Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cohen & Steers Inc (CNS, Financial) reported strong investment performance with 96% of total AUM outperforming its benchmark in the second quarter.
- The company maintained a stable effective fee rate of 58 basis points, consistent with the previous quarter.
- Cohen & Steers Inc (CNS) has a strong liquidity position with firm liquidity totaling $325.1 million at quarter end.
- The company successfully raised $68.5 million from a registered stock offering, strengthening its balance sheet.
- Cohen & Steers Inc (CNS) is optimistic about future growth opportunities, particularly in the areas of listed real estate and infrastructure, as well as the Future of Energy Fund.
Negative Points
- Cohen & Steers Inc (CNS) experienced a decrease in revenue to $122 million, down from $122.9 million sequentially.
- The company reported net outflows of $345 million in the second quarter, contributing to a decrease in assets under management.
- Operating income decreased to $42.5 million from $43.7 million sequentially, with a slight decline in operating margin to 34.9%.
- The macroeconomic environment, particularly interest rate expectations, has been challenging, impacting client flows and portfolio allocations.
- The company faces headwinds in the private real estate market, with price corrections still underway and adjustments needed in seller expectations.
Q & A Highlights
Q: Are you seeing shifts in the wealth management channel for US REITs and preferreds, and can you update us on the demand for public versus private markets?
A: Matthew Stadler, CFO, explained that in the first quarter, anticipation of rate cuts led to strong inflows into REITs and preferreds. However, as expectations shifted, redemptions in preferreds occurred, though inflows into open-end funds continued. Institutional advisory clients are redeeming to fund private investments due to increased private allocations and commitments. Stadler noted that the price correction in private markets is about two-thirds complete, with adjustments needed in seller expectations.
Q: How could NISA be a significant tailwind for Japan, and how do you plan to capitalize on Japan's investing renaissance?
A: Matthew Stadler highlighted positive trends in Japan, such as reflation, improved corporate governance, and increased global interest. While equities have been the focus, the overall favorable investing environment should benefit Cohen & Steers. The company plans to leverage its 20-year presence in Japan and strengthen partnerships with Daiwa to capture portfolio allocations.
Q: How do you plan to deploy the recent capital raised, and is M&A on the table?
A: Joseph Harvey, CEO, stated that the capital raised was opportunistic, aimed at supporting the more capital-intensive private real estate business and potential active ETFs. The balance sheet is strong, and while organic growth is the focus, there are no current plans for acquisitions.
Q: What are your thoughts on real estate subsectors, particularly data centers, in the context of a potential regime change?
A: Jon Cheigh, CIO, noted that fundamental drivers in the data center business, such as high demand and limited supply, will continue to drive rents. The company sees opportunities in sectors like towers and data centers, despite market dispersions. Cheigh emphasized that the REIT market's earnings growth has been comparable to the S&P, contrary to the perception that real estate is underperforming.
Q: Are there specific product areas targeted for active ETFs, and what is your view on closed-end funds given the upcoming Pershing IPO?
A: Matthew Stadler mentioned that active ETFs will focus on core strategies like REITs and preferreds. The closed-end fund market faces challenges due to high interest rates, which impact leverage components. The Pershing IPO is different from traditional closed-end funds, and while Cohen & Steers would like to see the market open up, it may require more interest rate relief.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
