Cohen & Steers(US:CNS)2023-01-26 18:47Financial Data and Key Metrics Changes - Earnings per share for Q4 2022 were $0.79, down from $1.24 in the prior year and $0.96 sequentially [7] - Revenue for the quarter was $125.5 million, compared to $159.7 million in the prior year and $140.2 million sequentially, primarily due to lower average assets under management [7] - Operating income was $50.9 million for the quarter, down from $60.1 million sequentially [33] - The effective fee rate was 57.8 basis points, slightly down from 58 basis points in the previous quarter [33] - Assets under management increased to $80.4 billion at December 31, 2022, from $79.2 billion at September 30, 2022, due to market appreciation [11] Business Line Data and Key Metrics Changes - The compensation to revenue ratio was 36.4% for Q4 2022, reflecting a reduction in incentive compensation [8] - The firm experienced outflows of $1 billion from open-end funds, with significant outflows from core preferred mutual funds totaling $819 million [27] - Institutional advisory had outflows of $392 million, with existing client outflows totaling $573 million [28] Market Data and Key Metrics Changes - Global equities were up 9.9% in Q4, with U.S. REITs up 4.1% and international real estate up 10.3% [43] - The performance of U.S. REITs was down approximately 25% in 2022, while private real estate values generally increased [22] - The firm’s market share in preferreds declined to 43%, reflecting increased competition in the space [79] Company Strategy and Development Direction - The company plans to balance anticipated revenue declines with a disciplined approach to human capital [12] - Expected G&A expenses are projected to increase by 12% to 14% in 2023, primarily due to costs associated with the new corporate headquarters [13] - The firm aims to expand its market share in U.S. real estate, global real estate, and global listed infrastructure [26] Management's Comments on Operating Environment and Future Outlook - Management anticipates a transition to an early cycle economy by the end of 2023, with positive returns expected across all asset classes [21] - The firm expects inflation to stabilize around 3% by year-end, with an average recession likely [46] - Management remains optimistic about the investment performance and believes the firm is well-positioned to capture investor allocations [26] Other Important Information - The firm arranged for a $100 million three-year senior unsecured revolving credit facility to provide financial flexibility [36] - The firm’s liquidity totaled $316.1 million at quarter-end, up from $269.9 million in the previous quarter [35] - The company is focused on integrating private and listed real estate capabilities to optimize client portfolios [88] Q&A Session Summary Question: What are the expected inflows versus outflows in the wealth management channel for 2023? - Management noted improved flows this year, indicating a shift from tax loss selling to capitalizing on price declines, suggesting better entry points for REIT investors [64] Question: What is the outlook for preferreds in the current rate environment? - Management expects double-digit returns from preferreds, driven by high income levels and favorable fundamentals [66] Question: What is the potential for U.S. infrastructure flows in 2023? - Management indicated a pickup in flows due to increased focus on infrastructure spending, but noted it is still early for broader adoption [70] Question: How does the company view the competitive landscape in the REIT space? - Management highlighted that while some competitors have shrunk, the firm continues to gain market share due to consistent performance [108] Question: What is the vision for the next few years regarding private real estate? - The firm is focused on building a private real estate team and expects to see emerging opportunities to deploy capital as prices correct [114]