Cohen & Steers, Inc. Q2 FY2025 earnings call

• Revenue for Q2 2025 was $135 million, up 1.1% from prior quarter, driven by higher average AUM and day count. - Operating margin 33.6% vs 34.7% prior quarter. - Ending AUM at $88.9 billion, positively impacted by market appreciation during the quarter despite April market events. - Investment performance: 89% of AUM outperformed benchmark in Q2, 94% 1-year outperformance, 3/5/10-year outperformance rates above 95%. - Real estate: Private real estate prices bottomed after 7 consecutive quarters of negative returns, with open-air necessity-driven shopping centers leading appreciation. - Launched tactical listed and private real estate strategy, aiming to provide better liquidity, returns, and alpha potential. - Flows: Open-end funds had net inflows of $285 million (4th consecutive quarter), closed-end funds had inflows, advisory had outflows partially offset by new mandates, unfunded pipeline built back up to $776 million from $61 million low watermark. - Active ETFs: First 3 launched with $54 million net inflows in first full quarter, showing strong investment performance and interest from advisers.

Revenue for Q2 2025 increased 1.1% from the prior quarter to $135 million. Ending AUM as of Q2 was $88.9 billion, up from $87.6 billion at prior quarter end. The effective fee rate was 59 basis points, in line with the prior quarter. Operating margin was 33.6% compared to 34.7% in the prior quarter. 89% of the firm's AUM outperformed its benchmark in Q2. Open-end funds have had positive net flows in the last 4 consecutive quarters. Revenue growth was driven by higher average AUM and day count.

• 2025 comp ratio to remain at 40.5%. - Full year G&A expected to increase 7%-8% compared to 2024, driven by talent acquisition costs, business development activities, active ETF launch, and foreign office upgrades. - Effective tax rate to remain at 25.3% on an as-adjusted basis for 2025. - After 2025, expect annual G&A changes to moderate to mid-single-digit percentage range.

• Market events in April negatively impacted average AUM during Q2. - Some private real estate funds still need to work through portfolios built at peak valuations in certain sectors. - Policy questions and potential tax regulations could impact investor allocations.

Q: Give color on the temperature of the wealth management channel? And looking forward to the second half, do you expect any seasonality to play out over the course of the next 6 months?

A: The wealth channel is important for the firm, with progress in the RIA segment. Gross sales in the second quarter were about 10% lower than recent levels, but there is seasonality with a dip in the second quarter historically, though not statistically significant. The firm feels good about its team and potential to drive real asset allocations with active ETFs.

Q: Global listed infrastructure saw strong flows in the first quarter, and that seems to have weakened a little bit in the second quarter with a higher level of outflows. Can you talk about what drove that and your early views on the strategy in the third quarter?

A: The GLI strategy was positive in the quarter but had large redemptions from institutional investors rebalancing. Longer term, the firm is bullish on the strategy, with plans for an active ETF in infrastructure and combined listed/private infrastructure vehicles.

Q: Flows in global real estate were stronger than U.S. real estate in the second quarter. Can you talk about if that demand is from U.S. or international investors? And have you seen any shift away from U.S. real estate after liberation date?

A: There has been an American exceptionalism dynamic in allocations to real estate strategies, with more interest in global when looking at the pipeline. There has been very little broad reverberation from policy questions like the revenge tax, though one European institution redeemed part of a U.S. strategy due to concerns, but it's not a broad trend.