Cohen & Steers, Inc. Aktie

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Friday, April 17, 2026. I would now like to turn the conference over to Brian Heller, Senior Vice President and Deputy General Counsel of Cohen Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers First Quarter 2026 Earnings Conference Call. Joining me are Joe Harvey, our Chief Executive Officer; Mike Donohue, our Interim Chief Financial Officer, and Jon Cheigh, our President and Chief Investment Officer.

I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying first quarter earnings release and presentation, our most recent annual report on Form 10-K and our other SEC filings. We assume no duty to update any forward-looking statement.

Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund or other investment vehicles. Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available.

The earnings release and presentation as well as links to our SEC filings are available in the Investor Relations section of our website at www.cohenandsteers.com. With that, I'll turn the call over to Mike.

Thank you, Brian, and good morning, everyone. My remarks today will focus on our as-adjusted results. A reconciliation of GAAP to as adjusted results can be found in the earnings release and presentation.

Yesterday, we reported earnings of $0.79 per share as compared to $0.81 sequentially. Revenue for Q1 increased from the prior quarter by 0.3% to $144.3 million. The change in revenue from the prior quarter was driven by higher average AUM, partially offset by 2 less days in the quarter.

In addition, and as we noted in last quarter's earnings call, there were $1.7 million of performance fees recognized in Q4 related to certain institutional accounts. We typically don't recognize such fees early in the year and we have few performance fee accounts.

Our effective tax rate during the quarter was 58.2 basis points. Excluding nonrecurring items, our fee rate was 58.4 basis points which is slightly lower than the prior quarter.

Operating income was $50.7 million during the quarter compared to $52.4 million sequentially. The and our operating margin was 35.1% compared to 36.4% in the prior quarter.

Ending AUM in Q1 was $93.1 billion, which was up from $90.5 billion at the end of Q4. This end of period change in AUM was driven by positive net inflows during Q1, primarily related to open-end funds.

In addition, end-of-period AUM was positively impacted by market appreciation of $2.7 billion during the quarter. As a result, average AUM increased during Q1 to $94.4 billion as compared to $90.8 billion in the prior quarter. Joe Harvey will provide additional insights regarding our flows and pipeline shortly.

Total expenses were higher compared to the prior quarter primarily due to increased comp and benefits and distribution and service fees expense. Compensation and benefits was higher compared to prior quarter as a result of the year-to-date compensation accrual true-up to actual that reduced compensation expense in Q4.

The compensation ratio for the quarter was 40%, which was in line with the guidance we provided. Distribution and service fee expense was up due to the increase in average AUM, and G&A expense remained consistent with the prior quarter.

Regarding taxes, our effective rate was 25.5% for the quarter on an as adjusted basis. Our earnings material presents liquidity at the end of Q1 and prior quarters. Our liquidity totaled $343 million at quarter end, which represents a decrease of $60 million versus the prior period. This quarterly change in liquidity is in line with prior years and driven by the annual incentive compensation cycle for the firm, which occurs in Q1.

Let me now touch on a few items regarding guidance for the remainder of 2026. With respect to compensation and benefits, we would expect our compensation ratio to remain at 40% as we experienced in Q1. We expect G&A to increase in the mid-single digits for the year as compared to the prior year. Lastly, regarding 2026 guidance, we expect our effective tax rate to remain consistent at 25.5% on an as-adjusted basis. I will now turn it over to Jon Cheigh, who will lead the discussion of our business performance.

Thank you, Mike, and good morning. Today, I'd like to cover three topics: our performance scorecard, our 2026 outlook given the recent geopolitical events, and last, our long-term structural view of the economy, the market regime and some asset allocation implications for investors.

Beginning with our performance scorecard. We continue to build on our record of consistent, long-term outperformance. On a 1-year basis, 86% of our AUM has outperformed its benchmark, while our 3- and 5-year outperformance rates are both above 97%.

95% of our open-end fund AUM is rated 4- or 5-star by Morningstar, which is up from 90% last quarter. In short, we continue to meet our primary objective of providing outstanding long-term performance for our investors. Turning to the investment environment.

Coming into 2026, we expected both an acceleration and a rebalancing of global growth with a corresponding broadening of market leadership. While that outlook was spot on early in the year, the current Middle East conflict may have brought that market leadership shift into question. U.S. and global REITs were both up about 10% through February, well ahead of flattish equity markets. As we saw market rotation into the relative laggards of the last several years.

While events in March raised some of those gains, REIT still posted positive absolute performance for the quarter with U.S. and global REITs up about 4% and 1%, respectively.

Listed infrastructure performance was resilient, up 8% for the quarter. Businesses such as utilities and midstream energy continue to demonstrate their criticality in the world of short-term energy scarcity and the continued power buildout, needed to serve increasing industrialization and AI-related demand.

Diversified Real assets rose 12% for the quarter, with strong gains in commodities and natural resource equities. As we saw in 2022, real assets have been a clear winner and diversifier for a 60-40 stock bond portfolio. The asset allocation case for real assets continues to be made.

Preferred securities and fixed income classes broadly declined slightly in the quarter as renewed inflation concerns indicate that monetary policy could be tighter for longer.

So as we update our economic and market outlook for the rest of 2026, our expectation is that the Middle East military deescalation that began several weeks ago, and will continue, including just this morning over the coming -- over the course of the coming weeks and months. We know it will have its starts and stops. But as long-term investors, our focus is on the trajectory of where we are headed.

As a result, our initial 2026 view of broadening economic growth and financial markets remains intact. Now thinking beyond 2026, we believe investors must see recent developments, not as a one-off or a surprise. But instead, as another chapter in a book, which will continue to shape markets for the next 10 years or more.

For some time, we have stated that the global economy is undergoing a structural transition one that looks meaningfully different than the prior 30 years. And there are four major themes that we expect will serve as important drivers of asset allocation shifts.

First, deglobalization or what we would call geopolitical fracturing. For 20 years, the global economy enjoyed friendly trading relationships and uninhibited delivery of just-in-time resources. In the 2000s, this drove a buildup of global supply chains, primarily in Asia, but a [ deindustrialization ] for much of the developed world. For nearly 10 years now, we've seen repeated reminders that this system, while leading to lower consumer goods prices and higher profit margins was fragile and exposed the global economy to tail risks. In the last 6 years, we've seen four consecutive supply shocks, the pandemic, followed by the War in Ukraine, then tariffs and now the conflict in the Middle East. These are not one-off events. But again, an outcome of shifts in global power dynamics and alliances. This geopolitical fracturing will drive significant fixed asset investment boom greater than what the 2,000 saw from China, driven by reindustrialization and remilitarization.

The second major theme is AI and technological disruption. Artificial intelligence is a transformational force on its own. But importantly, it is not a software but rather a hardware story. AI leadership will ultimately be about compute capacity and the marginal cost will likely be about the cost and availability of power.

The third theme is inflation uncertainty. In the last decade, inflation consistently undershot expectations. In contrast, inflation in recent years has consistently surprised to the upside, confounding forecasts that expected a quick return to the old normal of low and stable prices. Even as headline inflation has moderated from recent peaks, underlying pressures remain.

As you all read in our forthcoming capital markets assumptions, Cohen & Steers forecast consumer inflation to average 3% annually in the U.S. over the next 10 years. Below recent peaks, but well above the 1.6% experienced in the last cycle and significantly higher than the Federal Reserve's long-term 2% target.

While AI may produce a productivity boom, which could prove highly deflationary, the investment needed to produce that deflationary boom is highly inflationary. The job of any central banker over the next 10 years will be challenging.

Our conclusion is that while inflation is likely to be higher than markets expect. The precise path and pace of inflation represents a major market uncertainty and risk factor.

The final important trend is the end of low interest rates. Some of this is about inflation and some is about persistent fiscal deficits. Importantly, we also believe that the market continues to underestimate that we will live in a more capital-intensive world, we took interest rates and credit spreads wider.

Hyperscalers shifting from being highly cash flow positive -- [ CASM ] of this shift. Given these four major themes in the next phase, some of last cycle's winners may remain winner, but areas of structural change tend to disrupt market leadership new faces emerge, incumbents decline and entirely different parts of the economy of these shifts are natural resources and the picks and shovels of the global economy. Notably energy, infrastructure and the plumbing that supports construction, transportation and power delivery. This represents a tremendous investment opportunity but also one that comes with challenges of higher and more volatile inflation, as I mentioned earlier.

So for our clients, our advice is simple. First, diversification not just in terms of asset classes or listed versus private but instead diversification of investment exposure to different economic drivers, inflation regimes and factors.

Second, hard assets, including real assets must be a meaningful allocation sourced from equity and fixed income as a diversifier and as a total return opportunity.

Third, investors should use a broader toolkit with some private exposure when it provides unique exposure or an illiquidity premium. But in a highly uncertain world, where the old models may not work, the cost of illiquidity is very high and should be used thoughtfully rather than just for quarterly statement diversification.

We believe the first quarter is the continuation of the market's recognition of this major turn in leadership, which will unfold with the remaining chapters of this book. And with that, let me turn it over to Joe.

Thanks, Jon. You may be able to hear a fire arm in the background, everything is okay, we're going to proceed. Today, I will review our key business trends in the first quarter and provide an update on our growth initiatives.

While we started the year with accelerating fundamentals on February 28, the world changed with U.S. military operations and Iran. As is typical in these situations, business activity slowed for a period as investors attempted to calibrate how long the conflict will last and what the short- and long-term ramifications could be for economies, geopolitics and asset allocation.

If the U.S. economy Pre-Iran was reflationary with an upward bias in growth, consensus post war is for stagflation with the key unknowables being how much and for how long. Not to be forgotten, prewar investors were very focused on the existential risk of AI on certain industry groups in addition to credit and liquidity risk and private credit. We believe our liquid real asset strategies fit the so-called halo trade very well, that is heavy or hard assets, low obsolescence with liquidity becoming a more valued investment characteristic.

The first quarter's fundamental highlights include net inflows of $497 million a strong one unfunded pipeline of $1.7 billion, characterized by good velocity with continued fundings and new mandates, stable fee rates strong absolute performance and neutral relative performance, while 1-, 3- and 5-year relative performance continues to be excellent. We made good progress with our growth initiatives, including active ETFs, offshore SICAV open-end funds, our non-traded REIT and our recently launched listed private real estate for institutions.

Flow highlights by investment strategy include: multi-strategy real asset inflows totaled $142 million, the best quarter since third quarter of 2022. Preferred Securities generated $133 million of net outflows for its strongest quarter since the fourth quarter of '21. And global listed infrastructure recorded its fifth straight quarter of net inflows totaling $96 million after a record year in 2025.

The firm-wide net inflows of $497 million represent positive organic growth for 6 out of the past 7 quarters. We recorded our seventh straight quarter of net inflows into open-end funds, with U.S. open-end fund inflows of over $300 million and broad-based contributions of over $100 million into each of our U.S. real estate, preferred securities and our multi-strategy real asset strategies. Our active ETFs continued their momentum with $224 million of third-party net flows in the quarter. Our international SICAV continued their streak of net inflows in 25 of the past 27 quarters. The SICAV recorded $62 million this quarter across a range of countries most notably in the U.K. and South Africa. The most popular SICAV allocations were to our multi-strategy real assets and global listed infrastructure strategies.

Looking at institutional trends, our advisory channel had its second consecutive quarter of net inflows with $210 million in the quarter, comprised of five new mandates totaling $287 million partially offset by $76 million termination. Sub-advisory experienced $269 million of net outflows in the quarter with $164 million in outflows from Japan.

While we experienced net outflows in Japan sub-advisory for the past 2 quarters, as real estate flows have been challenged industry-wide amidst flows into local bond funds and equity funds, we have slightly improved our industry-leading market share in Japan.

The other sub-advisory outflows were due to normal rebalancing by existing clients, partially offset by two new mandates funding $83 million.

