Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers First Quarter 2024 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, April 18th, 2024. And 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 First Quarter 2024 Earnings Conference Call. Joining me are our Chief Executive Officer, Joe Harvey; our Chief Financial Officer, Matt Stadler, and our Chief Investment Officer, Jon Cheigh. 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 accompanying first quarter earnings release and presentation, our most recent Annual Report on Form 10-K, 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 or other investment vehicle. Our presentation also contains non-GAAP financial measures, referred to as adjusted 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.

Thank you, Brian. Good morning, everyone. As in previous quarters, my remarks will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on Pages 13 and 14 of the earnings release and on Slides 16 through 20 of the earnings presentation. Yesterday, we reported earnings of $0.70 per share compared with $0.76 in the prior year's quarter and $0.67 sequentially. Revenue was $122.9 million in the quarter compared with $126.3 million in the prior year's quarter and $119 million sequentially. The increase in revenue from the fourth quarter was primarily due to higher average assets under management across all three types of investment vehicles and an increase in the effective fee rate partially offset by one fewer day in the quarter. The fourth quarter included $1.3 million of performance fees. Our effective fee rate was 58 basis points in the first quarter, compared with 57.7 basis points in the fourth quarter. Excluding the $1.3 million of performance fees, the fourth quarter effective fee rate would have been 57 basis points. The increase in the first quarter fee rate was due in part to the termination of two institutional accounts with assets under management of $2.3 billion that eliminated their strategic allocation to real estate. These two accounts had lower than average fee rates. Operating income was $43.7 million in the quarter compared with $48 million in the prior year's quarter and $41.3 million sequentially. And our operating margin increased to 35.5% from 34.7% last quarter. Expenses increased 2% from the fourth quarter, primarily due to higher compensation and benefits, an increase in depreciation and amortization, and higher distribution and service fees, partially offset by a decrease in G&A. The compensation to revenue ratio for the first quarter was 40.5%, consistent with the guidance provided…

Thank you, Matt, and good morning. Today, I'd like first to cover our performance scorecard. Second, summarize the first quarter market environment for our asset classes. And last, I'd like to provide our latest investment viewpoint on why asset allocators should increase their exposure to real assets in a higher inflation regime. Turning to our performance scorecard. For the first quarter, 96% of our total AUM outperformed its benchmark, a marked improvement from last quarter's 35%. When looking at our AUM on a one-year basis, 99% of our AUM outperformed its benchmark, which is up on our 2023 outperformance figure, 85%. This uptick in one-year performance can be attributed to our core preferred strategy, turning from relative underperformer to outperformer. The preferred strategy has now outperformed for four straight quarters following its pullback in the first quarter of last year. As a result, 96% of our total AUM is now outperforming its benchmark on a three-year basis and 97% on a five-year basis. From a competitive perspective, 93% of our open-end fund AUM is rated 4 or 5-star by Morningstar, relative to 94% last quarter. All eight of our core strategies outperformed in the quarter, natural resource equities and low duration preferred strategies exhibiting the strongest relative performance. More specifically, low duration preferreds outperformed by roughly 200 basis points during the quarter, bringing its one-year outperformance to 640 basis points. Natural Resources for its part, also outperformed by 200 basis points, bringing its one-year and three-year outperformance figures to 400 basis points and 427 basis points, respectively. I want to congratulate Portfolio Manager, Tyler Rosenlicht and his team for putting up this extremely compelling performance in this dynamic area requiring active management. Our global listed infrastructure portfolio also experienced strong alpha, outperforming its benchmark by 140 basis points, while global…

