Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Third Quarter 2018 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, October 18, 2018. I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead, sir.

Thank you and welcome to the Cohen & Steers third quarter 2018 earnings conference call. Joining me are Chief Executive Officer, Bob Steers; our President, Joe Harvey; and our Chief Financial Officer, Matt Stadler. 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 most recent annual report on Form 10-K and other SEC filings. We assume no duty to update any forward-looking statements. Also, our presentation contains non-GAAP financial measures that we believe are meaningful and 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. The earnings release and presentation as well as linked 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 Matt.

Thank you, Brian, good morning, everyone. Our remarks this morning will focus on our as adjusted results. A reconciliation of GAAP to as adjusted results can be found on Pages 18 and 19 of the earnings release or on Slide 16 and 17 of the earnings presentation. Yesterday, we reported earnings of $0.64 per share compared with $0.55 in the prior year's quarter and $0.59 sequentially. Revenue was $98.2 million for the third quarter compared with $96.7 million in the prior year's quarter and $94.2 million sequentially. The increase in revenue from the second quarter was primarily attributable to higher average assets under management and one more day in the quarter. Average assets under management were $60.4 billion compared with $61.2 billion in the prior year's quarter and $58.7 billion sequentially. Operating income was $39.4 million in the quarter compared with $40.4 million in the prior year's quarter and $36.4 million sequentially. Our operating margin increased to 40.2% from 38.7% last quarter primarily due to lower G&A and compensation and benefits when compared to revenue. Please recall that the second quarter of 2018 included a cumulative adjustment to increase the year-to-date compensation to revenue ratio to 33.75%. Expenses increased 1.7% on a sequential basis as higher distribution and service fees and compensation and benefits were partially offset by lower G&A. On our last call we mentioned at one of our intermediaries deferred the imposition of revenue-sharing and sub TA fees on retirement accounts into the second half of the year. The increase in distribution and service fee expense this quarter was primarily due to the recognition of these deferred fees, as well as increased expenses associated with higher average assets under management in U.S. open end funds. The increase in compensation and benefits was primarily due to higher salaries and…

Thanks Matt, and good morning everyone. In the third quarter our asset classes were not in favor compared with the S&P 500 which returned to 7.7%. Importantly however we delivered strong relative performance with nine of our 10 strategies outperforming their benchmarks. For the latest 12 months, eight out of 10 strategies outperformed. Looking at AUM, 98% of our portfolios are outperforming on both a one year and three year timeframe. Macro trends influencing our strategies include a strong economy that is broadening and maturing filed by tax reform, deregulation, fiscal stimulus and an increasingly vibrant consumer. With unemployment at 49 year lows, workers are confident enough in the job market and in wage growth that consumption strengthened. Market factors influencing our strategies included rising short-term interest rates and bond yields and strong energy markets. The 10 year treasury yield rose 20 basis points to 3.06% during the third quarter and subsequently yields capped out in October. While rising bond yields restraint returns in some of our strategies, our portfolios performed better than it did earlier this year reflecting the interest rate sensitivity has been partially priced in. Our strategies are not direct beneficiaries of the resurgence and consumer spending and China trade wars dampen commodity and resource equity returns. As a result, real asset returns lagged equities. In spite of rising bond yields, our preferred securities returned 1.1% on the back of spread compression of 35 basis points in the quarter. Low duration preferreds returned 1.4%. We outperformed in our core strategy and underperformed in our low duration strategy. Over the past 12 months however, we outperformed in both. We continue to see expanding investor interest in preferred securities with asset constables embracing them, more institutions are evaluating them as alternative sources of income and wealth firms placing them…

Thank you, Joe, and good morning. As a reminder and as we addressed extensively in our annual reports, our overarching strategy and our strategic focus is to deliver more for less. To that end as you already known, we've made significant investments in growing our investment teams and productivity enhancing technology aimed at delivering more alpha while also maintaining profitability. As you heard from Joe but it bears repeating, the performance of all of our core real asset and alternative income strategies remain strong in all relevant time periods. Today over the last one and three year periods between 98% and 100% of our total AUM is in strategies which are outperforming their benchmarks and 86% of our open-end fund assets are rated four or five stars by Morningstar. The combination of industry-leading performance and competitive fees for our real estate infrastructure and preferred security strategies has translated into sustained positive organic growth in meaningful market share gains versus our active peers. We intend to sustain these trends by staying focused and specialized and going deeper into the real asset space. For example, we are currently highlighting our five-star and top decile performing midstream energy fund which also offers a total costs that is among the lowest in the industry. This is what we mean by delivering more for less and what will hopefully sustain our market share gains across all of our core strategies. As you know from our reported results, overall close in the quarter were mixed with continued strength and net inflows in our open-end fund and advisory segments but with net outflows from our Japan and Japan ex-subadvisory businesses. However looking ahead with the exception of Japan's subadvisory which will take time to return to equilibrium, we believe the outlook for open-end funds advisory and even…

[Operator Instructions] And our first question comes from the line of Ari Ghosh with Credit Suisse. Please proceed with your question.

