Q1 2020 Earnings Call
Good day, ladies and gentlemen, and thank you for spending by and welcome to the permanent years first quarter.
2020, <unk> earnings conference call.
During the presentation, all participants will be in listen only mode.
The words, we will conduct a question and answer session.
I said time, if he would like to register for question. Please press the one.
Our new telephone if at any time trying to convince you each we cannot Peter Please press star zero.
As a reminder, this conference is being recorded today Thursday April 20, Threerd 2020.
My pleasure to turn the conference over to Brian how their senior Vice President and corporate counsel when its two years. Please go ahead.
Thank you and welcome to the covenants years first quarter 2020 earnings conference call joining.
Joining me are Chief Executive Officer, Bob Steers, our President Joe Harvey.
Our chief financial Officer, not Stadler.
I want to remind you that some of our comments and answers to your questions may include forward looking statements.
We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying first quarter earnings release and presentation.
Our most recent annual report on form 10-K.
And our other FCC filings, we assume no duty to update forward looking statement.
Our presentation also contains non-GAAP financial measures that we believe are meaningful in evaluating our performance.
These non-GAAP financial measures you read in conjunction with our GAAP results.
A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available.
The earnings release, some presentation as well as links to our FCC filings.
Available in the Investor Relations section of our website.
Www dot com wins fears dotcom.
Finally, I'd like to note good in accordance with our firm's work from home protocol currently in effect.
Each of our speakers are participating on today's call remote.
With that I'll turn the call over to Matt.
Thank you, Brian Good morning, everyone and thanks for joining us today.
Before I discuss our first quarter results I'd like to take a few minutes to report on our business continuity planning and capabilities in the context of the ongoing cobot 19 pandemic.
This week marks the sixth consecutive weeks that our U.S. employees.
I've been in a work from home environment longer in the case, it's somewhat born non U.S. personnel.
Like most firms we experienced an adjustment period at the outset, which is to be expected.
But we quickly transition relying on our remote access capabilities to establish reliable lines of communication and an organizational routine.
During this time working from home, we've been able to maintain both or work and control environments.
Communication throughout the firm, which is critical has been affected and without disruption and well our departments and operations are functioning well.
Our executive and management teams have been in regular communication throughout the crisis, both with each other and with employees.
We continue to assess the chain of command for executive team and portfolio managers. So that we are prepared to various contingency scenarios, including should someone become temporarily aren't able to perform their responsibilities.
This quarter included 8.9 million items that were excluded from our as adjusted results.
These items included $11.9 million cost incurred in connection with the rights offering.
Barbara closed end fund.
And then steers quality income Realty fun.
And 9.4 million attributable to our portion of unrealized losses on seed investments.
The tax benefit associated with these two adjustments from 4.8 million.
Well, it's 5.8 million benefit related to certain discrete tax items have also been excluded.
My remaining remarks. This morning, we'll focus on our as adjusted results.
A reconciliation of GAAP to adjusted results can be found on pages 14, and 15 of the earnings release.
And on slide 16 and 17.
Earnings presentation.
Yesterday, we reported quarterly earnings of 61 cents per share compared with 58 cents in the party years quarter and 74 cents sequentially.
Revenue was 105.8 million for the quarter compared with 93.9 million in the prior years quarter.
And 109.8 million sequentially.
The decrease in revenue from the fourth quarter was primarily attributable to lower average assets under management and one less day in the quarter.
Average assets under management was 69 billion for the quarter.
Compared with 62.8 billion in the prior years quarter and 71 billion sequentially.
Or implied effective fee rate was 56.7 basis points in the first quarter compared with 56.5 basis points in the fourth quarter.
Operating income was 40.4 million for the first quarter compared with 35.8 million in the prior years corridor and 47.4 million sequentially.
Our operating margin decreased to 38.2% from 43.1% in the fourth quarter, primarily due to higher compensation and benefits when compared to revenue.
