Set forth on the following pages is management's discussion and analysis of our financial condition and results of operations for the three and nine months endedSeptember 30, 2021 and 2020. Such information should be read in conjunction with our condensed consolidated financial statements and the related notes included herein. The condensed consolidated financial statements of the Company are unaudited. When we use the terms "Cohen & Steers ," the "Company," "we," "us," and "our," we meanCohen & Steers, Inc. , aDelaware corporation, and its consolidated subsidiaries. Executive Overview General We are a leading global investment manager specializing in real assets and alternative income, including real estate, preferred securities, infrastructure, resource equities, commodities, as well as multi-strategy solutions. Founded in 1986, we are headquartered inNew York City , with offices inLondon ,Dublin ,Hong Kong andTokyo . Our primary investment strategies includeU.S. real estate, preferred securities and low duration preferred securities, global/international real estate, global listed infrastructure, real assets multi-strategy, midstream energy and MLPs, as well as global natural resource equities. Our strategies seek to achieve a variety of investment objectives for different risk profiles and are actively managed by specialist teams of investment professionals who employ fundamental-driven research and portfolio management processes. We offer our strategies through a variety of investment vehicles, includingU.S. and non-U.S. registered funds and other commingled vehicles, separate accounts, and subadvised portfolios. Our distribution network encompasses two major channels, wealth management and institutional. Our wealth management channel includes registered investment advisers, wirehouses, independent and regional broker dealers and bank trusts. Our institutional channel includes sovereign wealth funds, corporate plans, insurance companies and public funds, including defined benefit and defined contribution plans, as well as other financial institutions that access our investment management services directly or through consultants and other intermediaries. Our revenue is derived from fees received from our clients, including fees for managing or subadvising client accounts as well as investment advisory, administration, distribution and service fees received from Company-sponsored open-end and closed-end funds. Our fees are based on contractually specified rates applied to the value of the assets we manage and, in certain cases, investment performance. Our revenue fluctuates with changes in the total value of our assets under management, which may occur as a result of market appreciation or depreciation, contributions or withdrawals from investor accounts and distributions. This revenue is recognized over the period that the assets are managed. 21 -------------------------------------------------------------------------------- Assets Under Management By Investment Vehicle (in millions) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Institutional Accounts Assets under management, beginning of period$ 40,156 $ 28,867 $ 33,255 $ 31,813 Inflows 1,380 1,936 5,541 6,103 Outflows (1,996) (1,337) (4,198) (3,321) Net inflows (outflows) (616) 599 1,343 2,782 Market appreciation (depreciation) 102 1,273 5,657 (3,206) Distributions (295) (359) (908) (1,009) Total increase (decrease) (809) 1,513 6,092 (1,433)
Assets under management, end of period
$ 39,347 $ 30,380 Percentage of total assets under management 40.5 % 43.1 % 40.5 % 43.1 % Average assets under management$ 40,880 $ 30,325
Open-end Funds Assets under management, beginning of period$ 43,532 $ 28,921 $ 35,160 $ 30,725 Inflows 4,321 4,020 13,968 13,560 Outflows (2,320) (2,398) (7,716) (9,832) Net inflows (outflows) 2,001 1,622 6,252 3,728 Market appreciation (depreciation) 336 1,100 5,007 (2,006) Distributions (276) (239) (826) (1,043) Total increase (decrease) 2,061 2,483 10,433 679
Assets under management, end of period
$ 45,593 $ 31,404 Percentage of total assets under management 46.9 % 44.5 % 46.9 % 44.5 % Average assets under management$ 45,666 $ 30,694
Closed-end Funds Assets under management, beginning of period$ 12,537 $ 8,539 $ 11,493 $ 9,644 Inflows 18 50 186 454 Outflows (119) (1) (119) (89) Net inflows (outflows) (101) 49 67 365 Market appreciation (depreciation) 31 257 1,203 (908) Distributions (147) (126) (443) (382) Total increase (decrease) (217) 180 827 (925)
Assets under management, end of period
$ 12,320 $ 8,719 Percentage of total assets under management 12.7 % 12.4 % 12.7 % 12.4 % Average assets under management$ 12,633 $ 8,777
Total
Assets under management, beginning of period
$ 79,908 $ 72,182 Inflows 5,719 6,006 19,695 20,117 Outflows (4,435) (3,736) (12,033) (13,242) Net inflows (outflows) 1,284 2,270 7,662 6,875 Market appreciation (depreciation) 469 2,630 11,867 (6,120) Distributions (718) (724) (2,177) (2,434) Total increase (decrease) 1,035 4,176 17,352 (1,679)
Assets under management, end of period
$ 97,260 $ 70,503 Average assets under management$ 99,179 $ 69,796 $ 91,713 $ 67,091 22
-------------------------------------------------------------------------------- Assets Under Management - Institutional Accounts By Account Type (in millions) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Advisory
Assets under management, beginning of period
