Cohen & Steers, Inc. (New York) Q1 FY2025 earnings call

Key Points

• Raja Dakkuri noted revenue decrease driven by lower average AUM and day count, but effective fee rate improved. Operating margin was 34.7%. Ending AUM increased to $87.6 billion with net inflows in open-end funds and strong flows in global listed infrastructure.
• Jon Cheigh discussed investment performance: 81% of AUM outperformed benchmarks in Q1, one-year outperformance at 89%, and long-term rates above 95%. Market conditions saw US equities decline, while developed ex-US, US REITs, and global listed infrastructure performed well. Rotation to real assets due to macro factors and valuations. Emphasized importance of active management and liquidity.
• Joe Harvey addressed business state: third consecutive quarter of net inflows, institutional advisory unfunded pipeline declined but business activity healthy. Wealth channel led net inflows. Launched active ETFs in real estate, preferreds, natural resource equities. Progress on private real estate initiative and offshore wealth market. Focus on distribution capabilities for wealth channel.

Revenue for Q1 2025 was $133.8 million, a decrease from the prior quarter. The primary driver was lower average AUM during the quarter, also impacted by lower day count. Operating margin was 34.7% compared to 35.5% in the prior quarter. Ending AUM was $87.6 billion as of Q1, up from $85.8 billion at prior quarter end. Open-end funds generated overall net inflows during Q1, partially offset by institutional outflows. Global listed infrastructure experienced strong flows during the quarter. Revenue contribution details weren't explicitly broken down by product segment beyond these general impacts.

Guidance

• Comp and benefits ratio expected to remain at 40.5% in line with Q1.
• G&A expense expected to increase 6% to 7% compared to prior year, driven by infrastructure investments, ETF rollout, and business development.
• Effective tax rate expected to remain at 25.3% on an as-adjusted basis.
• Focus on investment in distribution capabilities, particularly for the wealth channel and RIA/multifamily office segment, with new vehicles and strategies designed for these advisors.

Risks

• Economic uncertainty and financial market dislocations. Tariffs and potential trade wars leading to stagflationary impact, increasing odds of US recession. Impact on different strategies: natural resource equities more cyclical, real estate and infrastructure relatively more insulated but still affected by indirect economic effects. Uncertainty around liquidity costs and private allocations.

Q: Get color on the wealth management channel and redemption trends A: Joe Harvey mentioned interest in US REITs due to anticipated bottoming of commercial real estate cycle and Fed easing. Also interest in listed infrastructure, but preferred stock strategies had outflows due to fixed income allocations resurgence and regional banking crisis hangover. Redemption trends affected by market volatility and economic uncertainty Q: Talk about second-order impacts from tariffs A: Joe Harvey stated tariffs would lead to slower economic growth, higher inflation. Infrastructure is stagflationary strategy. Economy slowing would negatively impact natural resource equities, with real estate most insulated. Firm focuses on client interaction and strategic hires, with eye on potential recession Q: Difference in selling active ETFs vs open-end funds A: Joe Harvey said selling involves educating advisors on asset classes. Initial investors in ETFs come from RIA market, different from wirehouses. Some existing open-end fund investors are converting to ETFs, helping retain assets and support growth of advisors Q: Is the low pipeline an anomaly or will it linger A: Joe Harvey noted solid activity but need to translate to real mandates. History shows consistency in pipeline. Getting through interest rate regime change and fixed income allocation restoration, with new allocations in real assets expected Q: M&A and innovation plans A: Joe Harvey mentioned potential acquisitions, looking at firms with strategies meeting criteria. Working on real estate strategy combining listed and private core real estate, to be launched and announced before mid-year. Also open to partnerships and sponsorships for new vehicles