COHEN & STEERS, INC. 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, 2022 and 2021. 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 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 and institutional. Our wealth 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 from the wealth channel is derived from investment advisory, administration, distribution and service fees from open-end and closed-end funds. Our revenue from the institutional channel is derived from fees received from our clients for managing advised and subadvised accounts. Our fees are based on contractually specified rates applied to the value of the assets we manage and, in certain cases, may include a performance-based fee. Our revenue fluctuates with changes in the total value of our assets under management, which may occur as a result of market appreciation and depreciation, contributions or withdrawals from investor accounts and distributions.
Inflation and the associated increase in interest rates have combined to adversely affect the total value of our assets under management, which will reduce the fees we earn. In addition, inflationary pressures have negatively impacted our expenses, particularly segments of compensation and certain operating and vendor costs.
The Russian invasion ofUkraine has impacted global financial markets, introducing new threats to global economic growth and adding to inflationary pressures. We have taken measures to ensure ongoing compliance with all applicable sanctions and guidance issued by authorities globally against certain regions, entities, or individuals. Our overall exposure to Russian and Ukrainian securities is limited and we do not expect a material impact to our financial results. 21 -------------------------------------------------------------------------------- Assets Under Management By Investment Vehicle (in millions) Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Open-end Funds Assets under management, beginning of period$ 41,583 $ 43,532 $ 50,911 $ 35,160 Inflows 4,019 4,321 13,764 13,968 Outflows (4,751) (2,320) (14,532) (7,716) Net inflows (outflows) (732) 2,001 (768) 6,252 Market appreciation (depreciation) (3,212) 336 (11,601) 5,007 Distributions (293) (276) (1,196) (826) Total increase (decrease) (4,237) 2,061 (13,565) 10,433
Assets under management, end of period
$ 37,346 $ 45,593 Percentage of total assets under management 47.2 % 46.9 % 47.2 % 46.9 % Average assets under management$ 42,322 $ 45,666
Institutional Accounts Assets under management, beginning of period$ 34,506 $ 40,156 $ 42,727 $ 33,255 Inflows 1,374 1,380 4,693 5,541 Outflows (1,251) (1,996) (5,051) (4,198) Net inflows (outflows) 123 (616) (358) 1,343 Market appreciation (depreciation) (3,527) 102 (10,754) 5,657 Distributions (235) (295) (748) (908) Total increase (decrease) (3,639) (809) (11,860) 6,092
Assets under management, end of period
$ 30,867 $ 39,347 Percentage of total assets under management 39.0 % 40.5 % 39.0 % 40.5 % Average assets under management$ 35,396 $ 40,880
Closed-end Funds Assets under management, beginning of period$ 11,773 $ 12,537 $ 12,991 $ 11,493 Inflows 11 18 567 186 Outflows - (119) - (119) Net inflows (outflows) 11 (101) 567 67 Market appreciation (depreciation) (647) 31 (2,121) 1,203 Distributions (152) (147) (452) (443) Total increase (decrease) (788) (217) (2,006) 827
Assets under management, end of period
$ 10,985 $ 12,320 Percentage of total assets under management 13.9 % 12.7 % 13.9 % 12.7 % Average assets under management$ 12,025 $ 12,633
Total
Assets under management, beginning of period
$ 106,629 $ 79,908 Inflows 5,404 5,719 19,024 19,695 Outflows (6,002) (4,435) (19,583) (12,033) Net inflows (outflows) (598) 1,284 (559) 7,662 Market appreciation (depreciation) (7,386) 469 (24,476) 11,867 Distributions (680) (718) (2,396) (2,177) Total increase (decrease) (8,664) 1,035 (27,431) 17,352
Assets under management, end of period
