Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers fourth quarter and full year 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. At that time, if you have a question please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star, zero. As a reminder, this conference is being recorded Thursday, January 24, 2019. I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.

Thank you and welcome to the Cohen & Steers fourth quarter and full year 2018 earnings conference call. Joining me are our 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 statement. Also our presentation contains non-GAAP financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation. The earnings release and presentation as well as links to our SEC filings are available in the Investor Relations section of our website at www.cohenandsteers.com. With that, I’ll turn the call over to Matt.

Thank you, Brian. Good morning everyone and thanks for joining us. My remarks this morning will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on Pages 19 and 20 of the earnings release or on Slide 16 and 17 of the earnings presentation. Yesterday we reported earnings of $0.56 per share compared with $0.55 in the prior year’s quarter and $0.64 sequentially. Revenue was $93.6 million for the quarter compared with $99.3 million in the prior year’s quarter and $98.2 million sequentially. The decrease in revenue from the third quarter was primarily attributable to lower average assets under management. Average assets under management were $57.6 billion compared with $62 billion in the prior year’s quarter and $60.4 billion sequentially. Operating income was $34.5 million in the quarter compared with $41.2 million in the prior year’s quarter and $39.4 million sequentially. Our operating margin decreased to 36.8% from 40.2% last quarter primarily due to higher compensation and benefits in G&A when compared to revenue. Expenses increased less than 1% on a sequential basis primarily due to higher compensation and benefits in G&A, partially offset by lower distribution and service fees. The compensation to revenue ratio for the fourth quarter was 36.85%, which is higher than the guidance we previously provided of 33.75%. The increase in the ratio was primarily due to lower than forecasted revenue combined with accrued severance costs. For the year, the compensation to revenue ratio was 34.51%. The increase in G&A was primarily due to higher professional fees, travel and entertainment expenses, and sponsored and hosted conferences. We did not incur previously anticipated revenue sharing and sub-TA fees on retirement accounts at one of our intermediaries. The decrease in distribution and service fee expense was primarily due to the reversal of…

Thank you Matt, and good morning everyone. I’m going to discuss our investment performance and then summarize our 2019 priorities for the investment department. In the fourth quarter our asset classes, with the exception of midstream energy and resource equities, defended much better than the S&P 500, which lost 13.5%. The draw-downs in U.S. and global REITs were half or less of the S&P 500’s decline while global infrastructure experienced even greater resistance, with a decline of just 19% of the S&P 500’s drop. Preferreds returned negative 3.7%, which reflected widening credit spreads which more than offset the decline in treasury yields. Looking at our relative investment performance, in the quarter six of our 10 core strategies outperformed their benchmarks, and for the full year nine out of 10 core strategies outperformed. Keep in mind that beyond our core strategies, we typically have several versions of portfolios across the spectrum of risk and return as well as portfolios that represent more targeted subsets of the core strategy. For example, within preferreds which is counted as a single core strategy, we have seven composite track records managed by our preferred and fixed income group, including low duration preferreds, REIT preferreds, and contingent capital securities. Measured by AUM, 93% of our portfolios are outperforming on a one-year basis, 97% are outperforming over three years, and 98% are outperforming over five years. Eight-three percent of our AUM are in open-end funds that are rated four or five star by Morningstar. Market activity in the fourth quarter indicates that we are late cycle and is likely a harbinger of the next phase in the markets. Over a year ago, we believed the biggest investment risk would be the transition from quantitative easing to quantitative tightening. In late 2018, the market clearly became focused on…

Thank you Joe, and good morning everyone. As we all know by now, last quarter and especially December saw capital markets and asset flows that were volatile, complex and influenced by tax considerations. These conditions induced investors across the spectrum to initiate risk reduction, tax loss and rebalancing strategies, with the end result being high levels of money in motion. This market reaction also compressed and illuminated both the cyclical and secular challenges facing the active management industry. Although we were not immune from these market conditions, we remain well positioned and confident that market conditions notwithstanding, we will generate positive organic growth this year. As reported, we experienced net outflows of $1.2 billion in the quarter, the overwhelming majority of which was derived from our open-end funds. It’s our belief that the retail outflows were predominantly a year-end phenomenon which will be at least partially reversed in the first quarter. Consistent with the trends in recent quarters, the institutional advisory segment enjoyed robust investor demand and continued positive net flows, but our sub-advisory flows in the aggregate remained challenged in the quarter. Specifically with respect to the wealth channel, tax law selling and concerns regarding the widening of yield spreads had a major impact on our preferred securities open-end fund flows in the quarter. In total, our open-end funds had $1 billion of net outflows with the two preferred securities funds accounting for virtually all of that amount. Flows into our real estate and infrastructure funds were essentially flat; however, our industry-leading midstream energy fund bucked the sector trends and delivered $42 million of net inflows. Our optimism regarding the wealth channel’s return to positive flows this quarter and year is grounded in a number of relevant fundamental factors. First, we expect a not insignificant portion of the tax…