Looking through the Iran conflict, I like our core strategies as it relates to inflation, deglobalization, AI, rotation to heart assets, among other trends. As we continue to experience inflation, we believe our multi-strategy real assets portfolio is a great solution, which investors are increasingly recognizing.

With the long-term criticality of energy back and focus our future of energy strategy, which invests in both conventional and renewable energy could be upgraded to more than just a tactical allocation. Resource equities probably have the best supply-demand future of any strategy I can think of. And the Iran conflict has clearly demonstrated the strategic importance of these businesses due to the profound impact that resource scarcity can have on resource pricing and markets.

Real estate returns could be tempered by stagflation, but remember, valuations have reset versus normalized interest rates. The fundamental cycle has turned positive and investors are rotating into tangible assets.

Our global listed infrastructure strategy has shown both strong absolute and relative performance and is a beneficiary of the capital investment cycle underway.

In addition, we have all been watching the growing concerns in the private wealth channel about liquidity strengths in private vehicles and private infrastructure is probably the most illiquid private strategy being brought to wealth. We, therefore, see global listed infrastructure as a winner and wealth, either as a stand-alone allocation or as a complement to private with proper liquidity protection.

Our corporate strategy for active ETFs is going very well. Total AUM for our first five ETFs is currently $675 million. Flows are strong, investment performance is good, and we are gaining traction and scale. Our platforming efforts for ETFs are accelerating. And in the first quarter, we received our first placement on a major broker-dealer platform. We announced the conversion of our future of Energy open-end fund to an ETF which should occur sometime midyear. We intend to launch a version of our multi-strategy real assets portfolio later this year, and we filed for ETF as a share class as many other managers have done. We want full optionality to deliver all of our core strategies in the ETF structure.

Our nontraded REIT Coasters income opportunities REIT has established a portfolio of 11 properties owned or under contract totaling $650 million in assets and continues to provide investment performance at the top of the real estate peer group with 10.6% annualized returns since inception against a 4.3% peer average. Our focus on open-air shopping centers has helped drive performance as occupancies of 97% on average translate into very strong pricing power for landlords.

A key question for CNS REIT short term is how redemption constraints in private wealth vehicles will affect investor appetite for evergreen vehicles generally. As an industry, we must position these allocations as private strategies with liquidity provisioning as available. And emphasize the importance of liquidity frameworks to protect investors and effectively deploy a long-term investment strategy.

In the case of real estate, it is possible that since the return cycle has returned positive -- has turned positive, the category to garner allocations that previously were taken by private credit. The early data in March show increased redemption activity in private credit and an uptick in sales in real estate and infrastructure.

Time will tell. We remain constructive on the long-term benefits of blending listed and private real estate and wealth portfolios. And believe we offer compelling solutions across the liquidity spectrum for investors.

We've previously discussed the launch late last year of an LP vehicle that invests in core private property funds and listed REITs together. The goal is to deliver a better core allocation to institutional investors using an indexed approach to core funds, combined with listed reach to enhance returns without adding too much volatility and implying an asset allocation overlay. We now have $250 million of fundings or commitments and the strategy is earning the support of a growing list of asset consultants.

I wanted to also comment on our short duration preferred strategy. We now have three open-end vehicles with the launch of a SICAV and an active ETF over the past year to complement our $1.9 billion open-end mutual fund and our $1 billion closed-end fund. Our open-end vehicles have yields just shy of 6%, durations of 2.5 years and investment-grade credit profiles of BBB-. Taxable investors in the U.S. realized an additional 100 basis points of tax equivalent yield.

Relative to corporate bonds of similar duration, short duration preferreds provide nearly 300 basis points of additional tax equivalent yield to compensate for just three notches of credit quality moving from A- to BBB. As yields on cash and other fixed income allocations have declined, these strategies are starting to see more investor interest. Related in our core preferred strategies, we saw a return to positive flows in the quarter, perhaps as a substitute for private credit. I wouldn't be surprised to see investors accept a lower headline yield with tax benefits for a portfolio of strong, transparent credits dominated by banks, insurance companies and utilities, in the midst of greater uncertainty and less transparency around credit quality within private credit.

I'll close with a brief update on distribution, which we've highlighted as a priority for 2026 and 2027. We've made great strides on our plan to invest in distribution, including increased coverage of RIAs and expanded international coverage. All key hires have been made, including a new Head of Japan, a newly created Chief Operating Officer for distribution and additional RIA sales roles. We also promoted [ Brad ] is path to lead wealth and brought in a wealth sales leader on [ Brad's ] team. Our approach to expanding the sales team from here will be success-based, meaning additions will be tied to organic growth.

That concludes our prepared remarks. Julianne, please open the lines for questions.

[Operator Instructions] Our first question comes from John Dunn from Evercore ISI.

First on the advisory channel. You mentioned it's been 2 straight inflow quarters. Do you think you've moved to kind of a more sustainable place? And is it coming from more existing clients or new ones? And are you seeing potential for clients looking at multiple strategies?

Thanks, John. As we've been talking about for the past 3 or 4 quarters, we've seen an improvement in our institutional advisory business as broad conditions have become more favorable, more flexible in investor portfolios. An end toward upping allocations to fixed income and clients continuing to deal with liquidity in their private parts of their portfolio. But we now have a very strong pipeline, I think, for the third straight quarter at $1.7 billion.

I talk about the velocity, meaning in the quarter, we were awarded $74 million of new mandates. There was another $45 million that was won and funded in the quarter. And then we also had another $490 million fund in the quarter. So that's good velocity and demonstrates that things have been loosening up in the institutional channel.

We also just see more from an intangible perspective, increased activity by clients. It's not RFP business anymore, but we've seen a couple of large RFPs recently. So combined with the outlook that John laid out for our investment strategies, we're optimistic that the institutional advisory channel will continue to perform better and better.

Got it. Maybe a little more on ETFs. I mean just -- could you give a flavor of how you're finding clients' acceptance of the vehicle? And are you seeing any cannibalization? And then maybe just could you describe kind of the demand of the different buckets in wealth management? And any potential for any activity for institutional down the road?

The tone in active ETFs is very good. You can see that as our flows ramp. And most importantly, it starts with delivering strong performance, which we have done. And the design of these ETFs are to present our core strategies.

For distribution considerations, some of them have some slight differences versus our core strategies, but our performance has been very good. The so-called use cases make us very bullish on these vehicles. It starts with the RIAs, many of whom are converting their businesses to use exclusively ETFs compared with open-end funds. We're gaining scale, so that allows us to be placed into models. And as I mentioned in my remarks, with our real estate vehicle, which is now the largest and is what we're best known for, we've achieved platform placement on a major broker-dealer providers.

So I would say I'm very bullish on this vehicle. Everything that we're seeing validates the decision to invest in this. And as I said, we're going to continue to get all of our core strategies in these vehicles.

As it relates to institutional interest, they're going to need to scale up. We can see -- we've had discussions with different asset consultants about using the vehicles. So I think there are some use cases, but large institutions generally want to have a separate account.

Right. Okay. And then you went through the component pieces of the private real estate effort. Are you seeing rising demand? And since you don't have a lot of legacy assets and you're entering or ramping up in a good part of the cycle. Is that a big part of the pitch? And maybe where do you expect demand to come from?

I'm not sure I understand the question, John. But as it relates to the private real estate business, when you look at private allocations in wealth, real estate has been the laggard. Private credit has been the leader, as I mentioned, that inflected in March, we'll see if that continues to play out. Infrastructure continues to have good growth.

But we believe that based on our views and other views on the real estate cycle that you can see a rotation into the real estate strategies. We're seeing a little bit of that, but it's still early. Our approach to the wealth channel is that we believe that investors should have an allocation to both listed and private, and we're trying to coach our clients on how to do that and how to optimize those portfolios.

With our nontraded REIT, as I mentioned, we have -- we're at the top of the leaderboard in terms of performance. And as we gain scale, we believe we'll have the ability to get platformed on more RIA as well as [ wirehouse ] platforms in the future.

Yes. Yes, that's what I was driving that. And then maybe just one more, thinking about the theme of rotation of some money moving to non-U.S. strategies. Global real estate was positive this quarter. Are you seeing any like interest in diversifying? And is that -- could that drive positive flows for global real estate in this year and next?

We have been seeing more of that. Go back 1 year, 1.5 years, there weren't a lot of flows into global strategies except for global infrastructure. So I'm talking primarily about global real estate. That was primarily related to U.S. exceptionalism and related stock market performance. But as the world has turned geopolitics have turned, and we've started to see better performance in international markets broadly. We've seen more interest and flows into our global real estate strategy. So I would expect that to continue. It's magnitude. I can't say, but I definitely would expect to see our global portfolios have more interest.

[Operator Instructions] Our next question comes from Mac Sykes from Gabelli Funds.

Joe, I wish -- I wanted to ask a question about sort of historical context of shifts to real estate strategies. And I guess, as we think about some of the items you've mentioned this morning. When you're looking at educating capital allocators at some of these bigger platforms that do shifts in these models, what are some of the catalysts for that? Is it sort of adviser interest, is it returns that have just happened, so outperformance of the asset class interest rate. I guess, if you could just dig into some of the things we can watch for in anticipation of more sizable allocations to real estate.

Mac, this is Jon Cheigh. Well, first of all, of course, we're talking with all of the intermediaries about real estate. But of course, all of our asset classes, including infrastructure, preferreds and natural resources.

But specifically to real estate, look, it's a combination of investors thinking about the interest rate cycle as well as the fundamental or supply and demand cycle. And so I've said a few times that when you look over the last 3 or 4 years, sometimes people would say, "Oh, well, real estate is done poorly because interest rates are higher." And that's really only half the story. The other reality is that we had too much new supply that got built. So fundamentals weakened. So over the last several years, REIT earnings have probably grown 2%, 3%, 4%, while the S&P was growing 10%, 11%, 12%. So yes, it's an interest rate story, but it's also a fundamental story.

So when they revisit the story today, what they're looking at is the S&P is a lot more expensive from a valuation standpoint than it was 3, 4 years ago. It seems like the earnings growth is beginning to decelerate and we all know about the market concentration within the S&P and in some cases, concerns about the significant amount of CapEx that's occurring. So there's -- how is the S&P looking on a price-to-earnings basis versus on a free cash flow basis because you know just as well how capital-intensive the S&P 500 is becoming at the top end.

So some of it is as far as real estate versus broader equities is valuations look better. The interest rate adjustment has happened. So being in this 4% to 5% -- 4% to 4.5% range is the new normal, as I talked about. But what we're also talking to them about is the reacceleration of earnings or fundamentals. So that 2% to 3% growth of REITs will probably be more like 5% or 6% this year, 7% or 8% next year. So I'd say that's I'd say the fundamental inflection is probably the bigger thing that our investors are focused on.

And this kind of goes back to one of the earlier questions on shifts we're seeing on the advisory channel. We've had a lot of conversations with investors for the last few years. And I think they understood the valuation story, but they were focused on is today the right day? Why 2024, why 2025, why 2026? And real estate fundamentals are slow moving. They're not going to go from being below average to above average in 1 quarter. And so it's taken a couple of years. We've digested some of that excess supply. And that's why I think the story for 2026 to 2027 is about improving fundamentals and stable interest rates and attractive valuations.

And that's why we're seeing some of those shifts, whether it's in the public markets but also within the nontraded REIT side, again, a lot of money went into private credit. But as Joe talked about, as that money is looking for the next opportunity you're beginning to see it in the flow data, but we're certainly starting to hear it of -- well, real estate lag, other things have gone up. It seems like a place to pivot back to. So I think we're early in that pivoting process.

Just one other question on the private credit side, as you compete, I think a lot of the sales channel adviser-driven component has been some of the fee structures with some of these products. coming with pretty large fee structures and incentives to the adviser. And with your products, actually much more rationally priced and compelling, I believe.

But how do you sort of compete with that where the adviser centers? Maybe a more compelling yield perspective from you and liquidity and all that stuff, but yet they come with lower adviser incentives in terms of the sales component.