$ 79,198 $ 97,260 Average assets under management$ 89,743 $ 99,179 $ 95,330 $ 91,713 22
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Assets Under Management - Institutional Accounts
By Account Type
(in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Advisory
Assets under management, beginning of period
$ 24,599 $ 17,628 Inflows 813 1,080 3,155 4,529 Outflows (1,033) (1,391) (3,825) (2,127) Net inflows (outflows) (220) (311) (670) 2,402 Market appreciation (depreciation) (1,941) 14 (5,955) 2,788 Total increase (decrease) (2,161) (297) (6,625) 5,190
Assets under management, end of period
$ 17,974 $ 22,818 Percentage of institutional assets under management 58.2 % 58.0 % 58.2 % 58.0 % Average assets under management$ 20,685 $ 23,666
Japan Subadvisory Assets under management, beginning of period$ 8,939 $ 10,503 $ 11,329 $ 9,720 Inflows 193 123 661 243 Outflows (61) (175) (390) (771) Net inflows (outflows) 132 (52) 271 (528) Market appreciation (depreciation) (921) 106 (2,937) 1,978 Distributions (235) (295) (748) (908) Total increase (decrease) (1,024) (241) (3,414) 542
Assets under management, end of period
$ 7,915 $ 10,262 Percentage of institutional assets under management 25.6 % 26.1 % 25.6 % 26.1 % Average assets under management$ 9,082 $ 10,669
Subadvisory Excluding Japan Assets under management, beginning of period$ 5,432 $ 6,538 $ 6,799 $ 5,907 Inflows 368 177 877 769 Outflows (157) (430) (836) (1,300) Net inflows (outflows) 211 (253) 41 (531) Market appreciation (depreciation) (665) (18) (1,862) 891 Total increase (decrease) (454) (271) (1,821) 360
Assets under management, end of period
$ 4,978 $ 6,267 Percentage of institutional assets under management 16.1 % 15.9 % 16.1 % 15.9 % Average assets under management$ 5,629 $ 6,545
Total Institutional Accounts Assets under management, beginning of period$ 34,506 $ 40,156 $ 42,727 $ 33,255 Inflows 1,374 1,380 4,693 5,541 Outflows (1,251) (1,996) (5,051) (4,198) Net inflows (outflows) 123 (616) (358) 1,343 Market appreciation (depreciation) (3,527) 102 (10,754) 5,657 Distributions (235) (295) (748) (908) Total increase (decrease) (3,639) (809) (11,860) 6,092
Assets under management, end of period
$ 30,867 $ 39,347 Average assets under management$ 35,396 $ 40,880 $ 37,823 $ 38,219 23
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Assets Under Management
By Investment Strategy
(in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
U.S. Real Estate
Assets under management, beginning of period $ 40,178 $ 41,865 $ 49,915 $ 32,827
Inflows 2,143 2,737 8,018 8,455
Outflows (3,082) (1,586) (8,251) (4,700)
Net inflows (outflows) (939) 1,151 (233) 3,755
Market appreciation (depreciation) (4,129) 489 (13,463) 7,745
Distributions (414) (420) (1,523) (1,242)
Transfers - (40) - (40)
Total increase (decrease) (5,482) 1,180 (15,219) 10,218
Assets under management, end of period $ 34,696 $ 43,045 $ 34,696 $ 43,045
Percentage of total assets under management 43.8 % 44.3 % 43.8 % 44.3 %
Average assets under management $ 40,910 $
44,085
Preferred Securities Assets under management, beginning of period$ 21,449 $ 25,498 $ 26,987 $ 23,185 Inflows 1,899 2,056 5,574 6,716 Outflows (2,225) (855) (7,854) (3,532) Net inflows (outflows) (326) 1,201 (2,280) 3,184 Market appreciation (depreciation) (404) 202 (3,573) 954 Distributions (200) (226) (615) (648) Transfers - 40 - 40 Total increase (decrease) (930) 1,217 (6,468) 3,530 Assets under management, end of period$ 20,519 $ 26,715 $ 20,519 $ 26,715 Percentage of total assets under management 25.9 % 27.5 % 25.9 % 27.5 % Average assets under management$ 21,936 $
26,123
Global/International Real Estate Assets under management, beginning of period$ 15,709 $ 18,220 $ 19,380 $ 15,214 Inflows 527 511 2,944 2,701 Outflows (396) (518) (2,340) (1,975) Net inflows (outflows) 131 (7) 604 726 Market appreciation (depreciation) (1,956) (215) (6,034) 2,158 Distributions (13) (20) (79) (120) Total increase (decrease) (1,838) (242) (5,509) 2,764 Assets under management, end of period$ 13,871 $ 17,978 $ 13,871 $ 17,978 Percentage of total assets under management 17.5 % 18.5 % 17.5 % 18.5 % Average assets under management$ 15,938 $ 18,760 $ 17,432 $ 17,362 24
