Cohen & Steers, Inc. (CNS) Q4 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and Full-Year 2015 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Thursday, January 21, 2016. I would now like to turn the conference over to Adam Johnson, Senior Vice President and Associate General Counsel of Cohen & Steers. Please go ahead, sir.

Thank you and welcome to the Cohen & Steers fourth quarter and full year 2015 earnings conference call. Joining me are Chief Executive Officer, Bob Steers; Executive Chairman, Marty Cohen; our President, Joe Harvey; and our Chief Financial Officer, Matt Stadler. Before I turn the call over to Matt, I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that some of these factors are described in the Risk Factor section of our 2014 Form 10-K, which is available on our website at cohenandsteers.com. I want to remind you that the company assumes no duty to update any forward-looking statements. Also, the presentation we make today may contains pro forma or non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For disclosures on pro forma metrics and their GAAP reconciliations, you should refer to the financial data contained in the earnings release we issued yesterday as well as in our previous earnings releases, each available on our website. Finally, this presentation may contain information with respect to the investment performance of certain of our funds and strategies. I want to remind you that past performance is not a guarantee of future performance. This presentation may also contain information about funds that have filed registration statements with the SEC that have not yet become effective. This communication is not an offer to sell or the solicitation of any offer to buy these securities. For more complete information about these funds, including charges, expenses and risks, please call 1-800-330-7348 for a prospectus. With that, I'll turn the call over to Matt.

