Cohen & Steers, Inc. (CNS) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions]. 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 Fourth Quarter and Full Year 2020 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 annual - earnings release and presentation; our most recent annual report on Form 10-K; our quarterly reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020; and our other SEC filings. We assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund. Our presentation also 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 to the extent reasonably available. 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.

Thanks, Brian, and good morning, everyone. My remarks this morning, as usual, will focus on our as-adjusted results, which exclude costs of $60.2 million associated with the initial public offering of the Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund. A reconciliation of GAAP to as-adjusted results can be found on Pages 19 and 20 of the earnings release or on Slides 16 through 18 of the earnings presentation. Yesterday, we reported record earnings of $0.76 per share compared with $0.74 in the prior year's quarter and $0.67 sequentially. The fourth quarter of 2020 included cumulative adjustments to compensation and benefits and income taxes that lowered our compensation to revenue ratio and effective tax rate, respectively. Revenue was a record $116.6 million for the quarter compared with $109.8 million in the prior year's quarter and $111.4 million sequentially. The increase in revenue from the third quarter was primarily attributable to higher average assets under management, partially offset by lower performance fees when compared with the third quarter. Our implied effective fee rate was 57 basis points in the fourth quarter compared with 59 basis points in the third quarter. Excluding performance fees, our fourth quarter implied effective fee rate would have been 56.3 basis points, and our third quarter implied effective fee rate would have been 5 point - 56 basis points. Operating income was a record $49.4 million in the quarter compared with $47.4 million in the prior year's quarter and $44.2 million sequentially. Our operating margin increased to 42.4% from 39.6% last quarter. Expenses were essentially flat compared with the third quarter as lower G&A was offset by higher expenses related to distribution and service fees as well as compensation and benefits. The decrease in G&A was primarily due to lower professional fees and a reduction in virtually hosted conferences. The increase in distribution and service fee expense, which as noted earlier, excludes the cost of our new closed-end fund, is primarily due to higher average assets under management in U.S. open-end funds. And the compensation to revenue ratio for the fourth quarter was 35% lower than the guidance we provided on our last call. The decrease was primarily due to an adjustment to reflect actual incentive compensation to be paid. For the year, the compensation to revenue ratio was 36.1%. Our effective tax rate was 25.8% for the fourth quarter, which included an adjustment to bring the full year rate to 26.65%. The lower full year tax rate was primarily due to the relationship between a consistent amount of permanent differences relative to higher-than-forecasted pretax income. Page 15 of the earnings presentation sets forth our cash, corporate investments in U.S. Treasury Securities and seed investments for the current and trailing 4 quarters. Our firm liquidity totaled $143 million at quarter end compared with $201.9 million last quarter. Firm liquidity as of December 31 reflected the payment of approximately $60.2 million for costs associated with our new closed-end fund and a special cash dividend in December of approximately $47 million or $1 per share. Over the past 11 years, we have paid a total of $14 per share in special dividends. And we remain debt-free. Assets under management totaled a record $79.9 billion at December 31, an increase of $9.4 billion or 13% from September 30. The increase was due to net inflows of $3.9 billion and market appreciation of $6.4 billion, partially offset by distributions of $859 million. Bob Steers will be providing an update on our flows and institutional pipeline of awarded unfunded mandates. Now I'd like to briefly discuss a few items to consider as we begin the new year. With respect to compensation and benefits, we expect to balance anticipated revenue growth from year-end assets under management that exceeded our 2020 full year average assets under management by about 15%, with our focus on controlled investment in order to maintain our industry-leading performance, broaden our product offerings and expand our distribution efforts. As a result, we expect that our compensation to revenue ratio will decline to 35.5% from the 36.1% recorded in 2020. Continuing with the theme of investing in our business, we expect G&A to increase by about 6% from the $42.6 million we recorded in 2020. After finishing last year 8% below 2019, which was largely driven by lower travel and entertainment and a reduction in hosted and sponsored conference costs as a result of COVID conditions, we intend to make incremental investments this year in technology, including the implementation of new systems, cloud migration and upgrades to our infrastructure and security as well as in global marketing, focused on hosting virtual conferences and expanding our digital footprint. We also expect that travel and entertainment costs will increase as conditions begin to return to normal. We expect that our effective tax rate will be 27.25% in 2021. And finally, we will have earned a full quarter and full year of fees from our new closed-end fund. And so all things being equal, we expect our implied effective fee rate, excluding performance fees, will increase by about 1 basis point. And now I'd like to turn it over to Joe Harvey, who will discuss our investment performance.