Sorry, if I miss this in the prepared remarks but just on Japan subadvised business, it looks like industry-wide sales have slowed little as distributors a sort of rethinking the way they sell U.S. REIT funds and are increasing education around the products over there. So, should we expect inflection point here anytime soon or is it kind of more of the same in the near-term as the kind of the sales trend slow a little bit?

That's a great question. I think that inflection points will vary depending on the manager. I think the overarching headwind is going to be not so much the distribution cuts which are largely or completely behind us, it’s the absolute returns from U.S. REITs. So this year U.S. REITs have generated negative returns and so at least up until this month our technology funds and high yield funds got most of the market attention in Japan. Going forward I think both the passage of time and how U.S. REITs perform absolutely will determine the level of interest on the part of investors. Secondly, most managers have different distribution arrangements and so whereas I think those managers who distribute exclusively through brokerage or wire house channels, I think will continue to face headwinds whereas those that have more diverse including regional banks and other non-brokerage distributors I think will do better.

And then just a quick follow-up. Given the REIT backdrop right now, which products are you most constructive on as net flow generators over the next 12 months. And then maybe give us a quick update on some of the newer launches including global logistics and your multi-strategy offerings as well. And then, if I can squeeze another one in there as well kind of talked all this morning, but on the M&A front we’ve been involved in some of the - like late stage due-diligence, recently so curious how the search for potential targets maybe is evolved over the last 12 months. And then on the other side of it, I think also typically seen some ongoing interest yourselves in potential targets. So curious if there has been any uptick in charter there or what that looks like? Thank you very much.

Is that all? I’ll handle the first part of that question and I’ll ask Joe Harvey talk about product pipeline. So looking forward there are number of our strategies that we think are well-positioned to garner significant flows that would include, low duration preferred as we've seen as Joe mentioned it generates significant yield with roughly two year duration, that's frankly been a strong interest on the part of retail and candidly I think it competes well with long short funds for institutional. Secondly, as both Joe and I talked about our fundamental outlook for midstream energy is extremely positive. It's one of the few segments of the market that is well below its prior highs and looks statistically cheap, and it's not an accident that coincident with us getting our five stars we recently reduced our expense cap on the fund to among if not the lowest in the industry. And so we're putting a very aggressive push on all of our midstream energy strategies and our mutual fund. Thirdly, we do expect REITs, particularly U.S. REITs to perform well. They've been flat for several years, they've underperformed private as Joe mentioned, and they are statistically cheap, they are many companies selling below asset value and as we've seen in prior cycles and private equity as record levels of dry-powder that tends to provide an NAV floor on the valuations of REITs. And so we like REIT fundamentals, we love their valuations, and so we think the outlook there is great and then as Joe will speak about we have similar phenomena in infrastructure, lots of dry powder, a great universe of public companies and we think a lot of that dry-powder will find its way into the public markets. And so, again, we see the fundamentals there strong, we see the technical's strong, and like midstream energy, we're planning to launch a number of new initiatives, and so I'll ask Joe to maybe expand on some of those.

Sure. So, in terms of strategy and product development, there are several dimensions to it and maybe I'll just talk about some of the investor needs that we see out there and - I mentioned in my comments but the first is a need for more active share and we achieved that through creating these very concentrated portfolios which is the antithesis of an index oriented strategy for the talented managers that can deliver that alpha that's where we think that active managers can get paid fairly in the future. So, for all of our strategies where we think that our focus portfolio is relevant, we either have them seated and are managing them or managing them for clients or we're evaluating whether to package those strategies in LP structures for certain market segments. Another area that we're seeing is interest in multi strategy portfolio. So, this could range across a spectrum from investing across the capital stack in real estate with real estate equity or prefers or real REIT stat to our multi-strategy real asset portfolios, and we've got three different versions of that which are across the risk and return spectrum. Then in terms of new markets, we've talked about developing strategies for the multi-family office, dominant foundation and outsource CIO markets where we see the greatest growth in AUM. And these are markets that have very particular needs. They want customized portfolios that are high alpha, that are differentiated, they maybe thematic or more focused across a thinner slice of a particular asset class. So, we have a range of strategies that either we're managing now. We have several focused versions of our real estate strategy which are ideal for those markets, they're also developing other strategies such as ESG real estate, a hedge version of real estate Then, turning to infrastructure where - it's a very dynamic market based on the capital needs and the activity that's taking place, we've exceeded global logistics and visual infrastructure strategies. We're currently working on others such as a small cap infrastructure strategy. And as I mentioned, the focused version of our midstream portfolio which could include some private elements to it. So, we've been very busy in the strategy development area and this gets back to a theme that Bob's been talking about, we've return in our annual report which is getting more focused and it starts with being creative and innovative in terms of our investment strategies. I'm energized along with our investment teams to develop these new strategies and we think we have a lot of opportunity.

