Q2 2022 Cohen & Steers Inc Earnings Call

Speaker 1: Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance.

Speaker 1: These non- GAAP financial measures should be read in conjunction with our gap results.

Speaker 1: A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available.

Speaker 1: in the coming quarters. Don, any color to add on? I mean, the only thing I would add is, I mean, we know that investors are dealing with a bit of a denominator effect. Everything's moved down, so there's a bit less to allocate from a new commitment standpoint. So that's a bit of a headwind, if you will, from a fundraising perspective. But when we look out, we know, and I'm sure you know, that there's a number of folks that are gonna have to deal with just legacy issues, meaning dealing with marks coming down, dealing with selling assets to create liquidity. So we feel like we're more on the front foot in terms of our effort, where all of our focus is on this vintage and growing from here. Makes sense. And then maybe across the pond, can you talk about how things are shifting in your European CCAV business and maybe what the prospects might look like over the next couple years? Sure, we're optimistic on our CCAV, our offshore USETS funds business, which is relatively small relative to our open-end fund business and our overall business. I didn't report on it in the quarter, but in our CCAVs, we had positive, very modestly positive flows in the quarter, and I think that's the eighth quarter in a row, and I would attribute that to the new leader.

Speaker 2: in sales that we put in place about a year and a half ago. He's been very influential. influential has a great business plan and we're positive on the outlook for the C-Cavs. We've seen the best flows into our multi-strategy real assets portfolio, which like in the US, not surprising in light of the inflation environment.

Speaker 2: That strategy has been in demand in Europe . But these funds are designed for more than Europe . They're also designed for Asian investors and we're beginning the process of laying some groundwork in Asia. I mentioned in my comments the fact that preferred that preferred are starting to shape up to create an interesting.

Speaker 2: something that's on the drawing boards.

Speaker 3: Thank you.

Speaker 4: As a reminder to register for a question, please press the 1 followed by the 4.

Speaker 4: And our next question comes line of Marlowe Bakker with Siddhati. Please proceed.

Speaker 5: So, as you consider some of these strategy extensions that you're contemplating and also as you're out there trying to raise capital for the private equity fund, do you feel that at the moment you have sufficient bandwidth in terms of your current sales and investment teams to support both these and other efforts?

Speaker 2: That's a really good question and I'll make it a broader question. Based on the success that we've been having over the past several years with.

Speaker 2: The demand for our strategies and organic growth, you know, that has required us to hire more people in a lot of different areas. The demand for our strategies and organic growth, you know, that has required us to hire more people in a lot of different areas.

Speaker 2: But more specifically to your question is we think about some strategy extensions of things that we already do in perfords, for example, there's really not any additional head count we need to add to execute on something like that, either from a product development standpoint because we've been, you know, we've kind of rebuilt our product strategy team.

Speaker 2: but also from a sales standpoint because we already have those personnel in place and they're very adept and skilled in selling preferred strategies. As it relates to private real estate, that's a different matter. We've had to add some specialists.

Speaker 2: and who have private real estate experience. And as we think about going into the wealth channel, potentially with a non-traded rep, we'll need to have specialists in private real estate who will help support our existing sales team. The

Speaker 2: So good question and it's something that you know, we've we've had the luxury of Needing to add, you know personnel to keep up with the demand for our strategies, you know right now that's you know Makes things a little bit more challenging and the more volatile market environment but You know, we've been fortunate to be able to have the opportunity to to you know Add to our teams and capitalize on on them on

Speaker 6: are will rise below the

Speaker 7: Well, I

Speaker 2: I'll answer that two ways, but one.

Speaker 2: We see a big opportunity in the Wealth Channel broadly.

Speaker 2: both listed in private real estate. And when I say broadly, we've got the broker dealer channel, we have the registered investment advisor channel, and then we have the more sophisticated family office type firms. And you know there's a migration happening, taking place from the broker dealers to independent RIAs. And all of these types of advisors.

Speaker 2: use different types of implementations for real estate. Some use listed real estate, some particularly the sophisticated family office businesses they're accustomed to investing in private equity real estate vehicles.

Speaker 2: With the development of the non-traded REIT vehicle, that's been embraced by the wealth channels, but I think we're in the early days of that adoption. So I'm gonna tie this into John Shea's comments about the real estate strategy position that we've just filled here. We see a great opportunity to help educate these advisors on how to optimize real estate allocations and portfolios. This is something that we are passionate about.

Speaker 2: Just on the topic of listed in private real estate in the broker dealer or the wealth channel.

Speaker 2: Everyone's very familiar with what's happening with the growth of private in the wealth channel. And in particular, is it relates to real estate, the accelerating sales of non-traded retail vehicles. But just some fun facts. If you look today.