Well, I'm not too familiar with the adviser incentives that you're talking about. But what we think about every morning we would get up is delivering investment performance and managing risk. So we -- as it relates to the private real estate strategy need to deliver a good total return with a balance between current income and capital appreciation and not take undue risk.

So as it relates to the fee structure for that vehicle, we've made it very investor-friendly compared with the peer group.

[Operator Instructions] we have no more question [Audio Gap].

Thank you, Julianne. We look forward to reporting our second quarter results in July. Meantime, if you have any questions, please reach out to [ Brian Meta ], and we'll talk to you soon. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded, Friday, January 23, 2026. I would now like to turn the conference over to Brian Heller, Senior Vice President and Deputy General Counsel of Cohen & Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me are Joe Harvey, our Chief Executive Officer; Mike Donohue, our Chief Financial Officer; and Jon Cheigh, our President and Chief Investment Officer.

I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying fourth quarter and full year earnings release and presentation, our most recent annual report on Form 10-K and our other SEC filings. We assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund or other investment vehicles.

Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. Reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation as well as links to our SEC filings are available in the Investor Relations section of our website at www.cohenandsteers.com.

With that, I'll turn the call over to Mike.

Thank you, Brian, and good morning, everyone. My remarks today will focus on the as-adjusted results. Reconciliation of GAAP to as adjusted results can be found in the earnings release and presentation.

Yesterday, reported earnings of $0.81 per share, which equaled EPS reported in the prior quarter. Earnings for the full year 2025 was $3.09 per share compared to $2.93 in 2024. Key highlights for the quarter include: solid revenue growth driven by higher average AUM and combined with a stable effective fee rate. We had another quarter of net inflows, which makes 5 out of 6 trailing quarters with net inflows. Operating income was higher than prior quarter and prior year and our [ 1 but ] unfunded pipeline is again near multiyear highs.

Now I'll provide some detail on our financial results. Revenue for Q4 increased 2% sequentially to $143.8 million. Revenues for the full year increased 6.9% versus the prior year to $554 million. The increase in revenue from the prior quarter was driven by higher average AUM and the recognition of $1.7 million in performance fees. Our effective fee rate during the quarter, excluding performance fees, was 59 basis points, which was consistent with the prior quarter. Operating income increased 3% to $52.4 million during the quarter. Operating income for the full year increased 6.3% to $195.1 million. And our operating margin was 36.4% as compared to 36.1% in the prior quarter.

Ending AUM in Q4 was $90.5 billion, which was down slightly from the end of Q3. However, as noted earlier, we experienced higher average AUM during Q4 as compared to the prior quarter. Net inflows during Q4 were $1.2 billion, primarily related to advisory and closed-end funds, which was offset by market depreciation and distributions. Joe Harvey will provide additional insights regarding our flows and pipeline.

Total expenses were higher compared to the prior quarter, primarily due to increased G&A expense. During the quarter, the increase in compensation and benefits was below the sequential increase in revenue to reflect actual incentive compensation to be paid. As a result, our compensation ratio for the quarter decreased to 39% and was 40% for the full year. This was just below the guidance we provided at the beginning of the year of 40.5%.

The decrease in distribution and service fees during the quarter was due to reduced fees paid to intermediaries as investors shifted into lower fee paying share classes. G&A expenses were higher during the quarter primarily related to travel and other business development-related activities as well as increased talent acquisition costs.

Regarding taxes, our effective rate was 25.7% for the quarter and 25.3% for the year, which was consistent with 2024. Our earnings material presents liquidity at the end of Q4 and prior quarters. Our liquidity totaled $403 million at year-end, which represents a $39 million increase versus the prior quarter end. As a reminder, our liquidity normally decreases during Q1 of each year due to our compensation cycle as year-end bonuses are paid.

Let me now touch on a few items for 2026. With respect to compensation and benefits, we would expect our compensation ratio to remain at 40%. We continue to maintain a disciplined approach to managing talent by balancing our business needs and strategic priorities with revenue growth. We expect annual G&A growth in 2026 to moderate from 2025 and are projecting it to be in the mid-single-digit percentage range. Lastly, regarding 2026 guidance, we expect our effective tax rate to be 25.4% on an as-adjusted basis.

I will now turn it over to Jon Cheigh, who will discuss our investment outlook.

Thank you, Mike, and good morning. Today, I'd like to cover 3 topics: our performance scorecard, the investment environment for the fourth quarter and our 2026 outlook for the economy, markets and the opportunity in our asset classes.

Beginning with our performance scorecard. We have maintained a record of consistent long-term outperformance. On a 1-year basis, 95% of our AUM has outperformed its benchmark, while our 3-, 5- and 10-year outperformance rates or all above 95%. 90% of our open-end fund AUM is rated 4- or 5-star by Morningstar, a modest increase from last quarter. Importantly, our nontraded REIT, CNS REIT has enjoyed a 10.3% annualized return since its January 2024 inception, which is more than double the return of the median equity nontraded REIT.

In short, we continue to meet our objective of providing long-term alpha for our clients. Transitioning to investment market conditions, equities finished 2025 with double-digit gains for the third consecutive year. Although sentiment in the fourth quarter generally shifted toward value-type stocks as investors trimmed positions in prior AI winners. In this environment, diversified real assets rose about 3% in the quarter, in line with global equities but outperformed equities for the full year, which we believe is significant as market drivers broaden, which I will touch on later.

Natural Resource equities were a positive standout in the quarter, up more than 6%, driven by strength in metals and mining stocks amid reduced tariff uncertainty and expectations for stronger economic growth in 2026. Global real estate stocks were flattish overall in the quarter as gains in Asia Pacific markets were countered by weakness elsewhere. While U.S. REIT had a modest decline in the quarter, we continued to see large return disparities by property cut. In this case, industrial and hotel REITs had sizable games, while data center and telecommunification landlords remained sluggish.

Private real estate meanwhile, had a total return of 0.9% as measured by the preliminary results of NCREIF Odyssey Index. This marked the sixth consecutive quarter that total returns have increased. The clearest private real estate recovery signal we've seen since the 2022 downturn. Within listed infrastructure, airports were a notable winner on strong passenger traffic volumes amid steady air travel demand.

Most fixed income classes, including preferred securities, had slightly positive total returns in the quarter with treasury yields ending the period largely unchanged and as credit spreads remained historically tight.

Turning to our economic and investment outlook. Last quarter, I noted that economic growth for 2025 was historically narrow, the so-called K-shaped economy. Unsurprisingly, corporate profit growth and market performance have also been narrow. As we enter 2026, we expect economic activity and market returns to broaden after several years of highly concentrated games. Our view is for above consensus global growth inflation and interest rates.

We believe the economic and market rotation is well underway. Real assets, which have lagged for some time are evidence of this shift. In 2025, a diversified portfolio of real assets outperformed equities, with virtually all categories generating double-digit returns. Natural resource equities led rising nearly 30%, followed by commodities up 16%, global listed infrastructure at 14% and global real estate just under 10%. We also can't forget about gold, which had a banner year, climbing 64% last year.

Gold is an interesting case study. from mid-2020 to mid-2023, gold generally traded around $1,800 per ounce with a range of plus or minus $200. Some argued that maybe gold had become displaced by bitcoin and secular change or that gold couldn't work in a higher interest rate environment. 2.5 years later, gold is up 250% to 4,800 an ounce. Few people today now argue that gold is obsolete versus Bitcoin. In our experience, claims that this time is different, or that an asset class, like real estate is also obsolete, tend to correct over time. And when the sentiment and fund flows shift, valuations can move meaningfully and quickly.

Equities are at historically high valuations. Everyone knows this and has known this. Just because equity valuations were expensive at the start of 2025 and the market still went up doesn't mean relative valuations don't matter or the asset allocations don't need to shift. Instead, it means the case for asset allocation changes is even stronger today with the location just starting.

Turning to more specific drivers by asset class. Real estate has been a [ laggard ] for the last several years because of the rapid rise in long-term interest rates from 2022 to 2023, oversupply in industrial, apartments and self-storage and growth rates that decelerated from double digits down to only 3.3% growth in 2025. But that performance and those drivers are now in the past.

Long-term interest rates have essentially been flat now for 2.5 years. Those same higher rates plus construction costs that are up 40% since 2020, have driven new supply materially lower. Our companies are not in the construction business. Lower supply is good for real estate. We expect the combination of lower supply and accelerating economic growth and thus demand to result in accelerating REIT earnings above trend to roughly 8% in 2026 and 2027.

In our experience, discounted valuations with accelerating growth drives multiple expansion. Performance drives flows to the asset class. And often, we see the rotation from laggard to leader and investors fear of missing out, take hold. And historically, the recovery in share prices is a sharp rather than measured move. Natural resource equities and global listed infrastructure represent some of the clearest examples of how broadening market leadership can unlock return over a longer time horizon. Capacity discipline, higher borrowing costs and aging infrastructure have constrained the supply of natural resources.

Meanwhile, growing populations, AI infrastructure needs, defense growth, and increased electrification or accelerating demand, record metal prices and persistent supply chain disruptions in 2025 highlight this shift. Against this backdrop, natural resource equities led real asset returns last year. And importantly, we believe we're still early in a multiyear commodity super cycle.

As market leadership broadens beyond mega cap tech, these companies offer structural growth, yield, diversification, and an attractive complement to richly valued traditional assets. Last, in fixed income markets, lower short-end rates combined with stronger broadening growth bode well for preferred securities.

To be sure, overall credit spreads are tight, but preferreds represent high income from high-quality issues and generally with tax advantages. In short, we continue to believe that the combination of a broadening economic growth engine along with relative valuation attractiveness will benefit our asset classes in 2026, while secular forces provide an exciting backdrop for many years to come. The stage is set for natural resource equities, along with listed infrastructure and listed real estate play a larger role in portfolios as the next leg of participation unfolds.

With that, let me turn the call over to Joe.

Thank you, Jon, and good morning. Today, I will review key business trends in the fourth quarter and then discuss our plans to drive organic growth and realize returns on investments we have made in recent years.

We ended 2025 with good momentum across key business metrics. We saw positive flows into nearly all vehicles. Fee rates were stable. Our institutional pipeline continued to strengthen and we are making progress on distribution initiatives. We ended the year with $90.5 billion in AUM compared with the full year average of $88.6 billion. While markets were strong in 2025, our largest strategy by AUM, U.S. REITs returned just 3.2%, ranking 11 out of the 11 gig sectors in the S&P 500.

Some of our smaller strategies performed exceptionally well, such as natural resource equities at 30%, real assets multi-strategy at 17% and global listed infrastructure ranging from 14% to 22%, depending on the sub strategy, and that's before our teams generated alpha on top of those benchmarks.

In the fourth quarter, we had net inflows of $1.28 billion, bringing full year 2025 flows to $1.5 billion. Major story lines included net inflows in all vehicles, including improved advisory flows, which led at $651 million, flow leadership by strategy in U.S. REITs and global listed infrastructure and an inflow of $513 million from a rights offering and associated leverage for our infrastructure closed-end fund.

Open-end funds had a small net inflow at $13 million with large inflows into 2 of our U.S. real estate open-end funds and outflows from our third real estate fund and our core preferred stock fund. Our non-U.S. CCAP funds had inflows of $89 million. Active ETFs had $175 million in net inflows, comprised of $25 million of seed capital and $150 million from clients. Advisory had 4 new mandates totaling $689 million plus existing client inflows of $86 million offset by 1 termination of $124 million.

Subadvisory had $30 million of net inflows, framed by significant activity, including 2 new mandates of $532 million, 1 account termination of $330 million and client rebalancing outflows of $172 million. Our one unfunded pipeline continued to strengthen at $1.72 billion at year-end across 20 mandates compared with $5 billion last quarter and a 3-year average of $970 million.

We were awarded $660 million of new mandates in the quarter and an additional $385 million was won and funded within the quarter and therefore, did not hit the pipeline. The largest percentage of the pipeline at 54% is U.S. REIT strategies with another 23% in global listed infrastructure and 16% in global real estate. The factors driving improved activity are similar to last quarter. More confidence by allocators in the macro environment and interest rate cycle additional flexibility in portfolios due to listed equity outperformance, increased interest in more inflation-sensitive allocations and takeaways from underperforming competitors.