Thank you, Matt, and good morning, everyone. Today, I will review our investment performance and provide some perspective on how our largest asset classes are positioned for 2021. The markets were ebullient in the fourth quarter as investors continued to look beyond the valley of the pandemic, encouraged by progress with the vaccine and anticipating a potential economic recovery, relieved by clarity on our new administration and government and supported by record monetary and fiscal stimulus. The macro environment in 2020 was unprecedented with the Fed's balance sheet increasing by over 75%, the budget deficit reaching the highest level since World War II, money supply growing 25% and negative yielding debt reaching $18 trillion globally. Although we had some of the best relative performance ever in 2020, our asset classes, except for preferreds, lagged their market counterparts meaningfully. Summarizing our performance at a high level, preferreds performed competitively within fixed income. U.S. and Global REITs and infrastructure significantly trailed the technology-led performance in stocks. And certain of our strategies with energy allocations underperformed due to concerns about the secular decline in the demand for oil, considering the growing focus on renewables. Looking at our performance scorecard, in the fourth quarter, 5 of 9 core strategies outperformed their benchmarks. For the last 12 months, 6 of 9 core strategies outperformed. As measured by AUM, 84% of our portfolios are outperforming on a 1-year basis, an improvement from 70% last quarter, mostly due to our preferred portfolios. On a 1- and 3-year basis, 99% are outperforming, which was consistent with last quarter. 90% of our open-end fund AUM is rated 4- or 5-star by Morningstar, compared with 92% last quarter. Preferreds returned 4.6% in the fourth quarter. We outperformed in both our core and low-duration preferred strategies. After a brief stretch of underperformance, we've now outperformed for 3 consecutive quarters. Our 12-month figures are beginning to turn positive across our accounts, which led to the improvement in our 12-month outperforming AUM. While our relative performance was mixed in 2020, we outperformed all peers. Taking stock of the critical factors for preferreds, unprecedented monetary stimulus has helped to compress credit spreads to near record low levels. Credit quality should benefit as the recovery progresses. With 2020 elections over, the expectation for more fiscal stimulus, and potentially, with the bottoming of inflation, treasury yields may be transitioning from declining to rising. As a result, companies are taking their cue from markets and issuing significant amounts of preferreds at a very low cost of capital. Taken together, these factors lead us to expect lower returns from preferreds, and we are currently suggesting that investors consider our low-duration strategy. In 2020, real estate and infrastructure performance materially lagged the broader stock market indexes as certain subsectors of our asset classes have been uniquely hit by the pandemic, and while they have representation and technology-related subsectors, it is less than the amount of tech in the market overall. With that as a starting point, we believe that conditions later in 2021 and 2022 may create good entry points for these asset classes as the vaccine continues to be distributed, businesses reopen and recovery brings back the more cyclical real estate and infrastructure subsectors that have been disproportionately hit. In the fourth quarter, infrastructure returned 8.4%, which lagged the global stock index return of 14.8%. While we underperformed our benchmark in the fourth quarter, we exceeded our excess return target for the full year. Assessing the infrastructure universe's sensitivity to the economic situation and pandemic, we believe that 9% benefits from secular trends, 50% is relatively unaffected by the economy and pandemic, 20% is directly sensitive to the economic recovery, and 21% will be reliant on successful penetration of the vaccine. Key investment themes for infrastructure include digital transformation of economies, including 5G deployment; decarbonization and development of renewable power; and the potential for recovery in