Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and Full Year 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, January 23, 2025. I would now like to turn the conference over to Brian Heller, Senior Vice President and Deputy Corporate Counsel of Cohen & Steers. Please go ahead. I would now like to turn the conference over to Brian Heller Senior Vice President and Deputy General Counsel of Cohen & Steers. Please go ahead.

Thank you and welcome to the Cohen & Steers fourth quarter and full year 2024 earnings conference call. Joining me are Joe Harvey, our Chief Executive Officer; Raja Dakkuri, our Chief Financial Officer; and Jeff Palma, our Head of Multi-Asset Solutions. 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 fourth quarter and full year 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 vehicles. Our presentation also contains non-GAAP financial measures referred to as 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 Raja.

Thank you, Brian, and good morning, everyone. My remarks today will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found in the earnings release and presentation. Yesterday we reported earnings of $0.78 per share compared to $0.77 sequentially. Earnings for full year 2024 were $2.93 per share compared to $2.84 in 2023. Revenue for Q4 increased 4.9% sequentially to $139.9 million. Revenue for full year 2024 increased 5.9% to $518 million. The increase in revenue from the prior quarter was driven by two items. The primary driver was higher average AUM during the quarter. The secondary driver was the recognition of $1.4 million in performance fees. These performance fees recognized in Q4 related to the full year results of certain institutional accounts. Our effective fee rate during the quarter excluding performance fees was 58 basis points, which was consistent with the prior quarter. Operating income was $49.7 million during the quarter, compared to $47.6 million sequentially. Our operating margin was 35.5%, which was generally in line with the prior quarter. As noted, we did experience higher average AUM during Q4 as compared to the prior quarter. We generated net inflows during Q4, primarily related to our open-end funds. This is the second quarter of net inflows after strong flow results in Q3. However, our AUM was impacted by market depreciation during the quarter. As a result AUM was $85.8 billion as of year-end, compared to $91.8 billion at the end of Q3. Joe Harvey will provide additional insights regarding our flows and our pipeline. Total expenses were higher compared to the prior quarter primarily due to an increase in compensation and benefits. To a lesser extent expenses were impacted by increases in both distribution and service fees as well as G&A. During the quarter,…

Thank you, Raja and good morning. As noted, we've adjusted the speaker lineup for today's call. John Cheigh, our President and CIO, who usually joins these calls is traveling. Jeff Palma, Head of our Multi-Asset Solutions Group will discuss the outlook for our asset classes. Following Jeff's remarks, I'll cover our investment performance and the market environment, key business metrics and our 2025 outlook. But first, let's turn it over to Jeff.

Thank you, Joe. I would like to take a few minutes to discuss a topic that research shows is a dominant driver of aggregate portfolio returns, asset allocation, particularly during the current market and macro landscape. On this topic, we wrote a paper recently called FOMO Reversals of Fortune and the Opportunity in Real Assets, which has generated positive feedback from our clients and is available on our website. I think it's resonating, because market dynamics have truly been fascinating of late but investors also need the occasional reminder that we've seen this movie before. To begin, consider the last decade. Through 2024, global equities delivered annual total returns of more than 10%. US equities returned nearly 13.5% annually, in those same 10 years. Private assets were likewise impressive, with double-digit returns in most categories, amid extremely low reported volatility. Listed real assets were substantially lower by comparison over the last decade. Total returns on global real estate and commodities were less than 2% annualized while global infrastructure and natural resource equities, returned just under 5%. With a decade of near zero interest rates, fixed income was challenged too, driven by the low starting point of interest rates following the global financial crisis, and the sharp rise in rates since 2022. Now consider the 10 years that ended in 2010. It's a stark contrast. During that decade, equity markets were the worst performing asset class, with barely positive total returns. US treasury returns were strong and well above equities. Private markets were also substantially weaker and register higher volatility. Conversely, listed real assets were standout performers. In short, assets that performed well between 2000 and 2010 fared worse in the last decade and vice versa. It's easy to become enamored with what has worked best recently and it's challenging to…

