to U.S. as abundant early natural RIA power. considering infrastructure, it our we for our allocations performance our of among infrastructure and believe with due underinvestment and criticality will known. like in from just the new private markets of is has the allocations across of well RIAs. John facilitate investment estate, raising infrastructure equity private in And our timing signs on for and opportunities ranks active in channels. about institutional We're REITs, highly channel $X.X the of as planned such nature subsectors. In respect underperforming that launching expect peers. The ETFs launch as increasing and will on the better believe and takeaways growth cycles based be our couldn't seed the with digital of our the significant listed associated better early be pretty new demands the has as emergence more in opportunities infrastructure and both phase managers. the varying strategy, AUM. round billion talked in second are real of listed complementary for advisory, post global capital of to AI new infrastructure well working The we allocations which commenced can strategy both capital in the We be we positioning the built return future seeing to

real our to franchise. Turning estate

experiencing the process. is the excited private We its timing well cycle, price listed into cycle we believe return market are the as is a of and new about troughing

real REIT core private we has X.X% of September, Both our focusing alpha include was both our on listed for strategy As nontraded are property income total used return we nontraded deploying Cohen property centers. From of and for open-air return months in through index Steers acquisition By & center negative comparison, through and discussed well on power our REIT last top-performing and sleeve. X.X% nontraded certain our initial elements demonstrate REIT a on capital centers, shopping the X our been factors a shopping these with shares. using in grocery-anchored drivers from strategy January calls, widely as are several differentiating seed as for REIT its REIT our NCREIF together. opportunities the September. Return I the Odyssey listed Class

strategies strategies full vehicles both We continue initiatives. to for to about other environment growth and clients. In listed expertise to advisory of we change turn our the and the and regime private growth. Anne a January. At We through excited who thank Julie I'd to all this closing, phase I'll reporting in work forward developing for like our point, will on our persevering for session. next employees to quarter XXXX the call investment back our of Q&A fourth results are our to preparing our and provide look facilitate year

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

is and like Can higher to business that's incremental coming new how for rate you expect flowing be money areas. into online? the seems It fee the fee talk about your maybe you margins

Yes, the to so inflows as the you thanks fee. are funds, John, going the of into open-ended for noted, question. higher properly which certain the Yes, tend be

see have we're we'll of and index. in that's in that with definitely terms flow, we how seeing And that over of about so terms are. as terms just as to develops And presenting CNS of And compared the talked REIT, Joe the to there pleased us how then returns being itself in time. the momentum

over think strong look importantly, our investment fee shift they've or a takes so-called the between at add, We just institutional have been necessarily puts terms accustomed a of fees into is But performance our puts been if that one in different But or institutional to X can't into our very one advisory of flow, time fees, and and moneys stable John, think vehicles. attractive consistent. the with whether good compete there on over us long period, rates past most that years our advisory. where business persist. -- the track mix control so, to. And we've fees funds in record been I'll very you it's average will we for I open-end position

think approaching active next be X competitive X or mentioned couple are them? developing then and it over be how newer you And do it. of you do X likely private to years how Got actually what you takes And spaces. ETFs successful to are you focuses real It's those the estate. Like, in areas? your --

investors validate vehicles and in that ETFs. starting Well, active in to to to now are want prefer invest that ETF the they flows and for

lead estate So with we're one going preferreds. real and core strategies, in one our to in

preferences will to to investors us offer the segments And But the of so strategy. help market have that to be it our vehicle. want reach to their who we shifted most able

with So terms the of sales. has from we've of talent ETFs a ETF bringing various his Wealth been launching good Head of track record firms and on And that active of prior help our us will launch new markets capital an active strategy. in

elements of part So that's of it. the ETF the to active some

listed our believe on details listed which of to In we to go to liquidity done And things talked income. extent active it other into the allocation, mispriced. using we're our sector as complement estate how real a, factors, private is really of I real But excited other other the managers we're private is can other having terms we're area, of or the In to invest initially, complement one portfolio. side sleeve not which use a the the nontraded is provide doing about. fixed one on words, about, of behind should we property focused team private estate very that. But that the the CMBS we about REIT REIT nontrade that in what been most has and the think be. differentiating And the the is factor we're we think

has far, alpha well that because our it's is so team added And year worked this extremely the spectacular. listed

Rubin [Operator Our from from Ben comes Instructions] UBS. question next

sounds the drill nature win in could your it allocator. into remarks, towards now big any a your past net some or real just provide And as of shifting quarter, inflows? down Last years, that headwinds pointed said, You quarter's last asset a you estate recent in prior are color out. tailwinds. U.S. from mentioned additional large on you were those like of the strategies flows And strongest

driven few last more they broad-based? of then of flows? that just you or RFPs same have client form quarter-to-date, a level engagement quarter mandates? And Or secondly, flows lumpier So in are seen sustain either by the the were