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Assets Under Management
By Investment Strategy - continued
(in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Global Listed Infrastructure
Assets under management, beginning of period $ 8,574 $ 8,246 $ 8,763 $ 6,729
Inflows 394 354 1,319 1,513
Outflows (151) (396) (803) (611)
Net inflows (outflows) 243 (42) 516 902
Market appreciation (depreciation) (742) (21) (1,101) 649
Distributions (45) (45) (148) (142)
Total increase (decrease) (544) (108) (733) 1,409
Assets under management, end of period
$ 8,030 $ 8,138 Percentage of total assets under management 10.1 % 8.4 % 10.1 % 8.4 % Average assets under management$ 8,859 $ 8,203
Other
Assets under management, beginning of period
$ 1,584 $ 1,953 Inflows 441 61 1,169 310 Outflows (148) (1,080) (335) (1,215) Net inflows (outflows) 293 (1,019) 834 (905) Market appreciation (depreciation) (155) 14 (305) 361 Distributions (8) (7) (31) (25) Total increase (decrease) 130 (1,012) 498 (569)
Assets under management, end of period
$ 2,082 $ 1,384 Percentage of total assets under management 2.6 % 1.4 % 2.6 % 1.4 % Average assets under management$ 2,100 $ 2,008
Total
Assets under management, beginning of period
$ 106,629 $ 79,908 Inflows 5,404 5,719 19,024 19,695 Outflows (6,002) (4,435) (19,583) (12,033) Net inflows (outflows) (598) 1,284 (559) 7,662 Market appreciation (depreciation) (7,386) 469 (24,476) 11,867 Distributions (680) (718) (2,396) (2,177) Total increase (decrease) (8,664) 1,035 (27,431) 17,352
Assets under management, end of period
$ 79,198 $ 97,260 Average assets under management$ 89,743 $ 99,179 $ 95,330 $ 91,713 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) © 2022 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, 2022 . 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, 2022 decreased 18.6% to$79.2 billion from$97.3 billion atSeptember 30, 2021 . The decrease was due to market depreciation of$15.3 billion and distributions of$4.0 billion , partially offset by net inflows of$1.2 billion . Net inflows included$1.1 billion intoU.S. real estate. Market depreciation included$6.8 billion fromU.S. real estate,$4.3 billion from global/international real estate and$3.6 billion from preferred securities. Distributions included$2.6 billion fromU.S. real estate and$952 million from preferred securities. Our organic growth rate for the twelve months endedSeptember 30, 2022 was 1.3%. 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, 2022 decreased 9.5% to$89.7 billion from$99.2 billion for the three months endedSeptember 30, 2021 . 26 --------------------------------------------------------------------------------
Open-end funds
Assets under management in open-end funds atSeptember 30, 2022 , which represented 47.2% of total assets under management, decreased 18.1% to$37.3 billion from$45.6 billion atSeptember 30, 2021 . The decrease was due to market depreciation of$7.7 billion and distributions of$2.3 billion , partially offset by net inflows of$1.8 billion . Net inflows included$1.9 billion intoU.S. real estate and$897 million into real assets multi-strategy (included in "Other" in the table on pages 24 and 25), partially offset by net outflows of$1.7 billion from preferred securities. Market depreciation included$4.2 billion fromU.S. real estate and$2.5 billion from preferred securities. Distributions included$1.4 billion fromU.S. real estate and$730 million from preferred securities. Of these distributions,$1.9 billion was reinvested. Our organic growth rate for open-end funds for the twelve months endedSeptember 30, 2022 was 3.9%. Average assets under management for open-end funds for the three months endedSeptember 30, 2022 decreased 7.3% to$42.3 billion from$45.7 billion for the three months endedSeptember 30, 2021 .