Over the past several quarters, we have disclosed known terminations and last quarter, that AUM was $500 million to $600 million. As before, those terminations were principally driven by client allocation and investment vehicle changes rather than performance. We have transitioned to a more typical low level of termination activity now that those outflows are complete. Other full year highlights include record net inflows of $1.6 billion into global listed infrastructure, record inflows into our 6 CCAB vehicles of $291 million and the doubling of our AUM in Australia over the past 2 years to $1.2 billion. All of these areas deserve continued focus in 2026.

Since the Fed began easing in September 2024, we have had 6 -- 5 of 6 quarters of net inflows averaging $612 million. This contrasts with 9 prior quarters of outflows during the interest rate tightening period. While on the surface that may seem to reflect a business that is interest rate sensitive, I believe the right depiction is more muted especially considering that interest rates have normalized and that will likely be in a more inflation persistent environment. The need for diversification amidst top decile valuations alongside persistent inflation backdrop is helping to drive more listed real asset allocations.

During 2026, we expect to focus on harvesting ROI or return on investment for investments we've made over the past several years in new strategies, vehicles and talents. In November, we announced Dan Noonan's promotion to Head of Global Distribution after watching him implement his strategic plan for wealth that is well underway. Key goals include increasing coverage of the RIA channel, while maintaining our presence in the wirehouses, putting greater resources on global sub-advisory and growing our institutional presence outside of the U.S. with focuses on Japan, the Middle East and Asia.

We believe our largest AUM strategy, real estate, is entering a favorable return cycle. Looked at through REITs, real estate has been among the worst S&P sectors for multiyear periods driven by asset pricing adjustments as well as earnings deceleration. But we expect earnings to inflect positively, as Jon discussed. REITs are statistically cheap versus equities in our view, but fairly priced versus bonds. And reflecting inflation, reprices are 18% below trend versus replacement cost.

In our view, at this time, real estate should garner 15% of the 60-40 medium risk portfolio with 9% allocated to listed real estate and 6% to private. Our U.S. REIT performance is outstanding, and global strategies are seeing increasing interest. Meantime, our private business is gaining momentum with strong investment performance by our non-traded REIT while distribution is expanding through an increasing number of independent and enterprise RIA firms.

What's more, last year, we launched an institutional vehicle that combines a listed real estate strategy with an indexed approach to core private property funds through our partner, IDR. We have commenced fundraising and are excited about this vehicle's prospects. My favorite investment strategy, the one to allocate to and forget about, so to speak, is natural resource equities. These companies produce critical real assets, which are connected to the economy survival, national security and capital investment. Their supply-demand profiles are attractive because of depleting resources in many cases and result in strong pricing power. As Jon articulated, resource equities are in a multiyear return cycle in our view.

Following record flows in global listed infrastructure in 2025, we expect the allocation momentum to continue. The investment case remains compelling, centered around critical themes such as deglobalization and evolving supply chains, digitalization and power demand and decarbonization. We successfully completed a rights offering for our closed-end fund and are excited about our recently launched active ETF.

Interestingly, several of the institutional wins in 2025 include open-end vehicles which provide opportunities for organic growth. Our core preferred strategy has been in outflows in spite of yields normalizing and fixed income allocations being reestablished potentially the result of competition from private credit strategies. Nevertheless, preferreds had very strong returns on '25, and we delivered alpha.

We are prepared for allocations to return to preferred with open-end fund, ETF and CCAP vehicles in both our core and short duration preferred strategies. We are very pleased with the launch of active ETFs, we closed the year with 5 ETFs and total AUM of $378 million, of which our seed capital is $90 million. We are pleased with their trading spreads, performance and flows. Our first launches in February were REITs, preferreds and natural resource equities. In December, we launched short duration preferreds and the global infrastructure strategy, which is more concentrated and opportunistic in nature than our open-end fund.

We are working toward threshold AUM milestones for allocators while continuing to deliver performance. Next milestone is to achieve profitability. Efforts to grow our offshore CCAP vehicles are paying off with record net inflows in 2025 and in '24 of the past 26 quarters. The leading flow CCAB is our real assets multi-strategy a reflection of the inflation environment. These vehicles are seeing flows in over 8 countries, led by the U.K. and South Africa. We expect to achieve profitability in 2026, and the next milestone is to scale AUM.

Turning to our investment initiatives. We have invested significantly in the business the past few years across vehicles and strategies. As these businesses scale, we will add more distribution resources calibrated to organic growth. At this point, we expect that we're reaching the peak of balance sheet funding for new vehicles and strategies.

In closing, Cohen & Steers will celebrate its 40th anniversary in 2026. We'll be celebrating both our evolution from a single strategy manager to a global real asset manager as well as the role of the listed markets. What Martin Cohen and Bob Steers our founders created in 1986 is truly remarkable. First, in terms of pioneering a better way to invest in core real estate through the listed REIT market. Second was to lead the way in evolving the traditional 60-40 portfolio construction to include real asset allocations and the 20% context to enhance returns with better inflation sensitivity and diversification.

Our founders backed their belief in the listed markets by bringing Cohen & Steers public in 2004. It has been a spectacular way for us to organize for our clients, our employees and the business, particularly now with the speed of change in asset management. Part of the 40-year celebration will be to extol the virtues of the listed markets. Too many companies have false impressions about the costs and risks of being public. To us, it's easy. It's like waking up in the morning. and being public provides discipline, governance, brand awareness and resources to continually innovate and improve our business.

Going public also provided a strong balance sheet to support [ seeding ] strategies and funding co-investments. Our active ETF launches and the nontraded REIT are prominent recent examples. We will continue to do our part to promote capital formation in the listed markets in 2026.

Now I will turn the call back to Abby to facilitate Q&A.

[Operator Instructions] And our first question comes from the line of John Dunn with Evercore ISI.

Wanted to ask a little more on the private real estate. It seems like we're seeing signs of some improving demand for that asset class. First of all, are you seeing that? And then also, do you think it can be a more significant contributor in 2026?

Well, I think we're early in the process of investor interest coming back to private real estate, but we're seeing some good early phase signs. The level of interest is increasing, particularly with some cracks showing up in the private credit markets and the vehicles in the wealth channel that have raised a lot of money.

So when you just follow the chain of factors that are starting to drive that private credit is wrestling with interest rates coming down some, some potential credit problems and the fact that there's been a lot of money raised. So the recent articles that have followed the outflows that are coming from those vehicles, and we believe that some of that capital will find its way into the real estate market because the factors driving what's going on in private credit will help the private real estate market, namely, the reduction in the interest rates and the fact that prices have adjusted in the commercial real estate and the capital flows have really slowed.

So as with all these types of transitions, it will take -- it will unfold over a period of time. But we're -- as I said, we're seeing more shoppers, more lookers and we're really well positioned with our nontraded REIT because we believe we have the right investment strategy. We've delivered performance. We're gaining critical mass and we're starting to broaden the number of platforms that we're on. So we're ready in case that transition does follow through.

Got it. And then on the active ETFs, other vehicle launches take time for the market to kind of accept. But because these are based on established strategies, do you think active ETFs can scale more quickly for you guys?

Absolutely. And there are a lot of factors behind that. You named one of them, there are core strategies. They're just delivered in a different vehicle and the market has voted that active ETFs are the way to go for the future. Of course, there's nothing wrong with open-end funds, and there will be a lot of advisers and individual investors that continue to hold them. But at the margin, the new business models are using active ETFs more. So because we've got proven strategies or strategies that close cousins and based on our core strategies. Investors know what they're getting is just happening through a different vehicle.

So I think that, as I said in my remarks, we've got our milestones. We want to get the vehicles as we launch them to scale so that allocators know they can come in and have efficient trading spreads on them. They -- because of the strategies in some cases, they're a little bit different. They'll get comfortable with those differences and the performance that we're delivering. And once we get to critical mass so that model-based users and other allocators are comfortable.

I think they have the potential to scale up very rapidly. And that stands in contrast to some of the private strategies you're seeing in nontraded REITs or interval funds, et cetera, where it is a new allocation for the wealth market and some of the strategies are less tested. And because they have a private element to them, there's more risk for the gatekeepers and they want to see more performance.

So I think it's very different, and it makes us very excited because we can see how for the new capital going into active ETFs, it can help these vehicles scale very rapidly.

John, this is Jon Cheigh. I would just add one thing. I think our REIT is a really good example of that. So this is a CSRE. So as an example, it took us 159 days to get to $50 million of AUM in that ETF. And with each proceeding $50 million, it's -- we're achieving that faster and faster and faster, meaning it took us almost half a year to get the first $50 million at this stage. It's taken us a little bit more than a month to get the last $50 million. So clearly, adoption is accelerating and has continued to accelerate.

And our next question comes from the line of Rodrigo Ferreira with Bank of America.

Can you talk a little bit about the recent progress in the institutional channel? Just what have conversations looked like and maybe contrast it to what I had looked a year ago? And then if you also can maybe expand like based on the conversations you're having right now, where do you think it can go from here?

Sure, Rodrigo. Yes, I think that's one of the critical inflections in our business, and we've been talking about this for the past year or so. And again, like a lot of these transitions, it takes time. But we've now had a very strong pipeline for 2 quarters in a row. This quarter, I'd say that, that pipeline has broadened a little bit. It's deepened a little bit with the number of mandates, the location of the domicile of the allocator and the range of strategies.

So I think it's a combination of our team just being very steadfast and sticking with the process and the program. but also the environment changing, as I said, I think the environment is improved for allocators with more liquidity in the portfolios. It's not totally -- and the free and clear because there's still illiquidity and private allocations.

But with -- for -- going back a couple of years, allocators are reestablishing fixed income allocations, okay. Now with equities, it's created more flexibility. And so -- and then with the backdrop of persistent inflation, we just see more allocators coming back to the strategies we manage. And so it's a better environment. Our teams are very focused and there's disciplined about pursuing the process.

So I would expect as these things go for this to continue to unfold. And as we've talked about also in prior calls, we're working on investing in the institutional side of our business and with adding sales professionals, adding consultants to help us in different [ rickets ]. So becoming more bullish on this segment of the market and can wait to report in future quarters.

Got it. And then maybe for my follow-up. On the [ 1 but ] unfunded pipeline, it seems like the amount that you're winning and funding intra-quarter has been going up. Is that a fair observation? And then also, can you comment on any dynamics driving that?

I think over the longer history, what happens in the 1 and unfunded or the intra-quarter is pretty consistent. So the fact that it's turned up in the recent quarters is just a reflection of the broader dynamic that I described. I don't think there's anything unique to that. But over the longer term, it's been pretty consistent.

[Operator Instructions] And we will take a follow-up question from John Dunn with Evercore ISI.

So just thinking about like regional demand. You mentioned on the wealth management side, where there's demand for the CCAP. But on the institutional side, could you just kind of give us a flavor of any pockets of demand around the world for both advisory and subadvisory.

But again, if you go back a couple of years in a more challenging environment for advisory and it's also been a period when the U.S. has really performed well market-wise. More of the activity got concentrated in the U.S. I would say we're starting to see that expanding now with -- now with the non-U.S. international markets performing better.

A little bit of concern on the geopolitical front and non-U.S. allocators not wanting to be so concentrated in the U.S. But just to give you a flavor for the domiciles of our allocators, it's Belgium, it's Canada, it's Japan, it's Philippines, it's the U.K. So it's starting to expand. And I would hope to see that continue as we are allocating more resources, more sales talent in the non-U.S. markets.

Got it. And then maybe just one more quick one. On the global real estate side, what do you think some of the dynamics that could change that would move that to become more of a tailwind?

