Cohen & Steers, Inc. (CNS) Q4 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and Full Year 2016 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 19, 2017. 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 2016 Earnings Conference Call. Joining me are, Chief Executive Officer, Bob Steers; 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 Factors section of our 2015 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 contains non-GAAP financial measures, which we believe are meaningful in evaluating the company’s performance. For disclosures on these non-GAAP financial measures and their GAAP reconciliations, you should refer to the financial data contained in the earnings release and presentation, which are 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 does not constitute an offer to sell or the solicitation of an offer to buy these securities. For more complete information about these funds, including charges, expenses and risks, please visit our website. And with that, I'll turn the call over to Matt.

Thanks very much Adam and good morning, everyone, thanks for joining us today. My remarks this morning will focus on our as-adjusted results, which exclude the after-tax financial effect associated with our seed investments, certain discrete tax items and the effect of an accelerated vesting of certain restricted stock units that occurred in the first quarter of 2016. Yesterday, we reported earnings of $0.48 per share, compared with $0.41 in the prior year's quarter and $0.51 sequentially. For the year, we reported earnings of $1.85 per share, compared with the $1.71 per share last year. Page four of the earnings presentation, which is available on our website, reflects the current and trailing four-quarter trend in revenue and breaks out investment advisory fees by vehicle. Revenue was $89.5 million for the quarter, compared with $81.7 million in the prior year's quarter and $94.4 million sequentially. The decrease in revenue from the third quarter was attributable to lower average assets under management. Average assets under management for the quarter were $57.4 billion, compared with $52 billion in the prior year’s quarter and $60.5 billion sequentially. Operating income was $35.9 million for the fourth quarter, compared with $30.4 million in the prior year’s quarter and $37.3 million sequentially. For the year operating income was $137.7 million, compared with $127.7 million in 2015. Our operating margin increased to 40.1% from 39.5% last quarter. For the full year, our operating margin increased to 39.3% from 38.8% in 2015. Page five of the earnings presentation, reflects the current and trailing four quarter trend in expenses, which decrease 6.3% on a sequential basis, primarily due to lower compensation and benefits and lower distribution and service fees. The compensation to revenue ratio was 31.7% for the quarter, lower than the guidance we provided on our last call. The decrease, which was due to lower incentive and production compensation, brought the full year compensation to revenue ratio to 32.5%, compared with our full year guidance of 32.75%. The decrease in distribution and service fee expense was consistent with the decline in average assets under management in our U.S. no-load open-end funds. As a result of a shift in the mix of taxable income from non-U.S. to U.S. our full year effective tax rate increased to 38% up from our estimate of 37.75% last quarter. The fourth quarter rate of 38.7% included the cumulative effect of this rate adjustment. Page 12 of the earnings presentation displays our cash, cash equivalents and seed investments for the current and trailing four quarters and indicates that portion of cash and cash equivalents held outside the U.S. Our firm liquidity totaled $239 million compared with $224 million last quarter and stockholders’ equity was $266 million compared with $272 million at September 30th. The balances for firm liquidity and stockholders’ equity reflect the payment of a special dividend of approximately $23 million or $0.50 per share made in December. Over the past seven years we have paid $7.50 per share in special dividends. We remain debt free. Moving to assets under management which can be found on page six of the earnings presentation, our AUM totaled $57.2 billion at December 31th, a decrease of $3.3 billion or 5% from September 