As you May recall, the fourth quarter included a cumulative adjustment to compensation and benefits to reflect actual incentive compensation to be paid which increased our fourth quarter operating margin like 310 basis points.
<unk> expenses increased 4.7% on a sequential basis, primarily due to higher compensation and benefits, partially offset by lower gionee.
The compensation to revenue ratio for the first quarter was 36.5% higher than the guidance, we provided on our last call.
The increase was primarily due to lower first quarter revenue than we had projected.
As I mentioned, a moment ago. The fourth quarter included accumulative adjustment to reflect actual incentive compensation to be paid resulting in a compensation to revenue ratio up 31.5%.
Compensation and benefits increased 1.6% sequentially after normalizing the fourth quarter for this adjustment.
The decrease in DNA was primarily due to lower travel and entertainment expenses.
Our effective tax rate through the quarter was 27.4%.
I read into guidance provided on our last call.
The increase was primarily due to the amplified effects that certain permanent differences on a lower than expected pre tax basis.
Page 15 of the earnings presentation displays our cash corporate investments in U.S. Treasury Securities and seed investments for the current and trailing four quarters.
From liquidity totaled 140 million at quarter end, compared with 204 million last quarter.
A decline in from liquidity from December 31st was primarily due to the payment of bonuses and the firm's customary funding of payroll tax obligations arising from the best thing and delivery of restricted stock units on behalf of certain employees.
And most importantly, we remain debt free.
Assets under management totaled 57.4 billion at March 31st a decrease of 14.8 billion or 21% from December 31st.
The decrease was due to market depreciation of 15.3 billion and distributions of 671 million, partially offset by net inflows of 1.2 billion.
The advisory accounts had net inflows at 697 million during the quarter, which included four new mandates.
Three of these totaling 66 million were included in last quarter's pipeline and the other one totaling a billion, which both awarded and funded within the quarter.
Inflows from these four mandates were primarily at the global real estate portfolios.
Additionally, we recorded 250 million of net inflows from client Rebalancings.
Partially offsetting these inflows were 622 million of outflows associated with five terminated accounts, primarily from U.S. and global real estate portfolios.
Bob Steers will provide an update on our record institutional pipeline of awarded unfunded mandates.
Japan sub advisory had net inflows of $280 million during the quarter compared with net inflows of 341 million during the fourth quarter.
This marked the third consecutive quarter of net inflows from Japan sub advisory after eight straight quarters of net outflows.
Distributions from these portfolios totaled 316 million compared with 308 million last quarter.
Subadvisory, excluding Japan had net outflows of 175 million, primarily from client Rebalancings out of U.S. real estate global listed infrastructure portfolios.
Open end funds recorded net inflows of 67 million during the quarter as inflows into U.S. real estate funds were essentially offset by outflows from preferred securities funds.
Distributions totaled 227 million 176 million of which was reinvested.
Closed end funds had net inflows of 315 million during the quarter due primarily to the successful rights offering of the cone and steers quality income Realty fun, which raised 401 million including leverage.
Let me briefly discuss a few items to consider for the second quarter and the remainder of the year.
Notwithstanding or long term plan to strategically expand institutional distribution efforts that we referred to last quarter.
We are taking a deliberate and measured approach to new and replacement hires which we expect will limit our head count growth.
As a result, we expect our compensation to revenue ratio to remain at 36.5%.
We have undertaken a review of all of our expenses, which include but are not limited to application licenses market data services and professional fees other costs, which will be lower as result of the current environment include sponsored and hosted conferences marketing costs and travel and entertainment.
We project DNA to be flat to 2% down from the 46 million. We recorded in 2019 on our last call we projected a 5% increase in Gionee.
We expected our effective tax rate will remain at approximately 27.4%.
And finally first quarter investment advisory fees included a true up for performance fees and excluded the full quarters effect of our newly funded advisory mandates.
Considering these items and based on our March 31st asset mix, we project that our implied effective fee rate for the second quarter will decline by about a basis point from the implied rate I mentioned earlier.