Thank you, Adam. Good morning everyone and thank you for joining us this morning. As a reminder, our fourth quarter earnings presentation is available on our website. Yesterday, we reported net income of $0.13 per share compared with $0.34 in the prior year and $0.37 sequentially. The fourth quarter results included non-realized non-operating loss of $8.2 million attributable to a change in the accounting classification on one of our seed investments, and it also included an unrealized loss of $2.8 million resulting from an other than temporary impairment on another one of our seed investments. The fourth quarter results also included a higher tax rate resulting from a full valuation allowance on the tax benefit associated with those losses. Operating income per share was $0.41 for the quarter compared with $0.44 in the prior-year and $0.43 sequentially. Page 5 of the earnings presentation displays the current and trailing four-quarter trends in revenue and breaks out the investment advisory fees by vehicle. Revenue was $81.7 million for the quarter compared with $81.8 million in the prior year and $79.7 million sequentially. The increase in revenue from the sequential quarter was attributable to higher average assets under management. For the quarter, average assets under management were $52 billion compared with $52.4 billion in the prior-year’s quarter and $50.7 billion sequentially. Operating income was $30.4 million compared with $32.4 million in the prior year and $31.5 million sequentially. Our operating margin decreased to 37.2% from 39.5% in last year's quarter. The decrease was primarily due to higher employee compensation and benefits, and higher G&A costs. Pre-tax income, net of non-controlling interest was $18.3 million for the quarter compared with $28.3 million in the prior year's quarter and $28.6 million sequentially. The fourth quarter of 2015 included unrealized non-operating losses from our seed investments of $12.6 million. Non-controlling interest represents third-party interests in the funds that we've consolidated. For the year, we reported net income of $1.41 per share compared with a $1.65 per share last year. The full year 2015 results included unrealized non-operating losses on seed investments of $15.4 million and a higher effective tax rate resulting from a full valuation allowance that was recorded on those losses. Operating income per share was $1.72 for 2015 compared with $1.66 last year. Page 6 of the earnings presentation displays the current and trailing four-quarter trend in expenses, which increased 6.5% on a sequential basis, primarily due to higher compensation and benefits and G&A. The compensation to revenue ratio was 33.6% for the quarter, which was higher than the guidance we provided on our last call. The increase, which was due to higher incentive and production compensation, where [ph] the full year compensation to revenue ratio to 32.8%, slightly higher than the full year guidance of 32.5%. The increase in G&A was primarily due to increased hosted and sponsored conferences and the recognition of organizational expenses related to launch of the Cohen & Steers Low Duration Preferred and Income Fund, a US open-end mutual fund. We recorded non-operating loss of $12.1 million for the quarter compared with a non-operating loss of $3 million last quarter. The non-operating losses for the fourth quarter were primarily due to unrealized losses from seed investments. Our tax provision for the quarter included a full valuation allowance on the tax benefit associated with the $12.6 million of unrealized non-operating losses from our seed investments. This resulted in a higher than usual tax rate for the quarter of 67.9%. Page 7 of the earnings presentation displays our cash, cash equivalents and seed investments for the current and trailing four quarters and reflects how much of our cash and cash equivalents are held outside the US. Our firm liquidity totaled $202 million compared with $197 million last quarter and stockholders' equity was $232 million compared with $246 million at September 30. The balances for firm liquidity and stockholders' equity reflect the special dividend payment made in December of approximately $23 million or $0.50 per share. Over the past six years, we've paid $7 per share in special dividends, and we continued to have no debt. Assets under management, which can be found on page 8 of the earnings presentation, totaled $52.6 billion at December [ph] 31, an increase of $2.9 billion or 6% from September 30. The increase in assets under management was attributable to market appreciation of $2.4 billion and net inflows of more $450 million. This marks the first quarter we’ve recorded net inflows since the first quarter of 2013. For the year, assets under management decreased $543 million due to net outflows of $981 million, partially offset by market appreciation of $438 million. Page 11 of the earnings presentation displays net flows by investment vehicle. Because of the unique characteristics related to fund distributions in Japan, we believe it is useful to show the net flows from Japan separately. Assets under management in institutional accounts totaled $26.1 billion at December 31, an increase of $1.5 billion or 6% from the third quarter. The sequential increase in institutional assets under management was due to market appreciation of $1.5 billion, partially offset by net outflows of $35 million. For the quarter, advised accounts recorded net inflows of $60 million resulting primarily from inflows into global listed infrastructure and preferred securities portfolios, partially offset by outflows from global real estate portfolios. This marked the second quarter in a row of net inflows into advised accounts. Excluding sub-advised portfolios in Japan, sub-advised accounts recorded net outflows of $45 million as outflows from global and US real estate portfolios were partially offset by inflows into commodities and global listed infrastructure portfolios. Sub-advised portfolios in Japan recorded net outflows of $50 million for the quarter, which included $600 million of distributions, partially offset by net inflows of $550 million. Excluding distributions, sub-advised portfolios in Japan recorded net inflows in each of the last six quarters. For the year, institutional assets under management declined slightly as net outflows were essentially offset by market appreciation. Institutional accounts had a 4% decay rate for 2015. Bob Steers will discuss our institutional pipeline in a moment. Open-end funds had assets under management of $17.5 billion at December 31, an increase of $1.3 billion or 8% from the third quarter. The increase was due to market appreciation of $800 million and net inflows of $519 million. Net inflows included $608 million into preferred securities, $80 million into US real estate, partially offset by net outflows of $92 million from goals and international real estate. For the year, assets under management increased $329 million or 2% due to market appreciation of $299 million and net inflows of $30 million. Assets under management in our closed-end funds totaled $9 billion at December 31, an increase of $71 million or 1% from the third quarter and was primarily due to market appreciation. For the year, assets under management decreased $776 million or 8%, primarily due to market depreciation. Let me briefly discuss a few items to consider for 2016. As a result of the compounded effect from the unfavorable market conditions we've experienced since the end of the year, we expect our compensation to revenue ratio to remain at approximately 32.75%. We project G&A to increase between 4% and 6% from 2015. That said, we have some flexibility to manage our discretionary expenses should the unfavorable market conditions persist. Based on our preliminary projections, assuming no gains or losses on our seed investments and no discrete items, we expect that our effective tax rate will approximate 38% for 2016. And finally, with respect to non-operating income, of the $59.4 million of seed investments at December 31, which are noted on page 7 of the earnings presentation, $42.2 million have either been consolidated or classified as equity method, and as a result, any unrealized gains and losses will be recorded in non-operating income on the income statement. The remaining $17.2 million have been classified as available for sale, and any unrealized gains and losses will be recorded in other comprehensive income on the balance sheet. The strategy breakdown for the $42.2 million of seed investments where the unrealized gains and losses will be reported on the income statement are as follows: $15 million in Low Duration Preferred Securities, $11.2 million in MLP and Midstream Energy, $11 million in commodities and $5 million in global listed infrastructure. And now, I would like to turn it over to Bob Steers.