travel. We continue to see adoption of infrastructure allocations with asset consultants and institutions. With the new administration and potential for additional fiscal stimulus via infrastructure, we also believe that wealth advisers may have more interest as well. In fact, our closed-end fund, UTF, is now trading at a premium to its NAV, indicating investor demand and anticipation of recovery. In the fourth quarter, U.S. real estate returned 8.1% compared with the S&P 500, which was up 12.1%, and global real estate returned 13.2%. For the year, we outperformed our benchmarks in all strategies by region and style and by amounts that exceed our excess return targets across the board. In terms of where real estate is headed, all eyes are on the vaccine and the timing of the reopening of the economy. Currently, some sectors such as apartments are seeing stabilization with rents flattening out, which is a key step in the recovery progression. The secular winners such as cell towers, data centers and industrial continue to have great fundamentals. Probably, the biggest unknown relates to return-to-office dynamics and the proportion of occupancy that may be permanently impaired. Broadly speaking, lenders have been kicking the can down the road, but banks are now beginning to feel pressure to address problem loans. While pricing transparency for many sectors is opaque, we expect transactional activity to pick up as the economic recovery takes hold. Overall, on most metrics, REITs are very cheap, as cheap as they were in the depths of the global financial crisis in 2009. As the recovery unfolds, considering how much REITs have lagged, we would expect a catch-up in performance. I also want to mention that our real assets multi-strategy portfolio had very good relative performance in 2020, outperforming by 200 basis - 240 basis points for the year, which puts us in good position with investors who are looking for inflation protection. Looking backward over a period of low inflation, investors had not felt a need for this portfolio, which includes real estate, infrastructure, resource equities, commodities and short-duration credit. However, it has the highest inflation sensitivity of all of our strategies, and we are seeing increased interest in inflation protection, perhaps no surprise considering the deficit and monetary statistics cited earlier. As Matt mentioned, allocating resources to our investment department is always a priority. This past year has been particularly gratifying as we continue to see the growing return on investments we've made over the past 5 years in our people, IT, processing strategies and data and quantitative resources. One example is our transition of U.S. REIT team leadership that we announced in the fourth quarter. Our current head, Tom Bohjalian, will be retiring in the middle of this year, and our succession plan has been put in place with Jason Yablon assuming leadership in partnership with Matt Kirschner. It's hard to imagine replacing as a strong a leader and investor as Tom. But in the spirit of continuous improvement, we expect Jason to give Tom a run for his money. We'll continue to build the team for depth and succession. We will never be complacent on performance and innovation, and we will continue to drive our Alpha Mining initiatives. Last quarter, I noted that we have a stable of - track record accounts for strategies that have been developed over the past 3 years, ranging from existing strategy extensions to new ideas generated by our investment teams. All but one outperformed benchmarks last year. We'll be adding more track record accounts in 2021, including one in renewables and clean energy. Our challenge will be to convert these investment ideas into investor allocations. Our recent hire of Greg Bottjer from Nuveen, who heads Global Product Strategy and Development, will help us bring some of these strategies to market as well as map out real asset strategy extensions for the next phase of growth. Overall, I'd say the state of our investment department is strong. And we are optimistic about our ability to capitalize on the investment opportunities that are expected to come along with a post-pandemic economic recovery. Thanks for listening. I'll turn the call over to Bob Steers.

