CNS - Earnings call transcript Q3 2017

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Third Quarter 2017 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, October 19, 2017. to President conference of and Steers. like Johnson, to Cohen now Vice Senior Associate would turn over the Adam & I General Counsel go Please sir. ahead,

Adam Johnson

XXXX Cohen you Steers Thank to call. the welcome third and quarter earnings conference &

Steers; Joining Harvey; President, Matt and me Officer, Joe Financial our Officer, Chief are Executive Stadler. Chief Bob our

of statements the may to during forward-looking these Matt, turn our XX-K, outcomes is performance. statements. are any the of We that to some this subject make those course statements. evaluating make of from these the forward-looking number at factors are website conference want forward-looking the believe are duty to indicated that I cause Also, in differ to described risks and measures, which Before we to various I XXXX section Company call over available call, a of which our in remind materially factors actual Company’s that on in update the and we statements. point meaningful are I Factors there to today financial cohenandsteers.com. out want that the These uncertainties no you contains non-GAAP could we assumes believe Form presentation Risk important

are and on on these data which non-GAAP release our GAAP For financial disclosures should website. financial their available to earnings you presentation, and the measures refer reconciliations, contained the in

the become certain an This that filed an sale have may of the investment offer communication to Finally, guarantee solicitation securities. performance have this registration our of does This funds not not past about the to remind information and constitute contain these contain performance. presentation performance SEC buy statements want is offer respect or of to not that may future effective. yet with to strategies. that you presentation with information funds of also I a

the I’ll And complete funds please information call including these website. expenses that, and our Matt. more with over visit turn risks, For to about charges,

Matthew Stadler

primarily assets million day under year’s a quarter. The quarter quarter also record $XX.X increase per year’s Thank at $X.XX was of under income and of prior revenue $XX.X $XX.X to morning, million record with higher $XX.X quarter were quarter release Slides and in My XX the of good the on XX be earnings remarks prior A on the everyone. in to reconciliation will $XX.X a results GAAP billion average the one Pages Adam, and can quarter $X.XX prior management XX the quarter million year’s presentation. in we Operating compared prior for focus $X.XX the and compared results. XX or on and you, Average sequentially. as-adjusted was and attributable earnings with sequentially. $XX.X more with Yesterday, management billion assets quarter our as-adjusted reported the second the of from compared and the in record quarter billion for compared for million the year’s share million $XX.X in million $XX.X with was and earnings Revenue the sequentially. $XX.X in found sequentially.

primarily expense the for from partially were The in in benefits The and is mix share decrease XX.X% on therefore, the and compensation and to increase service expense line provided in a lower and offset fee increased call. to last XX.XX% was compensation by increased with service shift classes. in of revenue. the distribution as basis, quarter, margin fees. last growth ratio we into due guidance distribution our And the cost XX.X% sequential consistent operating higher Expenses revenue Our a on benefits at remained to lower slightly quarter. compensation with

from As the of full-year declined XX.XX% tax effective to XX%. revenue, apportionment the rate in of a result a change

cumulative effect for the four The of XX.X% third current equivalents, and the quarter seed earnings the rate quarters cash displays and of tax adjustment. held equivalents outside and that cash, and States. Page the United indicates investments our XX this of cash included our cash trailing presentation of rate portion

totaled and million stockholders’ quarter we compared liquidity remain million was with $XXX $XXX and $XXX with at million firm compared debt XX, Our last $XXX June free. million equity

management billion X% under Assets totaled increase at June September billion an XX, $X.X from XX. $XX.X or of