Thank you, John, and good morning. Today I'll describe how our fundamentals started off the year, then discuss the opportunities we see in front of us. Our first quarter financial results were solid in-line with our expectations for improving returns in our asset classes based on a positive inflection in the interest rate cycle and continued repositioning in asset allocations. Some investors are legging into the new return cycle, while others are reassessing their strategic allocations in response to higher yield fixed income options. Most importantly, our relative investment performance is outstanding. In addition to the stats that Jon cited, I am proud of our one-year weighted average excess return of 309 basis points across all strategies. Said simply, we are delivering for our clients. That said, our asset classes did not keep up with the [torrid pace] (ph) of the S&P 500, which returned 10.6% in the quarter, with our highest absolute return for a strategy at 4.2% for core preferreds. Listed real estate returns were modestly negative in all regions in the quarter after leading markets in the fourth quarter. Looking at firm-wide flows, we had net outflows of $2 billion in the first quarter. The major drivers were two large account terminations and advisory, both in global real estate. We announced last quarter the termination of a $1.5 billion account, and the other during the quarter was $744 million. Both clients eliminated listed REITs from their strategic portfolio allocations. This was partially offset by net inflows of $569 million into open-end mutual funds. By month, firm-wide flows in January and February were negative, then March turned positive with $183 million in net inflows. Although We are disappointed to see some clients eliminate strategic allocations to REITs, even as we are on the cusp of a new return…

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of John Dunn with Evercore ISI. Please go ahead.

Thank you. Maybe could you talk about if you have any line of sight into any other like chunky institutional mandates that might be exiting over the next stretch and then also maybe take us through the puts and takes regionally of the institutional advisory business?

Sure, John. Good morning. You know, right now we have one client that has about $90 million that they want to trim from their account. That's a small number. But apart from that, we don't have any accounts that we know will be terminated. In terms of the business globally on advisory, last quarter we talked about how our pipeline was represented in eight different countries. And that has not changed much. So when you go around the world, I would say that the largest market for advisory is in the U.S. But as we've talked about in the past couple of calls, we've seen more interest in Asia, which is a new trend relative to the past. And again, it's mostly focused in listed real estate and listed infrastructure. While in Australia, you know, there's -- investors have invested in real assets, real estate and infrastructure in particular, you know, we've seen some opportunities to, you know, take business away from competitors as well as align with some intermediaries who are executing independent advisor growth strategies. So Asia, I'd say, would follow the U.S., level of interest. The Middle East has been relatively dormant for listed allocations, but with the growth in AUM there, we could see some activity in the future. And then I just wrap up by saying in Japan, there's something interesting going on with the investing markets there. In addition to adding some sales support to help our – our -- and intermediary clients -- gains sales support, we just brought on a new institutional salesperson and -- so we see opportunity in Japan.

Got it. And then maybe you could give us a little more of a flavor of the change in the wealth management channel, which has been positive now for a little bit, more flavor on the demand and gross sales potential and is it sustainable for U.S. REIT and Preferred.

Well, this started at the end of last year and I'd say the catalyst is the inflection in interest rates fed going from tightening to pausing. Of course, you know, that had a run early this year, but it has now reversed somewhat. So we could see a little bit of a pause in that. But as I said, we continue to see flows into wealth. And I'd say there's part of the market that is anticipatory and working alongside our sales support that lays out the investment case for how our asset classes will perform in this part of the cycle. There's another part of the market that's a little bit more coincident. So we might see a little bit of pause in that, but based on our comments, we think that these new return cycles have begun. It doesn't happen overnight. It unfolds over a period of time. So, we're confident to be engaging in the wealth market at this point.

Thanks very much.

[Operator Instructions] And your next question comes from the line of Adam Beatty with UBS. Please go ahead.

Thank you and good morning. Just wanted to broaden out the discussion around preferreds a little bit and just maybe draw upon your historical experience. Obviously, trailing returns are good. Relative performance is probably better than good. So just giving your experience, when would you expect flows there to kind of get a little bit more traction? You mentioned competition from other short duration instruments. Do you need to spread over that to get preferred flows? And you also mentioned some competition from private credit and just wondering how you see that playing out. Thanks very much.