Thank you, Jeff. After a third quarter that looked like a turning point with the beginning of monetary easing and a positive inflection in our flows, the fourth quarter was decidedly mixed. Continued economic strength, persistent inflation and a recalibration in the macro for the Trump presidency caused the bond market to sell off and lifted the 10-year treasury yield 80 basis points to 4.6%. It's a reminder that regime change mostly happens over a period of time. Market depreciation in most of our asset classes and the lower batting average of outperformance tempered a second consecutive quarter of positive flows and a notable increase in business activity. Turning to our performance scorecard. 49% of our AUM outperformed its benchmark in the quarter. While our outperformance metrics softened, we focus on longer-term results which remain strong. For one year, 95% of our AUM has outperformed its benchmark, while our three, five and 10-year outperformance stands at 96%, 97% and 99% respectively. Our one, three and five-year excess returns are 288 basis points, 162 and 224 basis points respectively. 94% of our open-end fund AUM is rated 4 or 5 star by Morningstar. In short, we are delivering alpha consistently for our clients. Transitioning to market conditions, the fourth quarter was modestly positive for stocks, with growth in tech generally outperforming value. Listed real assets pulled back following a strong absolute performance in the third quarter. For example, US REITs declined 8.2% in the fourth quarter, while global-listed infrastructure fell 5.7%. By comparison, US equities rose 2.4% and the MSCI World was flat. While the Federal Reserve cut interest rates in the quarter with two 25-basis-point rate reductions, they projected more modest cuts in 2025. The resulting upward effect on real interest rates pressured REIT share prices, even as fundamentals remained…

Thank you. [Operator Instructions] Our first question comes from John Dunn from Evercore ISI. Please go ahead. Your line is open.

Hi. Thank you. Maybe could you just give a little more color on the kind of the temperature of the sales conversation you guys are having in the wealth management channel for REITs and preferreds just given the cross current rate -- cross currents we could see in 2025, and then also like your expectations for like the appetite for redemptions?

Well, in the wealth channel as our statistics support, we've had very strong interest in U.S. REITs mostly and preferreds have been less strong. And I outlined some of the reasons why in my comments on the U.S. REIT front, first our performance has been very strong both absolute as REITs have bottomed and led the recovery in real estate generally and our excess returns or alpha. In preferreds, I just think there's a lot more competition for fixed income now that the yield curve has normalized, particularly with private credit now becoming more widely available in the wealth channel. Most of our flows have come over the past two quarters from the RIA channel, which is a place where AUM is growing the fastest and we can talk about some of those reasons. But as I mentioned, we're focusing more of our resources on those types of investors, because their models which tend to be more like a university endowment model, tend to align better with how we do things and our active management. So I guess big picture, as you've seen for the past several years our flows have been tended to be more correlated to interest rates as -- than they've been in a long-term. I think a large part of that relates to the very long period of monetary policy post GFC where rates have been pegged to zero and then the normalization of rates. But now that things have stabilized so to speak or normalized, I think my belief -- my view is that flow should be a little less sensitive to changes in rates as time marches on.

Got it. And then we've seen that active ETFs can really take off, so it's great you guys are getting into that. But it is new to you guys. So maybe could you just talk a little bit more about the plan for rolling it out? You mentioned to RIAs, but how -- is it different from selling or marketing than what the vehicles you have now? Any early indicators on interest, and any concern on the potential cannibalization?

Well, we're leading with our core asset classes. And the way that we have gained market share in the wealth channel, and it's significant as I mentioned early. But just to put some statistics on that in preferred securities and the open-end fund vehicles our market share is 38%. In U.S. REITs, it's in the mid-40%. So, the reason why we've been able to garner that is a, our performance; but b, our educational efforts and explain to advisers why those asset classes make sense in a diversified portfolio and how they should allocate over an economic cycle. So we will bring that knowledge and that education to the targeted investors for ETFs. We will initially start with the RIA market. We need to gain some critical mass before we can get onboarded at the wirehouses. So it's going to be an aggressive campaign of introducing our vehicles, but also educating those advisers on our asset classes and how the nuances and the strategies that we're bringing to market will add value in their portfolios.

Thank you.

Our next question comes from Ben Rubin from UBS. Please go ahead. Your line is open.

Hi. Thanks for taking my questions. My first question is for Raja. Last year you guys saw some solid growth in your open-end vehicles and also firm-wide flows inflected positively later into the year as you touched on in your prepared remarks. Despite that we still saw operating expenses outpaced management fee growth. So, obviously, appreciating that operating leverage tends to lag inflows and general AUM build, do you think you can grow operating margins off the 35% clip in 2025? And if so do you require another year of positive market beta or appreciation to unlock that? Thank you.

Yeah. Let me just maybe kick it off and then I'll turn it over to Joe to go deeper on this. So I think as we've talked about with the initiatives on the investments that we have in process that we've been undertaking this most recent year and also that we're looking for into 2025 and the future years there's a level of operating expense that's associated with those. But, obviously, those initiatives will have revenue attached to them in the medium and the long-term and that's going to create positive operating leverage. And so that's how we think about the context of the investments, the initiatives and the approach that we take towards balancing operating leverage in the near-term as well as investing in the firm.