$ 17,628 $ 15,669 Inflows 1,080 1,142 4,529 3,679 Outflows (1,391) (1,036) (2,127) (2,025) Net inflows (outflows) (311) 106 2,402 1,654 Market appreciation (depreciation) 14 736 2,788 (1,230) Total increase (decrease) (297) 842 5,190 424
Assets under management, end of period
$ 22,818 $ 16,093 Percentage of institutional assets under management 58.0 % 53.0 % 58.0 % 53.0 % Average assets under management$ 23,666 $ 16,209
Japan Subadvisory Assets under management, beginning of period$ 10,503 $ 8,736 $ 9,720 $ 10,323 Inflows 123 390 243 1,366 Outflows (175) (96) (771) (474) Net inflows (outflows) (52) 294 (528) 892 Market appreciation (depreciation) 106 345 1,978 (1,190) Distributions (295) (359) (908) (1,009) Total increase (decrease) (241) 280 542 (1,307)
Assets under management, end of period
$ 10,262 $ 9,016 Percentage of institutional assets under management 26.1 % 29.7 % 26.1 % 29.7 % Average assets under management$ 10,669 $ 8,968
Subadvisory Excluding Japan Assets under management, beginning of period$ 6,538 $ 4,880 $ 5,907 $ 5,821 Inflows 177 404 769 1,058 Outflows (430) (205) (1,300) (822) Net inflows (outflows) (253) 199 (531) 236 Market appreciation (depreciation) (18) 192 891 (786) Total increase (decrease) (271) 391 360 (550)
Assets under management, end of period
$ 6,267 $ 5,271 Percentage of institutional assets under management 15.9 % 17.4 % 15.9 % 17.4 % Average assets under management$ 6,545 $ 5,148
Total Institutional Accounts Assets under management, beginning of period$ 40,156 $ 28,867 $ 33,255 $ 31,813 Inflows 1,380 1,936 5,541 6,103 Outflows (1,996) (1,337) (4,198) (3,321) Net inflows (outflows) (616) 599 1,343 2,782 Market appreciation (depreciation) 102 1,273 5,657 (3,206) Distributions (295) (359) (908) (1,009) Total increase (decrease) (809) 1,513 6,092 (1,433)
Assets under management, end of period
$ 39,347 $ 30,380 Average assets under management$ 40,880 $ 30,325 $ 38,219 $ 29,159 23
-------------------------------------------------------------------------------- Assets Under Management By Investment Strategy (in millions) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020U.S. Real Estate Assets under management, beginning of period$ 41,865 $ 28,119 $ 32,827 $ 31,024 Inflows 2,737 2,827 8,455 8,910 Outflows (1,586) (1,733) (4,700) (5,186) Net inflows (outflows) 1,151 1,094 3,755 3,724 Market appreciation (depreciation) 489 882 7,745 (3,460) Distributions (420) (485) (1,242) (1,709) Transfers (40) - (40) 31 Total increase (decrease) 1,180 1,491 10,218 (1,414) Assets under management, end of period$ 43,045 $ 29,610 $ 43,045 $ 29,610 Percentage of total assets under management 44.3 % 42.0 % 44.3 % 42.0 % Average assets under management$ 44,085 $
29,442
Preferred Securities Assets under management, beginning of period$ 25,498 $ 17,116 $ 23,185 $ 17,581 Inflows 2,056 2,167 6,716 6,698 Outflows (855) (941) (3,532) (4,836) Net inflows (outflows) 1,201 1,226 3,184 1,862 Market appreciation (depreciation) 202 844 954 102 Distributions (226) (176) (648) (504) Transfers 40 - 40 (31) Total increase (decrease) 1,217 1,894 3,530 1,429 Assets under management, end of period$ 26,715 $ 19,010 $ 26,715 $ 19,010 Percentage of total assets under management 27.5 % 27.0 % 27.5 % 27.0 % Average assets under management$ 26,123 $
18,255
Global/International Real Estate Assets under management, beginning of period$ 18,220 $ 12,659 $ 15,214 $ 13,509 Inflows 511 851 2,701 3,706 Outflows (518) (379) (1,975) (1,759) Net inflows (outflows) (7) 472 726 1,947 Market appreciation (depreciation) (215) 740 2,158 (1,546) Distributions (20) (8) (120) (47) Total increase (decrease) (242) 1,204 2,764 354 Assets under management, end of period$ 17,978 $ 13,863 $ 17,978 $ 13,863 Percentage of total assets under management 18.5 % 19.7 % 18.5 % 19.7 % Average assets under management$ 18,760 $ 13,520 $ 17,362 $ 12,722 24
-------------------------------------------------------------------------------- Assets Under Management By Investment Strategy - continued (in millions) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Global Listed Infrastructure Assets under management, beginning of period$ 8,246 $ 6,768 $ 6,729 $ 8,076 Inflows 354 139 1,513 681 Outflows (396) (655) (611) (1,323) Net inflows (outflows) (42) (516) 902 (642) Market appreciation (depreciation) (21) 93 649 (985) Distributions (45) (46) (142) (150) Total increase (decrease) (108) (469) 1,409 (1,777)
Assets under management, end of period
$ 8,138 $ 6,299 Percentage of total assets under management 8.4 % 8.9 % 8.4 % 8.9 % Average assets under management$ 8,203 $ 6,839
Other
Assets under management, beginning of period
$ 1,953 $ 1,992 Inflows 61 22 310 122 Outflows (1,080) (28) (1,215) (138) Net inflows (outflows) (1,019) (6) (905) (16) Market appreciation (depreciation) 14 71 361 (231) Distributions (7) (9) (25) (24) Total increase (decrease) (1,012) 56 (569) (271)
Assets under management, end of period
$ 1,384 $ 1,721 Percentage of total assets under management 1.4 % 2.4 % 1.4 % 2.4 % Average assets under management$ 2,008 $ 1,740
Total
Assets under management, beginning of period
$ 79,908 $ 72,182 Inflows 5,719 6,006 19,695 20,117 Outflows (4,435) (3,736) (12,033) (13,242) Net inflows (outflows) 1,284 2,270 7,662 6,875 Market appreciation (depreciation) 469 2,630 11,867 (6,120) Distributions (718) (724) (2,177) (2,434) Total increase (decrease) 1,035 4,176 17,352 (1,679)
Assets under management, end of period