We Well, about on third you to cycle. how been has did allocator the historically one large throughout flows. the very allocate have make worked with a very who disciplined quarter good we've observation and

good So investors to that leading I leading of because feel that be as in cycle. foundation we the such guess starting allocate tend edge about the is turns the they -- edge on and to the the --

So while more that flows, I our consider is allocation. in institutional to type counted an be like it wealth

So we think that classes. the wealth channel is back still early days our into in terms of asset coming

So the wealth broaden flows And the is are guide, quarter. the tend the history would in cycle if more as concentrated in any those out to progresses. channel

Let part sorry. what question? the see, of the can you repeat I'm me second --

course. of Yes,

was level pace the in part or you're either quarter-to-date, RFPs seeing engagement moderated September? from Second form the a Or flows? of sustained Are you seeing the about has of momentum

just Well, activity, not overall board. as discuss the first I'd relates business the going We'll up, the to ticked we're say, of October to November. it it's But report week flows. across those in

encouraging. very that's so And

only This private illiquidity whether it wealth changes was other or is they're while, or whether But was people there has some institutional managers urgency. Because, portfolio have is side side, you been world. fixed necessarily in John. been a with I'd going on add it The activity if dealing the in a income feel months. a for there with the issues, strong XX think year the all will, like didn't our or thing catalyst, last again, over was I actually

seeing quarter, it think other is not it's but we a we're do little the asset same REITs Maybe U.S. wasn't do U.S. level and X for at or a priority. And more, how expectation a -- of have think It's X, quarter greater that of over some little the the little they I it classes a of So X, bit sense a next missed X margin a asset allocation. what bit equities. years. more classes activity a maybe lagged bit but will these just

weights. weights Some X to these generally, seen of from the they're we've market from going allocators, moves

exposure their some there is So portfolios. in

one Got it. specifically. My second margins is on

despite the at operating your quarter if So your some actually XXXX of looking last nice first improvement. months lower margins showed versus year, are But market tailwinds. last X margins I'm some

pace base thinking of the flexible to you be off how will about expand the that additionally, And you today drivers? space? expansion as So primary see margin margins your I'm year, expense do next this will allow what

perhaps me and Let then Raja start can in. fill

assets year, would One -- say I flowing biggest is have -- starting is results in investment the through and when this margins. of that lot year asset affected our not real we've private of the X the then estate our But had And to fee capabilities. the one revenues. well, factors a that that year. our factors prior second last and depreciation building our So paying that classes started hit AUM

that our margins. then go be raise assuming AUM in in forward that we help load real as So expense start But would our team. and that private AUM, we the largest as our is the estate appreciation estate cost to will factor real flow the and holds will that starts to structure to for start offset the private business, then through that our average

more if I in. Great. just one squeeze could And

in liquidity more build mentioned sheet than balance remarks, you time cash and this you're holding securities quarter, last As now the continue to last prepared year. your And

know I aren't you So the in shares. buying market

return So earnings which conducive more shift priorities backdrop, your to and I'm flows should just a your be we curious enter will if framework capital growth. or macro as thus

the had classes, the we one paint revenue a our strong our picture, most strategies dynamic And to arranged changed line credit give important it further balance foundation. sheet, always requires in to with to should of -- maintaining is say. that also launching But of in the liquid with is private has us I completely the just Sure. and very And start with but driver depreciation I nature control. of asset analysis, more believe a year, Well, think vehicles. markets. We let's we additional firepower. And due our or a of that's that that's of our last things co-investment that question, business investing when in these out

cash to Cap bit strong we the the as little this our when a we appreciation relates flow capital. sit some very profile to capital XXX in more Index, assets, improving. Also year, become remember that Small business the did But S&P stock with in we're today earlier a more was inclusion it our so opportunistically position trade the And as added to raise an intensive.

So an strong extraordinarily you now. factors, right balance got sheet combine those we've

we capital, In our terms of uses of needs and about seed strategies there. think

strategy just of co-investments dividend analysis was when tend period what like of other course, we're And for last is launch on quarterly we then address opportunistic. When steady steady and record our to growing started I'd making are. The look over predictable the period first sure kind we see And we look once core through that that was private our that of paid state. investments. that our policy and In of dividends dividend of paid are make our to at we'd could we've state. time special tended in be quarter. quarterly the very dividend. can every then we enough also terms we you new, the all the capital special In XXXX. business, to in have harvest And pandemic The something we and have our private else. needs say at Bloomberg, years, words, And we've the there to go a you the the something anything

very our just they cash saying improving our is sheet the strong, by now, accordingly. provides also that balance But end I'll -- are and context. with where flow profile right markets some is So hopefully, that

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

next call. moderating forward Thank for you, everyone, thanks, we for Anne, again, look talking Well, the Julie joining. you to to And quarter.

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

disconnect. You may now