Thanks Matt, and good morning. Following the release of our December and full-year AUM report, John Dunn of Evercore published a report entitled out of the desert net inflows after a ten quarter drought. While it’s just one quarter, the inflows reflect our successful effort to improve investment performance especially in our flagship REIT strategies and to expand and improve our distribution. I believe that we’ve succeeded in both endeavors and I'll expand on that in a minute. The timing of our improved flows is noteworthy and that while we appear to be emerging from the desert, almost all traditional long-only managers are facing significant organic decay rates despite the long-running debt in equity bull markets. It's clear that the secular headwinds were active long-only managers are real. That said, I believe we can achieve positive organic growth based on three fundamental trends. First, we invest in inefficient asset classes were active management has and continues to work well. Second, as a firm, our investment performance especially in preferred securities in all three REIT strategies is outstanding and dominates our active competitors and especially passive. Finally, these real asset and income oriented strategies are consistently gaining market share of asset allocations at the expense of traditional core style boxes. As we've seen so dramatically already in January, the markets will ultimately determine where capital will flow. But we are better positioned today than ever to compete for those flows. Investment performance is the main reason for our confidence, so let me share some highlights from last year. First, I need to point out that despite the concerns about how REITs might perform in a rising interest rate environment, US REIT indices were up over 7% in the quarter despite the highly anticipated December FED tightening. During the quarter and also for the full year, seven out of ten of our core strategies outperformed their benchmarks. In 2015, all of our REIT strategies beat their benchmarks by a lot, 280 basis points to 420 basis points. And our preferred securities strategy was 290 basis points over, which marks the 13th consecutive year of outperformance, a really remarkable accomplishment. Of our investment strategies that have ten-year records, five of the six have outperformed in all of the one, three, five and ten year time periods. The fixed strategy, global listed infrastructure underperformed by 20 basis points last year but otherwise has also outperformed for the three, five and ten year time periods. In addition, our flagship US REIT fund Cohen & Steers real estate securities and our flagship income fund Cohen & Steers preferred securities and income are both ranked in the top-decile versus their peers by Morningstar for each of the one, three and five year time periods. These results convincingly demonstrate that for our real asset and preferred security strategies active management is vastly superior to passive and that we complete extremely well versus our peers. As Matt mentioned, firm-wide net outflows were $981 million last year. However, since the second quarter, we’ve seen a persistent uptrend in flows in each channel culminating in fourth-quarter net inflows of $450 million or a 4% organic growth rate. Wealth management was by far the strongest channel but as I mentioned last quarter, search activity and our advisory group has ramped up significantly and remains elevated. In the quarter, wealth management book net inflows of $519 million for a 13% organic growth rate. As has been the case all year, our preferred securities fund dominated the net inflows. However, what is different is that we also had net inflows into our US net strategies for the first time in over a year. On the new product front, in December, we launched a first of its kind low duration preferred securities fund. And we anticipate that investor demand will gradually ratchet up throughout the year for what we think is a very timely product for the current market environment. Turning to the advisory channel, the increase in institutional real asset RFP activity we saw earlier in the year has translated into multiple new advisory mandates. The three largest mandates that were awarded but are not yet funded ranged in size from $200 million to $400 million each and encompassed Asia Pacific real estate, global real estate, and our first multi-start real assets advisory portfolio. Needless to say, we’re encouraged by the increased institutional interest in real asset space. So even as we are able to achieve modestly positive advisory net inflows in the quarter, our pipeline of awarded but unfunded mandates grew from $500 million in the third quarter to $1.35 billion at year-end, which bodes well for organic growth going forward and RFP activity remains high. Lastly, we've been reviewing our European business development plans for over a year and we are pleased to announce that Marc Haynes formerly a partner at Greenwich Associates heading up their global investment management practice across the UK and Europe will head up our business development efforts in the region. Sub-advisory flows ex-Japan were muted in the quarter. Net outflows were a modest $45 million and for the full year net inflows totaled $22 million, which is the best result since 2011. Turning to Japan, the trends there too have shown strong improvement. Total net outflows in the quarter were only $50 million, the lowest in over four years. In fact, as Matt mentioned, Daiwa had $576 million of net inflows before the anticipated distributions of $600 million, which puts us very close to our target of flat net flows. As always, we are working with existing and new distribution partners to support existing funds and to launch new products. Also, our more recent focus on the institutional market in Japan is progressing nicely and we’re currently working with our local partners on multiple active searches. Looking ahead, our industry is facing a variety of secular headwinds ranging from the rise in cost of regulation and distribution to the competitive threats of passive and alternative strategies. Differentiated investment performance has always been important but is even more so now and we'll be in the future. If the current trends of negative organic growth, multiple contraction and consolidation persistent to the future, a high quality and liquid balance sheet will also be important for future value creation through opportunistic capital allocation. As Matt noted in this remarks, our balance sheet is quite strong with no debt and meaningful cash. In addition to delivering industry-leading investment performance, we plan to maintain our financial strength and flexibility to compete effectively and to create future shareholder value. With that, I'd like to open the floor to questions.