Well, I think there -- this is Jon. I think there's 2 factors. So the first is, generally speaking, global real estate is more favored by global institutions. So as we've talked about, there have been lower interest in real estate overall in 2022 to 2023, 2024. So I think as we see a reacceleration in demand for real estate from global institutions. I think generally, they're going to have a preference for global real estate. So that's the first thing.

I think the second thing is that for U.S.-based investors, and so that's both for wealth and institutional, the reality is that international underperformed for the last 10, 11, 12 years, not every year, but a majority of those years. And so it's like the comments I talked about sometimes when something underperforms, people say, oh, there's something structurally wrong. It's never going to perform. And there's elements of that, but the realities are more that growth had slowed in China. That growth was slow in Europe and that places like Europe and Japan had to go through interest rate resetting cycle.

Again, a majority of those factors are more in the rearview mirror. And we've seen last year, international real estate did meaningfully better than U.S. real estate. And that's probably a harbinger of what we're likely to see over the next few years. So I think we're seeing changes in behavior, both from global institutions and thinking about the U.S. versus global as well as U.S. institutions.

And our next question comes from the line of Macrae Sykes with Gabelli.

Just on -- going back to the ETFs, the active ETFs, could you perhaps break down some of the areas of demand that you're seeing? And any surprises there. So retail platforms, RIAs, Institutional?

I wouldn't say there's been too many surprises. But when you see it actually happen, it gives you more conviction about the strategy but we're seeing examples of RIAs who only use ETFs in their practice. So this is money that we never would have seen that. Had we not launched active ETFs. We're seeing existing holders of our open-end funds who are converting their practices to using ETFs. And so there's some swapping going on.

In our business projections for the ETFs, we've factored in some the cannibalization, so to speak. And to the extent that you can measure that, we'd say that it's kind of in line with what we've expected. But -- and if there's money that would be going away for us, we're net-net better off for having launched the active ETF.

So there are model builders who only use ETFs, and so that's a dynamic. So far, the activity has been with the independent RIAs because for the wire houses, we need to go through the process of getting onboarded. We're in that process for several of our ETFs. So as that happens, we're going to be able to see other dimensions to how this transition from open-end funds to ETFs is going to unfold.

And as we talk about these launches, we talk about it in phases, so we've launched 5. We're going to continue to create vehicles that we have all of our core strategies in ETF. But then over time, there's going to be a longer-term exercise of figuring out how to create vehicles for other of our open-end fund AUM which we haven't been able to address with what we currently have. So it's going to be a process that unfolds over multiple years.

And that concludes our question-and-answer session. I will now turn the conference back over to Mr. Joe Harvey for closing remarks.

Well, thank you, Abby, and thank you, everyone, for taking the time to listen to our outlook and look forward to reporting our first quarter in April. See you then.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, Friday, October 17, 2025. I would now like to turn the conference over to Brian Heller, Senior Vice President and Deputy General Counsel of Cohen & Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers Third Quarter 2025 Earnings Conference Call. Joining me are Joe Harvey, our Chief Executive Officer; Raja Dakkuri, our Chief Financial Officer; and Jon Cheigh, our President and Chief Investment Officer.

I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us but actual outcomes could differ materially due to a number of factors, including those described in our accompanying third quarter earnings release and presentation, our most recent annual report on Form 10-K and our other SEC filings. We assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell with the solicitation of an offer to buy the securities of any fund or other investment vehicles.

Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation as well as links to our SEC filings are available in the Investor Relations section of our website at www.cohenandsteers.com. With that, I'll turn the call over to Raja.

Thank you, Brian, and good morning, everyone. My remarks today will focus on our as-adjusted results. Yesterday, we reported earnings of $0.81 per share compared to $0.73 sequentially, representing an increase of 11.6% versus Q2. We Key highlights for the quarter include meaningful revenue growth driven by higher AUM, combined with a stable effective fee rate, expense management and discipline with revenue growth outpacing expense growth. Expanded operating margin as compared to both the prior quarter and prior year's quarter, net inflows during the period a multiyear high in our 1 but unfunded pipeline resulting from investment performance and our focus on sales and distribution. And lastly, a strong balance sheet with high levels of liquidity and no leverage enabling us to be opportunistic.

Now back to the detailed results. Revenue for Q3 increased 4.2% from the prior quarter to $141 million. The change in revenue from the prior quarter was driven by higher average AUM, plus an additional day during the period. Our effective fee rate was 59 basis points, in line with the prior quarter. Our operating margin increased meaningfully to 36.1% compared to 33.6% in Q2. As noted, we experienced higher average AUM compared to the prior quarter. In addition, ending AUM increased to $90.9 billion as of Q3. AUM was positively impacted by both market appreciation as well as net inflows. Net inflows into our open-end funds were partially offset by institutional net outflows. And our open-end funds have experienced positive net flows in the last 5 consecutive quarters.

Joe Harvey will provide additional insights regarding our flows and pipeline. Total expenses during Q3 were essentially flat to the prior quarter due to several drivers. G&A expenses decreased meaningfully versus the prior quarter. G&A was lower across areas, including talent acquisition and travel costs. While compensation and benefits increased during the quarter, the change in comp and benefits was below the change in revenue. As a result, our compensation ratio for the quarter was lower. This has driven our year-to-date compensation ratio down to 40.5%. And lastly, on expenses, distribution and service fees were impacted by higher average AUM in our open-end funds. Regarding taxes, our effective rate was lower for the quarter, resulting in our year-to-date rate being 25.1%. Our earnings material presents liquidity at the end of Q3 and prior quarters. Our liquidity totaled $364 million at quarter end which compares positively to $323 million in the prior quarter.

Let me now touch on a few items regarding full year 2025 guidance. With respect to comp and benefits for 2025. We expect our compensation ratio to remain at 40.25% for the full year. We expect full year G&A increase of around 9% compared to full year 2024. This full year G&A increase has been primarily driven by talent acquisition and business development costs incurred in the first half of the year. Also impacting G&A this year have been expenses such as marketing and related costs for our active ETF launch. We remain focused on expense management and will be disciplined but balanced as we see investment opportunities in our business. In 2026, we expect annual G&A changes to moderate from this year's growth level to being in the mid-single-digit percentage range. Lastly, we expect our effective tax rate to remain at 25.1% on an as-adjusted basis. I'll now turn it over to Jon Cheigh, who will discuss investment performance.

Thank you, Raj, and good morning. I'd like to focus on 2 key areas today: our performance scorecard and our investment outlook, particularly why we see emerging tailwinds for listed real assets and infrastructure. Beginning with our performance scorecard. Our shorter-term quarterly performance was slightly weaker with 33% of AUM outperforming with strong performance from our global listed infrastructure strategy offset by weaker U.S. REIT performance. Despite the short-term underperformance, we have maintained a record of consistent long-term outperformance. On a 1-year basis, 93% of our AUM has outperformed its benchmark, while our 3- and 5-year outperformance rates are above 95%. Our 1, 3 and 5-year excess returns of 184 basis points, 227 basis points and 216 basis points, respectively, are near or above our targets. 87% of our open-end fund AUM is rated 4 or 5 star by Morningstar versus 90% in the prior quarter.

In short, we continue to meet our objective of providing long-term alpha for our investors, which has and will continue to create opportunities for new allocations and takeaways from underperforming managers. Last, I want to flag our exceptional performance since launch of our 3 active ETFs, our real estate ETF has outperformed by 217 basis points since inception and is #1 versus its peers. Our preferred ETF has outperformed by 124 basis points and is also #1 versus its peers. While our resource equities ETF has outperformed by 490 basis points. Our early business success with our active ETFs is a team effort, but we know it has to start with great performance. Congrats to our team for delivering.

Transitioning to the market and our outlook, the third quarter was broadly positive for risk assets amid prospects for the Federal Reserve easing, corporate profits continuing to generally meet or exceed expectations and the AI CapEx boom accelerating. While the MAX 7 lagged the broader equity market at the start of the year, the group has surged back since the market lows in April. This continued in the third quarter as a technology sector, for example, outperformed the S&P 500 by more than 500 basis points. So far this year, the drivers of economic growth have been fairly narrow leading to the so-called k-shaped economy, where some segments, notably AI investment and high-end consumers who have been supported by wealth effects are performing well. while other segments appear more sluggish.

Looking ahead, we believe economic growth and thus corporate profits should remain resilient, but the foundations of growth will likely broaden with both monetary and fiscal stimulus. This is also consistent with estimates for earnings growth were forecast for sectors that have seen sluggish growth in 2025, which is real estate, energy and materials accelerate in 2026. In addition to a broadening economy and market we believe 2 interrelated dynamics are also worth highlighting because they inform our investment outlook. First, despite stocks trading at all-time highs, along with lofty valuations and inflation closer to 3% rather than the Federal Reserve stated 2% target. The Fed seems focused on cutting rates at least once more if not place, in 2025, the Fed is focused on slowing job growth and modestly rising unemployment. Notably, an environment just like this of slightly elevated inflation and lower rates is a positive backdrop for real assets.

Under the surface of the [indiscernible] or even the press focus on record gold and surging silver prices, natural resource equities were up nearly 21% year-to-date and our diversified real asset strategy which, as a reminder, focuses on the core 4 real asset classes of real estate, infrastructure, commodities and natural resource equities is up over 13%. We believe these results are telling us that the market is anticipating the reacceleration of non-wage inflation as well as the continued scarcity of many commodities. The supply-demand dynamic for natural resource equities given increasing power demand and underinvestment over the last decade is a very favorable trend for the asset class. Second, we are believers in the significant productivity enhancement potential of AI, which we anticipate will lead to a multiyear period of healthy GDP growth and corporate profits, it will likely also lead to more muted employment growth.

The current balancing act for the Fed between muted job growth and elevated inflation is likely to be a multiyear, if not decade challenge. Again, the risk to higher nonwage inflation remain elevated. We are only in year 2 of what is likely to be a $4 billion to $5 trillion AI-driven investment cycle lasting at least the next 5 years. This view has driven our optimism in areas like electric utilities, levered to accelerate demand growth and companies geared to natural gas production and infrastructure. Within real estate, we favor data center owners of stabilized assets focused on cloud, inference and to a lesser degree, training. Barring a shock that undercuts profitability for the fundamental growth outlook, markets will probably remain patient and optimistic about the longer-term monetization potential of AI. Further, power constraints will be a healthy governor of excess.

But as we look further out, there was a long history of CapEx cycles like this ending in pain and underperformance for the initial CapEx investors. In short, we believe it will be hard to thread the needle to get the hand off in spending to revenue collection. While the technology is likely to be lasting and valuable, we're reluctant to conclude that this time will be different from the narrow set of winners so far. So as stocks trade at record valuations across a range of metrics and provide investors with less diversification because of increased market concentration, we believe real assets can and should help investors diversify, create more resilient portfolios and improve sharp ratios given more attractive valuations and greater inflation sensitivity. With this in mind, the global listed infrastructure sector deserves a meaningful strategic allocation to begin these companies often have inflation-linked pricing built into their revenue models, allowing them to adjust contract prices.

For instance, airport and toll road operators typically have agreements that allow service rate hikes at fixed triggers above the inflation rate. There are mechanisms built into the contract structure for most infrastructure businesses that allow them to pass higher costs whether from inflation or tariffs on to customers. This is one reason why infrastructure offers investors higher inflation sensitivity and stocks or bonds. We wrote a piece 12 months ago, which I believe remains at, the piece was called [indiscernible] reversals of fortune and the opportunity in real assets. Frankly, I have even more conviction that a major market shift is right around the corner today than I did a year ago. elevated inflation, a dovish Fed focused on muted job growth, a significant investment cycle and attractively valued real assets versus historically expensive broader equity markets, creates an extremely compelling case for strategic allocation of listed real assets including infrastructure, natural resources, commodities and real estate.

With our strong investment performance, we believe our combination of alpha and beta will drive continued allocations to our asset classes. With that, let me call -- let me turn the call to Joe.