$ 97,260 $ 70,503 Average assets under management$ 99,179 $ 69,796 $ 91,713 $ 67,091 25
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Investment Performance at
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(1) Past performance is no guarantee of future results.Outperformance is determined by comparing the annualized investment performance of each investment strategy to the performance of specified reference benchmarks. Investment performance in excess of the performance of the benchmark is considered outperformance. The investment performance calculation of each investment strategy is based on all active accounts and investment models pursuing similar investment objectives. For accounts, actual investment performance is measured gross of fees and net of withholding taxes. For investment models, for which actual investment performance does not exist, the investment performance of a composite of accounts pursuing comparable investment objectives is used as a proxy for actual investment performance. The performance of the specified reference benchmark for each account and investment model is measured net of withholding taxes, where applicable. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided byCohen & Steers . (2) © 2021 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Morningstar calculates its ratings based on a risk-adjusted return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars and the bottom 10% receive one star. Past performance is no guarantee of future results. Based on independent rating by Morningstar, Inc. of investment performance of eachCohen & Steers -sponsored open-endU.S. -registered mutual fund for all share classes for the overall period atSeptember 30, 2021 . Overall Morningstar rating is a weighted average based on the 3-year, 5-year and 10-year Morningstar rating. Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided byCohen & Steers . Overview Assets under management atSeptember 30, 2021 increased 38.0% to$97.3 billion from$70.5 billion atSeptember 30, 2020 . The increase was due to net inflows of$11.5 billion and market appreciation of$18.2 billion , partially offset by distributions of$3.0 billion . Net inflows included$6.5 billion into preferred securities and$4.7 billion intoU.S. real estate. Market appreciation included$10.6 billion fromU.S. real estate,$3.8 billion from global/international real estate and$2.0 billion from preferred securities. Distributions included$1.8 billion fromU.S. real estate and$840 million from preferred securities. Our organic growth rate for the twelve months endedSeptember 30, 2021 was 16.4%. The organic growth/decay rate represents the ratio of net flows for the period to the beginning assets under management. Average assets under management for the three months endedSeptember 30, 2021 increased 42.1% to$99.2 billion from$69.8 billion for the three months endedSeptember 30, 2020 . 26 -------------------------------------------------------------------------------- Institutional accounts Assets under management in institutional accounts atSeptember 30, 2021 , which represented 40.5% of total assets under management, increased 29.5% to$39.3 billion from$30.4 billion atSeptember 30, 2020 . The increase was due to net inflows of$1.3 billion and market appreciation of$8.9 billion , partially offset by distributions of$1.3 billion . Net inflows included$1.5 billion intoU.S. real estate and$522 million into global listed infrastructure, partially offset by net outflows of$1.0 billion from real assets multi-strategy (included in "Other" in the table on pages 24 and 25). Market appreciation included$4.3 billion fromU.S. real estate and$3.3 billion from global/international real estate. Distributions included$1.2 billion fromU.S. real estate. Our organic growth rate for institutional accounts for the twelve months endedSeptember 30, 2021 was 4.4%. Average assets under management for institutional accounts for the three months endedSeptember 30, 2021 increased 34.8% to$40.9 billion from$30.3 billion for the three months endedSeptember 30, 2020 . Assets under management in institutional advisory accounts atSeptember 30, 2021 , which represented 58.0% of institutional assets under management, increased 41.8% to$22.8 billion from$16.1 billion atSeptember 30, 2020 . The increase was due to net inflows of$2.3 billion and market appreciation of$4.4 billion . Net inflows included$1.7 billion intoU.S. real estate,$678 million into global listed infrastructure and$585 million into preferred securities, partially offset by net outflows of$1.0 billion from real assets multi-strategy (included in "Other" in the table on pages 24 and 25). Market appreciation included$1.8 billion from global/international real estate and$1.6 billion fromU.S. real estate. Our organic growth rate for institutional advisory accounts for the twelve months endedSeptember 30, 2021 was 14.3%. Average assets under management for institutional advisory accounts for the three months endedSeptember 30, 2021 increased 46.0% to$23.7 billion from$16.2 billion for the three months endedSeptember 30, 2020 . Assets under management inJapan subadvisory accounts atSeptember 30, 2021 , which represented 26.1% of institutional assets under management, increased 13.8% to$10.3 billion from$9.0 billion atSeptember 30, 2020 . The increase was due to market appreciation of$3.0 billion , partially offset by