[Operator Instructions] Our first question coming from the line of Adam Beatty with Bank of America Merrill Lynch. Please proceed with your question.

Good morning, thanks for taking my questions. You mentioned the FED rate hike and some of the expectations around that you know in a positive sense I guess, we’re not necessarily fulfilled. My question is, how have your clients sort of reacted to that, have you seen any kind of inflection point in terms of a renewed level of interest given that the hike passed somewhat uneventfully? Thanks.

I don't think the institutional market was that concerned about it. I think it was really more in the wealth channel where there were concerns. We have provided mountains of empirical research which shows that in the environment that real estate is in and expanding economy that REITs tend to produce significant and positive returns in that environment, a very high percentage of the time and that the key underlying cause of rising rates i.e. improving fundamentals will dominate investment performance. So, I think that we still battle the notion that REITs are interest rate sensitive, which in any period other than short-term weeks and months they are not. And then turning to the institutional channel, I would say that a significant portion of the RFP activity that we’re currently seeing is focused on US REIT mandates.

That's great thank you very much. And I also like to beyond just the impact of rates, I'd like to get your view on kind of the opportunities in the real estate market right now, there has been, it seems like macro at least in the US is on a modest uptrend, but just wanted to get your thoughts in terms of the fundamentals in the US and abroad? Thanks.

This is Joe Harvey. We’re still in a favorable point in the real estate cycle, where real estate fundamentals are strong. There is a lot of concern now about whether the global economy might go into recession or whether US might go into recession but we don't think that's going to happen, so we think that the fundamental trends and cash flows can continue. At the same time, there is a lot of capital looking to be placed in real estate for a lot of reasons that we talked about on these call, the search for more diversification and alternatives. So when you look at the private funds, core funds and opportunity funds, there is a lot of capital on the sidelines looking for opportunities. And some of those opportunities are being found in the public market because of the discounts to private market value that we've talked about on these calls; we've seen an uptick in the privatization activity. And so that's indicative of the view about real estate investing and the opportunities that can be found in the public market and that's helped the public REIT market do better as evidenced by the 7% return in the fourth quarter. When you grow globally, it really varies by region. In Europe, fundamentals are still good by relative comparison. In Asia, because of challenges in the emerging markets, it’s more spotty depending on what country you go to.

Thanks, Joe. In terms of capital coming in off the sidelines, are you concerned that that might create evaluation imbalance the other way?

As the real estate cycle moves forward that historically has been a concern. One I think I think that’s different this time is that there is much more discipline from the banks on the lending side. So compared with last cycle and no two cycles are ever the same, much more restrained on the lending side both in terms of loan-to-value ratios and because of that it has limited some of the participation by those that don’t have stronger equity capital raising abilities.

Got it. Thanks very much. That’s very helpful. Appreciate it.

Thank you. Our next question is coming from the line of John Dunn with Evercore ISI. Please proceed with your question.