[Operator instructions] Our first question comes from Ari Ghosh of Credit Suisse. Please go ahead.

Hey, good morning everyone. Matt, maybe you can take the first one. Just on the 2019 comp ratio of 35.75 that you mentioned, is that projection based on 4Q AUM levels or are you baking in any market improvement that we’ve seen over the last three weeks? Then just to confirm, the starting point that you mentioned for G&A was $46 million and you expect that to remain flattish for full-year ’19, all else equal?

Yes, so with the comp ratio, we do our own internal forecasts but we are starting off at our year-end AUM levels, and we’re making assumptions like you guys do on flows and markets. Although we are going to have a very tight control on headcount, there’s always going to be one or two that need to be added for strategic and important asset gathering reasons, so our comp ratio is based on that. Obviously it’s January 24, so every early on. It’s our best guess of where are at the moment, and as the year unfolds we’ll react accordingly; but we feel good with that number just based on the $54 billion of where we’re starting. The G&A, in my points I’ve cited the non-GAAP G&A for the year because there is sometimes a little confusion, since we don’t provide a non-GAAP income statement; but yes, we expect G&A to be flat to 2018 but with a downward bias. Although we don’t have quantified numbers, we’re extremely busy looking at all of our expense base and would be disappointed, honestly, if we wound up flat to 2018.

If I could just add maybe a little color, starting the year with assets that were so depressed and with negative momentum in the marketplace, I think our philosophy, whether considering the inputs to a comp ratio or our approach to managing controllable expenses, has been to plan for the worst and hope for the best, so I would say that our approach to cost management, our approach to assessing or projecting net flows or market are very conservative.

Got it, that’s helpful. Then if you could provide any color on retail trends, maybe, that you’ve seen early in 2019, especially in your preferred funds, and then on the $2.5 billion of mandates in consideration that you called out, are these from new client relationships, existing clients, is it lumpy in nature, and any--you know, if you could provide some information on that, that’d be great as well. Thank you.

Sure. We’ve had positive flows into virtually all of our open-end funds so far this quarter by a wide margin. The greatest inflows are into our preferred securities fund, and so as we anticipated ending the quarter and beginning the year, I think we’re seeing a combination of some of the tax loss selling coming back, but frankly new investors excited about the investment opportunity there. We’re seeing solid flows into real estate funds as well, so so far, so good. The pipeline or the $2.5 billion-plus that we’re waiting to hear from represents all new clients. It’s a little lumpy in that, as I mentioned in my comments, what we’re seeing is quite a number of very large institutions, both domestically and outside the United States, who have heretofore invested in real assets almost exclusively through private investing, are pursuing the public markets now for the reasons I mentioned. I think the $2.5 billion is a minimum - there’s others in the pipeline that haven’t gotten to the final stage yet, so it’s not just one or two, but it is large and a little bit lumpy.

Very helpful, thank you.

Thank you. Our next question comes from the line of John Dunn, Evercore ISI. Please go ahead.

Good morning. You guys had gross sales go up, I think in the four major categories, up 33% quarter over quarter, so you guys are selling a lot of stuff. Can you talk about that side of net flows, maybe where that aggregate number could go, and maybe what a little bit environment in 2019 would mean for it?

Yes, it’s hard to really get a trend of your gross inflows and outflows. I think it’s encouraging that in the open-end funds, we saw a large increase in our inflows, showing that there’s interest in a lot of our real estate funds where we were seeing the inflows occur. The outflows were distortive, as mentioned, because of the client redemptions and tax loss selling, but we’re encouraged by that trend. I think we’re looking to have lower outflows and maybe stay in the trajectory of the inflows, and that’s where we’re kind of optimistic in the wealth channel for 2019.