Now I'd like to turn it over to Joe Harvey, who will discuss our investment performance.
Thank you, Matt and good morning.
This morning, I will review our relative investment performance then share how our investment teams are operating in this environment.
And offer some perspectives about our major asset classes.
The macro environment in the first quarter was turned upside down and dramatic fashion.
Spending from Goldilocks with positive conditions for our asset classes to a crisis.
Humanitarian as well as economic including a bear market and recession.
Virtually no asset class was spared from the cessation of economic activity.
Concerns about the price and availability of credit and emerging balance sheet stress.
Turning to our scorecard and the first quarter seven of our non core strategies outperformed their benchmarks.
For the last 12 months.
679 core strategies outperformed.
Measured by am 64% of our portfolios are outperforming on a one year basis.
77% are outperforming over three years.
And 99% are outperforming over five years.
The decline in our batting average is from last quarter was primarily primarily attributable to our preferred strategies.
You have consistently outperformed long term, but underperformed during the market decline in March.
95% of our open end fund you EM is rated four or five star by Morningstar.
Our investment teams are functioning at a high level. Thanks in large part to our I T infrastructure and operations teams, who have facilitated a successful and complete transition to a work from home environment.
In addition to our normal investment routines, we have implemented special research task force is focused on topics such as the virus.
Its trajectory and our countries and the world's ability to track and treat it.
And how this crisis will change longer term behaviors and business trends.
Each team is continually re underwriting base and bear case forecast as our views evolve in order to synthesize our top down macro roadmap with valuation regimes and guide portfolio decisions.
In addition, our teams are spending a lot of time with clients to help them understand what is happening and in many cases advising on how to deploy capital to take advantage of dislocations.
And navigating this recession, we are positioning and companies with the healthiest balance sheets, because it will be difficult in the near term to predict the duration and scope of the virus and its economic impact and the extent to which cash flow interruptions will create balance sheets distress.
We are focusing on what we can assess with some degree of confidence.
Which companies have balance sheets that we believe are likely to be strong enough to avoid equity dilution.
Then we can identify distressed and fix it opportunities as the economic effects of the recession ripple through.
Turning to our major strategies by a U M.
You Esri declined 23% and global real estate declined 29% in the quarter.
We outperformed benchmarks in both our court U.S. and global strategies.
The magnitude of a draw down that reads experience would be surprising and most bare market scenarios, yet nobody would have realistically contemplated a complete cessation of business in some sectors.
Giving tenants economic and political coverage to postponed or avoid rent payments.
On one end of the spectrum about 34% of our investment universe is directly affected with hotels and gaming revenue trending towards zero.
And regional mall properties being closed.
On the other end about 53% of the universe is comprised of businesses that are less or positively affected.
Including data centers cell towers and warehouses.
And our underwriting even considering the disruption in cash flow. Our team believes that reads have two to three years of liquidity.
Banks. Unlike during the global financial crisis are supportive in providing liquidity through lines of credit.
From loans and in some cases covenant relaxation.
In addition, there have been a handful of unsecured bond deal since the crisis unfolded at reasonable all in rates.
Market that was completely closed during the G F.C.
Given our best thinking for new levels of cash flow. We believe that reads globally are trading at the low end of their cash flow multiple and asset valuation ranges.
As a result, we are seeing institutional investors, who invest in both the private and public market shift capital to the where where the Mark downs have occurred.
The public market.
We're excited to help these institutions execute on these allocations and we believe this may represent an inflection point for market share gains by private investing.
One milestone on the topic is the long and growing list of private property commingled funds, both institutional and retail that are enforcing withdrawal gauge because appraised valuations are stale and uncertain.
These redemption road blocks are an important reminder of the value of liquidity and our franchise and listed real assets.
It will take some time for opportunities to emerge in the private market.
But ultimately there will be problems with tenant bankruptcies and vacancies.
Leasing on completion of new construction and refinancings for defaults on debt.