Thanks, guys. I think the institutional demand for preferreds is a fairly new phenomenon. Could you did tell us what’s driving that and do you think it can be a material driver and then also due you think retail demand for preferreds has legs in 2016.

Let me start while with interest rates being at kind of record levels, the concern is we could have rising interest rates, but our view is it's likely going to be lower for longer so to speak and in that environment, preferreds are going to be very much in demand because of their high relative income rates and that is very scarce in the capital markets. So, we believe that in the wealth channel, there is going to be continued strong demand as we've seen in our flows. We have expanded our opportunity set as Bob mentioned with our low duration of preferred fund. The preferred market has not - looking backward - been an institutional market and I think - we think that can change as more institutions look for alternative income as strategies to deal with the very low yield environment and the concern about rates. So when you layer on the fact that it’s a very inefficient market as our performance has demonstrated, our team has outperformed 13 years in a row. And so it's a target rich environment one where we can add value. So I think that that is going to become more appealing to institutions and we are seeing some signs of that and Japan is one example, but I think that’s going to broaden up, but still to be determined.

Got it. And then on distribution, can you give us an update on what you have been doing to court larger consultants, I think that’s an area you guys were going to make a focus and is that - are you finding it to be better lane than going after the smaller DC plans and the more mid-sized guys?

John, I think we are going to try and do all of that. As I am mentioned, Marc Haynes from Greenwich Associates actually starts today in our London office and Greenwich is a well-known consultant over in the region there. We are also in the process of evaluating with an eye towards expanding just generally our institutional consultant relations effort. But at the same time, over the last several years, we’ve implemented and are expanding a direct sales, institutional sales capability as well. And then lastly, we intend to redouble our efforts on the DC side. Some of that intersects with the consulting community, some of it doesn’t. But the one thing we are finding in those various different institutional DC type of channels, they are all also merging with the wealth channel. So our advisory and consultant relations team and our wealth management, business development and national accounts teams are collaborating all the time and we expect to see a great deal of that collaboration as our strategy in Europe is reoriented away from exclusively on the DB market and a more significant focus on the intermediary or sub-advisory opportunities over there which we think are significant.

Got it. Kind of a three-prong strategy. Thanks very much.

Thank you.

Thank you. [Operator Instructions] Our next question coming from the line of Ann Dai with KBW. Please proceed with your question.

Hi, good morning. Thanks guys for taking my question. Just wanted to start on the advisory pipeline. So you mentioned the roughly 1.4 billion of one mandate, but not yet funded, is there any color you can give on timing around when you would expect those to be funded or maybe how much you would expect to be funded in the next first half or in the next year or so?

We expect most of those mandates to be funded sometime this quarter.

Great. Thank you. And moving on to Japan, so the improvement in flows from Japan, do you feel like that’s being driving improving performance over the years or are you seeing a change in Japanese retail investor behavior and some more interest there as well? Any color you can give would be great.

Well, Japanese investors have and continued to pour money into REITs especially U.S. REITs and that hasn’t changed that much. Our partner Daiwa Asset Management simply has reinvigorated the marketing efforts with existing distributors and last summer we added Japan Post as a distributor and as I'm sure you're aware, they are one the, if not the most powerful distribution house over there. So it's really not so much the market that has changed it’s just as I say every call, we work with our partners to add distribution partners and to support their marketing efforts. And having virtually the best track record of any of the funds, US funds over there, it’s become a priority product for Daiwa again and so they are working hard to improve distribution and to get into a net inflow after distributions as well. This is their bestselling product, we are their best-performing manager, so we have their attention and it's beginning to result in better flows.

And what about some of those newer sub-advisory relationships. Can you comment on those kind of progress and maybe when we might be able to see some flows from there?

You're speaking about the Japanese sub-advisory?

Yes?

They've been going sideways, they are focused on preferred securities and to a lesser extent global listed infrastructure and right now investor demand for those two are - for preferreds I think we can see some modest growth. There's a few funds which we're working with our partners on now that will have net inflows. Global listed infrastructure really is kind of dead in the water at the moment. So we don’t really expect a lot from that strategy. But again we are continuing to work on new and different preferred strategies. It could be CoCo preferreds or things like that or even more targeted REIT strategies, but those other two strategies are basically going sideways at the moment.