30th. Assets under management and institutional accounts totaled $28.7 billion a decrease of $1.3 billion or 4% from last quarter and open end funds had assets under management of $19.6 billion, a decrease of $1.6 billion or 8% from last quarter. AUM and closed end funds decreased $421 million or 4% from last year. For the year, assets under management increased $4.6 billion or 9%. We recorded total net inflows of $707 million in the quarter and annualized organic growth rate of 5%. This marks the ninth consecutive quarter we have recorded net inflows. For the year we recorded net inflows of $6.7 billion, a 13% organic growth rate. Page nine of the earnings presentation reflects net flows by investment vehicle. Institutional accounts recorded net inflows of $655 million in the fourth quarter, an annualized organic growth rate of 9%. For the year, institutional accounts recorded net inflows of $4 billion, a 15% organic growth rate. Sub-advised portfolios in Japan recorded net inflows of $109 million in the quarter, compared with $988 million of net inflows last quarter. Net inflows were primarily from U.S. real estate portfolios. Distributions decreased by $28 million to $800 million from $828 million last quarter. When including distributions, this is the first quarter since the fourth quarter of 2015 that we have recorded net outflows. For the year, sub-advised portfolios in Japan recorded net inflows of $2.8 billion, which were offset by $3 billion of distributions. Sub-advised accounts excluding Japan recorded net inflows of $40 million with inflows from global real estate portfolios being partially offset by outflows from U.S. real estate portfolios. For the year sub-advised accounts excluding Japan recorded net inflows of $111 million. Advised accounts recorded net inflows of $506 million during the quarter, which included a new institutional separate account mandate in Japan, a targeted market in our strategic plan for the region. Advised net inflows were primarily from multi-strategy real assets and global listed infrastructure portfolios. For the year advised accounts recorded net inflows of $1 billion. Bob Steers will provide some color on the level of activity and our institutional pipeline in a moment. Open-end funds recorded net inflows of $54 million during the quarter. Distributions which included the payment of year end capital gains totaled $935 million of which $706 million were reinvested. For the year, open-end funds recorded net inflows of $2.8 billion, a 16% organic growth rate. Let me briefly discuss a few items to consider for 2017 before turning it over to Bob. With respect to compensation and benefits, we expect the compensation-to-revenue ratio to be 32.75% slightly higher than 2016, but in line with the guidance we provided on our calls last year. We project G&A to increase between 4% and 5% from 2016. The increase can be broken down into three categories, collective investment trust administration costs, strategic spends related to business development in the DCIO channel and in Europe, and the full year effect of recent approved pricing adjustments for certain of our open-end mutual funds. Excluding these three items, G&A is projected to be flat year-over-year. CITs of the vehicle of choice in the retirement channel and they represent an important part of our real assets strategy. We recorded approximately $800 million of inflows into CITs during 2016 with more than half occurring in the fourth quarter. These inflows bring our AUM and CITs to about $1 billion across four real assets strategies. The increased cost for administering the CITs, which is accompanied by higher management fees is a result of our recent success in this market. DCIO and Europe both represents strategic opportunities for us and our forecast for 2017 includes investments to promote asset growth from those areas. These investments which include conferences and marketing costs are targeted to certain institutional markets and financial intermediaries. As part of our plan to increase market share, we reduced management fees and lowered expense caps for certain of our open-end mutual funds. The lower expense caps will result in higher year-over-year fund reimbursement costs. And finally we expect that our effective tax rate will remain at approximately 38% this year 2017. Now I’d like to turn it over to Bob Steers.