Thank you, Jon, and good morning. Today, I will review key business trends in the third quarter and then discuss our strategic priorities and some industry topics. For the quarter, our financial results were solid. Flows were positive. Our institutional pipeline built up meaningfully. New strategies and vehicles are gaining traction, and we are making progress on distribution initiatives. On the investment front, while all of our strategies had positive returns, our equity strategy returns except for natural resource equities at 10.7%, lagged the S&P 500 with our largest strategy, U.S. REITs returning 1.4% and ranking ninth of the 11 S&P industry groups. Our preferred stock strategies continued to perform well versus fixed income, reflecting the continued strength of credit and the soundness of the U.S. banking system. If the macro outlook transitions to slower growth with a bias toward lower short rates with sticky inflation our strategies should perform better on a relative basis, particularly with equities at top decile valuations across most metrics.

Since the Fed began easing in September 2024, a we have had 4 or 5 quarters of net inflows averaging $494 million. This contrasts with 9 quarters of outflows, averaging $745 million during the Fed rate tightening period from March 2022 to September 2024. In the third quarter, we had net inflows of $233 million bringing year-to-date inflows to $325 million. Major story lines were net inflows of $768 million into open-end funds and net outflows of $455 million and $82 million from institutional advisory and subadvisory respectively. We had net inflows into all of our strategies except U.S. real estate with the largest flows in global and international real estate, which has seen a positive inflection in terms of market performance and investor interest. Open-end funds, active ETFs and offshore CCAP funds all had net inflows, while model portfolios for wealth had modest net outflows. With respect to institutional advisory, we had 2 account terminations totaling $269 million and net outflows from existing client accounts totaling $186 million.

Regarding the 2 largest outflows, one was due to a European client derisking their U.S. allocation in favor of international and one was due to the restructuring of a retirement plan which I put in the category of old architecture. Our one unfunded pipeline grew substantially to $1.75 billion at quarter end compared with $776 million last quarter and a 3-year average of $900 million. That is the largest pipeline since the fourth quarter of 2021. We were awarded million of new mandates in the quarter and an additional $55 million was one and funded. The largest percentage of the pipeline at 66% is in U.S. REIT strategies with a balanced spread across 5 other strategies. We believe this increased activity is driven by several factors, including more confidence by allocators in the interest rate cycle a bit more flexibility in portfolios due to listed equity outperformance, the search for more inflation-sensitive allocations and reallocations from underperforming managers.

Of the $500 million in known terminations we disclosed last quarter, 72% has been realized. Incremental additions since then have brought the total back to $500 million to $600 million. As the pipeline demonstrates, we believe we have transitioned to a net positive position on the institutional flow front. In addition to the pipeline, last night, we priced an equity rights offering for our closed-end fund Cohen & Steers Infrastructure Fund listed on the New York Stock Exchange under symbol UTF. We raised $353 million in equity, which combined with associated leverage, will provide over $500 million in dry powder to allocate to opportunities in global infrastructure, such as increased power demand and decarbonization, the digital transformation of economies and deglobalization with transforming supply chains. This was the third largest closed-end fund rights offering -- transferable rights offering ever and was a firm-wide team effort. I'd like to give special thanks to Ted Valenti from our product team, who was a closed-end fund champion and led this effort.

UTFs returns have compounded at 9.7% since its inception over 21 years ago. The time line for scaling up our active ETF strategy is a bit ahead of plan. We had $70 million in net inflows into our 3 active ETFs and real estate, preferreds and natural resource equities lifting total AUM, including our seed capital to over $200 million. We are on track to launch 2 more ETFs in the fourth quarter in the preferred stock and listed infrastructure categories. Together with others in the industry, we continue to evaluate the model of ETFs as a share class of an open-end fund. Given the complexities with that structure, we are comfortable with our decision to move forward and establish our market position with these individual launches, more to come.

In private real estate, we continue to make progress on both the capital raising and investment fronts. Our first closed-end drawdown fund, Cohen & Steers Real Estate Opportunities Fund had its final close at the end of September raising $236 million overall. Our nontraded REIT Cohen & Steers Income Opportunities REIT has continued its industry-leading investment performance with a focus on open-air shopping centers. We are targeting the RIA channel for both additional strategic seed capital as well as traditional allocations. We will be launching on a major enterprise RIA firm in a few weeks, and we are in advanced discussions to onboard with the second major distribution partner. With these 2 vehicles, we have begun to record revenue from the private real estate business and are focused on driving this strategic initiative to profitability. One of the hotly debated topics in the asset management industry today is the potential addition of private investments to individual retirement plans, principally through target date funds.

From an industry perspective, it's far from clear how far this will advance in light of the wariness of 401(k) sponsors against potential liability, which has resulted in sterile lineups of core style box strategies in equities and bonds with passive strategies and low fees pervading. I'm a huge advocate for adding diversifiers via listed real asset strategies to these plans. However, that goal can be achieved right now simply by using mutual funds and CITs and listed strategies real estate, infrastructure and diversified real assets. And these products, unlike most private vehicles, come with the added benefits of attractive fees, daily liquidity and market-based, not stale or appraisal-based pricing. Today, about 16% of our mutual FMS assets are from 401(k) plans with the vast majority being listed real estate. We welcome the conversation on adding real assets to 401(k) lineups and believe we can make a strong case that there is an easy way to do it without the illiquidity, opacity and potential liability associated with private allocations.

This year marks the 65th anniversary of the legislation of the REIT structure signed by President Eisenhower. This innovation was genius and has resulted in a -- we're relatively quiet, but the early 1990, you saw a flurry of activity when the public market was called upon to rescue the commercial real estate industry with much needed IPO equity capital that couldn't otherwise be found. This phenomenon fundamentally reshape the landscape, corporatizing the real estate industry, both organizationally and strategically. It's amazing to see how real estate has helped foster the growth of our economy in recent decades, from an industrial age to today's digital age with the largest sectors comprising data centers, cell towers, single and multifamily and seniors housing among many others. Listed REIT returns have vested core private real estate returns by 150 basis points annually from 1998 to 1992, according to a CEM benchmarking study. Amazingly, despite this outperformance, listed allocations in U.S. pension portfolios are just 60 basis points compared with 6% in private real estate.

So you ask, what gives, despite the 150 basis point net of fee performance advantage, allocators continue to choose private real estate extensively due to the higher perceived volatility of listed REITs and the desire to have something unique. While we continue to build our private real estate platform in order to serve clients across the real estate spectrum, we're not satisfied with getting just 10% of the allocation pie for listed. Hence, at the 65-year mile marker, we will continue to make the case for listed REITs to innovate and find ways to help our clients build better portfolios. If this sounds like a full-throated endorsement of the listed markets, it is, it happens there first.

I'll close by thanking Raja Dakkuri for his service to coin his steers and wish him all the best in his new opportunity. We'll be cheery for him as we do with many alumni. Mike Donahue will take on the role of interim CFO; and Brian Meda as Head of FP&A and IR, will continue to facilitate communications with you. Now I will turn the call back to the operator, Julianne, to facilitate Q&A.

[Operator Instructions] Our first question today comes from John Dunn from Evercore ISI.

The demand for U.S. REITs and the wealth management channel has been good lately. Can you maybe compare how that's developed versus past cycles leading up to interest rates? Has it been slower to materialize. Has it been about the same? And then do you think flows can into what the channel can accelerate from where they are in the past few months?

Well, the long story is that historically, returns have tended to be stimulated by interest rate cuts. But that's a pretty one-dimensional way to think about it. You also have to think about what's happening in the economy, fundamentally, the trajectory of growth rates and inflation and such. I would say that the progression of the interest rate cycle this time, which has been about as extreme as we've ever seen it, because of the transition from quantitative easing and leaving 0 interest rates behind has created a different dynamic that real estate pricing had really advanced with -- in the 0 interest rate environment. And as rates have normalized real estate pricing has had to adjust. We think that's mostly occurred.

But in some sectors, it still needs to happen. So there's less of a feeling that we're going to have a V-shaped recovery and in the REIT return cycle. All of that said, we think we're at a good point in that cycle. And that it's likely that, as Jon said, rates are going to continue to come down. And I think that's going to be a continued catalyst for strong REIT performance. In terms of your question, I think we've had very good results in wealth. We're also seeing good activity in the institutional market for U.S. REIT. As I mentioned, 66% of the $1.75 billion pipeline is in U.S. REIT strategies, and that there are a lot of different stories with that. So maybe with that, I'll stop and see if Jon like to add anything.

The only thing I'd add is, like Joe said, it's -- of course, everyone wants to talk about the interest rate cycle, and that's important. But there's also the so-called fundamental cycle, supply and demand. Fundamentals were very, very strong in 2021, but the reality is, is that low interest rates planted the seeds to frankly, too much building in places like industrial and apartments. And so the industry is going through a hangover, if you will, of oversupply of warehouses and apartments. We are going through that process. And so importantly, and I talked about how just overall, we should see the economy and earnings growth begin to broaden out, we expect REIT earnings to accelerate into 2026 and 2027. So again, it's not just a rate story, it is also an earnings and rental growth story.

Got you. And then I guess on the institutional side, you gave us the kind of the profile of the people who are -- the clients who are redeeming. Maybe could you give us a flavor of who's giving you money geographically client-type profile? Any other areas besides U.S. REITs in particular that people are putting money to work?

Well, in the pipeline -- for the pipeline, it's predominantly North America, and it's a wide variety of investors, including retirement plans for individuals, annuity providers. Interestingly, I keep talking about the old architecture structure of vehicles, and we've been -- we've had some losses due to that. One of the big wins recently is where we're being with the beneficiary of a restructuring of annuity-type plans. So the one interesting non-U.S. allocation we've seen recently, I mentioned in my talking points was from a European institution who just is less comfortable with what's going on here in the U.S. and redeemed some of the U.S. position, but they actually added about half of what they redeemed into a European real estate strategy. We also have another interesting in the pipeline of global real estate allocation from a nuclear decommissioning entity in Europe. So I'd say there's really good stories in the pipeline, and they span strategic allocation changes to us continuing to make wins from underperforming peer managers and that continues to be a story both in real estate as well as infrastructure.

[Operator Instructions] Our next question comes from Rodrigo Ferreira from Bank of America.

As rates continue to go down, where do you expect that cash sitting on the sidelines to go into? And I guess, what your strategies do you feel stand to benefit the most from a flows perspective?

Well, as everybody knows, we've had record levels of cash sitting in my funds and T-bills and such. And I would expect as Jon laid out, the big picture that allocations to diversifiers to real asset strategies and price insensitive probably should be going up. So that would point to our real estate strategies, our infrastructure strategies and our multi-strategy real assets portfolios, which are the most inflation sensitive because they include resource equities and commodities along with real estate and infrastructure.

The only other thing I'd add in we would probably expect some movement to go into preferreds, probably our shorter duration and lower duration preferreds where, of course, high tax-advantaged income is an investment objective, but capital preservation is also an investment objective. And so what we found when short rates were high was that cash was yielding more than short and long duration fixed income, in some cases, including preferred. So I think to the extent the yield curve continues to steepen, we should see more of that deposit and money market move into things like short-duration preferreds.

I'd also say that, of course, a lot of money at the margin has gone into private credit funds over the last several years to the extent there are new allocations to the extent of SOFR is coming down with Fed funds. And obviously, total returns for private credit are expected to be compressed. So again, I think both of those incremental movement from private credit into preferreds and out of cash into preferreds are likely places to look.

Got it. And then just for my follow-up, you've given us good visibility on the comp ratio in 2025. How should we think about it in 2026 and longer term? I guess at this moment, like how do you think about the balance of investing in the business versus the opportunity to continue to expand the operating margin.

Yes. Well, I mean, so far this year, we've had decent revenue growth, and that appreciation is the best formula to help the comp ratio and, of course, the associated margin impact. Part of what has been happening toward the end of this year is the timing of some of our hiring is getting pushed out into next year. So I wouldn't extrapolate the trend too much yet. But then we need to focus on kind of what's been happening with some of our new initiatives and the fact that we're beginning to generate revenue from things like private real estate and active ETFs, where the costs associated with those initiatives are in the system. But as everyone knows, we're just still in the launching and buildup phase.