Sub-advised quarter rate million we accounts of rate the the net consecutive had $XX.X X% XX, in in million, total September million $XXX $X.X $XXX with the global net of from rebalancing. Advised million increase XXth rate million $XXX the had distribution management quarter, quarter portfolios had or in million from billion last organic last were $XXX remain at under from inflows This funds net of closed-end moment. were portfolios. we were Institutional in an of and from recorded We which of decrease $XXX excluding multi of quarter, the an quarter Assets under were the inflows Net $X.X institutional X% we to Distributions result $X quarter. in of cap that result in portfolios. totaled have provide million of steady largely September funds estate the factor or quarter, XX, portfolios quarter, from a the net listed assets were from inflows. inflows management during $XX.X accounts, X%. the net on $XXX of of in management marks accounts net contributing annualized X%. which $XXX activity increase recorded growth distribution had Japan assets billion of accounts XX%. real also totaled compared which quarter. billion had of the also of cut which net infrastructure, billion. an Distributions growth of as funds of annualized of net at million of organic was record under call. Japan portfolios, preferred, last million and $XXX And reinvested. an a outflows color the recorded mandates in on will of real assets during quarter. Open-end of million net quarter. and million a primarily at during outflows global had outflows third last billion inflows totaled totaled inflows our million which $XXX outflows $XXX the primarily newly The strategy quarter both from growth listed in Sub-advised Open-end cut infrastructure annualized $XXX pipeline discussed last large U.S. Bob awarded $XXX million our some during level organic $XXX a institutional value an

a the to respect for benefits, compensation at revenue fourth quarter. to few XX.XX% maintain Let to we me to consider briefly With ratio. and discuss expect items compensation

expect We and G&A between from XXXX. X% X% continue to to increase

year-over-year well fund majority of strategic we as increase attributable made in mutual G&A the and investments As in is reimbursement our higher distribution costs, to Europe, channel to we DCIO a which increased effective and reminder, that the as XX.XX%. capabilities the tax collective with rate will investment our of approximately administering growth. at our cost And remain trusts, for finally, both associated project were asset generally in

it I’d over Bob. to to Now, like turn

Robert Steers

Good Matt. Thank everyone. you, morning,

of XX by organic as strategies two from growth. estate The Matt solid global estate, and their Matt, outperformed we As performance real earnings listed the preferred on quarter low-duration positive have organic Whereas quarter Today contributions multi-strap also billion are securities. inflows, was getting U.S. of positive growth and real asset growth. flow real the XXth global in infrastructure, and and XX consecutive you net from seven in $X.X said of another driven this represented quarter mainly with five past our of benchmarks beating assets. was year-to-date preferred basis. of securities, Investment heard a was good strategies

of or annualized and inflows rate. preferred global REITs growth channel quarter outstanding another quarterly XX% preferred low-duration organic Our high. million $XXX a the a growth. new saw wealth real flows, estate net flows contributed securities was $XX Net had which biggest U.S. but of million were

our During we institutional interest continued well, at strong strategies quarter listed a derived these which multi-strap The in and in funds $X also different several Net distribution reflecting partners had the an our reflects both inflows important growth recommended global performance. channel XX% which the U.S. assets. organic as mandates. infrastructure, and rate of estate, preferred securities, success from real exceeded to rate was also was advisory real elevated our competing the range added including list strategies for billion, quarter, five had exceptionally and

$XXX pipeline are of not the vast investing yet not mandates mandates. In million pipeline at strategies, advisory from we of second two the but million funded mandates, which was stands majority that $XXX new, adding Also million different from funded Our funded these unfunded awarded, at a during our million, new of $XXX the our of quarter, and the the utilizing. $XXX assets and $XXX but up added the of number million real the won million quarter, show global of result portfolios The down quarter. to statistics. in estate we $XXX in did clients are as end

global RFP are due awaiting Outflows approximately strategies, infrastructure from large rebalancing and million, six remains have high $XXX listed We to and total which undecided the activity relationships currently our million sub-advisory mandates out returns. outcome $XXX strong. value totaling our of cap absolute ex-Japan experienced of primarily

quarter, to we last that with Japanese our sub-advisory Japanese our following And experience have we expected business cut we did in refunds in the one in noted sub-advised, outflows. we net outflows reporting call, total million. the inflows U.S. $XXX net of the shift of As distribution overall that net been

which or Japanese break trend. are the this our and outflows funding our question, competitors’ outflows or at sub-advisory levels XX% relationship, below you stage accounts from in REIT assets we declining tell can our or fund for approximately under the don't management, that of by well U.S. While I

couple would of share Before like to finishing up, a I thoughts.