Thank you. Just appreciate that Raja and that color. I believe in the last call you guys guided to $1 billion of known redemptions from a combination of both advisory and sub-advisory clients. That would be split or is expected to be split evenly between the fourth quarter and in this quarter. So I just want to clarify did the $500 million that you expected to come out, did come out of the last quarter's numbers? And does your updated guidance of the $800 million of expected redemptions in the first half of this year reflects some portion of that previous amount? I just want to clarify the updated redemption guidance. Thank you.

Ladies and gentlemen this is the operator. We are experiencing technical difficulties. Please stay on the line. The call will resume shortly. The speaker line is now reconnected.

Okay. This is Joe Harvey. We got disconnected, but I was responding to the question on operating leverage. And just to recap the drivers of operating leverage; number one, our market levels or appreciation or depreciation; second is, organic growth; and the third is, what we're doing from a new investment perspective. And the first one appreciation/depreciation we can't control. The second one we can organic growth. And then the third as it relates to the investments and specifically to where we're situated today we've made a lot of the investments for our private real estate business. What we're doing on our active ETFs is factored into comp ratio guidance for -- and G&A guidance for 2025. So -- and as you'll note the comp ratio guidance is similar to what it was in 2024. So I would say the progression will be a function of what the markets do and how we do on generating organic growth.

Got it. Thanks for those helpful responses. So it sounds like more like a longer-term theme as opposed to a near-term phenomenon. So I believe in the last call you guys guided to $1 billion of known redemptions from a combination of both advisory and subadvisory clients and it was expected that that $1 billion would be split evenly between the fourth quarter and this quarter. So I just wanted to confirm, did the $500 million come out in the fourth quarter? And does your updated guidance for $800 million of redemptions in the first half of this year include some portion of that previous amount? I just want to clarify the updated guidance. Thanks.

The $800 million would be the same -- on the same basis as the $1 billion. So about $200 million of it already occurred before year end.

$200 million came -- sorry $200 million came out in the fourth quarter?

Correct.

Got it. Thanks. And then just squeeze the last one in. We see a number of deals announced in the space in terms of active managers acquiring private managers or buying differentiated capabilities. Is that something you too would be open to pursuing? And if so which asset classes would be most appealing? And would you be open to putting debt on the balance sheet to finance such a transaction? Thank you.

Yes. I mean we're -- we've historically been very focused on organic growth and have had a lot of success with that. And as you can surmise from these comments today whether it's our private real estate business or active ETFs or international SICAVs, we've got a lot of opportunities and growth initiatives underway. And so we're going to stay very focused on that. Those activities require capital because we're seeding all of those vehicles and so our very strong balance sheet is -- puts us in a very good position to pursue these types of opportunities. In our history, we've made one small acquisition and that enabled us to expand our -- what was one strategy at the time US REITs into a global strategy and it began the process of us going global as it relates to distribution. And so there are circumstances where an acquisition can really be a strategic change for the company. Right now it's not what we're focused on. But if we could find an investment strategy that would make sense to enhance our lineup it's something that we would have the interest in doing and have the resources to do. But acquisitions M&A is not part of our day-to-day business. Delivering excess returns and generating organic growth is.

Great. Thank you for taking my questions.

Our next question comes from John Dunn from Evercore ISI. Please go ahead. Your line is open.

Thanks. So you mentioned that you're investing in your international offices. So maybe could you just talk about like what are the best and most important markets outside the U.S. for flow demand? And are there any different like preferences or behavioral differences to point to for those markets?

Well, I believe Raja's comment on G&A reflected the fact that we have expanded some of our international offices, London and Tokyo and Hong Kong, and in most cases, we've expanded our footprint, because we need more space. But to the essence of your question, we think there are opportunities in many parts of the world. We opened an office in Singapore, I don't know, 1.5 years or so ago, and that was driven by two factors. One is that we wanted to have another office in case our employees in Hong Kong wanted to relocate to another domicile. But also there are many clients in Singapore and the region that want to see you have an office in Singapore. I've been talking about, for several quarters now, how we're starting to see adoption of our asset classes, real estate infrastructure, primarily in Asia, ex Japan, and that is continuing. And it's a slow process in some cases, but it certainly justifies having a bigger commitment personnel-wise in the region. So we have confidence to do that. In Japan, I've talked about the investment renaissance. It hasn't played out in terms of our flows yet, but we continue to add some sales resources to support our partner Daiwa Asset Management there. And that will be subject to market conditions, but still confident in the very positive trajectory and the investment and asset management industry in Japan. So those are just some color, but we're -- we think we have a lot of opportunities in the markets outside of the U.S.

Thanks, again.

We have no further questions. I will now turn the call back over to Joe Harvey for closing remarks.

Okay. Well, thank you for listening this quarter and look forward to talking about the progress on our strategic plan, as we progress throughout 2025, and we'll talk to you next in April. So, thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.