Institutional accounts
Assets under management in institutional accounts atSeptember 30, 2022 , which represented 39.0% of total assets under management, decreased 21.6% to$30.9 billion from$39.3 billion atSeptember 30, 2021 . The decrease was due to net outflows of$1.1 billion , market depreciation of$6.4 billion and distributions of$1.0 billion . Net outflows included$1.3 billion fromU.S. real estate, partially offset by net inflows of$320 million into global listed infrastructure. Market depreciation included$3.5 billion from global/international real estate and$2.1 billion fromU.S. real estate. Distributions included$964 million fromU.S. real estate. Our organic decay rate for institutional accounts for the twelve months endedSeptember 30, 2022 was (2.8%). Average assets under management for institutional accounts for the three months endedSeptember 30, 2022 decreased 13.4% to$35.4 billion from$40.9 billion for the three months endedSeptember 30, 2021 . Assets under management in advisory accounts atSeptember 30, 2022 , which represented 58.2% of institutional assets under management, decreased 21.2% to$18.0 billion from$22.8 billion atSeptember 30, 2021 . The decrease was due to net outflows of$1.1 billion and market depreciation of$3.7 billion . Net outflows included$1.4 billion fromU.S. real estate, partially offset by net inflows of$409 million into global listed infrastructure. Market depreciation included$2.1 billion from global/international real estate and$991 million fromU.S. real estate. Our organic decay rate for advisory accounts for the twelve months endedSeptember 30, 2022 was (4.9%). Average assets under management for advisory accounts for the three months endedSeptember 30, 2022 decreased 12.6% to$20.7 billion from$23.7 billion for the three months endedSeptember 30, 2021 . Assets under management inJapan subadvisory accounts atSeptember 30, 2022 , which represented 25.6% of institutional assets under management, decreased 22.9% to$7.9 billion from$10.3 billion atSeptember 30, 2021 . The decrease was primarily due to market depreciation of$1.4 billion and distributions of$1.0 billion . Market depreciation included$881 million fromU.S. real estate and$455 million from global/international real estate. Distributions included$964 million fromU.S. real estate. Our organic growth rate forJapan subadvisory accounts for the twelve months endedSeptember 30, 2022 was 0.3%.
Average assets under management for
Assets under management in subadvisory accounts excludingJapan atSeptember 30, 2022 , which represented 16.1% of institutional assets under management, decreased 20.6% to$5.0 billion from$6.3 billion atSeptember 30, 2021 . The decrease was primarily due to market depreciation of$1.3 billion . Market depreciation included$964 million from global/international real estate. Our organic decay rate for subadvisory accounts excludingJapan for the twelve months endedSeptember 30, 2022 was (0.3%). Average assets under management for subadvisory accounts excludingJapan for the three months endedSeptember 30, 2022 decreased 14.0% to$5.6 billion from$6.5 billion for the three months endedSeptember 30, 2021 .