by prospects. organic strategies to reiterate of the years and primarily want is improve strategies quarter. was these continue if net had inflows additional Obviously, in our I real powered which organic sets for future U.S. First, growth, now the which to four by to preferred supported trends growth estate that potential security our all

bear as focus our continues the quarter, in saw managing financial results Second, from on expenses controllable our you to fruit.

regarding it concerns incremental increasing comply have will with very that the prospect it's That the that near future rules distribution there to MiFID with fully associated new said, be of unfounded. as costs appears likely regulatory In various accessing such retail been costs II. addition, in

to continue performance designed these enhancing the to of and requirements mitigate strategies other the end, to should the on and of the have select investments We will I continue impact prudent open stop In investment for regulatory performance, and been enable opportunities financial regulatory to strong and floor potential productivity and changes. work in questions. us to grow there profitably management future. foreseeable

Operator

of comes line [Operator Dunn you. with from Thank Evercore John Instructions] first ISI. the Our question

proceed may You with question. your

John Dunn

Hey, guys.

quarter, inning chucking CSRSX last get mentioning, up Performance what you investing you you back just still little but bit. is guys performance are bucket through a one-year apropos the and decline we doing that maybe great, in what from what the was be the Just REIT up might to about cycle? are against some can performance talk lagging

Joseph Harvey

funds relates Harvey. outperforming – but REIT Sure, appropriate. John, Cohen strategies REIT our strategies shares. strategies context decline to relating our we just from Joe think opportunistic one are this strategies. you, our our that some not return Within approaches is Steers to U.S. is or it's And at to strategy, in The flagship correct of focus to I of concentrate strategy, our our variety U.S. core to run realty total ranging & strategy a REIT

objectives. also We that strategies have income have

considerations strategy one and be our the had unique outperforming income strategy would outperformed including that And in XX%. percentage one question strategy its strategies some has some sub of so objectives

So I'd we're process consistent Underlying any with performance with say not quarter. what it or was issues. last concerned

Within leads and different well. Our REIT very REIT global had strategies are on both U.S. strategies. strategies, who also in our take we general doing have U.S. PMs

deviate So other in time, process, expect shorter any the But converge we all quarter the of they can follow bit. a little period same REIT positive it strategies. with to trends will one but they our with

John Dunn

you might kind Can Great. not then investor be think kind kind in talk And why that about whether preferreds of then for and the of and you're you the institutional super seeing interesting. that demand profile is in of preferred opportunistic activity? institutional just interest sustainable and

Robert Steers

other and their largest fact Sure. recommendation. they would of insurance from income institutional the a more not preferred the activity companies have us interest the oriented also of the that client excellent as for first we institutional and in clients, and embrace corporations their still this. so if stretched institutional most force many value. is those is foremost pretty standpoint securities. include business and extremely offer consultants the much and They the supported expect institutions clients other expect John, consultants being yield embraced full consultants from preferred And have top And institutional to strategies the range and search by driving two whereas we valuation perhaps appear

John Dunn

Great. Thanks guys.

Operator

line Our next Ghosh Suisse. question comes of with from the Credit Ari

You proceed. may

Ari Ghosh

guys. Hey, good morning

Robert Steers

Good morning.

Ari Ghosh

the on over better even Japan Just probably and outflows initially business so have there, anticipated. modest sub advisory than pretty been we

wanted cut different a relationship to get the or event to there funds? the the is funds thoughts in either And rate from business event or in funds, the a rate a of assets just to to cause that would So anything there? on drastic reaction other manager remaining cut your the strategy be the little more other

Robert Steers

broker velocity higher already a through flows regional other just and U.S. REIT mainly two excellent to institutions the distributed assets that There's question. whereas cut fund it's other in That's really is that banks because an we one where and would dealer mainly expect the to a funds has have tend be fund fund of the stickier. distributed question,

on if first additional cut the be the is muted when if history guide there So outflows fund. than the more and to flows other REIT should an the is any U.S. fund,