net outflows of$445 million and distributions of$1.3 billion . Net outflows included$155 million fromU.S. real estate,$148 million from global/international real estate and$136 million from preferred securities. Market appreciation included$2.4 billion fromU.S. real estate and$531 million from global/international real estate. Distributions included$1.2 billion fromU.S. real estate. Our organic decay rate forJapan subadvisory accounts for the twelve months endedSeptember 30, 2021 was (4.9%). Average assets under management forJapan subadvisory accounts for the three months endedSeptember 30, 2021 increased 19.0% to$10.7 billion from$9.0 billion for the three months endedSeptember 30, 2020 . Assets under management in institutional subadvisory accounts excludingJapan atSeptember 30, 2021 , which represented 15.9% of institutional assets under management, increased 18.9% to$6.3 billion from$5.3 billion atSeptember 30, 2020 . The increase was due to market appreciation of$1.5 billion , partially offset by net outflows of$521 million . Net outflows included$336 million from global/international real estate and$151 million from global listed infrastructure. Market appreciation included$1.0 billion from global/international real estate and$262 million fromU.S. real estate. Our organic decay rate for institutional subadvisory accounts excludingJapan for the twelve months endedSeptember 30, 2021 was (9.9%). Average assets under management for institutional subadvisory accounts excludingJapan for the three months endedSeptember 30, 2021 increased 27.1% to$6.5 billion from$5.1 billion for the three months endedSeptember 30, 2020 . Open-end funds Assets under management in open-end funds atSeptember 30, 2021 , which represented 46.9% of total assets under management, increased 45.2% to$45.6 billion from$31.4 billion atSeptember 30, 2020 . The increase was due to net inflows of$7.9 billion and market appreciation of$7.4 billion , partially offset by distributions of$1.2 billion . Net inflows included$3.9 billion into preferred securities and$3.0 billion intoU.S. real estate. Market appreciation included$5.5 billion fromU.S. real estate and$1.3 billion from preferred securities. Distributions included$657 million from preferred securities ($490 million of which was reinvested) and$413 million fromU.S. real estate ($385 million of which was reinvested). Our organic growth rate for open-end funds for the twelve months endedSeptember 30, 2021 was 25.3%. Average assets under management for open-end funds for the three months endedSeptember 30, 2021 increased 48.8% to$45.7 billion from$30.7 billion for the three months endedSeptember 30, 2020 . 27 -------------------------------------------------------------------------------- Closed-end funds Assets under management in closed-end funds atSeptember 30, 2021 , which represented 12.7% of total assets under management, increased 41.3% to$12.3 billion from$8.7 billion atSeptember 30, 2020 . The increase was due to net inflows of$2.3 billion and market appreciation of$1.9 billion , partially offset by distributions of$577 million . Net inflows included$2.1 billion from the Company's initial public offering of theCohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA), partially offset by net outflows related to the liquidation of Cohen & Steers MLP Income and Energy Opportunity Fund, Inc. Our organic growth rate for closed-end funds for the twelve months endedSeptember 30, 2021 was 26.0%. Average assets under management for closed-end funds for the three months endedSeptember 30, 2021 increased 43.9% to$12.6 billion from$8.8 billion for the three months endedSeptember 30, 2020 . 28 --------------------------------------------------------------------------------
Summary of Operating Information
Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except percentages and per share data) 2021 2020 2021 2020 U.S. GAAP Revenue$ 154,187 $ 111,159 $ 424,203 $ 311,076 Expenses$ 85,956 $ 67,852 $ 244,337 $ 204,105 Operating income$ 68,231 $ 43,307 $ 179,866 $ 106,971 Non-operating income (loss)$ 1,246 $ 3,231 $ 14,735 $ (8,659) Net income attributable to common stockholders$ 51,483 $ 31,904 $ 146,914 $ 80,996 Diluted earnings per share$ 1.05 $ 0.66 $ 3.00 $ 1.67 Operating margin 44.3 % 39.0 % 42.4 % 34.4 % As Adjusted (1) Net income attributable to common stockholders$ 52,137 $ 32,616 $ 136,683 $ 88,209 Diluted earnings per share$ 1.06 $ 0.67 $ 2.79 $ 1.82 Operating margin 45.6 % 39.6 % 43.9 % 38.6 % _________________________
(1) These amounts represent the Company's as adjusted results. Please refer to
pages 34-35 for reconciliations of