Great. Thank you, Joe. Thank you, everyone, for dialing in this morning. Let me start by stating the obvious. 2020 was a year that all of us would like to forget. The one-two punch of COVID and political and social upheaval has had a devastating impact on our culture and economy, and we're not out of the woods quite yet. I'll leave it to others more qualified than me to opine on where we go from here, but thankfully, we do see light at the end of this tunnel. In contrast to the unprecedented challenges that we faced last year, U.S. equity markets posted remarkably positive returns led by the COVID beneficiary plays as demonstrated by the strength in the FAANG and related stocks, as Joe already touched on. While most active managers continued to battle the dual challenges of declining fees and net outflows, the equity markets offered them a reprieve with the S&P 500 and NASDAQ up 16.3% and 43.6%, respectively, last year. While alternative income strategies such as preferred securities also performed well, delivering returns in high single digits, most real asset strategies, notably real estate and infrastructure, did not. As Joe noted, global and U.S. real estate securities indices actually declined by 9% and 5.1%, respectively, while global listed infrastructure indices also fell by 4.1%. It's a point of pride for us that unlike our peers in the industry that benefited from market appreciation, we faced significant market headwinds last year, and yet, still generated industry-leading organic growth. Importantly, our growth was broad-based and - with almost every region, strategy and channel contributing to record-breaking results. We ended the quarter with record assets, as Matt said, of $79.9 billion. Assets under management in each of the open-end fund, closed-end fund and advisory channels also ended the year at record levels. In the quarter, gross inflows were a record $7.3 billion and net inflows contributed $3.9 billion. Virtually, all the organic growth in the quarter was derived from the wealth channel. Our confidence in the new generation of closed-end funds paid off in the quarter, and we added $2.1 billion of net new assets through the IPO of our Tax-Advantaged Preferred Securities and Income Fund. Although not a record, our open-end fund channel registered $1.7 billion of net inflows, driven mainly by preferred securities and U.S. real estate strategies. Notably, each of the RIA, BD, DCIO and Bank Trust verticals generated positive net inflows in the quarter. Our non-U.S. open-end fund showed modest improvement, albeit from low levels, with net inflows of $41 million in the quarter. We are continuing to build out our EMEA wholesale distribution team and fully expect that these nascent positive trends will improve. Consistent with more recent trends, Japan subadvisory saw net inflows of $83 million before distributions and $293 million of net outflows after distributions. And it was a quiet quarter for subadvisory ex Japan with $10 million of net inflows. While the headline results for the advisory channel of $101 million of net outflows was disappointing, the underlying trends continue to be strong. 5 new mandates totaling $297 million, combined with $282 million of inflows from existing clients, contributed $579 million of gross inflows. Offsetting these inflows was an unexpected $301 million global real estate outflow, stemming from the termination of a relatively new institutional account, along with a global listed infrastructure termination totaling $299 million. We do expect the balance of the terminated global real estate account of approximately $960 million to be withdrawn in the next quarter or 2. Lastly, the quarter ended with a record-setting pipeline of $1 billion, but unfunded mandates of $1.7 billion. The quarter began with a $1.2 billion pipeline. $400 million was funded in the quarter, and another $280 million has been deferred due to funding uncertainties. New awards totaled $1.1 billion. These new awards were diverse both by strategy and region. We added mandates in 5 different strategies with global real estate and global listed infrastructure being the largest and with representation from each of North America, EMEA and Asia. Demand for our strategies, especially real assets remained strong, driven by relative performance, attractive valuations and rising concerns regarding future inflation expectations. As you know, in recent years, our overarching goal has been to achieve positive flows in each of our core strategies and in every channel and region simultaneously. To accomplish these results, we have invested continuously in our investment teams, IT, existing and new channels of distribution, innovative new investment strategies, and most importantly, in our people and culture. So while 2020 was a terrible year in so many ways, it was also a year to be proud of at Cohen & Steers. All of our teams came together under crisis conditions to deliver a cascade of record results. For the full year, firm-wide gross sales were $27.4 billion, which exceeded the prior record achieved in 2011 of $17 billion by 61%. Open-end fund gross sales of $17.6 billion were 41% above the prior record, and closed-end fund sales of $2.7 billion similarly blew by the prior record by more than double. Even in the transition year for us in the U.S. institutional market, our advisory channel recorded sales of $4.3 billion, which was more than 100% better than the prior - the record set in 2018. Net inflows last year also set a record at $10.8 billion. While this was only modestly above the prior record set in 2011, it highlights the important progress that we've made in diversifying our sources of organic growth. In 2011, net inflows were $10.7 billion. However, subadvisory inflows from Daiwa Asset Management contributed 81% of that amount in 1 single strategy. In contrast, last year, 6 strategies across open-end funds, closed-end funds and advisory contributed $5.4 billion, $2.6 billion and $1.6 billion of net inflows, respectively, and each setting individual channel records and accounting for almost 90% of firm-wide totals. Achieving these results despite significant market declines for most of our strategies is extraordinary and bodes well for the future. Strong investment performance in our core strategies has helped us to gain significant market share from our active peers and even passive alternatives. Seeding and launching innovative new strategies, such as low duration and tax-advantaged preferred securities, next-generation real estate and digital infrastructure has been well received, and our product pipeline is robust. In addition, expanding and improving the delivery of our strategies through the launch of usage funds, CITs, SMAs and closed-end funds has materially broadened our distribution reach and opportunities. Lastly, our focus on improving underperforming distribution channels such as U.S. Advisory is starting to pay dividends. Maintaining the current level of organic growth will not only require a continuation of industry-leading investment performance but also the development of the next generation of innovative real asset and alternative income strategies to complement our existing lineup. We believe that in the current market cycle, a significant shift in asset allocations into real assets, seeking to capitalize on depressed valuations and the potential to hedge against unexpected inflation is taking place. Current and prospective clients are looking to us to implement their strategies through both listed and private markets. In response to our clients' needs and to maintain our leadership position in real assets and alternative income strategies, we plan to expand our opportunity set and related capabilities to include non-traded equity and fixed income investments. In addition, an important point of differentiation for us will be the ability to deliver all of our capabilities through strategically allocated and bespoke solutions. As always, we're committed to invest as necessary to drive our long-term growth. With that, I'd like to ask the operator to open up the floor to questions.