Ari Ghosh

related Got most some look just I advisory that's then I it. of pipeline mandates in That’s Bob was funded in last like the helpful. XQ. looks And call of and believe it really the

just of the curious more months a XQ, as expect for I side to demand in be management recurring great or what look segment.? and quarter you share either if little resources the the more total next the just sort grown like you've on a as to but of lumpy So, business the trends advisory six the business wondering was to

Robert Steers

searches of year-end. widely searches to demand remarks couple and the tried past is much now make institutional we're seasonality That the Well, and that I our probably will said, becoming volume the so I emphasize or RFPs a the There of some important comments. that in it's whether terms my to channel more trend and really channel among peak in is between strategies. advisory wealth in the dispersed of

estate, look So preferred global and as U.S. strategies we outcomes, natural at include equities, the finalist real we and real resource, securities, were the waiting mandates global six infrastructure. where a estate, we're listed

to that is to two asset. grow that's here stronger from gone stool key really the So we've obviously and multi-leg a a stool legged a much foundation

Ari Ghosh

Thank you Great. much. very

Operator

line Michael Lynch. the Carrier from with of Bank Merrill comes question next Our of America

with proceed may You your question.

Jeffrey Ambrosi

Ambrosi I filling in just for Hi. question. for ask about This distribution to our Mike. is actually Thanks Jeffrey the wanted the in taking expense quarter.

to notably, you So I pretty guess it if you look dropped cost at that it in seem I know mentioned shift ratio AUM, lower products. so relative the like the

just similar guess So the I trend in the what there we we ahead look as I declining the expense? and distribution of should ratio guess expect kind

Matthew Stadler

Hi, Jeff, it’s Stadler. Matt

that from our couple that, a think a influence into I things shares make each in C seen that AUM. there's quarter majority iShares consistent but pretty change of we've of a overall iShares and up A now

component. the cost a own are has business overall quarter the do its there's flows to and differentiation where cost to any in depending lower going addition there's a particular so on in And be intermediary at And each cost.

is to like I been of the still seems change steady most be while is the for pretty coming a and it DOL that where reoccur progress. has and of the think us So likely versus in rationalization flows something continuing will and from it are work the cost a with iShares somewhat

handicap to one. that hard be might it So

Robert Steers

for DOL will evolving. rethinking overarching we're in what at intermediate have they networking. I said are the and of would how middle then minimum environment revenue approach we're their I in and the sub But assistance and and we not the year, this seeing comments, strategies likely we we still think most be monitoring costs buckets, are things and just this, they in standardization which cost the fact decreasing. in a seeing they trend those of and for add two costs, not seen And instances decline, longer-term so post them in see charge distributors all that as distribution of we're and I mainly TA do process, direction but to cost in sharing that the some these that closely cost increasing rise my see just is the

Jeffrey Ambrosi

Okay, That’s helpful. great. very Thanks.

Operator

comes question Dai from Ann of KBW. the line next Our with

with You your may proceed questions.

Ann Dai

good and Thanks morning, everyone.

Robert Steers

Good morning.

Ann Dai

for us and is on color you a just I been guys place your to question on have on like touched I know side, thinking you further, MiFID first already Bob, you potential what briefly the versus in kind given My earnings? What in costs from you what II. incremental give there with And regulations can little I'm still P&L hoping on, what’s the are how a a working little so looking comply that then is research take and handicap? to far, know you are anyway be of it works? could it standpoint, about payments to impact to we at what’s And pass-through guess,

Robert Steers

heading And excellent of to question. in that's us. going that up then us. front mind Joe something I'm question for that a ask the effort Harvey really is and answer is for Joe to

Joseph Harvey

Great.