When the opportunities emerge the public market will provide the capital for reads to capitalize on the opportunities.
In fact earlier this week, our real estate strategy is provided equity to a net lease retail read to take advantage of potential acquisition opportunities.
Preferred securities declined 10% in the first quarter. Despite the collapse of the 10 year Treasury yield.
Credit spreads widened dramatically and prices were impacted further by liquidity issues in the early phase of the drawdown.
We underperformed in both our core and low duration preferred strategies as we were more aggressively positioning credit and were overweight Europe and contingent capital securities for Cocos, which are mostly obligations of European banks and tend to be below investment grade with higher beta.
Since the end of the quarter preferred to have rallied almost 6%. Thanks in part to the liquidity provided through the numerous monetary and credit support programs by the fed and Treasury.
We have already recovered some of our underperformance and it performed well compared with peers.
Considering the banks represent over 50% of the preferred market investors are wrestling with two questions.
First our U.S. banks healthy enough to weather loan losses and pay preferred dividends.
We believe that banks much improved capital ratios liquidity and profitability.
Further supported by dramatic policy measures.
Well encouraged there continued payment of preferred dividends.
The second question, what does the risk that European banks hit capital triggers or stopped paying cocoa dividends.
Here too we believe for many of the same reasons as well as the E. C bees affirmation of preferred dividends. The overall risk of dividend interruptions for our European Bank Holdings is unlikely.
All things considered with yields at 5.4% for domestic investment grade preferreds and about 7% for Cocos. We believe there is ample compensation compared with corporate bonds, yielding 3.3%.
Global listed infrastructure declined 21% in the quarter compared with the global equity index could decline of 22%.
We enjoyed strong outperformance compared with our benchmark.
As an asset class infrastructure behaved less defensively, then it hasn't historically as some sectors have been directly hit by the fallout from the virus.
We estimate that about 35% of the infrastructure universe is more affected by the crisis, most notably airports oil and gas pipelines toll roads and railroads.
I contrast, 65% is less affected or benefits such as the case with cell towers.
Just as with real estate infrastructure investors can now find the best opportunities in the public market.
In closing, while we're disappointed in the value declines in our portfolios. We're pleased that we are effectively managing what is within our control.
Looking forward and acknowledging there still many unknowns about the virus and the economy.
We are planning for a longer so called U shaped rather than V shaped recovery.
There will be some permanent damage to our economy and to corporate personnel and government balance sheets.
Along with greater headwinds from higher debt levels savings trends and contingency costs.
It's likely the interest rates will stay low for a while.
What should make the income generation of our asset classes appealing during a period when earnings power and growth are uncertain.
Looking further out considering the amount of fiscal stimulus that we'll have accumulated the probability for higher if inflation at some point has gone up.
As a result, we believe that investors needs for income true diversification and liquidity will be even greater.
This is my fifth major bear market at Cowen and stairs.
After each previous one we found major investment opportunities.
Ranging from providing private placement growth capital to reach a 1998.
To capitalizing on discounts and preferred stocks during the tech boom in 2001 income was schond.
Two recapitalizing rates and the GFC.
We believe that opportunities will emerge from this horrible crisis, and we are well positioned to find them.
With that I'll turn the call over to Bob Steers.
Thank you Joe a good morning, I hope everyone listening today is healthy and managing well wherever you are.
As we all know by now we're facing the health care and economic crisis that is unprecedented and for which there is no playbook to draw phone.
Fortunately, having managed through multiple crises over our almost 35 years, we built the platform and culture.
That is resilient and well position to weather almost any storm.
And emerge stronger and better.
As always we've been committed to keeping in place and supporting all of our teams Justice we did during the financial crisis.
This is essential in order to promote trust and a productive team oriented culture and to deliver for our clients, even while coping with unexpected personal and professional challenges.
Equally important is the unique platform that weve developed to support our.
Maintaining our focus on listed real assets on alternative income strategies has positioned us to be a category killer in these unique asset class.