Three Months EndedSeptember 30, 2021 Compared with Three Months EndedSeptember 30, 2020 Revenue Three Months Ended September 30, (in thousands) 2021 2020 $ Change % Change Open-end funds$ 77,477 $ 51,604 $ 25,873 50.1 % Institutional accounts 38,039 32,880 5,159 15.7 % Closed-end funds 28,122 18,676 9,446 50.6 % Investment advisory and administration fees 143,638 103,160 40,478 39.2 % Distribution and service fees 9,900 7,572 2,328 30.7 % Other 649 427 222 52.0 % Total revenue$ 154,187 $ 111,159 $ 43,028 38.7 % Revenue for the three months endedSeptember 30, 2021 increased primarily due to higher average assets under management across all three investment vehicles, partially offset by lower performance fees from certain institutional accounts of$4.7 million (performance fees were$523,000 and$5.2 million for the three months endedSeptember 30, 2021 and 2020, respectively). Total investment advisory and administration revenue compared with average assets under management in open-end funds implied an annualized effective fee rate of 67.3 bps and 66.9 bps for the three months endedSeptember 30, 2021 and 2020, respectively. Total investment advisory revenue compared with average assets under management in institutional accounts implied an annualized effective fee rate of 36.9 bps and 43.1 bps for the three months endedSeptember 30, 2021 and 2020, respectively. The decrease in the implied annualized effective fee rate was primarily due to lower performance fees for the three months endedSeptember 30, 2021 . Excluding the performance fees, the implied annualized effective fee rate for the three months endedSeptember 30, 2021 and 2020, respectively, would have been 36.4 bps and 36.3 bps. Total investment advisory and administration revenue compared with average assets under management in closed-end funds implied an annualized effective fee rate of 88.3 bps and 84.7 bps for the three months endedSeptember 30, 2021 and 2020, respectively. The increase in the implied annualized effective fee rate was primarily due to the initial public offering of PTA, which concluded onOctober 27, 2020 . 29 --------------------------------------------------------------------------------
Expenses Three Months Ended September 30, (in thousands) 2021 2020 $ Change % Change Employee compensation and benefits$ 53,092 $ 41,060 $ 12,032 29.3 % Distribution and service fees 19,906 14,642 5,264 36.0 % General and administrative 11,981 11,006 975 8.9 % Depreciation and amortization 977 1,144 (167) (14.6) % Total expenses$ 85,956 $ 67,852 $ 18,104 26.7 % Employee compensation and benefits expenses for the three months endedSeptember 30, 2021 increased primarily due to higher incentive compensation of$7.7 million and higher amortization of restricted stock units of of$2.5 million . Distribution and service fees expense for the three months endedSeptember 30, 2021 increased primarily due to higher average assets under management in open-end funds and a shift in the composition of assets under management into a higher cost intermediary. General and administrative expenses for the three months endedSeptember 30, 2021 increased primarily due to higher recruitment fees of$517,000 and higher travel and entertainment expenses of$404,000 . Operating Margin Operating margin for the three months endedSeptember 30, 2021 increased to 44.3% from 39.0% for the three months endedSeptember 30, 2020 . Operating margin represents the ratio of operating income to revenue. Non-operating Income (Loss) Three Months Ended September 30, 2021 September 30, 2020 (in thousands) Seed Investments Other Total Seed Investments Other Total Interest and dividend income-net $ 696$ 23 $ 719 $ 574$ 120 $ 694 Gain (loss) from investments-net (418) - (418) 3,279 - 3,279 Foreign currency gains (losses)-net 41 904 945 108 (850) (742) Total non-operating income (loss) $ 319 (1)$ 927 $ 1,246 $ 3,961 (1)$ (730) $ 3,231
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(1) Seed investments included net loss of
Three Months Ended September 30, (in thousands, except percentages) 2021 2020 $ Change % Change Income tax expense$ 18,090 $ 12,532 $ 5,558 44.4 % Effective tax rate 26.0 % 28.2 % The effective tax rate for the three months endedSeptember 30, 2021 differed from theU.S. federal statutory rate of 21.0% primarily due to state, local and foreign income taxes and limitations on the deductibility of executive compensation, partially offset by the cumulative effect of a change in the Company's estimated effective tax rate for the year. The effective tax rate for the three months endedSeptember 30, 2020 differed from theU.S. federal statutory rate of 21.0% primarily due to state, local and foreign income taxes and limitations on the deductibility of executive compensation. 30 -------------------------------------------------------------------------------- Nine Months EndedSeptember 30, 2021 Compared with Nine Months EndedSeptember 30, 2020 Revenue Nine Months Ended September 30, (in thousands) 2021 2020 $ Change % Change Open-end funds$ 207,786 $ 146,048 $ 61,738 42.3 % Institutional accounts 106,407 85,239 21,168 24.8 % Closed-end funds 80,714 55,810 24,904 44.6 % Investment advisory and administration fees 394,907 287,097 107,810 37.6 % Distribution and service fees 27,371 22,285 5,086 22.8 % Other 1,925 1,694 231 13.6 % Total revenue$ 424,203 $ 311,076 $ 113,127 36.4 % Revenue for the nine months endedSeptember 30, 2021 increased primarily due to higher average assets under management across all three investment vehicles, partially offset by lower performance fees from certain institutional accounts of$3.4 million (performance fees were$2.9 million and$6.3 million for the nine months endedSeptember 30, 2021 and 2020, respectively). Total investment advisory and administration revenue compared with average assets under management in open-end funds implied an annualized effective fee rate of 67.3 bps and 67.0 bps for the nine months endedSeptember 30, 2021 and 2020, respectively. Total investment advisory revenue compared with average assets under management in institutional accounts implied an annualized effective fee rate of 37.2 bps and 39.1 bps for the nine months endedSeptember 30, 2021 and 