Closed-end funds
Assets under management in closed-end funds atSeptember 30, 2022 , which represented 13.9% of total assets under management, decreased 10.8% to$11.0 billion from$12.3 billion atSeptember 30, 2021 . The decrease was due to market depreciation of$1.3 billion and distributions of$632 million , partially offset by net inflows of$587 million . Inflows of$482 million , which included leverage, were attributable to the Company's initial public offering of the Cohen & Steers Real Estate Opportunities and Income Fund (RLTY). Our organic growth rate for closed-end funds for the twelve months endedSeptember 30, 2022 was 4.8%. Average assets under management for closed-end funds for the three months endedSeptember 30, 2022 decreased 4.8% to$12.0 billion from$12.6 billion for the three months endedSeptember 30, 2021 . 27 -------------------------------------------------------------------------------- Summary of Operating Results (in thousands, except percentages and per Three Months Ended Nine Months Ended share data) September 30, September 30, 2022 2021 2022 2021 U.S. GAAP Revenue$ 139,951 $ 154,187 $ 441,571 $ 424,203 Expenses$ 82,770 $ 85,956 $ 272,405 $ 244,337 Operating income$ 57,181 $ 68,231 $ 169,166 $ 179,866 Non-operating income (loss) (1)$ (1,974) $ 1,246 $ (21,866) $ 14,735 Net income attributable to common stockholders$ 44,570 $ 51,483 $ 138,544 $ 146,914 Diluted earnings per share$ 0.90 $ 1.05 $ 2.81 $ 3.00 Operating margin 40.9 % 44.3 % 38.3 % 42.4 % As Adjusted (2) Net income attributable to common stockholders$ 45,167 $ 52,137 $ 143,521 $ 136,683 Diluted earnings per share$ 0.92 $ 1.06 $ 2.91 $ 2.79 Operating margin 42.8 % 45.6 % 43.6 % 43.9 %
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(1)Includes amounts attributable to third-party interests in consolidated investment vehicles. Refer to non-operating income (loss) tables on pages 29-32 for additional detail. (2)Refer to pages 33-34 for reconciliations ofU.S. GAAP to as adjusted results. Three Months EndedSeptember 30, 2022 Compared with Three Months EndedSeptember 30, 2021 Revenue (in thousands) Three Months Ended September 30, 2022 2021 $ Change % Change Investment advisory and administration fees Open-end funds$ 71,434 $ 77,477 $ (6,043) (7.8 %) Institutional accounts 32,500 38,039$ (5,539) (14.6 %) Closed-end funds 26,951 28,122$ (1,171) (4.2 %) Total 130,885 143,638$ (12,753) (8.9 %) Distribution and service fees 8,557 9,900$ (1,343) (13.6 %) Other 509 649$ (140) (21.6 %) Total revenue$ 139,951 $ 154,187 $ (14,236) (9.2 %) Investment advisory and administration fees decreased from the three months endedSeptember 30, 2021 , primarily due to lower average assets under management across all three investment vehicles. In addition, the three months endedSeptember 30, 2021 included the recognition of performance fees from certain institutional accounts. •Total investment advisory and administration revenue from open-end funds compared with average assets under management implied an annualized effective fee rate of 67.0 bps and 67.3 bps for the three months endedSeptember 30, 2022 and 2021, respectively. •Total investment advisory revenue from institutional accounts compared with average assets under management implied an annualized effective fee rate of 36.4 bps and 36.9 bps for the three months endedSeptember 30, 2022 and 2021, respectively. The decrease in the implied annualized effective fee rate was primarily due to the recognition of performance fees for the three months endedSeptember 30, 2021 . Excluding the performance fees, the implied annualized effective fee rate would have been 36.4 bps for the three months endedSeptember 30, 2021 . •Total investment advisory and administration revenue from closed-end funds compared with average assets under management implied an annualized effective fee rate of 88.9 bps and 88.3 bps for the three months endedSeptember 30, 2022 and 2021, respectively. The increase in the implied annualized effective fee rate was due to the initial public offering of RLTY in the first quarter of 2022. 28 --------------------------------------------------------------------------------
Expenses
(in thousands) Three Months Ended
September 30,
2022 2021 $ Change % Change
Employee compensation and benefits $ 51,669 $ 53,092 $ (1,423) (2.7 %)
Distribution and service fees 16,418 19,906 $ (3,488) (17.5 %)
General and administrative 13,548 11,981 $ 1,567 13.1 %
Depreciation and amortization 1,135 977 $ 158 16.2 %
Total expenses $ 82,770 $ 85,956 $ (3,186) (3.7 %)
Employee compensation and benefits decreased from the three months ended
Distribution and service fees decreased from the three months ended
General and administrative expenses increased from the three months ended
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