John, as we talked about, as you know, the fourth quarter and particularly December was pretty wild and woolly. The volatility was extreme, and so it triggered all sorts of strategies, tax losses being the most obvious, but there were plenty of others. I think it’s hard to extrapolate too much from there. I think it’s more instructive to focus on the fundamental factors that I referred to, so one, top quartile, top decile funds are selling, anything lower than that is not. Asset allocations to defensive dividend paying uncorrelated asset classes like ours are rising, both in the wealth channel which is--I think you’re seeing shifts away from high risk-on, call it technology and related strategies, to more defensive strategies that accrues to our benefit, and real estate infrastructure preferreds as well, and the trends we’re seeing institutionally. So it’s only been three weeks, but with the exception of sub-advisory we have solid positive flows in every channel. I’d like to extrapolate the rest of the year from that, but so far, so good.

Got it. A little more on Japan - it looks to us like flows have improved in January, and if that holds, it would be quicker than other recovery periods in the last couple distribution cut cycles. Are you guys seeing that, and is [indiscernible] doing anything different this time around?

There’s a number of, I think, positive fundamental issues or developments. One is, and some of you have inquired, the regulatory pressure which began two or three years ago on these monthly higher dividend paying funds appears to have waned and is no longer depressing marketing activity. Two, the top selling funds of last year were funds like robotics and AI and what I would call more speculative funds, and they had a very poor end of year. Those funds are not selling any longer. The need for income continues to be extreme and unabated in Japan, and so--and I would also add that one of the two U.S. REIT funds, the larger of the two has actually been in positive flows for several months now. I think the time between the last cuts and now has helped the regulatory pressure dissipating, perhaps gone completely now, and again not unlike domestically, a shift in investor appetite more towards dividend paying, defensive strategies. I would also point out, as Joe alluded to, we were the number one performing REIT fund in Japan last year, ahead of a fairly large group of decent competitors.

Got you. Thanks very much, guys.

Thank you. Our next question comes from Michael Carrier of Bank of America. Please go ahead.

Thanks guys. Matt, maybe first one just for you, just on the expenses. You mentioned you’re forecasting it based on your outlook, and obviously the tougher start with the December fall-off. As we think about going through the year, maybe just update us on how you think about what portion is variable in case the revenue environment gets a little bit tougher. I think you had some severance in the quarter. I just wanted to make sure we had the right amount, just so we’re thinking about adjusting that out.

ON the comp side, we said that the variation from the third to fourth quarter was primarily severance. It was about $0.025, if you’re just thinking about getting a better run rate. Our ratio of controllable to non-controllable is about 30% being controllable. That said, even in the non-controllable expenses, as we had done a few years back, there’s always opportunity with vendors, with number of users of a system and things of that nature, so we’re looking at everything. That’s why I say that at worse, we would expect it to be flat to ’18, but we would be disappointed if we weren’t able to achieve some saves year over year.

Okay, thanks. Maybe one for Joe or Bob. When I look at--and all your comments are helpful in terms of the outlook, but when you look at the outlook, you have the hardest thing - you have the performance with a lot of active managers, that’s a challenge. When you look at what you’re hearing from some of the clients, both the wins and some of either the reallocations or the redemptions, has some of the headwind been more from a cyclical standpoint and maybe that’s shifting, as Bob, I think you mentioned? Has it been new product competition that’s been coming into some of the categories, or has it just been changes in some of the distribution dynamics, meaning where you’re strong versus maybe where you have more penetration or work to do? I’m just trying to get a sense of some of the drivers, because obviously the performance is there. It sounds like your tone on the outlook is more variable.

Mike, it sounds like your question is focused mainly on retail. Is that right?

I think probably mostly on the retail side, because on the institutional side you gave a lot of color.