[Operator Instructions]. Our first question comes from John Dunn with Evercore ISI.

Kind of an overarching question. You just talked about a lot of stuff, but maybe you could reframe it for us. You've done a ton over the past decade in distribution and on the investment side to strengthen and diversify the company. Can you talk about how CNS is different now since - compared to when we had the taper tantrum or when rates started going up?

Well, I'd say most simply, our product set, our product lineup is much more diverse, and our channels of distribution and the delivery vehicles are much more diverse. In addition, I would say that we and others in the industry have done a very good job of educating the marketplace about the benefits of combining listed along with private real assets in portfolios. And - so we've seen a huge uptake of listed real assets by institutions, sovereign funds and the full range of institutions. So the universe of investors has gone over the last 20 years from primarily retail to a very healthy balance. And I think also our strategies and the investors who are embracing them are investing in our strategies for more than just yield. Again, I think many years ago, I think REITs and related real assets were viewed mainly as income vehicles. So it's broad-based. It's getting broader as we have next-gen real estate strategies, and also as our infrastructure team expands into renewables. We don't see any limit to how our real asset strategies can grow as our global infrastructure and real estate requirements change and grow as well.

Got you. And then you mentioned the U.S. Advisory piece. Maybe a little more on that, what's the outlook for U.S. Advisory after the revamp and what's changed? And what are maybe some positive affirmation points that we can kind of track as we go along?

Well, we brought a new leadership in the last 18 months. And we reorganized to a regional and blended approach, where we have regional teams comprised of business development, consultant relations, relationship management people on regional teams. And that reorganization was completed late last year. And - so I would expect a positive trajectory in gross and net flows. I doubt we'll hit our maximum stride this year, but certainly should next year. So I think what you should look for just as you should look for in our EMEA wholesale or retail channel, the trajectory should be positive. I hesitate to give you absolute targets because there's so much we don't control. But in both of those channels, which are - EMEA is relatively new. New leadership there as well. You should expect to see improving net inflows in both.

I must add - I would add, John, that the way we're going to measure our success is through market share. And what has led to us making these changes in leadership and organizational structure and process is that we felt like we haven't gotten our fair share of the market. It's a limited data point, but just over the past quarter and a half, our batting averages of the finals that we're winning have been very good, in fact, almost perfect. But - and it's a short time frame of measurement. But I think that's a good early indicator. But I think this is a project that you should evaluate over a 2 to 3 year time frame, and we're 1 year into it.