2020, respectively. The decrease in the implied annualized effective fee rate was primarily due to lower performance fees for the nine months endedSeptember 30, 2021 . Excluding the performance fees, the implied annualized effective fee rate for both the nine months endedSeptember 30, 2021 and 2020 would have been 36.2 bps. Total investment advisory and administration revenue compared with average assets under management in closed-end funds implied an annualized effective fee rate of 88.4 bps and 84.8 bps for the nine months endedSeptember 30, 2021 and 2020, respectively. The increase in the implied annualized effective fee rate was primarily due to the initial public offering of PTA, which concluded onOctober 27, 2020 . Expenses Nine Months Ended September 30, (in thousands) 2021 2020 $ Change % Change Employee compensation and benefits$ 152,095 $ 113,997 $ 38,098 33.4 % Distribution and service fees 55,260 41,264 13,996 33.9 % General and administrative 33,821 45,320 (11,499) (25.4) % Depreciation and amortization 3,161 3,524 (363) (10.3) % Total expenses$ 244,337 $ 204,105 $ 40,232 19.7 % Employee compensation and benefits expenses for the nine months endedSeptember 30, 2021 increased primarily due to higher incentive compensation of$26.7 million and higher amortization of restricted stock units of of$8.7 million . Distribution and service fees expense for the nine months endedSeptember 30, 2021 increased primarily due to higher average assets under management in open-end funds and a shift in the composition of assets under management into a higher cost intermediary. General and administrative expenses for the nine months endedSeptember 30, 2021 decreased$11.5 million . The nine months endedSeptember 30, 2020 included costs associated with the Cohen & Steers Quality Income Realty Fund, Inc. (RQI) rights offering of approximately$12.0 million . 31 -------------------------------------------------------------------------------- Operating Margin Operating margin for the nine months endedSeptember 30, 2021 increased to 42.4% from 34.4% for the nine months endedSeptember 30, 2020 . The nine months endedSeptember 30, 2020 included costs associated with the RQI rights offering. Non-operating Income (Loss) Nine Months Ended September 30, 2021 September 30, 2020 (in thousands) Seed Investments Other Total Seed Investments Other Total
Interest and dividend income-net $ 2,117
$ 2,172 $ 1,785$ 951 $ 2,736 Gain (loss) from investments-net 11,845 74 11,919 (11,431) - (11,431) Foreign currency gains (losses)-net 455 189 644 (590) 626 36
Total non-operating income (loss) $ 14,417 (1)
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(1) Seed investments included net income of$9.3 million and net loss of$6.8 million attributable to third-party interests for the nine months endedSeptember 30, 2021 and 2020, respectively. Income Taxes Nine Months Ended September 30, (in thousands, except percentages) 2021 2020 $ Change % Change Income tax expense$ 38,378 $ 24,076 $ 14,302 59.4 % Effective tax rate 20.7 % 22.9 % The effective tax rate for the nine months endedSeptember 30, 2021 differed from theU.S. federal statutory rate of 21.0% primarily due to state, local and foreign income taxes and limitations on the deductibility of executive compensation. These were more than offset by the reversal of certain liabilities associated with unrecognized tax benefits and the tax effect associated with the appreciated value of the restricted stock units delivered inJanuary 2021 . The effective tax rate for the nine months endedSeptember 30, 2020 differed from theU.S. federal statutory rate of 21.0% primarily due to state, local and foreign income taxes and limitations on the deductibility of executive compensation. These were partially offset by the tax effect associated with the appreciated value of the restricted stock units delivered inJanuary 2020 . As Adjusted This section discusses as adjusted results. Please refer to pages 34-35 for reconciliations ofU.S. GAAP to as adjusted results. Three Months EndedSeptember 30, 2021 Compared with Three Months EndedSeptember 30, 2020 Revenue Revenue, as adjusted, for the three months endedSeptember 30, 2021 was$154.3 million , compared with$111.4 million for the three months endedSeptember 30, 2020 . Revenue, as adjusted, excluded the consolidation of certain of our seed investments for both periods. Expenses Expenses, as adjusted, for the three months endedSeptember 30, 2021 were$83.9 million , compared with$67.3 million for the three months endedSeptember 30, 2020 . Expenses, as adjusted, excluded the following: •The consolidation of certain of our seed investments for both periods; •Amounts related to the accelerated vesting of certain restricted stock units for both periods; and •Costs associated with the initial public offering of PTA for the three months endedSeptember 30, 2020 . Operating Margin Operating margin, as adjusted, for the three months endedSeptember 30, 2021 was 45.6%, compared with 39.6% for the three months endedSeptember 30, 2020 . 