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 six months endedJune 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 Six Months Ended June 30, June 30, 2021 2020 2021 2020 Institutional Accounts Assets under management, beginning of period$ 36,538 $ 25,045 $ 33,255 $ 31,813 Inflows 1,826 1,904 4,161 4,167 Outflows (1,454) (523) (2,202) (1,984) Net inflows (outflows) 372 1,381 1,959 2,183 Market appreciation (depreciation) 3,555 2,775 5,555 (4,479) Distributions (309) (334) (613) (650) Total increase (decrease) 3,618 3,822 6,901 (2,946)
Assets under management, end of period
$ 40,156 $ 28,867 Percentage of total assets under management 41.7 % 43.5 % 41.7 % 43.5 % Average assets under management$ 39,103 $ 27,111
Open-end Funds Assets under management, beginning of period$ 38,623 $ 24,561 $ 35,160 $ 30,725 Inflows 4,577 5,163 9,647 9,540 Outflows (2,490) (3,124) (5,396) (7,434) Net inflows (outflows) 2,087 2,039 4,251 2,106 Market appreciation (depreciation) 3,134 2,898 4,671 (3,106) Distributions (312) (577) (550) (804) Total increase (decrease) 4,909 4,360 8,372 (1,804)
Assets under management, end of period
$ 43,532 $ 28,921 Percentage of total assets under management 45.2 % 43.6 % 45.2 % 43.6 % Average assets under management$ 41,469 $ 26,799
Closed-end Funds Assets under management, beginning of period$ 11,879 $ 7,763 $ 11,493 $ 9,644 Inflows 103 1 168 404 Outflows - - - (88) Net inflows (outflows) 103 1 168 316 Market appreciation (depreciation) 703 903 1,172 (1,165) Distributions (148) (128) (296) (256) Total increase (decrease) 658 776 1,044 (1,105)
Assets under management, end of period
$ 12,537 $ 8,539 Percentage of total assets under management 13.0 % 12.9 % 13.0 % 12.9 % Average assets under management$ 12,372 $ 8,322
Total
Assets under management, beginning of period
$ 79,908 $ 72,182 Inflows 6,506 7,068 13,976 14,111 Outflows (3,944) (3,647) (7,598) (9,506) Net inflows (outflows) 2,562 3,421 6,378 4,605 Market appreciation (depreciation) 7,392 6,576 11,398 (8,750) Distributions (769) (1,039) (1,459) (1,710) Total increase (decrease) 9,185 8,958 16,317 (5,855)
Assets under management, end of period
$ 96,225 $ 66,327 Average assets under management$ 92,944 $ 62,232 $ 87,930 $ 65,657 22
--------------------------------------------------------------------------------
Assets Under Management - Institutional Accounts
By Account Type
(in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Advisory
Assets under management, beginning of period
$ 17,628 $ 15,669 Inflows 1,512 1,103 3,449 2,537 Outflows (493) (252) (736) (989) Net inflows (outflows) 1,019 851 2,713 1,548 Market appreciation (depreciation) 1,817 1,352 2,774 (1,966) Total increase (decrease) 2,836 2,203 5,487 (418)
Assets under management, end of period
$ 23,115 $ 15,251 Percentage of institutional assets under management 57.6 % 52.8 % 57.6 % 52.8 % Average assets under management$ 22,084 $ 14,366
Japan Subadvisory Assets under management, beginning of period$ 9,924 $ 7,792 $ 9,720 $ 10,323 Inflows 22 418 120 976 Outflows (294) (100) (596) (378) Net inflows (outflows) (272) 318 (476) 598 Market appreciation (depreciation) 1,160 960 1,872 (1,535) Distributions (309) (334) (613) (650) Total increase (decrease) 579 944 783 (1,587)
Assets under management, end of period
$ 10,503 $ 8,736 Percentage of institutional assets under management 26.2 % 30.3 % 26.2 % 30.3 % Average assets under management$ 10,306 $ 8,128
Subadvisory Excluding Japan Assets under management, beginning of period$ 6,335 $ 4,205 $ 5,907 $ 5,821 Inflows 292 383 592 654 Outflows (667) (171) (870) (617) Net inflows (outflows) (375) 212 (278) 37 Market appreciation (depreciation) 578 463 909 (978) Total increase (decrease) 203 675 631 (941)
Assets under management, end of period