Okay, I appreciate the color. Thanks so much.

Sure.

Thank you. Our next question is coming from the line of Mac Sykes with Gabelli. Please proceed with your question.

Good morning, gentlemen and congrats on the update and certainly the pipeline and thank you again for those slides. I appreciate the transparency especially on the seed investments. My first question is around commodities. I noticed that you took in inflows and what has probably been a pretty challenging asset class for flows and certainly performance, but maybe you could just talk a little bit more about that opportunity whether you think that could scale from here or it's just too difficult environment.

This is Joe. So we have had a couple of institutional clients who have been very disciplined and as commodities have declined in price, they've increased their commitment to us to maintain their percentage allocation to commodities. And so for very disciplined asset allocators that’s what you would expect to see happen. Clearly with what's going on in commodities which is now a five year bear market, from a broad perspective, it’s going to be challenging for investors to step into what has been a falling knife situation. That said, our view of the commodities are an asset class which many investors believe is core, is important. And as the relative value continues to get better, we would expect investors to be attracted to that situation. And when you think about the post quantitative easing world and what asset classes are truly statistically cheap, it's hard to come up with a lot of them, but commodities would check that box. So as the fundamental cycle continues to play out that, that is the rebalancing of supply and demand takes place in commodities, we think that some of these asset allocators are going to be attracted to the statistically cheap asset class. So we are just very focused on making sure our relative performance improves, so that when that demand comes back we're going to be attractive for those allocators.

Okay. And then just on the - I’m sorry if I missed this, but the timing of the pipeline, did you give sort of guidance on when some of those mandates would potentially fund?

We don't control that obviously, but the guidance we’ve been giving is that the three large mandates, largest mandates we got in the quarter, last quarter will be funded this quarter, February or March.

Okay. Bob, you’ve been through a few cycles, and obviously with that report that you mentioned, will we see any turnaround in the company flows. You’ve obviously demonstrated good investment performance and now we’ve heard more recently about industry participants potentially buying competitors for 13 times EBITDA and when your multiple is materially lower than that. So I guess my question is what will be the catalyst to having investors appreciate your business a little bit more than internally being done.

That’s a great question. Look, I may be mistaken, but I think our multiple is still among the highest in the industry as public managers. So the first thing that has to happen is for the market to appreciate our industry better and get back to more normal historical multiples. And for that to happen, I think the industry has to transition from a situation like the fourth quarter when almost everybody, except ourselves and one or two others had organic decay. I think the market has been telegraphing concerns about active management, about active manager’s ability to deliver value or alpha. So that's going to have to change. I would argue that if it doesn't change, those acquisitions at 13 times EBITDA will turn out to have been very bad investments and those private market valuations are going to sink substantially, which I believe they will, which will precede a period of significant consolidation within the industry.

Okay. Thank you for taking my questions.

If I could just add, address a couple of questions or points that have been raised prior to the call, couple of so-called negatives in the quarter, one being the comp expense being slightly higher than expected and G&A likewise. I just want to make a couple of points on those two items. One of the reasons for higher comp as was mentioned is higher sales activity, but the other reason was just the really off the charts outstanding investment performance by some of our leading teams and we felt it was important to recognize that especially to ensure that these teams are intact and continue to deliver the type of high-quality performance that we believe is necessary to maintain a leading position in the industry. Secondly, with regard to G&A, the fourth quarter typically is a little heavier for us. We have our institutional conferences there along with our, more recently, traditional real asset institutes and so we were conference heavy in the quarter. We did launch the limited duration preferred fund really at the very end of the quarter. So we didn't have any opportunity to raise assets and so I want to make it very clear to everyone that we have in no way lost our discipline with regard to either compensation or G&A. We aim to have margins that are in line with our historic margins and hopefully at the higher end of the industry. But both of these items comp sort of promotional and fund launch activities. We think we are essential to put us in a position this year and for the foreseeable future to continue to generate higher returns and to have an opportunity to be generating positive organic growth.

Thank you. Our next question coming from the line of Gregory Warren with Morningstar. Please proceed with your question.