Thanks, Matt and good morning everyone. As you know the fourth quarter of last year was full of surprises and dominated by politics, immediately following the election investors abruptly shifted away from investments benefiting from slow growth, low inflation and interest rates and into plays focused on fiscal stimulus, higher rates and reflation. The prospect of business friendly leadership in Washington characterized by tax reforms, reduced regulatory burdens and incentives to hire and invest instantly unleashed animal spirits, which we expect will translate into the real economy in the form of higher growth rates sooner rather than later notwithstanding the reality that the practical impact from new fiscal stimulus and tax policies will likely be a 2018 event. Coincidentally immediately post-election equities went on a tear led by financial service, defense, cyclical and infrastructure plays while fixed income and equity income investments suffered. With that backdrop U.S. and global REIT industries got clobbered post-election down about 3% and 6% respectively for the quarter as did preferred securities down 3%. Conversely commodities, resource equities, MLP indices [ph] each delivered solidly positive absolute returns of 3%, 7%, and 2% respectively. Our relative performance in the quarter was mix with 6 of 10 strategies outperforming their respective benchmarks. And consistent with recent quarters, 88% of our open end fund assets are rated 4 or 5 stars by Morningstar. Let me quickly recap the flows by segment and then update you on the progress of some of our most important initiatives and strategies. As you’ve already heard firm-wide net inflows for the quarter were $707 million, a 5% organic growth rate. The wealth channel had a modest $54 million of net inflows in the quarter. Gross inflows reached a record $2.6 billion, however outflows virtually doubled from the third quarter mainly attributable to the short-term spike in interest rates. Net inflows in the U.S. REITs were $283 million and our low duration preferred fund launched one year ago also took in a net $68 million reflecting interest rate concerns. Conversely for the first time in three years our flagship preferred securities fund experienced net outflows of $312 million. The advisory channel had a very strong quarter with $506 million of net inflows for a 23% organic growth rate. Notably the source of the majority of inflows confirms the progress of several of our strategic initiatives. $425 million went into our multi-strat real estate strategy. The implementation of these funding was through a recently launch series of real asset collective investment trust vehicles that we hope will pay an increasingly significant role in penetrating the DCIO and institutional retirement market places. Multi-strat real assets has produced four consecutive quarters of net inflows and for the year accounted for 38% of total advisory gross inflows. Separately but equally important from a strategic point of view we had a $140 million funding of a global listed infrastructure mandate, which was awarded to us by a Japanese insurance company. As you may recall two years ago we committed people and resources to develop the institutional market in Japan and we are now beginning to gain some traction. Sub-advisory net inflows in Japan were a $109 million before distributions and sub-advisory inflows ex-Japan were $40 million. Turning to the current advisory pipeline we began the quarter with unfunded mandates of approximately $600 million and ended with $330 million. And between $425 million was funded and $155 million was newly awarded. RFP activity remained strong up 36% compared to the fourth quarter and up 61% for the full year led by U.S. and global real estate, preferred securities and multi-strat real assets. I’d like to dedicate the next few minutes by highlighting and updating you on the progress of our more recent business development initiatives. This is especially timely because although we are highly focused on carefully managing cost and seeking to deliver more for less, we are also selectively devoting additional resources to certain critical areas. Our commitment to be among the leading global multi-strat real asset managers is more compelling now than ever, especially as we appear to be entering the reflationary stage of this global economic cycle. We think about multi-strat real assets as both an investment solution and our most powerful global marketing strategy. The multi-strat approach showcases not only our multi-strat capabilities, but each of the underlying real assets strategies as well. Equally important is delivering our expertise through the most cost effective vehicles that the markets demand. As I mentioned we are increasingly utilizing a series of real asset collective investment trust to facilitate the low cost delivery of our real asset capabilities to the retirement markets. In Europe and Asia where historically we’ve only offered listed real estate funds, we are also well into the process of building a full lineup of active real estate strategies and we’ve recently added a new active commodities fund to complement our previously launched global listed infrastructure fund. In the U.S., our three year multi-strat performance numbers are strong and we will soon have a five year track record as well. As the flow data confirm, institutions are beginning to embrace this strategy and we anticipate that the wealth channel will follow. In an effort to sustain our superior investment performance and bolster our presence in the space we will continue to grow the asset allocation, commodity and resource equity teams. Preferred securities and alternative income strategies also remain a critical component of our growth plans both here and abroad and we will add to these teams as appropriate as we expand our asset base and product offerings. The strong flows into our recently launched low duration preferred securities fund is a case in point. Additional product launches are planned for this year in response to the strong global market demand for these alternative income solutions. Turning to our key business development initiatives, we are now entering year two of our DCIO and Japanese institutional efforts and are just beginning our refresh in Europe. With respect to the U.S. retirement opportunities we plan to further build out our business development team and implement changes to our fund share classes and fee structures to adapt to changing market conditions. Our full year 2016 DCIO net inflows were $215 million for a 9% organic growth rate and we expect that number to improve this year. In the UK and Europe, we are finally fully staffed and ready to pursue opportunities in the traditional define benefit and financial intermediary markets in the past our focus has mainly been on the institutional marketplace. We firmly believe that the global macro environment is now clearly moving in favor of real asset strategies. GDP growth rate, employment and inflation readings are on the rise and should accelerate as tax and regulatory reforms together with fiscal stimulus take effect. Real asset and alternative income strategies are poised to gain further market share of asset allocations worldwide and to effectively capitalize on these opportunities while contending with our industry headwinds we plan to control cost where we can, spend where necessary to remain comparative and selectively commit additional resources to our most compelling investments and business development opportunities. With that I’d like to open the floor to questions.