In addition, hi insider ownership in combination with the debt free and highly liquid balance sheet allows us to make the best short term decisions to promote long term success.
Under the circumstances I couldn't be more pleased with our results in the quarter.
As you know due primarily to market depreciation assets under management declined by 21% or almost $15 billion in the quarter.
By contrast, and despite these massive market headwinds.
We achieved record sales in our institutional advisory channel.
These inflows were broad based and included existing clients opportunistically, adding to their current mandates.
Along with multiple new relationships looking to capitalize on the market downdraft.
In addition record gross sales in our wealth channel helped to largely offset the flight to cash that characterize retail investor behavior in the latter half of the quarter.
The bottom line is that even in the current environment. We recorded 1.2 billion of net inflows in the quarter, which is a tribute to our people and a validation of the power of our platform.
Specifically the wealth channel delivered record open end fund gross sales of 4.4 billion, but also experienced record redemptions of 4.3 billion, resulting in positive net inflows of about 67 million.
Outflows were dominated by preferred security strategies, while a U.S. refund saw net inflows.
Not unlike the fourth quarter of 18 to the first quarter of 19 market environment.
Which saw a sharp drawdown followed by a rapid rebound in flows U.S. opening.
On flow outflows all occurred in the three week period from February 28 to March 20th.
And reverted back to net inflows the following week.
And that has continued into April.
We're also pleased to see continued net inflows in the D C O and Bank Trust and insurance channels, a 43 million and 133 million respectively.
As you know we're in uncharted territory, especially in the wall channel, where virtually all branch offices are close and our relationship managers must work from home.
However, in some respects the situation works to our advantage.
Focus investment performance thought leadership.
Fund recommendations and brands combined to give us continued access and a leg up versus our competitors through both digital and video outreach to leading advisory teams.
The advisory channel headed truly extraordinary quarter.
Net inflows were 697 million powered by the funding for new mandates totaling 1.1 billion and 329 million of net additions to 12 existing client account.
The vast majority of these positive flows were targeted to global real estate strategies as both new and existing clients look to capitalize on the street market downturn.
And the arbitrage opening up between listed and on listed real estate market.
Offsetting these inflows were five terminations totaling 622 million and modest outflows from rebalancing of 79.
Lastly, we ended the quarter with a record pipeline of one, but unfunded mandates totaling $1.6 billion.
The unfunded pipeline includes 1.1 billion from 11, New awards, but excludes a billion dollar mandate, which was both awarded and funded in the quarter.
The flow and pipeline activity reflects the market opportunity created by the current crisis.
But also the value of our brand and platform with leading investors.
Japan sub advisory recorded 280 million of net inflows before distributions in the quarter.
This marked the third consecutive quarter of net inflows.
Even after distributions flows were roughly flat at negative 37.
Oh strategic importance was the launch of our quote next Gen re fund with M., you cannot sponsor and SMBC Nikko as lead distributor.
Although the marketing and this fund only commenced in mid February they were able to raise over $100 million in a challenging market.
Sub advisory ex Japan had net outflows of 175 million driven by one client utilizing a momentum driven algorithm.
We're already seeing a reversal of these outflows and continued to be cautiously optimistic about the prospect for this recently reposition channel.
I want to conclude by recognizing the effectiveness of our business continuity planning teams and how successfully all of our people have adapted to the new working environment.
Portfolios are being managed administered and service at the highest levels.
The virtual surge in flows experienced in both the wealth and institutional channels speaks volumes about our platform brand and relationship management.
In a volatile and stressed environment, we have been the go to manager choice gaining market share in our key real estate infrastructure and preferred securities strategies.
Going forward, we remain focused on supporting our people and platform.
In anticipation of a gradual returned to more normal operations. We've assembled the task force with broad representation to identify the critical issues that we must address to ensure a safe and effective return to work.
Our efforts will be directed towards keeping our people healthy and secure so that they can focus on what they do best which is to deliver for our clients and each other.