So I'd say the last thing to think about is simply this appreciation dynamic for us relative to the markets more broadly, this year, we've been on the losing side of that. In other words, the S&P 500 has done tremendously well. And that helps drive compensation in the industry, and we need to compete for talent. So that's a dynamic at the margin, too. But overall, we feel like we're in a better position on the comp ratio with how markets performing, how we're performing investment-wise but also with our new initiatives beginning to generate revenues and kick in. On the investment front, it's still a time in the industry where things are changing very fast, and we have a lot of opportunities. A significant amount of the things that we've been working on are kind of done or in the numbers. But we continue to see opportunities and will continue because there are strategic things happening in the industry.

And then we have an optimistic situation from time to time, like with the UTF rights offering. But just to recap some of the investing on corporate infrastructure, we have 4 new headquarter facility or office facilities around the world. So we have plenty of high-quality space to accommodate our growth. We've launched the active ETFs and as we launch more, that will include some additional expenses, but we will scale this up and we expect it to be additive at the margin. As I mentioned, with private real estate, the costs are in place. And so now as we raise assets and generate revenue that will help on the comp ratio front. Elsewhere and investing in terms of seed capital, we still have some more money to put to work with our commitments for our nontraded REIT and with the new ETF launches. But we're getting to the point where some of that capital will be recycled and there will be less needs on the seed front for now.

Elsewhere on investing, I talked at the past couple of quarters about investing in distribution and particularly in the RIA segment of the wealth market, and this is something that we've made a tremendous amount of headway, but as we continue to have success, we'll continue to scale up our efforts on that front. So hopefully, that kind of provides you the waterfront of -- on those topics.

We have no further questions in queue. I'd like to turn the call back over to Joe Harvey for any closing remarks.

Great. Well, thanks, Julian. And -- we look forward to reporting fourth quarter next January. In the meantime, please call us, call Brian Nita with any questions that you have. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Second Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded Friday, July 18, 2025. The I would now like to turn the conference over to Brian Heller, Senior Vice President and Deputy General Counsel of Cohen & Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers Second Quarter 2025 Earnings Conference Call. Joining me are Joe Harvey, our Chief Executive Officer; Raja Dakkuri, our Chief Financial Officer; and Jon Cheigh, our President and Chief Investment Officer.

I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying second quarter earnings release and presentation, our most recent annual report on Form 10-K and our other SEC filings. We assume no duty to update any forward-looking statement.

Further, none of our statements constitute an offer to sell with the solicitation of an offer to buy securities of any fund or other investment vehicles. Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation as well as links to our SEC filings are available in the Investor Relations section of our website at www.cohenandsteers.com. With that, I'll turn the call over to Raja.

Thank you, Brian, and good morning, everyone. My remarks today will focus on our as-adjusted results. A reconciliation of GAAP to as adjusted results can be found in the earnings material. Yesterday, we reported earnings of $0.73 per share compared to $0.75 sequentially. Revenue for Q2 increased 1.1% from the prior quarter to $135 million. The change in revenue from the prior quarter was driven by a few items, including higher average AUM and day count.

Our effective fee rate was 59 basis points, which was in line with the prior quarter. Our operating margin was 33.6% compared to 34.7% in the prior quarter. As noted, we experienced higher average AUM compared to the prior quarter. In addition, ending AUM increase compared to Q1. Ending AUM was $88.9 billion as of Q2 compared to $87.6 billion at prior quarter end. Ended period AUM was positively impacted by market appreciation during the quarter. It is worth noting that the market events of April negatively impacted our average AUM during the quarter. However, more than recovered by the end of Q2. Net inflows into our open-end funds were offset by institutional net outflows. Our open-end funds have experienced positive net flows in the last 4 consecutive quarters. Joe Harvey will provide additional insights regarding our flows and pipeline.

Total expenses during Q2 were 2.9% higher than the prior quarter due to a number of drivers. Compensation and benefits increased during the quarter. The change in comp and benefits was in line with the sequential increase in our revenue. As a result, the compensation ratio for the quarter remained at 40.5%. Distribution and service fees were impacted by higher average AUM in our open-end funds. G&A expense levels increased versus the prior quarter. G&A was impacted by travel and other business development activities, including, for example, the launch of our active ETFs. This activity is consistent with our focus on sales and distribution. As a result of our efforts, we generated a meaningful increase in our one but unfunded pipeline as of quarter end. We will detail this later in the call.

In addition, regarding expenses, we experienced higher levels of talent acquisition costs during the quarter. The primary driver was recruiting for our sales and distribution functions. Regarding taxes, our effective rate was 25.3% for the quarter. Our earnings material presents lucidity at the end of Q2 and prior quarters. Our liquidity totaled $323 million at quarter end, which compares positively to $295 million in the prior quarter.

Let me now touch on a few items regarding 2025 guidance. With respect to comp and benefits for 2025, we expect our compensation ratio to remain at 40.5%, in line with our prior guidance. We expect full year G&A to increase in the 7% to 8% range as compared to full year 2024. The change in G&A is primarily driven by talent acquisition costs during 2025 as well as travel and other business development activities.

Also impacting G&A are expenses related to our active ETF launch. Other drivers of G&A includes infrastructure investments, such as our foreign office upgrades.

During Q2, we moved into our new Hong Kong office. This relocation represents the last of our planned foreign office upgrades. We remain focused on expense management and will be disciplined while continuing to make selective investments in our business. After this year, we expect annual G&A changes to moderate from 2025 growth levels to being in the mid-single-digit percentage range.

Lastly, we expect our effective tax rate to remain at 25.3% on an as-adjusted basis for 2025. I'll now turn it over to Jon Cheigh, who will discuss investment performance.

Thank you, Raja. Today, I will first review our performance scorecard. Second, I'll share our views on the market environment, the importance of diversification and the state of the real estate market and last, I'll highlight our recently launched tactical listed and private real estate strategy.

Beginning with our performance scorecard, the second quarter saw 89% of our AUM outperformance benchmark. On a 1-year basis, 94% of our AUM has outperformed its benchmark. While our 3-, 5- and 10-year outperformance rates are all above 95%, highlighted by 99% of AUM outperforming over 10 years. Our 1-, 3- and 5-year excess returns were all well in excess of 200 basis points and above our targets.

From a competitive standpoint, 90% of our open-end fund AUM is rated 4 or 5 far by Morningstar. In short, our investment franchise remains as strong as ever and as our asset classes continue to gain favor, we remain well positioned to take advantage of new opportunities.

Transitioning to the market environment, in the first days of the quarter, markets were rattled by escalating trade tensions and geopolitical uncertainty, leading to sharp declines in equities and heightened bond market volatility. However, some backtracking and a pause on tariffs helped restore investor confidence, driving a sharp risk on rally with mega cap tech stocks leading the recovery as the S&P 500 and the MSCI all country world indices returned 10.9% and 11.7%, respectively, in the quarter.

For our asset classes, absolute performance was generally positive for the quarter. but underperformed broader equity and fixed income markets. As we talk with our investors about the current environment and outlook, we have focused on two critical points: One, the importance of a disciplined approach to diversification and valuation. And second, that real estate values have bottomed and valuations are attractive representing an increasingly compelling risk reward opportunity for new investors.

On diversification, a topic we've spoken about throughout the year. It's worth noting that having a properly diversified portfolio continues to serve investors well. Indeed, despite the robust gains in the S&P 500 in Q2, global equities still outperformed the U.S. and similarly, global real estate outperformed U.S. real estate. While it may seem like cap-weighted U.S. equities have regained spotlight, in fact, real assets outperformed broader markets over the first half of 2025.

Taking a closer look at year-to-date returns, global equities, global listed infrastructure and natural resource equities with gains newer or greater than 10% to each have all substantially outperformed the S&P 500's 6.2% gain year-to-date. Global real estate and commodity returns have trailed only slightly.

6 months ago, all the talk was about U.S. exceptionalism. But only 3 months later, investors began to question and take action on their major overweights to U.S. assets. Our high conviction and advice to investors is that they need to strategically allocate to listed real assets prospectively and not after the fact before the inflation risk in their portfolios become apparent. We believe the outlook remains favorable for real assets, where valuations are at more attractive starting points than equities. The error of ultra-low interest rates is gone, inflation is stickier, fixed income allocations have been reestablished given higher yields. And there is a greater need for true diversification in portfolios that is not solved by stocks, bonds and private assets alone.

Moving specifically to real estate. After a nearly 2-year downturn, private real estate prices have reached a clear turning point, seven consecutive quarters of negative returns that started in 2022, how now given way the four consecutive positive quarters. We believe prices across several property types have bottomed and are beginning to appreciate with a leader being open-air necessity-driven shopping centers, which have been the focus of our private real estate strategies.

While the broader private market has bottomed, some existing private real estate funds must still work through portfolios built at peak valuations and in sectors concentrated in last cycles, winners of multifamily and industrial. Forward real estate performance will be heavily driven by property type and geographic exposure, and we expect those last cycle winners to be this cycle's lagers.

The reason for real estate bottoming is twofold and relates both to the listed and private markets. One, stable long-term interest rates, even if at a higher level than several years ago; and two, improving rental growth with the magnitude depending upon the property type. Many observers focus solely on interest rates, and I believe that's an incomplete assessment of what's happened the last few years. Lower interest rates may help valuations in the short run, but over time, they encourage new supply, which can lead to lower rents.

The 2021 cycle perfectly demonstrates this as low interest rates helped valuations but also drove fund flows into the sector and encourage development and excess industrial and apartment supply in 2023 that still exist today. REITs have underperformed equities the last few years partially because of interest rates, but just as much because new supply led to slowing earnings growth versus tech-led equities delivering double-digit earnings growth.

Today, supply has slowed down. And the 4-plus percent interest rate regime of the last 3 years has directly led to supply and demand coming back into balance. We strongly believe that too much is made of the higher for longer story impact on valuations and not enough is being made of the positive impact higher rates has on discouraging new supply and the normalization and return of rental growth, which we project in 2025 and beyond.

I'd like to finish by highlighting the mid-May announcement regarding our launch a tactical listed and private real estate strategy. We believe this strategy can be a compelling solution for both large and small institutional real estate investors who tend to focus the majority of their real estate investment on the core and core plus part of the risk return spectrum.

Historically, investors viewed their listed and course real estate allocations in separate silos, but there are several key benefits to combining listed and private real estate allocations into one integrated strategy. This recognition of the power of an integrated strategy is what prompted tone and steers to partner with IDR Investment Management to launch a real estate strategy designed to tactically allocate to both listed real estate securities and core private real estate in a single portfolio.

IDR has a patented process to replicate the NCREIF ODYSSEY Fund Index. We believe that such an integrated strategy has several advantages over legacy strategies.

First, this blend has historically led to higher returns, reduced risk and lower drawdowns over a full cycle when compared to core private real estate alone.

Second is improved liquidity. By definition, private allocations constrained liquidity more than listed REITs. The additional challenge is that those conditions often tighten when liquidity needs are greatest. But our strategy in partnership with IDR should create significantly more liquidity than stand-alone private allocations.

Third, an allocation to an active listed REIT strategy has strong potential for alpha as our historical performance demonstrates. And finally, a blended listed and private real estate strategy gives us as manager the ability to tactically allocate between the strategies.

While listed REITs in private real estate generally move together over long periods of time, REITs historically lead private real estate repricing in both downturns and recoveries. Particularly at market turning points. This lead lag dynamic in real estate is important because it creates timing-based windows of opportunity for knowledgeable investors with the governance and structure to take advantage.

Our early discussions with investors confirm that this combination of returns, reduced drawdowns and enhanced liquidity may be very compelling for large and smaller institutions, and we expect to provide regular updates on the strategy over time. I strongly believe that we have innovated something that didn't exist before that is complicated, but that the industry desperately needs. Any innovation is hard work, and I want to thank our partners at IDR and our team members across our legal tax accounting product distribution and investments for being entrepreneurs and creating something we believe will be impactful. With that, let's turn the call over to Joe.