Our next question comes from Mike Carrier with Bank of America.

Maybe first one, just on the institutional, I think you guys mentioned $1.7 million in the pipeline. And then just in terms of some of those redemptions, they seem kind of chunky and a little bit like unusual just given your guidance performance. Was there anything like, I guess, unusual, I mean, about the rationale between those decisions in the quarter?

Yes. Mike, thanks for the question. There were two totally unrelated: one, the global listed infrastructure termination was expected. It was an unusual strategy for us that, in the client's mind, underperformed. And so that, we knew was coming. The larger global real estate mandate, which was over $1 billion, we were a little surprised. It was an extremely large global entity that, to their credit, invested about $1 billion at the bottom of the market back in April or in that time period. And certainly, if we had known that it could be a relatively short-term trade, it would have been a business that we would not have been interested in, but we were a little surprised by it. But they made substantial gains and had, I think, other investment considerations. And so I would call that a very unusual one-off that isn't indicative of anything. I would also say the global listed infrastructure termination is not indicative of anything because, as Joe said, we had - for all of our traditional strategies in that space, we had a strong year last year. So we don't foresee any performance-related terminations in infrastructure or real estate because, as you know, we're pretty much the industry leader in both from a performance standpoint.

Okay. Great. That makes sense. And then just one on the product side. Obviously, you guys had a big success with the closed-end fund in the quarter. Just curious, post that, and just the conversations with the platforms, do you see more opportunity there? And then you guys had noted this in your comments, but just if we are in an environment where we're getting into more inflation over the next 1 to 2 years, I know it's been a while since we've seen that. But how do you think whether it's the products or the positions or what you expect from client demand?

Great. Let me address the closed-end fund question, and then I'll ask Joe to talk about inflation sensitivity and the implications there. As we've been speaking about for well over a year, we think that the closed-end funds version 2.0 are seriously attractive and competitive structure, with significant barriers to entry that we really like. We think it's great for the investor and good for us. We would like to do a steady flow of closed-end funds annually, or at least one a year, if possible. And as part of that, I think that market is evolving from strictly a yield market to one that really is looking to see unique strategies that offer investors access to securities that they cannot access on their own. And so that, to us, is a mix of listed, but also potentially significantly unlisted securities. And we see an exciting opportunity to collaborate with our partners on the distribution side to create these unique real estate, unique infrastructure and alternative income strategies that combine public and private in ways that haven't been done before and that investors have no ability to do on their own. And so we continue to be very excited about that opportunity. And again, we think it's a secular thing for closed-end funds.

As it relates to the inflation question, as I mentioned, we've been seeing an increase in questions around inflation concerns and strategies that could help combat that. And so - I mean, this is coming from asset consultants. It's coming from institutions. I think, ultimately, it will also come from the wealth market. So we're seeing investors ask about real estate as a potential inflation hedge. But also, we expect them to look at our multi-strategy real assets portfolio, which, as I mentioned in my comments, has the greatest inflation sensitivity of all of our strategies, in part because of the allocations to commodities and resource equities. Several years ago, we built out a range of these types of strategies for different risk and return appetite. So we've got our core real assets multi-strategy portfolio, but then we have a balanced one, which is designed to reduce the volatility, and it has a greater allocation to TIPS and short-duration credit. We also have our commodity and resource equity strategies, which are very sensitive to - or can be very sensitive to inflation. But I think investor appetite right now in light of the longer-term underperformance of those strategies because of energy and other sectors, we would expect investors to get exposure to those asset classes through the multi-strategy approaches. So this is something that we're being asked to do more work on. And so we're working with asset consultants to start with this menu, and then design things that may be more customer-specific for a given client. And we'll see. There have been a lot of people who - that have called for inflation over the past 5 to 8 years, and it hasn't come to pass, but it could be that now is the time that it actually becomes more of a risk for investors.