With that I'm going to ask the operator to open the Florida question.
Thank you Mr. steers, if he would like to register question. Please press. The one followed by the floor on your telephone you will hear about three times.
Acknowledge your request if your question has been answered and you would like to withdraw your registration. Please press. The one song of I did three.
Our first question from the line of John Dunn with Evercore ISI. Please go ahead.
Thank you.
Got it just an overarching question you talked about how are you able to recap that three industry and no nine but.
It is gonna be different this time around but maybe you could just talk about some of the areas where you're at this time right you're going to be able to take advantage of you know that a big market drop we just went through.
Joe would you take that.
Sure Hey, John Good morning, so.
It is as we've talked about already you know our existing clients are looking at the draw downs that have happened.
And noting that valuations for global real estate and a global listed infrastructure, our discounted versus a private markets and of course and environments. Like these are become questions about what private market values are so I guess, the the first level of opportunity is for.
Our clients to take advantage of discounts that.
And for is presented in the public market.
But as this evolves and the economic affects us.
<unk> ripple through a different companies will.
See holes and cash flows and.
That could create a for some companies some needs for equity capital and there's another opportunity to step in and like we did and the the global financial crisis to provide equity so that accompanies can make it to the other side of of or the situation.
But Ah Ah you know, it's always different and I think this time or companies are much better shape than than they were in the in the GFC and as we did earlier. This week, we think that there's an opportunity to provide equity two companies take advantage of opportunities and in that situation. The company already had a very good.
Balance sheet, but operates and the.
In a retail net lease.
Area and it's gonna see a lot of acquisition opportunities. So we provide them with you know more capital to have it.
A war chest to take advantage of of of the opportunities. So I think they'll be you know a couple of different buckets and it is really going to fall out a along the lines of which and the real estate area, which you know property sectors are you know more affected and what's your lease affected so that the the ones or lease affair.
Got it will have have access to capital and we'll take advantage of opportunities. The ones. There are more effective might need to have some balance sheet repair and you know we're you know.
Organized in position to.
Take advantage of opportunities and all all of those areas.
Gotcha and then.
Great to see that closed end fund market a window back open after many years Ben.
Hi, crowded locked up capital or maybe you could just talk about doing that look for demand there not just for the rest of this year, but maybe over the next few years.
Sure John that's an interesting question is as you know the closed end fund market did open up last year and very early this year and we were able to get that our rights offering off in February.
We had been scheduled to do an IPO in April.
And about a month or more ago, we agreed to reschedule that for later this year on the September October timeframe, the underwriters who are.
Committed to that transaction.
Our as or more excited now about the investment merit of that.
PEO.
Mainly for a lot of the reasons you heard from Joe about devaluation opportunity and preferred securities in the Yieldstar World. So our understanding is some other firms maybe.
Attempting to reopen the market in June or July well, we'll see how that goes but.
We think that the new structure.
The new economics of the closed end market or extremely favorable to investors and as a result.
As market conditions normalize there'll be opportunities for both ipos.
And rights issues in secondary offerings, and so where we continue to two can be very enthusiastic about the prospects there.
Thanks, guys.
Thanks, John.
As a reminder to register for a question. Please press the one followed by the four.
And our next question from the line of my carrier with Bank of America. Please go ahead.
Good morning, and thanks for taking the questions.
[music].
Maybe first just given the pandemic and realize it's tough to predict but.
How are you in the team you just thinking about you investing predicting a real estate I know you mentioned the comments on the strong balance sheet that makes a ton of sense, but just in terms of the sub sectors. You know what could potentially change I mean sectors that you have more confident and given this backdrop.
Sure the way you I think about it you know there there are.
Going to be cyclical impacts that affect a each each sector differently and then there, which I think as the essence of the question there they're gonna be secular.
Ah Ah impacts.
The the most obvious secular Ah Ah.
Issue relates to.