Thank you [Operator Instructions] Our first question comes from the line of John Dunn with Evercore ISI. Please go ahead sir.

Hi. On Japan infrastructure mandate, I think historically the market hasn’t been super interested in infrastructure. Do you think maybe there is a shifting of investment appetite going on, where investors in a country have become more open to other income investments?

Sure. This is Joe Harvey. Japan market has been most interested in U.S. REIT strategies and you can see that in our AUM, but as Bob talked about, our business strategy has been to broaden our distribution in Japan which to include the institutional market and to market our other strategies. We do believe that there is interest in other of our investment strategies in Japan, infrastructure is an example of that, but preferred securities is also an example of that. And the driver there is the need for current income in a negative rate environment. So -- and I think just to broaden that the need out a little bit more it’s not just for income but it’s for investments that have more predictable results and total return potential, which you can get with preference and with infrastructure strategies.

Got you. And then just to go bigger picture and not to front run what you might have in your end letter. But I mean can you give us an update on what you take of this data active management particularly post-election where we have gotten some lower single stock correlations and some more valuation dispersion. Do you think the same people still winning that in the new world we are in?

Well, that’s a tough question. I think that the headwinds for active management both long only and hedged frankly remain significant, relative returns have been partially poor and fee structures have been high. And so we firmly believe for ourselves the way to grow is to focus on delivering top quartile or better performance. But candidly also I think the big winners and active management going forward are going to be the most realistic about fees and how do efficiently deliver your active management, whether it’s through new vehicles in Europe, our commodity fund was created in a Ireland-based [indiscernible] structure very efficient structure there. So I think you need great performance, you need frankly not to be a laggard or on the high end of the fee range and this is particularly important time to understand that because there is lots of money in motion obviously lot of it’s going to passive, but I think active managers who operate in alternative strategies like we do and as well as multi-strat strategy implementations and can deliver those that performance efficiently can be big winners.

Thanks, guys.

Our next question is from the line of Ari Ghosh with Credit Suisse. Please go ahead sir.

Hey, good morning guys. Can you provide a little more color on the demand trends that you’re seeing within your institutional channel, specifically if you are continuing to see strong interest for the U.S. REIT products in the sub-advise channel or there has been some sort of a pivot to the other strategies?

I am not sure, we have seen any great shift in institutional demand for what we do, other than we have seen actually quite a substantial uptick in institutional demand for a preferred security strategies, which here to four have largely been a focus of the retailer or a wealth market. So, we are seeing consultants and institutions doing a lot more research on real assets. We're seeing a significant uptick in institutional interest and preferred securities, global listed infrastructure is also of interest in it. Worth pointing out that the increasing demand for real assets and global listed infrastructure is so far mainly an institutional phenomenon and we really haven't seen the wealth channel substantially increase their interest there. We believe that we're on the coast of significant perhaps even dramatic inflation surprises starting this quarter. And we have the view that we really are on the cusp of a substantial shift in sentiment characterized by upside surprises to growth, to inflation and obviously interest rates will follow. And that's why we think that as we enter this inflationary environment demand for real asset strategies of all kinds is going to move up substantially. And I think that's what you're seeing in the institutional market because I think they tend to be more forward-looking than the wealth channel.

Got it that's helpful. And then towards the end of last year you lowered your expense gap in management fees on several of your U.S. retail products. And I think you touched a little on that in the prepared remarks. I was just wondering what the feedback has been from the platforms? And if these planned cost have helped either regain existing or track new sub space?

Hi this is Todd Glickson just wanted to address that question. As it relates to our platform partners, I think our relationships have always been strong and the feedback we've gotten is that our price points have been competitive. I think what we've seen or we've taken a look at is not just the overall space, but also let's say the top three to five peers that we compete against. So our view was we just wanted to sharpen our pencils a little bit to make sure that to match our top tier performance our fees or we’re competitive. So again for the most part they have been this was really just the continued check in to make sure they were in the feedback from the platform partners has been positive. We’ve really not gotten anything, but really candid and of positive feedback from them in terms of our price points.