Thank you, Jon, and good morning. I'll begin by apologizing for the fire alarm in the background, I can assure you we're all safe and we're back on track.

Today, I will review our key business trends in the second quarter. and then provide an update on our strategic priorities. Starting with a top-down recap of the quarter. Our relative investment performance is strong, fee rates are stable our asset classes market performance range from slightly negative for U.S. REITs to in line with market for international REITs and infrastructure strategies.

Our flows turned slightly negative after three quarters of inflows, our one unfunded pipeline has built back up, and we made good progress with our growth initiatives. The market provided a strong quarter of financial returns after April's liberation date drawdowns. Stocks outperformed bonds and real assets and global strategies outperformed U.S. strategies. The resiliency in the economy and markets has been impressive and reflects, in my opinion, a combination of demographics, high productivity, strong private sector balance sheets with broad liquidity and as well as hope on the policy front.

Now let's dive into some details. In the second quarter, we had net outflows of $131 million after three consecutive quarters of inflows starting in the third quarter of last year when the Fed began to cut interest rates. Year-to-date, our overall flows are positive which stands out in light of the fact that Morningstar flows in our categories for both active and passive have been modestly negative, except for infrastructure.

Our largest flows for the quarter by strategy include $349 million in net inflows into U.S. real estate and $489 million in outflows from preferred securities. About 2/3 of the preferred outflows was attributable to one of our preferred open-end funds being removed from a model run by a large private wealth allocator. We continue to see good activity in global listed infrastructure, yet those flows were partially offset by some account rebalancing.

Open-end funds had net inflows of $285 million the fourth consecutive quarter of inflows. Closed-end funds had inflows of $103 million as we drew on our line of credit to make additional investments in our infrastructure closed-end fund, UTF, Advisory had net outflows of $412 million and subadvisory had outflows of $107 million. Breaking down open-end fund flows, the $285 million of inflows in the quarter results in a 12-month inflow total of $3.2 billion. U.S. open-end funds had $124 million in net inflows. Our offshore CCAs had net inflows of $121 million, the second highest flow quarter ever and continuing a positive trend for the 19 of the past 20 quarters. And active ETFs had inflows of $54 million.

In U.S. open-end funds, our market share continues to expand in U.S. and global real estate and infrastructure categories and is holding steady in preferreds. In advisory, the $412 million of outflows were attributable to account rebalancing for various reasons, including selling down to strategic allocation targets, taking gains to offset losses elsewhere and the restructuring of a defined contribution plan.

These outflows were partially offset by three new mandates totaling $69 million. Subadvisory was relatively quiet with $77 million of rebalancings out and $30 million in net outflows from Japan. None of the redemptions were related to our investment performance. Last quarter, we noted that our one unfunded pipeline was $61 million, a low watermark historically. I'm pleased to report the pipeline has since built back up and stands at $776 million, which compares with a 3-year average of $845 million. We also had one awarded and funded band date of $135 million in the quarter. 52% of the pipeline is in U.S. real estate is in global listed infrastructure. 15% is U.S. real estate and the balance is in various real asset strategies. Two of the largest mandates were so-called takeaways from competitors in one case for the sleeve of an open-end real assets vehicle in Canada and the other for a corporate defined contribution plan that transformed a global allocation into a U.S. REIT allocation.

Last quarter, we indicated that we had approximately $290 million of impending redemptions. Of that, $200 million occurred in the quarter. We have been apprised of another $400 million to be redeemed, resulting in total prospective redemptions of approximately $500 million. Therefore, with the one unfunded pipeline at $776 million and taking into account these known redemptions, the net pipeline is $275 million. We flagged these known redemptions for several quarters now and the main reasons for them have been tactical adjustments to get allocations down to target weights and outflows from sleeves of what I call old architecture strategies or vehicles which are less competitive. And again, none of these prospective redemptions are performance related.

Turning to strategic initiatives. As you know, in February, we launched our first three active ETFs. We are very pleased with the launch. As a reminder, our business strategy is to offer our core strategies through active ETFs with the first three being real estate, preferreds and natural resource equities. Most importantly, investment performance is off to a strong start with attractive alpha and peer rankings in all three ETFs, consistent with our investment results broadly in these strategies.

In our first full quarter, we recorded $54 million in net inflows. Total AUM is now $133 million, inclusive of our original seed of $55 million. In a survey by Broadridge, 43% of investment advisers expect that ETFs will replace most or all of their open-end fund mutual fund allocations. Based on our early success with the launch and the trends underlying the Broadridge survey, we plan to launch more active ETFs in the coming months. We have not filed for ETFs as a share class of open-end funds. And for now, we believe we can execute our plans with stand-alone launches. We continue to make progress with our private real estate initiative.

Cohen & Steer's income opportunities REIT continues to be the best performing nontraded REIT as measured by total return for the year ended May. C&S REIT returned 12.2% for that period compared with 5% for the average non-traded REIT. Our strategy of investing in open-air shopping centers has been differentiated and alpha generating. We believe our listed real estate franchise will continue to provide investment connections to our private strategies and that the listed market leads the private market and provides clues as to where the private market is headed fundamentally and valuation-wise.

Among private wealth alternative strategies. Private credit continues to be the most popular while real estate moves through its fundamental and valuation cycles. As John articulated, we believe that commercial real estate prices generally have bottomed.

On the capital raising front, while private credit has outpaced real estate by a larger margin, we believe the more real estate price trends demonstrate that a trough has been performed the closer will be to a capital shift towards real estate. We continue to identify additional seed capital investors while ramping our engagement with RIAs. We are live on the Schwab, Pershing and Fidelity platforms, which provides access to the majority of the RIA market.

We have also been recently approved for distribution at a regional broker-dealer and at a significant enterprise wealth platform, both important milestones as we move to broader distribution. Jon talked about our new listed private core real estate strategy designed for institutional investors. There's not a lot to report at this point on capital raising. But as we have begun investing, we're in discussions with several institutions. More to come, but the strategy is rationale as an improvement to core investing and to better integrate listed and private is resonating. We would like to find a similar partnership arrangement for infrastructure and are in discussions with several managers. This is driven by our passion for building better portfolios with listed and private allocations.

Last quarter, we also discussed investing in our distribution capabilities as a strategic priority for this year and next. This includes not only additional talent in areas that support growth but also investments in data and data analysis. With regard to talent, we have made additions to expand our wealth channel presence, particularly in the RIA and multifamily office segments. For the ETF launch and for our offshore funds and for the institutional team, both in the U.S. and internationally. We continue to see opportunities for asset owners to add real asset allocations to their portfolios and we believe additional resources will help us gain market share with those investors.

The vehicles we are launching, along with the extensions of our investment capabilities are designed to reach these growing investor segments. We have more work to do here, but our objectives are clear. We look forward to reporting our third quarter results in October. Meantime, please call us with any questions. Now I'll turn the call back to operator, Abby, to facilitate Q&A.

Thank you. we will now begin the question-and-answer session. [Operator Instructions]. And our first question comes from John Dunn with Evercore ISI.

Maybe just on what you were kind of wrapping up with. Maybe could you give us some color on the temperature of the wealth management channel, how's the appetite for gross sales and which strategies are in and out of favor. And looking forward to the second half, do you expect any seasonality to play out over the course of the next 6 months?

Thanks, John. Well, the wealth channel is very important for us and as a percentage of our AUM, and as we've talked about with the growth in the RIA segment and the growth in wealth overall, we're continuing to invest to reach more broadly, particularly into the independent RIA segment of it. And on that front, I'd say we are making good progress at gaining some allocations with some very sophisticated RIAs and that's happened in real estate. It's happened in multi-strategy real assets and it's happened in infrastructure. We talked about the flows we continue to be positive in Wealth. They've been a little bit less in the second quarter. If you look at our gross sales in the second quarter, there been lower, about 10% lower than what they've recently been. But I do think there's some seasonality to that. We've had a dip in the second quarter in the past 3 to 4 years. I wouldn't call that statistically significant. But there's -- particularly in the second quarter with the liberation day, volatility early in the quarter, I think it dampened some overall activity. But we feel very good about our team and what we're doing and the potential to continue to drive real asset allocations.

Just to expand a little bit more on that, we continue to have more vehicles to offer to this channel, particularly with the active ETFs and increasingly as we gain platforming with our nontraded REIT. Our team has a lot more to talk about with these investment advisers.

Got you. Yes, maybe on active ETFs. Some have really taken off in material drivers. Maybe you could just talk a little more about how you're finding the early days of marketing and selling your suite. Is it being looked at by new investors or existing ones? And what's kind of the profile of who -- where you're seeing the best results like which segments of the channel?

Well, this is really exciting because we feel like we're off to a very good start, and we can see the flows starting to build. They're still relatively small. But the people that we have brought in from other firms who have done these launches before are very excited about what we have. And based on the anecdotes that we've seen so far, we've had RIAs who only allocate to ETFs make some allocations. So this is money that we wouldn't otherwise have touched. We also have heard stories about advisers and wire houses who are converting their books of business from open-end 40 Act funds to ETFs. So when I hear stories like that, it really motivates us to continue to launched new active ETFs in our core strategies so that we can retain and grow assets as wealth grows with these types of advisers.

[Operator Instructions]. And our next question comes from the line of [ Rodrigo Ferrara ] with Bank of America.

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 in your early views on the strategy in the third quarter?

Sure. Well, thanks for joining the call, Rodrigo. Our GLI strategy was positive in the quarter, but it was at the lower end is what -- compared with what it's been trending at, we've had some good additions to the strategy, but we had two relatively large redemptions from institutional investors who have had very large allocations to infrastructure, and they pared back some of those weightings closer to their target levels. And in one case, it was an international institution, which wanted to take some gains to offset some losses in another part of their portfolio. So this is good news, bad news. The good news is that we really did our job in performing for this client. But the bad news is that they need to create some liquidity. But longer term, they're still a client, and we'll be looking forward to them reallocating it at some point.

We really don't comment on early trends in the next quarter, but I would say broadly, infrastructure is one of the most popular asset classes, particularly in the private markets. And that's helping to generate interest in the listed markets as well because there is a very good case for putting listed and private together. And this is a strategy that we're going to continue to invest in, in terms of additional vehicles I talked about active ETFs with infrastructure being a core strategy, we certainly should have an active ETF for infrastructure. And as I referred to in my remarks, we think there's opportunities to create other vehicles that could combine private infrastructure along with listed. So we're very bullish on the strategy and as a business driver for con and stairs.

And for my follow-up, 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?

It's a very astute observation, and we have had some flows into global strategies. And the global real estate strategy has been less active is just going back a little bit further, one of the reasons is that the international components of the markets have not performed as well as the U.S. have. So there's certainly been a American exceptionalism dynamic and allocations to those real estate strategies. So I would expect there to be more interest in global when you look at our pipeline that we're working on, there are more global allocators in that pipeline. I guess the last comment I would make is that we've seen very little reverberations from all of the policy questions around things like the [ revenge ] tax. We recently had one European institution redeem partly a U.S. strategy due to concerns about and questions about U.S. policy. But that is not a broad trend at all. And fortunately, the [ revenge ] tax was taken out of the tax regulation. And so that should help clear things up a little bit.

And we will take follow-up questions from John Dunn with Evercore ISI.

Maybe taking that last question a little further. Any differences to call out in terms of like geographical demand from the different regions, particularly on the advisory side. And then maybe if you can give us an update on the dynamics of the U.S. advisory effort in particular?

Well, in terms of size and activity, U.S. continues to be the largest and most active market. But we have budgeting activity in Asia. I'd say Europe is a little bit slower. And the Middle East while it's been very active 3 to 4 years ago is less active right now, but there's still opportunities in the Middle East.

And that concludes our question-and-answer session. I will now turn the conference back over to Mr. Joe Harvey for closing remarks.

Well, thank you, Abby, and thank you all for participating. We look forward to reporting a third quarter in October, and so have a great day.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.