[Operator Instructions]. Our next question comes from the line of Robert Lee with KBW.

On capital management, I'm just kind of curious, I mean, obviously, with the changes in the closed-end fund market as evidenced by this quarter and maybe also your expansion into non-traded investments, how should we be thinking of your potential continued changes or adoption of your dividend policy? And do you see seed capital needs going up to fund some of the non-traded investments or strategies? I mean I'm assuming you obviously might build cash back up if, hopefully, the opportunity comes to do another closed-end funds. Just trying to get a sense of - that all this means further changes in kind of your approach to your dividend?

Yes, that's a very good question. I would say that, yes, that, currently and going forward, in contrast to many years in the past, we do have a rising use of our capital for many of the purposes that you touched on, including potentially closed-end funds, seeding more strategies and also supporting our non-traded product launches. I think there will be a better use of our excess liquidity. I would point out that our regular dividend is at least, thus far, our philosophy has been to pay out between 50% and 60% of our earnings expectations. And so if we're fortunate enough to continue to grow, that regular quarterly dividend should be unimpacted by increasing needs for our cash.

Okay. Fair. That's helpful. And I'm just curious, speaking of the non-trading initiatives in the kind of illiquid non-trading space, you maybe dived into that a little bit deeper. I mean do you envision this - are you in the process or maybe you have kind of hired kind of teams? Or would you ever envision small acquisitions to kind of jump-start some of your illiquid capabilities if you could find the right property?

Yes. I'll ask Joe to answer that question specifically, but I want to just emphasize that our goal is to be able to deliver to our clients, particularly in real estate and infrastructure, the full range of solutions, be it 50-50, 75-25, 25-75. We don't want to limit our opportunities to create and deliver solutions for our clients. And we've already begun - last year, we made a large investment in a private company in the cold storage space. And so this is not totally new to us, but to your question, yes, we are going to be adding resources. And Joe, why don't you speak to that?

Sure. So I guess, the starting point is that it's going to be investment-driven, meaning we're not going to do something just to create a capability or just to try to add assets. It starts with the alpha opportunity. And we think there are ways to combine public and private to get to a better answer. And most of the asset managers who do these types of things tend to focus on what their incumbent legacy business is, and therefore, neglect the broader range of opportunities to allocate to where the best deal is, so to speak. And so in other words, the - last year, it would have been to go right into the public market because that's where the biggest discounts to real estate value worked compared with the private market. So to - with that as a philosophy, we are looking to expand our capabilities and would consider both adding teams, and potentially, making an acquisition. We wouldn't look to do something that's transformational. We're going to do it in a risk-managed way, in a way that is - where we can control it and influence how we design these strategies and integrate it with our other capabilities. So it's still early to talk about some of the specifics, but we would expect, over this year, we'll be able to.

Great. And then maybe indulge one more question on the illiquid topic. And obviously, the closed-end fund structure is ideal for adding illiquid assets. But outside of that, I mean, are you currently in planning? Or how do you think about kind of bringing rest of it to the retail? Is it kind of through an interval fund-type structure or maybe some type of non-traded, I guess, I'll call it, non-traded REIT-type structures? Kind of curious how you would handle that in the retail world?

Well, both of those options are on the table in our minds. As Joe said, our first objective, as with everything we do, is to identify excellent investment opportunities and build our expertise to support that. And we've been doing that for a while now in both real estate and infrastructure, whether it's in focusing on renewables, on the infrastructure side and doing some private company investing on the real estate side. And we'll deliver that performance in the structures that are important partners, all of whom were involved in the raise - the closed-end fund raise. And yes, absolutely, we would consider interval funds, non-traded entities. And again, the vehicle, the decision on delivery vehicles will be a collaboration between us and our partners.

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

Great. Well, thank you. We appreciate everyone who dialed in this morning, and we look forward to speaking to you next quarter. In the meantime, please, everyone, stay safe and healthy. Thank you.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.