Got it, thank you very much.

Our next question is from the line of Michael Carrier with Bank of America Merrill Lynch. Please go ahead sir.

Thanks guys. Hey Matt, just a question on the expense regarding from the G&A. And I think you mentioned the increase year-over-year there is like three aspects of it. Just wanted to understand is it pretty balanced between the three? I think on the last one you mentioned some of the pricing changes, it sounded like that was more around one platform. And so just maybe the expectations on if you get more platforms to make changes with are related to DOL what that could be?

Yeah I think the numbers that we're forecasting right now the biggest of the three components is definitely the administrative cost on the CIT, but that's balanced with increase in revenue. And a lot of came in in the fourth quarter so we haven't really seen a full year run rate on that. And those expenses are booked in G&A, but they will be more than offsetting increase in revenue from that. And that's a good margin business for us. The other two are basically equal in size. And they are combined a little bit less than the CIT administrative cost. But there are things that should have returns on investments that are more tangible for us to see and in the future calls we'll be tracking growth in the DCIO space and in Europe so that we can sort of together understand how those expenses are delivering asset growth or not. And then as far as other fee cuts in DOL to be honest that still -- it's in process and we are digesting a lot of information from a lot of the intermediaries. But I would say it's not at the point where we could give anything definitive.

Michael this is Bob. Related to DOL what we do know is that our most important distribution partners are requiring new share classes to be launched we filed for them. There are costs associated with adding those share classes and supporting them. But as Matt mentioned the investments in DCIO and Europe we expect to more than pay for themselves in the form of significant increases in asset gathering and whether it’s conforming to the needs of our partners, distribution partners for DCIO or the other DOL and related industry headwinds as Todd touched on. In a sense for those active strategies such as ours which can support organic growth because they’re alternative and hard to replicate passively. This not unlike passive this is an environment where in our view the key is to gain market share. And performance is a key component and having fees that are in line with our best competitors is a critical component here. And we fully expect to gain market share and to the extent there are any fee pressures we expect to more than make up for that in our asset gathering.

Okay, that’s helpful. And then just as a follow-up Bob you mentioned in the quarter just given the reaction in the markets we saw some impact on the flow side, but it also seems like it’s we’re in for reflation the real assets and some of the strategies should do well and the demand should pick up. So just wanted to get some sense when you think about maybe the near-term reaction on some of the markets and how demand for the products play out versus the reflation picks up which products that you guys offer that you expect the demand to accelerate. I guess some of this is just your traditional maybe real estate versus some of the newer products that are more geared towards that. And so where you see demand and maybe it’s starting to play out RFP activity so any breakdown there or maybe it’s still too early?

No I think it’s a critical question right now I think that’s the most important question, immediately post-election we saw the market became ebullient for growth and higher growth, higher inflation and higher interest rates. And so not surprisingly we had outflows from our preferred securities fund, we had inflows into the low duration preferred securities fund and our other real asset strategies continue to plug on do pretty well. Also last month our MLP fund hit the three year mark and got their first Morningstar rating performance is good. And so at the end of the day in the short run if we are entering a reflationary phase and if rates move up substantially then we would expect pressure on our global preferred securities fund and periodically you do see short-term pressures on U.S. REIT flows because they are viewed by some as interest rate sensitive, which they can be in the very short run but real estate will be a tremendous beneficiary in a reflationary cycle. So in the intermediate to long-term in that environment our one preferred securities fund might be challenged flow wise, but real estate, natural resource equities, MLPs, global listed infrastructure, commodities, multi-strat should all benefit.

Okay, thanks a lot.

[Operator Instructions] The next question is from the line of Ann Dai with KBW. Please go ahead.