Thank you guys for taking my question. Really appreciate that additional color on the comp and the G&A as well as the tax rate for coming into this year. The one thing I didn't see, did you guys have an outstanding share count for end of December and then just a follow-up on that, when we think about potential share repurchases in the near-term with this not being relatively cheap compared to historical, you're sitting at about 60 million in cash in the US and 84 million overseas. Do you feel there is enough flexibility there, would you ever consider taking on debt to buy back shares?

I think that as we think about effective capital allocation under the right conditions, we would certainly entertain taking on that, whether it was to facilitate an acquisition that might represent a product extension or something along those lines. To take on debt to buy back stock, I think our stock would have to be a lot lower, but look, we're not blindly against adding leverage to the balance sheet. We would just need a good reason to do it.

Okay. And then did you have an outstanding share count for the end of the year?

Yes. Hold on one sec. 45 million, 524 basic. That’s for the quarter.

Okay, that's good. And then as far as building the pipeline as we move into 2016, it's great that you’ve picked up. This 1.4 billion looks like it's going to fund in the first quarter. It also sounds like there is a lot of reception on particular product lines, including preferred securities. Is this both overseas and a US phenomenon or are you seeing much more interest on the overseas base, particularly Japan?

The new business that we won in the fourth quarter was pretty diverse. One of the three largest mandates came from a large, very large European pension fund and the other two were U.S.-based, but as I mentioned, we are in some finals. No assurance we will win, but some finals in Japan for both mandates, but also we’re talking to insurance companies over there about our preferred strategies. Preferreds are really wonderful for insurance companies to consider. So and we have seen the strongest interest in preferreds certainly from US retail and that remains very strong. So what we’re very pleased about is that whether it’s REIT strategies, preferred strategies, we are seeing it basically from every continent, both retail and institutional. So that kind of diversity gives us comfort that there will be opportunity, especially with our track record, and I want to emphasize that I know you guys track investment performance, particularly in the short run and you made comments about managers whose performance has improved recently, and so on. But I do want to emphasize that in our core strategies and - or I should say our flagship strategies, those that represent the bulk of our AUM and have represented the bulk of our flows, 1, 3, 5, 10 years, we’re killing it. Our preferred strategy, 13 consecutive years. There is nobody even in the same ZIP code as them. So we’re not just doing pretty well, we're really head and shoulders above everybody else right now and obviously we have to work every day to maintain that and your numbers can fall off pretty quickly after 12 or 18 months. So I’m not saying that we can be talking about these types of rankings all the time, but here we are, and so we feel very confident that with the numbers we have and seeing that RFPs institutionally for - particularly for US REITs, but also global are spiking up significantly. We’re the number one US REIT manager, no matter how you slice it, and same with preferreds. So we can't control the markets obviously, but demand is ramping up for both preferreds and REITs and we feel really good about where we fit in, in the industry right now.

On the US REIT search activity, going back to last year, the year before, we hadn't seen much institutional US research activity. So that's a tick up, no one can say how sustainable that would be, but I would say it's coming from very large corporate and public pension funds who don't have a listed real estate allocation. And there are multiple examples of that. So I think it's an evidence of continued adoption of listed real asset strategies and that is happening and as Bob said strategies where we’re very competitively positioned performance wise, we're feeling good about that.

That sounds good. I was just going to say that 3, 5, 10 year track record really is important in the institutional advisory sort of networks. And it seems like you guys are killing it there and then just from an active manager producing flows perspective and you guys have got a leg up right now. Thanks for taking my questions.

And maybe if I could just add, one of our soft spots had been the three-year numbers for global REITs and even US REITs and we've seen a pretty direct correlation between declining outflows or terminations along with rising RFP activity associated with our three-year numbers turning very positive. So that was - that three-year number was our Achilles heel up until about 6 or 12 months ago and now we look good in every time period. So again, hopefully that will translate into ongoing flows.

Thank you. Mr. Steers, there are no further questions at this time. I will turn the call back to you. Please continue with your presentation or closing remarks.

Great. Well, thank you all for joining us this morning and we look forward to staying in touch throughout the rest of the year. Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day.