Sure. Well look, it’s no secret on the retail side, we compete with passive ETFS consistently, and we’re one of the few managers that is in net inflows in the active long-only REIT space, for example, and passive continues to compete well. We see some other products. We have some private equity firms that have been in the market with non-traded real estate product, and historically the competition is mainly because we’re competing against a brand name. Historically those products do not perform well, so over a full cycle we end up getting those assets back. But you know, it is more competitive. That said, I think what’s in our favor is, as you know, your firm and others are narrowing their list of managers, and in particular much, much greater emphasis on recommended and, even more importantly, focus lists, and look, we’re the category killer. We’re on the recommended list, we’re on focus lists, and so in many ways we have many fewer competitors. The generic REIT or infrastructure, or even MLP mutual fund which is a two, three or even four stars is not on the focus list, and our partners actually help to elevate our performance and really provide a much stronger platform for us to continue to gain market share. I would point out, we continue to gain market share in the retail channel in virtually every strategy that we manage versus active managers, so to me the winners are those that can deliver that kind of performance and passive, and the losers are the active managers who cannot deliver five star performance.

I’d just add from a market appetite perspective, from an asset allocation perspective, looking backward for the past two years, a lot of our strategies have been seeing headwinds from the spectre of rising interest rates, whether it’s REIT strategies or preferred strategies, midstream energy not so much - the issues there have been more the fundamental cycle. But when you think about the comments I made on how the macroeconomic environment is turning and if we are in fact seeing a peak in process in bond yields, that headwind could turn to tailwinds. Bob mentioned that we’ve seen several strategies put buy recommendations on defensive equity strategies that have high income components and earnings profiles that are more stable, so it could be that if we get this--if the macro plays out as we suspect, we could have some of those headwinds turn into tailwinds, or maybe to neutral winds.

Mike, if I could also just add a little color on the institutional side, whereas some of those private equity firms are trying to raise retail assets, as Joe and I outlined and consistent with our goal to be able to generate both positive net organic growth and rising fees, not declining fees, we are introducing early this year some strategies that are not in 40 Act wrappers, that are going to be marketed to some of the same, whether it’s family offices, OCIOs, the endowment-foundation market that heretofore have been mainly dominated by private equity firms. We think those investors have the deep knowledge of the value of an asset allocation to real assets and alternative income strategies, they like highly concentrated, focused, thematic, limited capacity strategies, and obviously we’re not competing with passive fees in those channels so we’re very excited about this initiative.

Okay, thanks a lot.

Thank you. Ladies and gentlemen via the phone lines, you may press the one followed the four on your telephone keypad if you would like to register a question or comment. Once again, that is the one followed by the four on your telephone. Our next question comes from Mac Sykes of G.Research. Please go ahead.

Good morning everyone. You outlined some moving parts in Europe, but I just want to make I have this right. It sounds like fee rates will benefit from a future product mix, so into wealth and away from sub-advisory there at the moment. When I think about that [indiscernible] contribution, will that be additive to the overall fee rate?

Yes, I think the combination of lower fee business sort of being flat and higher fee business showing the greatest organic growth, that is what we hope will be the engine that will keep our fee rates certainly from declining, if not possibly even migrating a little bit higher.

Okay, and then could you just comment a little more on fundraising in Europe in general, just some of the noise around Brexit? Assuming we do get some clarity on those politics in the next couple months, could that be a catalyst for an acceleration in your progress there?

That’s a tough question. Institutionally we’re not--you know, we’re seeing strong investor interest. There’s been no diminution of accelerating demand on the institutional side. The wealth side, as we’ve talked about previously, is coming along more slowly than we originally expected, but it is coming along and part of that issue is there are some significant institutions that are not going to recommend or focus on our funds until they get to a critical mass of $200 million to $300 million, which we expect to achieve in our key funds this year. But I don’t think we’ve really seen any impact from Brexit other than our own contingency planning there.

My last one, a two-parter, the new series funds that you’ve outlined, are they being launched with seeded track records, and then how are you thinking about the margins in that business versus the overall business?

There’s a wide range of approaches to those strategies. There are several strategies that are now very much in demand, our concentrated strategies in global and U.S. real estate that have 15 and 20-year track records, and for one of those we’re looking at an LT structure. When we launch a new fund, we typically need to put in some capital. There are other strategies where we’ve just newly developed them and we don’t have long track records, but for the target markets that we talked about, we don’t think you necessarily have to have a track record, especially if you are managing a spinoff strategy or an extension of the things that we’re well known for. But we’ll have a variety of approaches, there will be some vehicles involved, others will be offered as separate accounts. In terms of the question of the profitability, we believe we can get attractive fees relative to our current fees. One of the issues, however, is that these investors like strategies that are unique and sometimes have limited capacity, so we may not be able to achieve the scale in some of these strategies that we have historically with broader mainstream strategies.