Hi, good morning thanks for taking my question. I wanted to start with some news that I saw around Fidelity cutting the dividend in their Japan REIT product. So I'm just kind of curious when you see one sponsor go does that open the door for other distributors, does it make it more likely that others will follow suit. And then kind of past on to that, last time we saw dividend cuts in these Japan REIT products we saw some meaningful outflows out of them. So are we in similar environment today or are the Japanese investors still start for income that even with the prospect of dividend cuts they’re still getting better total returns, so it’s a different environment, I guess I just like some color on that.

Sure, I think you answered you own question there. While we can’t know for sure, there have been some dividend cuts in U.S. REIT funds in Japan sponsored by firms other than our partner. We -- again we don’t have any visibility or input into their dividend policy, but the fact that other funds have cut I think affected, may have affected our flows in the quarter in the market if that’s true maybe inferring that a dividend cut for our partner could be in the offering. And if dividends are cut as you pointed out, historically there have been outflows following that for a period of time until there is a stabilization and then the cycle resumes. So, it’s a good question, we don’t have any definitive answers, again our partner has not reduced their distribution thus far, but we just don’t have any visibility on where that might end up.

Okay, appreciate the color. And to follow-up on some of the DOL questions, I am just wondering if your conversations with distributors have changed at all in a meaningful way post-election?

Not particularly, most of the distributors and we have met with our largest -- have been as I think you know have been proceeding under the assumption that DOL in some form will be implemented. In any event even if that’s not I think most of them and we agree that the forces unleashed by DOL that genie is out of the bottle. And so those best practices will likely be implemented. And so we are seeing new strip down share classes being requested, we’re seeing revenue sharing becoming more uniform and applied evenly amongst the various fund sponsors. And I don’t see those trends changing regardless of what regulatory reforms are and inactive.

Okay, great. If I may just follow-up on your comment around revenue sharing, what types of changes are you guys seeing in that, in becoming more uniform is it with their pressure downward is it positive for you guys?

I think the answer to that varies by firm, but the driver here is I think distributors don’t want to ever be in a position to be accused of selling a particular fund family or funds shares because that firm pays more revenue sharing or any other kind of economics to the distributor. And so it’s becoming unitized or standardized everyone’s paying the same, or at least they approach to everyone is the same. And our sense is that in some cases and it depends on the type of assets you have and the average size of account and what product it is. So it’s possible the total cost of revenue sharing could go up a bit, if it go down a bit. But the trend towards standardization is I think being well embarrassed throughout the industry.

Okay, thanks so much.

The next question is from the line of Mac Sykes with Gabelli. Please go ahead.

Thank you for taking my questions. Congratulations on a strong year. I just have one micro question and there is one fair question. The first one was in terms of security selection for the preferred strategies; I think you mentioned some challenges in a rising rate environment. What would some of the changes you would make there, if you do expect rates to increase?

Well the preferred securities market is very unique, there are a lot of different types of security structures and that’s what’s enabled us to add significant value consistently for our client portfolios. So in terms of our approach to managing with the macro outlook that we foresee, one thing that we would do is reduce the duration in portfolios. And you can do that a variety of different ways including owning more fix to floating securities. So a lot of tools at our disposal to reduce the duration and we've been well prepared for the environment that we foresee.

And then thank you for the update on DCIO. I just wanted to dig in a little bit more get some granularity on how you're making progress. Has there been any level of concentration this year or are you getting out on a lot more platforms? And then in terms of what is the lag time between initial conversation with the platform and then getting implemented?

Well I think in the first year two years ago or so we had to do one we had to get leadership in place in both the wealth channel and the institutional channel. And once in place they worked with Todd Glickson to evaluate whether we had the right share classes, fee structure and so forth and Todd you may want to comment on that briefly. And then once that was in place that probably took most of the first year. And so last year was the first year where our specialists spent time developing relationships and getting on platforms. Todd do you want to comment just on some of the changes we made in preparation?