Ecommerce and the effects that it's having on.
And the negative way on retail real estate and I think that are just the situation will kind of accelerate some of that a decline in the.
Bricks and mortar retail real estate.
On the other and the spectrum you've got a.
Ecommerce related property sectors like you know cell towers and.
Data centers and you know there they are thriving in a in a in a period of increased demand. Then you have some sectors like office that maybe have some impacts of both the cyclical and this and the secular so on the cyclical front, obviously with the.
You know.
Recession, that's going to impact demand as it normally would and we'll have to sort through bankruptcies and nonpayment of ran and.
And in this.
Cycle.
The this office sector will have to contend with.
Co working which is really going to be tested as a business model. The we work overhang.
You know in it in a in a model that where you wanted to pack people more tightly.
And.
So with in many cases noncredit tenants, so that'll be an overhang for the market but.
To your question looking a little bit further out there's going to be negative effects on office demand and positive effects. The the negative effects or a with the work from home experience I think we're going to see more companies.
Encourage work from home or on the other hand, you know, we're going to want to see less square footage per there's a per person and you might have companies.
Just first people to a greater locations, which could have a positive effects I think it's set pretty safe to say they often the case office for the near and intermediate term the the situations going to gonna be negative and you can go sector by sector and you know each each one has its its a.
Second a cyclical and secular factors.
Okay. That's helpful and then.
Maybe just to.
Follow up on the institutional business. Both the flows and then you know the pipeline. They you know you know really robust and this is yeah before a lot of the investments that you guys. You discussed last year that you were looking to put in place over the next few years. So I guess the question is just a little surprised done.
You know like how you know quick.
Some of this stuff has come club out and maybe what's changed I mean, obviously the valuations you have changed obviously that drive some of that but are you seeing more traction with some of the institutional clients have any in investments like started you know to pay off I'm worried that just more to come over the next couple of years.
I think it's really or both.
No I think that dates back to the financial crisis, when a institutional investors saw the are incredibly unique transactions and.
Resulting a massive alpha that was generated out of you know that draw down.
We over the last several years has had been working with clients on very unique opportunistic strategies in some cases, even draw down a you know distress.
Vesting strategy and that sort of thing so.
I think at the combination of or brand and reputation having delivered in the last.
They are market.
Two working for years now with some of the most sophisticated investors in the world on a more narrow thematic opportunistic.
Strategies and.
Our performance, obviously had had a big impact as well and so.
A lot of the assets coming in are being derived from large sovereign funds.
But at the same time, our current pipeline of 1.6 billion is is derived from 11 different mandate.
And so the the interest as broad it's both from existing clients and new clients and again I think they see an opportunity. They also see that active management today, whether its public or private real estate in the real estate asset class.
It's clearly the way to go you know you tips can't get out of the way of retail and those secular.
Losers in the real estate market.
Whereas.
We can and we have and we can also reposition and those property types that are cyclical lead depressed, but have a bright outlook from a secular standpoint.
And so some of the assets that we see flowing.
To us are coming out of passive.
Passive real estate strategy.
So it's all of those things, we're still staffing up in our both our U.S. and non U.S. institutional teams and we're going to continue to to make those investments.
Okay. Thanks, a lot.
Our next question from the line of Robert Lee with KBW.
Please proceed.
Hi, Good morning. This is a actually Jeff Dresdner on for Rob Lee.
Good morning, I hope everyone doing it will UBS.
Are you guys I just had a apologies I missed the a commentary around the April flows.
Huh.
Curious if you can just the over that one more time thanks.
Sure as I mentioned in my comments, you know the outflows were roughly a three week phenomenon and since that time, it's been a reversal and although the the circumstances or.
Dramatically different versus the fourth quarter of 18 until the first quarter of 19, where we saw a substantial outflows from preferred in the fourth quarter only to see a complete reversal the following quarter.
And we're seeing a similar phenomenon here.
April to date flows are positive.
And in fact, we have.