Great, thanks very much.

If I just could add quickly to that, what those strategies also do is frequently when we offer unique strategies like that, we end up managing two, three, four additional strategies with the same client, so even though a strategy may be capacity constrained, oftentimes we end up adding assets in related strategies - you know, global real estate, infrastructure and so forth.

Thank you. Our next question comes from Robert Lee, KBW. Please go ahead.

Great, thank you. Thanks for taking my questions. Most of them have been answered, but just a couple of minor things, maybe. You had mentioned that in distribution services, expenses in the quarter benefited from some prior reversals. Can you maybe just size that for us so we can get a sense of what the run rate is? Then maybe a follow-on on the expense side, I’m assuming that Q1 will have some--there’s normally some seasonal upward pressure in comp just as you pay FICA taxes and things like that.

Right, thanks Rob. With respect to the frictional costs on the payment of the bonuses and everything, we actually accrue those during 2018, so the comp ratio that we had mentioned would be a good comp ratio to use for the first quarter, inclusive of paying out the bonuses, which all those costs had been previously accrued, so nothing unique for us there. On the distribution, I would say if you wanted to size it up, it’s about--it’s between $400,000 and $500,000 a quarter. It was one of our larger intermediaries that had indicated towards the end of 2017 that they would be initiating rev-share on certain retirement assets that we have with them, and they didn’t bill us, so whether or not it’s going to get resurrected in 2019 is unclear. But we closed 2018 with a provision that we didn’t need, so we reversed it.

Okay, great. Then maybe just a follow-up question on any advisory. Could you maybe--and I apologize if you mentioned this early on, but give us a sense of some of the geographic breakdown of where you’re having the most success there, and maybe update us again on your view of what’s maybe driving that on a geographic basis.

Well, we’re seeing demand mainly from North America, Europe and the Middle East. We’re not--there’s very little of that, of the pipeline or the pipeline we’re waiting to hear about, very little of that is from Asia, so it’s really North America, Europe, the Middle East. I think what’s driving is the factors that Joe and I touched on already. Importantly, I think a significant part of that is sort of the multi-strat opportunities that we’re seeing, and we’re seeing it from public funds, we’re seeing it from Middle Eastern entities, we’re seeing endowments who are interested in not one of our strategies but three to five of our strategies, and some of the larger pools are interested in essence outsourcing their listed real estate or infrastructure allocation to a single provider. You know, it’s really not to dissimilar from wealth, where again you’re seeing the intermediaries saying, we’re going to identify the two or three top decile, top quartile managers, and everyone else is going to not have shelf space. I think you’re seeing the same thing institutionally, where large institutions are looking to establish strategic relationships with people, with firms that dominate their asset classes and they’re handing over a wide swath of their portfolios, albeit they have greater negotiating positions. But these are great relationships because they’re large and they’re very long term, they’re strategic, and that’s the key to our thinking today. Whether sub-advisory or elsewhere, we’re focused on developing strategic relationships, not just any.

Maybe as a follow-up to the advisory comment, just curious if you’re seeing any increased interest or maybe demand from some institutional accounts to put in place some type of performance fee structure, maybe a lower ongoing management fee and then having some kind of performance fee on top of that. Are you seeing any of that?

It depends on the strategy. Yes, we’re seeing some of that, but again I think there is--historically in our experience, there’s been two approaches that we’ve seen clients with respect to performance fees. One is a somewhat cynical approach of just cutting fees so that if you deliver massive alpha, you can get back to your base fee, and as you would expect, your ability to negotiate fees that are fair for both parties is a function of how strong your performance is, how unique your strategies are, and I think that’s why if you’re in core style boxes, you have no choice but to acquiesce, whereas the types of strategies that Joe outlined, nobody else is doing and very few can do. That’s one of the reasons that we like the new areas and markets that we’re focusing on. But yes, for the large cap, more generic strategies, there are clients who are interested in having that discussion.

Great, thanks for taking my questions.

Thank you. There are no further questions at this time. I will turn the call to Chief Executive Officer, Bob Steers for closing remarks. Please go ahead, sir.

Great, well thank you all for calling in this morning, and we look forward to speaking to you after the first 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. Thank you, and have a good day.