Sure. I think it's two pronged, first after we finished table setting making sure we have the right share classes with the right fee structures. We have a focus first on the record keepers making sure that we're working with the right record keepers the right platforms talking about our asset classes. We're specialized asset managers so things like REITs multi-asset real assets are not as well represented as other assets classes are, although there is a significant amount of assets out there. So we see that there is a lot of business for us to gain and really some competitive takeaway business. Number one by working with the biggest platforms, but separately because of our strong alignment with the Wires the biggest Wires out there we are also spending a lot of time with our whole selling team putting DCIO specialist out there alongside of them to work with our largest clients at the Wires to educate them on our products particularly those folks that are DCIO or retirement advisors. So I think that two pronged approach is started to get a little bit traction as you can see by our results. And next year we're hoping to see additional success.

Great. Thank you for taking my question.

The next question is from the line of Glenn Schorr with Evercore. Please go ahead.

Hi, thanks very much. Follow-up question on pricing on the mutual fund side. I was just curious what kind of pricing adjustments do we see? Where did the fee structure go from what to what? And then maybe the bigger picture as your performance is pretty darn good there. Is the requirement good performance and median or better performance pricing versus the peer group? I'm just curious on how you chose those the price break?

Now I'm going to ask Todd to answer that question, but this is a critical-critical issue that we discuss virtually every day here. It's a completely new environment today and going forward. And that right spot on the efficient frontier in terms of what performance do you need and what are the right price points that optimize your opportunities to gain market share that's really critical. And Todd you want to illuminate on that a little bit?

Sure. And I think we touched on it briefly before. If you looked at our historic price points relative to peers it's always been competitive. And separately as you know a lot of funds have had exceedingly good full cycle performance. But our thought process was as we move through this world where active management continues to be under a bit of pressure. We wanted to be very thoughtful about how we looked at strategically build our business case as it relates to value proposition and it really is looking at the top 3, 5, 7, 10 competitors that we bump up it against consistently because although there maybe 20, 30, 40, 50 players in the space. There really are -- there was a concentration of assets and success. So we really sharpened our pencil so to speak to make sure not only where we competitive with the overall peer group, but what we thought were our most meaningful competitors and I think that’s that does in good stead with our partners and is really consistent with what we’ve done overtime in our brand.

And I would just add it’s a dynamic environment out there. So where as I think historically fees change that at a glacial pace I think the market is moving rapidly in the active space not just the passive space for fees and it’s going to have to be monitored closely and actively managed.

I appreciate all those thoughts. And maybe the better side of the pricing conversation I’m curious where is the multi-strat real asset strategy price? And as you move into the wealth management channel, what is that competitive landscape look like versus a more competitive historic space like in the real estate space?

That’s a really good question and I think the answer is the multi-strat real asset product and the landscape is changing quickly. So if you start on the institutional side and I know your question was about wealth, but it’s good to provide this background, we’ve seen strong demand on the institutional side of the business and when you look at database providers people that create peer groups, there was a strong peer group there of a group of significant managers of which we’re a part of and that really helps the people that look for multi asset real assets find out -- find those types of managers consultants gate keepers. As you move to the wealth side of the business and how they look at multi-asset real assets, it’s not that different than how REITs preferred infrastructure we looked at X to Y years ago there is an evolution in education of what the asset class looks like. So, we are working with our partners at places like Lipper [ph] and Morningstar to make sure there is the right categorization in those databases. But it’s safe to say if you looked out and looked at real asset and real return managers there is a growing confluence of managers with about $20 billion to $30 billion in assets, we are part of that leading group of managers there, we are looking to further educate as we’ve always done with our advisor partners. But where we’re priced relative to peers is not inconsistent with what we’ve talked about for other asset classes, which is we look at the overall group that we view as significant and then have a focus on the top three or four managers. So we’re right there.

I would just emphasize Glenn that as much as pricing matters on as to what Todd just addressed, education as to how real assets fit into a broader portfolio of financial assets is equally important and just keep in mind that we’ve been in a very long deflationary environment one where certain of the sub real asset strategies have perform very well collectively as a group we haven’t been in a macro regime where they have been in favor. So, if we are heading into that regime and we believe that we are there is because of the deflation history we think it’s important to help our partners see how multi strategy real assets fits into a broader portfolio.

Excellent, thank you very much.

There are no further questions at this time. I will now turn the call back to Bob Steers.

Great. Well thank you all for joining us this morning. Happy New Year and we’ll speak to you in April. 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.