Speaker 2: The market share of private real estate allocations has gone from 10%

Speaker 2: 35% over the past three years. So, private-scale market share compared with the listed alternative. So, we see this as a one-hand challenge, but also an opportunity as we develop our approaches to private for the wealth channel.

Speaker 8: Thank you.

Speaker 4: And then that's questions from John Dunn with Evercore ISI. Please proceed.

Speaker 1: Yeah, maybe coming back to the US, can you talk a little bit about the state of the US advisory business and also maybe what you're seeing across demand for the other regions too?

Speaker 2: So, you know, the US advisory business is

Speaker 2: is strong, our flows this quarter don't really represent what's going on on the demand side because of the rebalancings and the redemptions, and particularly because of the opportunistic allocations. But just to characterize advisory from the top down.

Speaker 2: The man is strongest in real estate, and right now it's been more for global real estate than for a US real estate. It's also strong for listed infrastructure. In terms of our multi-stress, you realize that's portfolio, I'd say it's not as strong. There, as you might expect, and one of the reasons is, you know, the advisory clients tend to want to do asset allocation themselves. They tend to want to do asset allocation themselves.

Speaker 2: rather than turning it over to us to do. But...

Speaker 2: Just digging into why real estate has been so strong.

Speaker 2: You've just got a lot of...

Speaker 2: institutional investors who historically have invested in core private real estate and with the passage of time there

Speaker 2: They see the numbers on how listed performs relative to private. And it's hard not to make an allocation to listed within an allocation that say 5% to 10% of your portfolio, just based on the numbers, based on the facts. So we see large state pension plans, for example, who have never allocated to listed real estate.

Speaker 2: start to make those allocations and that's the type of thing that makes me really excited about our business.

Speaker 2: We are seeing the same thing around the world for some similar reasons, but also for some different reasons. But we've been talking about the Middle East as being very strong for listed real estate and to a lesser extent infrastructure. Middle Eastern investors have been big investors in private real estate over the years. And about two years ago we started to see them allocate to listed. And it's in part because

Speaker 2: They have a lot of money to put to work and returns got to be pretty low and a lot of competition in the private market. So that demand spilled over into the listed market.

Speaker 2: We have a lot of money to put to work and returns got to be pretty low and a lot of competition in the private market. So that demands build over into the listed market.

Speaker 2: Only recently we started to see demand take up in Asia and I think it's

Speaker 2: partly for some of the similar reasons, but also because of the inflation dynamics. So we're seeing some large sovereign funds begin to allocate to listed real estate and in other cases convert some private allocations, or sorry, some passive allocations to actively manage listed real estate mandates. So—

Speaker 2: You know,

Speaker 2: Our team is in a very good shape. We like what everybody's doing. Our consulting ratings are very strong. I would just say that we need to continue to bring more in the front door so that we can offset the redemptions that tend to happen from time to time from changes in allocations or changes due to the market of volatility that we described.

Speaker 2: So, hopefully that gives you some color on the advisory business.

Speaker 1: Yeah, it does. And maybe just one last one from me. You touched on the valuation and kind of secular growth pieces, but could you give us a flavor and maybe kind of a thumbnail sketch of like the client level conversations you're having on the institutional and wealth management side through the lens of inflation?

Speaker 2: I'm going to ask John Shea to take that because he's right in the middle of those conversations.

Speaker 1: Hey, John .

Speaker 1: So, okay.

Speaker 1: I'd say there's a diversity of conversations that is a good, of course, going to happen across institutional and wealth. I would say that.

Step one is people feel like they need more real assets in their portfolios. That's certain one thing. I'd say the other thing is, in some cases, you have investors that thought, I have gold, that's my real asset. I have real estate or they have crypto. So I think that our view is that there's a portfolio of real assets.

real estate, infrastructure, natural resource, equities, commodities that we think need to be put together in the right way that all deliver on this.

I wouldn't say inflation protection, but inflation sensitivity. And so I'd say there's some education on people saying, well.

I thought real estate was my only answer. I thought commodities was my only answer. I thought gold was my only answer. And the reality is, like anything, you need to have...

Diversified real acset exposure. So I'd say it's good that people want more and I think it's also good. The same way. Joe talked about educating with clients and trying to help them.

implement in the right way. There's a lot of conversations about the right level and the right implementation. Whether that means we'll end up running multi real asset portfolio for them, I don't know. It could be that or it could just be that they end up doing more real assets and we deliver more REITs and infrastructure for them or maybe it's just infrastructure or maybe it's just REITs but I think that it deepens our relationship because we're an expert on real assets.

October . So have a great day. Thank you.

Thank you, that does conclude the call for today. We thank you for your participation. Have a great day.

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