Sure. Good question, Adam. So when any investor is Obviously evaluating how and when to allocate. So obviously they're thinking about valuation fundamentals and whether we like it or not timing. I think, whether we're talking about REITs or preferreds, I think most of the investors we talk to, they see the valuation case. I think there were parts of last year, there are concerns about some of the fundamentals with banks, credit, et cetera, but I think people are now comfortable with both valuation and the fundamentals. Now we're just onto the timing part. And we saw some of the flows start to pick up because there was optimism that we're at peak short-term rates. We think that that should still be the case. But what we see from most investors is they're so-called legging into it in a few different steps. And my guess is that when we actually see more clarity on terminal rates, that we'll see even more flows come in. That would be my best guess. You know, in terms of --. So in terms of competition with short-duration competitive yield, right now, the investor view is, I'm getting a [5 or 5.5] (ph). That's similar to where we are in low duration preferreds and their view is duration is a risk as opposed to an asset. To the extent interest rates go down, you're going to want duration, right? And so that gets back to the extent we get to a peaking in long-term rates, all that money on the sidelines, which is in the front end of the curve, will want to go further out and own longer duration fixed income assets, equity assets, whatever the case might be. So I think that getting movement out of the short end to further along the curve is still back to when there's conviction that we are at peak Fed funds. I guess in terms of private credit, you know, there's -- a few years ago, you know, we spent a lot of time educating wealth about the tax efficiency of preferreds and their yields. And, you know, some of the movement that Joe talked about on certain investors looking more towards private credit, of course, number one, those were investors that can handle illiquidity, so those were institutional investors. Number two, preferreds are much more tax efficient than private credit. Those were institutions that I imagine didn't have the same after tax view of comparing, say 9% in private credit versus a 7% in preferred. So as you know, the vast majority of our AUM within preferreds is in our wealth-facing channel, where, frankly, the tax-efficient yield has been a very powerful argument. So I suspect we will still have some comparison versus private credit and preferreds over time but it'll depend as I said on is one having pre-tax view and after tax view, that kind of thing. I hope that helps.

Yes, absolutely, excellent, appreciate that. And then a little bit more maybe strategically, your commentary around target date funds and the 60-40 allocation and being broadly under allocated to real assets was pretty compelling. So just wanted to get a sense of how you're thinking about long-term, you know, how Cohen & Steers can play into rectifying that, whether it's, getting on retirement platforms, getting sleeves in target day funds, or other elements of your strategy. Thanks.

Well, obviously, we try to spend a lot of time educating, whether it's the record keepers, the target date managers, or the end investor on the importance of real assets. To be honest, for the end investor, I'm not sure they're always looking at their underlying exposure in their target date. So I think, we need to educate on all three of those levels. Again, the end investor, the 401(k) committee of a given company, the record keepers, and the managers. So, you know, we're going through that education process And we're going to keep doing that. You know the way this goes that I said that five years from now or 10 years from now, one of those groups will say, why didn't we do a better job? I talked about how over the last three years, if you just had real assets, you would have done 50 basis points better with lower drawdowns and volatility. It may not seem like a lot, but again, target dates, when you're talking about 10, 20, 30, 40 years and you're compounding that, you know, you're talking about, [4.2] (ph) versus [4.7] (ph), you're basically, it's like saying, you're improving your return 12% and you're compounding that. And so that's an education process that we continue to have. You know -- and we think over time there will be more success, but frankly, there needs to be some --. There probably needs to be some -- I don't want to say pain. What I would say is some remorse before there's more action taken on this. I would say at the end of 2022, when the 60-40 did very poorly, a lot of people said, well, talk to me about real assets. At the end of 2023, when the 60-40 had a much better year, people thought, you know what, maybe that inflation was just a blip. It was a moment in time. I think that towards the end of this year, there's going to be more people saying, you know what, inflation goes in cycles, as it goes higher. It goes lower. It goes higher. That's the lesson of the [70s] (ph) and its others. It needs to be part of my strategic allocation as opposed to I wish I had in 2022. So anyway, I think that's the acknowledgement process that we'll go through over the next 12 months.

But I think broadly, just to add to that, it's education of asset consultants, plan sponsors at this point in time, and ultimately to a lesser extent that the end users but it's also having the right vehicles and having an ability to customize -- customized strategies at some point. So with our mutual fund and with our – we have a collective investment trust or CIT, those are vehicles that are designed for that -- the end user. And over time we could end up with some vehicles that will help us customize for different plan sponsor needs.

Yeah, that all makes total sense. No, I appreciate it. That's all for me today. Thanks.

And that concludes our Q&A session. I will now turn the conference back over to Mr. Joe Harvey for closing remarks.

Well, thank you, Abby, and thanks everyone for listening, and we look forward to talking to you next quarter.

And ladies and gentlemen, this concludes today's conference call. You may now disconnect.