II of the just with really being part regulatory program. it’s reporting, So so the to relates in of One of we're year whole and that's through and that’s two straightforward, to execution of I more compliant MiFID relates parcel it consequential that there, trade – as through processes we're the be monitoring, is categories issues and process several a but monitoring to issues and ready regulatory different being the with at past beginning going don't other that little trade navigating. as years not that

what – everybody for related But which through for asset as by sure managers framework commissions. to trending The their budget they asset was related who's and commission asset those for managers costs on been P&L. be the toward those for And Europe just going to Europe costs electing clients who relates but research context on MiFID costs onto research clients. well simply be those to sees are that to requires the the those pay and is bears own whether report whether clients, costs regulation, a historical market commissions, take paid through the through call, in managers other has I’m will aware bucket or basis will themselves costs, on this paying

do the now So U.S. dealers we SEC the our opposed planning – and inevitability. to payments the not is that as reasons the Right that of clients precludes only wanting the broker one to buck trend to for market can European we for U.S. managers that commissions. in from cash

you dynamic. get evolving it a can been a So this sense and very has that is rapidly a complex

I to looking for significant We our up of research in externally. that some at of We're inevitability are the teams globally. end are optimizing of the research especially be of amount competitive our larger to for is being doing think we the think preparing pay we research going the sell-side teams declines. how and and a amount asset kind what a and research that sell-side effects going contraction providers, each for managers it's access as of information advantage

but of the for cost to as would business of what whole still our as and it's just that’s cost of It as the change terms I it's too than In rules will million, as we say total to be. less and the – what market direct what know that now the our are we going pretty know manageable and develop as Europe, model. it things we evolve trends relates costs, early in picture, understand all is terms $X we and

Ann Dai

you. Thank

helpful. incredibly that’s So

impact want potential some to follow-up, European teams think Europe there on As where you that if business might really are it's as manageable of that expanding how about focus think scale or in especially that business still to issue is much the a quick this at resources, you I or aren't point? of at just the an just kind that, your aspects not cost,

Robert Steers

so significant the our terms to in standpoint Europe in than regulatory from both so prospects. also to everyone answer But and investments environment excited people, and I'm made And new wanted going products that. business forth stand? more I but a about Glickson to we're we've – update of we registration notwithstanding Todd Todd just on ever where ask development

Todd Glickson

Sure. Thanks Bob.

us conversation last be. it's retrenching, the really We've strategic a Bob's Just pencils two point. our to the making relates sharpening to spent further Europe that the place that into to decision years for

best So right registered have of that are to the price Steers. & places sure but the have products we've end in the points, importantly that more that made right the we Cohen all represent

ago us So that real products at multi-asset, when a likely left got the estate product estate, along real really added what our product, real you gives we preferred are infrastructure assets that to similar level four of of view in global European that or have the and we stars most from right, which few five to in products look the in you've soon addition product the come completion to have a we with U.S. a years global

clients the So we tangible longstanding we're and some has have there to very anchored bring that that will and it relates last the what is business. as decade next about very is process relationships for been the XX months to XX hopeful thought the by business

Ann Dai

so Thanks it That’s me. for much.

Operator

Our next of question with Sykes Gabelli. [Operator comes the from Mac line Instructions]

your You question. with may proceed

Mac Sykes

inflows? the of you a the you talk in success you you're for the feel strong preferreds. at Congratulations execute how strong given on growth Good handling deploying metrics? questions. little Can all and the the answering morning just strategies to constrained thank about the Do bit

Joseph Harvey

is again. This Joe

in our talked When they I'll this multiple retrace you about one strategies preferred grow. continue that and calls, we've not ground. prior effort, I it's We've and some to maybe got but just at of strategy. think look

years rate get environment. and flows, perhaps see you interest rising version, is in which – two launched low our low securities. in of interest we come So low flows but don't us takes our to duration duration a rate we're And strongest different likely our accelerated also of rate which that a preferred version has corporate to universe our starting I strategy, ago know growth not surprising from as the considering

in strategies preferred. have interest asset which also also in strategies Japan. REIT been We're preferred debt seeing popular We real which have include

we're institutionally number So which to flow. invest and the securities wealth as the we grow accommodate the strategies of of in and market to helping continues have that managing it's that the grows universe channel, expands the to

the we So returns these in to answer had But your could no one some that the for expect. excess at version delivering point clients question, our strategies. investing challenge and be money any of limits there

example, we in if we've preferreds, For and to deem that as appropriate. REIT strategy accounts do and the to be closed that new we'll