Ben It we've experienced positive inflows in all four sectors open end funds advisory sub advisory and given.
Japan.
And as you might expect the enclosed the greatest in closer into our preferred security strategy. So.
You know.
You never know, whether that'll continue or not but.
Given the fact that there seems to be some stabilization and markets and markets, our operating and functioning even in the current environment that flows back into preferred securities.
Specialty Joe and his comments did discuss.
The fundamentals of preferred Theres still solid so it it's entirely logical and.
So.
As far April.
Broad based positive flows.
Great. Thanks, I actually had a quick follow up on on.
Good thing it so the M.
The Japan Subadvisory inflows into the strong the last couple of quarters picking up from the beginning of 2019 and not as to the back end of 28 in beginning there too I was wondering if you can maybe help understand maybe quantify what's been a propelling the stronger sales overall for the Japan.
Advisory.
Yeah.
Well, it's it's a few things.
Good performance Conan spheres again, that's been recognized as the top lead manager in Japan.
To continued demand for a yield in that marketplace.
Three.
Some of the regulatory pressures, which force distributions to decline across the full range of.
Japanese refunds has abated.
And so.
That has been a factor.
You missed on the call that we launched a new.
Totally new Nexgen read a strategy.
And you Cam and that's NBC, Nico, which raised $100 million and.
A mid February to the end of March very difficult time period. So we.
We continue to diversify there and we are also continuing to invest in and see very nice results in Japanese institutional market as well.
Oh.
Okay. Thanks, and then one last quick thing I don't know I missed this.
Part of the calls, but I'd be did you quantify the unfunded backlog.
Algae.
Yes, [laughter] glad you asked it's a it's a record by a lot of $1.6 billion.
Okay, great. Thank you very much.
Yep.
Our next question is a follow up question from John Dunn with Evercore ISI. Please go ahead.
Thanks, guys.
Could you maybe a little more color on global listed infrastructure outside of maybe midstream energy and like demand in conversations there and then looking further down the road. Eventually you think will ever seen some retail demand for the funds.
So you want to tackle the fundamentals.
Well, yeah shirts, and my comments John.
Identified the.
The sub segments of it.
Infrastructure being directly affected.
Some of them are pretty obvious airports for example, and then the pipeline segment, which has obviously been hit by the Oh.
Crashing and enter energy prices.
But then you have on the other end of the spectrum.
Factors that are beneficiaries like cell towers, and we invest in data centers as well.
And infrastructure so.
You know same as with real estate.
Our teams are you know assessing all of the.
You know.
Intermediate term.
Trends and changes and behavior with with infrastructure compared with real estate, you've got one interesting nuance is which is.
Regulation.
And that.
Can.
Be a more in favour of public interest compared with a private sector interest. So that's a unique.
Uh huh.
Aspect that that our teams have to contend with.
But.
So while you would have expected infrastructure to defend better in it but you know that a generic bear market scenario because of those transportation transportation related sectors. It's you know it kinda was in line with the market decline a this time as an asset class we continue to see.
More and more interest institutionally and we've had some existing clients add to that to their accounts. We have you know steady activity with a with new new allocations.
On the on the wealth side of it it or you know has not really taken hold up and it's partly because investors are wealth investors don't really know where to put it in their portfolios.
I will say that one trend that we are seeing is there was a lot of allocations made to the midstream energy sub segment of infrastructure.
And because it's been.
Uniquely you know affected by.
The oversupply in energy around the world.
You know, we're seeing some of those investors broaden out just there midstream only allocations to.
Converted to a broader.
You know a global listed infrastructure allocation so.
There's a that's one positive trend on on the well side.
Thanks again.
And Mr. steers. It appears there no further questions at this time I'll turn the call back to you you may continue with your presentation for closing remarks.
Great. Thanks, everyone for joining us this morning, and a we hope everyone remains a safe.
And we will certainly stay in touch and look forward to speaking to you at the end of the second quarter. Thank you very much.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
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