32 -------------------------------------------------------------------------------- Non-operating Income (Loss) Non-operating income, as adjusted, for the three months endedSeptember 30, 2021 was$19,000 , compared with$502,000 for the three months endedSeptember 30, 2020 . Non-operating income (loss), as adjusted, excluded the following for both periods: •Results from our seed investments; and •Net foreign currency exchange gains and losses associated withU.S. dollar-denominated assets held by certain foreign subsidiaries. Income Taxes The effective tax rate, as adjusted, for the three months endedSeptember 30, 2021 was 25.9%, compared with 27.0% for the three months endedSeptember 30, 2020 . The effective tax rate, as adjusted, excluded the following for both periods: •Tax effects associated with items noted above; and •Discrete tax items. Nine Months EndedSeptember 30, 2021 Compared with Nine Months EndedSeptember 30, 2020 Revenue Revenue, as adjusted, for the nine months endedSeptember 30, 2021 was$424.5 million , compared with$311.3 million for the nine months endedSeptember 30, 2020 . Revenue, as adjusted, excluded the consolidation of certain of our seed investments for both periods. Expenses Expenses, as adjusted, for the nine months endedSeptember 30, 2021 were$238.3 million , compared with$191.2 million for the nine months endedSeptember 30, 2020 . Expenses, as adjusted, excluded the following: •The consolidation of certain of our seed investments for both periods; •Amounts related to the accelerated vesting of certain restricted stock units for both periods; •Costs associated with the initial public offering of PTA for the nine months endedSeptember 30, 2020 ; and •Costs associated with the RQI rights offering for the nine months endedSeptember 30, 2020 . Operating Margin Operating margin, as adjusted, for the nine months endedSeptember 30, 2021 was 43.9%, compared with 38.6% for the nine months endedSeptember 30, 2020 . Non-operating Income (Loss) Non-operating loss, as adjusted, for the nine months endedSeptember 30, 2021 was$219,000 , compared with non-operating income, as adjusted, of$765,000 for the nine months endedSeptember 30, 2020 . Non-operating income (loss), as adjusted, excluded the following for both periods: •Results from our seed investments; and •Net foreign currency exchange gains and losses associated withU.S. dollar-denominated assets held by certain foreign subsidiaries. Income Taxes The effective tax rate, as adjusted, for the nine months endedSeptember 30, 2021 was 26.5%, compared with 27.0% for the nine months endedSeptember 30, 2020 . The effective tax rate, as adjusted, excluded the following for both periods: •Tax effects associated with items noted above; and •Discrete tax items. 33 -------------------------------------------------------------------------------- Reconciliations ofU.S. GAAP to As Adjusted Financial Results Management believes that use of the following as adjusted (non-GAAP) financial results provides greater transparency into the Company's operating performance. In addition, these as adjusted financial results are used to prepare the Company's internal management reports which are used in evaluating its business. While we believe that these as adjusted financial results are useful in evaluating operating performance, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance withU.S. GAAP. Reconciliation ofU.S. GAAP to As Adjusted Financial Results Net Income Attributable to Common Stockholders and Diluted Earnings per Share Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except per share data) 2021 2020 2021 2020 Net income attributable to common stockholders, U.S. GAAP$ 51,483 $ 31,904 $ 146,914 $ 80,996 Seed investments (1) (168) (1,686) (4,432) 4,017 Accelerated vesting of restricted stock units 1,888 387 5,640 387 Initial public offering costs (2) - 310 - 310 Rights offering costs (3) - - - 11,859 Foreign currency exchange (gains) losses-net (4) (908) 1,232 (537) (812) Tax adjustments (5) (158) 469 (10,902) (8,548) Net income attributable to common stockholders, as adjusted$ 52,137 $
32,616
Diluted weighted average shares outstanding 49,262 48,681 48,976 48,588 Diluted earnings per share, U.S. GAAP$ 1.05 $ 0.66 $ 3.00 $ 1.67 Seed investments - * (0.04) (0.09) 0.09 Accelerated vesting of restricted stock units 0.04 0.01 0.11 0.01 Initial public offering costs - 0.01 - 0.01 Rights offering costs - - - 0.24 Foreign currency exchange (gains) losses-net (0.02) 0.02 (0.01) (0.02) Tax adjustments (0.01) 0.01 (0.22) (0.18) Diluted earnings per share, as adjusted$ 1.06 $
0.67
_________________________
* Amounts round to less than$0.01 per share. (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds as well as non-operating (income) loss from seed investments that were not consolidated. (2) Represents costs associated with the initial public offering of the Cohen &Steers Tax-Advantaged Preferred Securities and Income Fund (PTA) which were recorded in general and administrative expenses in the third quarter of 2020. (3) Represents costs associated with the Cohen & Steers Quality Income Realty Fund, Inc. (RQI) rights offering which were recorded in general and administrative expense in the first quarter of 2020. (4) Represents net foreign currency exchange (gains) losses associated withU.S. dollar-denominated assets held by certain foreign subsidiaries. (5) Tax adjustments are summarized in the following table: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Exclusion of tax effects associated with items noted above$ (815) $ 407 $ (1,310) $ (2,803) Exclusion of discrete tax items 657 62 (9,592) (5,745) Total tax adjustments$ (158) $ 469 $ (10,902) $ (8,548) 34
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Reconciliation of
Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except percentages) 2021 2020 2021 2020 Revenue, U.S. GAAP$ 154,187 $ 111,159 $ 424,203 $ 311,076 Seed investments (1) 104 275 303 186 Revenue, as adjusted$ 154,291 $ 111,434 $ 424,506 $ 311,262 Expenses, U.S. GAAP$ 85,956 $ 67,852 $ 244,337 $ 204,105 Seed investments (1) (143) 102 (373) (355) Accelerated vesting of restricted stock units (1,888) (387) (5,640) (387) Initial public offering costs (2) - (310) - (310) Rights offering costs (3) - - - (11,859) Expenses, as adjusted$ 83,925 $ 67,257 $ 238,324 $ 191,194 Operating income, U.S. GAAP$ 68,231 $ 43,307 $ 179,866 $ 106,971 Seed investments (1) 247 173 676 541 Accelerated vesting of restricted stock units 1,888 387 5,640 387 Initial public offering costs (2) - 310 - 310 Rights offering costs (3) - - - 11,859 Operating income, as adjusted$ 70,366 $ 44,177
Operating margin, U.S. GAAP 44.3 % 39.0 % 42.4 % 34.4 % Operating margin, as adjusted 45.6 % 39.6 % 43.9 % 38.6 % _________________________ (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (2) Represents costs associated with the initial public offering of PTA which were recorded in general and administrative expenses in the third quarter of 2020. (3) Represents costs associated with the RQI rights offering which were recorded in general and administrative expenses in the first quarter of 2020. Reconciliation ofU.S. GAAP to As Adjusted Financial Results Non-operating Income (Loss) Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2021 2020 2021 2020 Non-operating income (loss), U.S. GAAP$ 1,246 $ 3,231 $ 14,735 $ (8,659) Seed investments (1) (319) (3,961) (14,417) 10,236 Foreign currency exchange (gains) losses-net (2) (908) 1,232 (537) (812) Non-operating income (loss), as adjusted$ 19 $
502
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(1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds as well as non-operating (income) loss from seed investments that were not consolidated. (2) Represents net foreign currency exchange (gains) losses associated withU.S. dollar-denominated assets held by certain foreign subsidiaries. 35 -------------------------------------------------------------------------------- Changes in Financial Condition, Liquidity and Capital Resources We seek to maintain a capital structure that supports our business strategies and to maintain the appropriate amount of liquidity at all times. Furthermore, we currently expect cash flows from operations to be more than adequate to fund our present and reasonably foreseeable future commitments for investing and financing activities. Net Liquid Assets Our current financial condition is highly liquid, primarily comprising cash and cash equivalents,U.S. Treasury securities, if any, seed investments and other current assets. Liquid assets are reduced by current liabilities, which are generally defined as obligations due within one year (together, net liquid assets). The Company does not currently have any outstanding debt. The table below summarizes our net liquid assets: September 30, December 31, (in thousands) 2021 2020 Cash and cash equivalents$ 168,472 $ 41,232 U.S. Treasury securities - 41,648 Seed investments-net 70,854 60,083 Current assets 89,460 70,208 Current liabilities (101,704) (93,870) Net liquid assets$ 227,082 $ 119,301 Cash and cash equivalents Cash and cash equivalents are on deposit with several highly rated financial institutions and include short-term, highly-liquid investments, which are readily convertible into cash and have original maturities of three months or less.U.S. Treasury securitiesU.S. Treasury securities are directly issued by theU.S. government and were classified as held to maturity. Seed investments-net Seed investments are primarily comprised of investments in Company-sponsored funds that we do not consolidate, our pro-rata share of the net assets of the funds that we do consolidate, and listed securities held directly for the purpose of establishing performance track records. Seed investments are recorded at fair value, are generally traded in active markets on major exchanges and can typically be liquidated within a normal settlement cycle. Seed investments are presented net of redeemable noncontrolling interests. Current assets Current assets primarily represent investment advisory and administration fees receivable. AtSeptember 30, 2021 , institutional accounts comprised 54.7% of total accounts receivable, while open-end and closed-end funds, together, comprised 44.7% of total accounts receivable. Open-end and closed-end fund receivables are generally collected on the first business day of the following month. We perform a review of our receivables on an ongoing basis in order to assess collectibility and, based on our analysis atSeptember 30, 2021 , there was no allowance for uncollectible accounts required. Current liabilities Current liabilities include accrued compensation and benefits, distribution and service fees payable, operating lease obligations due within 12 months, certain income taxes payable, and other liabilities and accrued expenses. Cash flows Our cash flows generally result from the operating activities of our business, with investment advisory and administration fees being the most significant contributor. 36 --------------------------------------------------------------------------------
The table below summarizes cash flows:
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