Mac Sykes

Okay, great. Thank you. see the first And previous in then on the could DCIO of effort, year given impact expect we years? uptick half your seasonal next inroads this to year, versus some

Robert Steers

since providers. That's do had I been We excellent platform and adjust been to classes, to question. about other XX of an staffed expect comments period. adjust record and to an It's roughly half, years year Europe. would Todd’s and unlike keepers next not fully year regarding months fully a to two see out to and share uptick work reach we've fees

developing infrastructure years did And sort two really so the filling roughly and require of it here. of and backing

note expect uptick flows. absolute see we've far so really there certainly some would XXXX to you green that's a lots indicated, basis, fully significant and both so view to but on wanted think I I some we've accounts also but ones, is smaller seasonality of thus And in shoots, which be seen seasonal hopeful this been as we of done, to a and

Mac Sykes

Is say or of in any of in to Xst some sort in to been terms And these quick is as on it that, is starting January relationships? of of aspect new just have continued terms with your initiating one engagement there it engaged on you there platforms? role the question

Robert Steers

thing. saying it's and a relationship we're of not our sort building, without the and latter place on excellent. the recommended in turning good into now the details, going strategies most lists, on type is in again are switch making progress of performance long-term a key plumbing importantly, perhaps where say a I'd it's But where wiring

our competitors so And are there else allocations, displacing should already real in estate where just current way most anyone winner frankly in be than the we the should we in our be performance and stronger is where particularly they're space. aren't the

very we're So optimistic.

Mac Sykes

thank Nice Great, you. quarter.

Operator

from Ari question Suisse. Ghosh comes next Credit Our with line of the

You may proceed with question. your

Ari Ghosh

numbers? a from imply we’ll and for couple – the believe a I impacted would what taking calls. Q in thanks that what pretty XQ Hey, bucket to significant be more guide on to anything growing and X% filter guys, any half mention the expenses the just as have you if just kept that jump the G&A was in real On beginning just through full call. had assuming like X% looks in there you in quick, that year-over-year, had, there That year curious might So, just hit the is you will that will the over that like quarter? that my

Robert Steers

always scheduled it's that's handful a uptick – fourth fourth and occur basis quarter we the when the in international of that months to over in which that Yes, in the going you we're quarter year-to-date travel nine have to is and that Ari, – Little it. was the we you're nine imply right given at the look year-over-year where to months the in the true attributable And that’s differential. that were I've reality guidance guidance gave always absolutely a a doing. would backloaded, third quarter, fourth conferences when the not of in so that conferences are is and some always that's travel guidance had is that

Ari Ghosh

G&A total Can million these research impact even million And and if from fluid, Europe if dollars are helpful. G&A impact that what dollar it's might early – growth that of a it on the costs your keeping look to are costs mentioned event the do or look still days type you you be could know be to line? the like in dollar your That’s SEC a to you look from arrangement? investment pointing things to I moves of of and probably that teams just you terms internalized growth, are think XXXX mind in you bottom implemented? in a band from it hit more the extrapolate I range what hard what these maybe it. of And a just circle some and at but on costs event then in towards at the shouldn’t MiFID. you by Got the back are What that these business? absolved some then

Robert Steers

Hi, Ari.

like although think the I so that starting certainly earlier, XXXX, how on this giving think moving some and to something we're little rationalize next of There's I for mentioned on we'll premature but thinking and Joe estimates. present of have be right call it's along pieces, still guidance to call. further we're really now be As on sort you a some should

Ari Ghosh

my taking Q&A questions. of for End Thanks

Operator

Mr. questions I Steers, you. will no at call this now to the turn there are back further time.

Robert Steers

Great. you for next you speak morning we Thank and will in Well quarter. this to you. calling all thank

Operator

and thank you that does we for conclude that your for call Ladies conference please today. ask disconnect the lines. you your And gentlemen, And participation.

Cohen & Steers (CNS) 19 Oct 172017 Q3 Earnings call transcript