Just to answer to your M&A question, there are no current - no conversations going on either side of that question.

Our next question comes from the line of John Dunn with Evercore ISI. Please proceed with your question.

One more on the advisory pipeline, you talked about the big takeaway from a competitor. But can you talk about, like, over the past couple of years how the profile has changed, stuff like there's been a change in the average mandate size or whether it's new clients or existing clients adding to what they already have and maybe any regional changes?

Sure, John. Well, I think it's changed in a number of ways. One is, some of our larger existing clients have access to go deeper and sort of their total solution and real estate or real assets. So, there's a concentration of managers going on institutionally. Second, in the subadvisory space, I think there is very substantial increasing pressure on large intermediaries, be they insurance companies or OCIOs, consultants, others, manufacturers of retirement products. There's tremendous pressure to replace managers who are not performing and/or who have higher fees and even in some cases where there is a conflict with the parent perhaps. So, our performance has put a lot of space between us and most of the rest of the industry and so a combination of our performance but also being current with the market on fees and costs is allowing us to go after some significant takeaways in the subadvisory space. More globally, we're seeing demand for listed everything in areas, in regions that where it didn't previously exist. And that's why we have made investments in our business development efforts both in Europe and the Middle East. And so - and interestingly most of that interest is coming from very large institutions that already have very significant exposure to real estate and infrastructure through private managers, and now they're very interested in adding to the other side of that which is listed. Whether that's because they subscribed to our thesis that a significant amount of the dry-powder in both areas is going to be deployed in the public markets or simply acknowledging that having investments and the knowledge of both the public and private side of real assets just makes them better investors. So, we'll definitely see a broadening out of institutional demand.

And you guys have been investing for a few years - heavily for a few years now and I think you have another real asset institute in the fourth quarter , and I think you kind of put in place - you've done that through just such an opportunities the MLP fund, can you talk about some of the specific things you've done and invested in, is going to make it so easier to sell this fund because it looks really teed keyed up.

Well we've, as you’ve suggested we've continued to grow headcount both in our wealth channel which includes not just salespeople but national account's people. But also we've grown headcount in our institutional and consultant relations teams. And so, as you touched on it’s a top decile the mutual fund is a top decile performer with the lowest cost. I mean it’s the best performer with the lowest-cost, the story is phenomenal. And so, we've never had more opportunities and voices to help disseminate that story both in wealth and institutionally. So we feel we’re in pretty good shape as Joe mentioned some of the more recent headcount we’ve added is in the team that is focusing on foundation, endowment, OCIO, multifamily office where I think their interest in energy infrastructure is high and where our ability to create with bespoke solutions in midstream, I think will be greatly appreciated. So we do have new people focused on discussing strategies like this with those newer markets.

[Operator Instructions] And our next question comes from the line of Mac Sykes with Gabelli Funds. Please proceed with your question.

Could we dig into the retirement space a little bit more, what are you seeing in terms of the acceptance of real assets on the retirement platforms in general versus your own distribution products?

Another good question. Retirement has been a space that as you know we made commitment to three years or four years ago. And candidly our penetration of that market while it is improving and it's been slower than we would have expected particularly in the target date space where we're just seeing. I believe until you see serious inflation and some catalysts that tells those product manufacturers that it's time to include real assets or an inflation hedge in those portfolios, there has been relatively less interest there. Secondly, with DOL having disappeared I think the move to open architecture and target dates has diminished significantly. Conversely we are seeing adoption of real assets in larger not manufactured product areas. So we do see large retirement funds adopting real assets and in particular listed. And so that's where we’re making progress less so in the target date space.

And with respect to capital allocation, can I assume the special dividend or the potential special dividend could be higher this year just given your strong cash generation and also the repatriation benefits that you mentioned earlier in the year?

I've got to give you the same answer we give every year at this time, is that we’re evaluating all of our potential uses of capital which we've talked about in the past both investing internally in exceeding funds and et cetera. And the Board will be taking this up at our next meeting and following that you'll know.

And there are no further questions. At this time, I'll turn the call back to Mr. Bob Steers, Chief Executive Officer for the closing remarks.

Great, well thank you all for dialing in this morning. And we look forward to speaking to you again about the fourth quarter. 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.