$ 6,538 $ 4,880 Percentage of institutional assets under management 16.3 % 16.9 % 16.3 % 16.9 % Average assets under management$ 6,713 $ 4,617
Total Institutional Accounts Assets under management, beginning of period$ 36,538 $ 25,045 $ 33,255 $ 31,813 Inflows 1,826 1,904 4,161 4,167 Outflows (1,454) (523) (2,202) (1,984) Net inflows (outflows) 372 1,381 1,959 2,183 Market appreciation (depreciation) 3,555 2,775 5,555 (4,479) Distributions (309) (334) (613) (650) Total increase (decrease) 3,618 3,822 6,901 (2,946)
Assets under management, end of period
$ 40,156 $ 28,867 Average assets under management$ 39,103 $ 27,111 $ 36,877 $ 28,524 23
--------------------------------------------------------------------------------
Assets Under Management
By Investment Strategy
(in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
U.S. Real Estate
Assets under management, beginning of period $ 36,984 $ 23,794 $ 32,827 $ 31,024
Inflows 2,592 3,596 5,718 6,083
Outflows (1,723) (1,522) (3,114) (3,453)
Net inflows (outflows) 869 2,074 2,604 2,630
Market appreciation (depreciation) 4,419 3,035 7,256 (4,342)
Distributions (407) (784) (822) (1,224)
Transfers - - - 31
Total increase (decrease) 4,881 4,325 9,038 (2,905)
Assets under management, end of period $ 41,865 $ 28,119 $ 41,865 $ 28,119
Percentage of total assets under management 43.5 % 42.4 % 43.5 % 42.4 %
Average assets under management $ 40,269 $
25,642
Preferred Securities Assets under management, beginning of period$ 23,790 $ 14,872 $ 23,185 $ 17,581 Inflows 2,254 2,075 4,660 4,531 Outflows (1,081) (1,319) (2,677) (3,895) Net inflows (outflows) 1,173 756 1,983 636 Market appreciation (depreciation) 750 1,653 752 (742) Distributions (215) (165) (422) (328) Transfers - - - (31) Total increase (decrease) 1,708 2,244 2,313 (465) Assets under management, end of period$ 25,498 $ 17,116 $ 25,498 $ 17,116 Percentage of total assets under management 26.5 % 25.8 % 26.5 % 25.8 % Average assets under management$ 24,546 $
16,422
Global/International Real Estate Assets under management, beginning of period$ 16,421 $ 11,005 $ 15,214 $ 13,509 Inflows 1,111 1,108 2,190 2,855 Outflows (890) (482) (1,457) (1,380) Net inflows (outflows) 221 626 733 1,475 Market appreciation (depreciation) 1,664 1,059 2,373 (2,286) Distributions (86) (31) (100) (39) Total increase (decrease) 1,799 1,654 3,006 (850) Assets under management, end of period$ 18,220 $ 12,659 $ 18,220 $ 12,659 Percentage of total assets under management 18.9 % 19.1 % 18.9 % 19.1 % Average assets under management$ 17,697 $ 11,799 $ 16,660 $ 12,288 24
--------------------------------------------------------------------------------
Assets Under Management
By Investment Strategy - continued
(in millions)
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Global Listed Infrastructure
Assets under management, beginning of period $ 7,604 $ 6,175 $ 6,729 $ 8,076
Inflows 480 252 1,159 542
Outflows (141) (279) (215) (668)
Net inflows (outflows) 339 (27) 944 (126)
Market appreciation (depreciation) 355 670 670 (1,078)
Distributions (52) (50) (97) (104)
Total increase (decrease) 642 593 1,517 (1,308)
Assets under management, end of period
$ 8,246 $ 6,768 Percentage of total assets under management 8.6 % 10.2 % 8.6 % 10.2 % Average assets under management$ 8,051 $ 6,763
Other
Assets under management, beginning of period
$ 1,953 $ 1,992 Inflows 69 37 249 100 Outflows (109) (45) (135) (110) Net inflows (outflows) (40) (8) 114 (10) Market appreciation (depreciation) 204 159 347 (302) Distributions (9) (9) (18) (15) Total increase (decrease) 155 142 443 (327)
Assets under management, end of period
$ 2,396 $ 1,665 Percentage of total assets under management 2.5 % 2.5 % 2.5 % 2.5 % Average assets under management$ 2,381 $ 1,606
Total
Assets under management, beginning of period
$ 79,908 $ 72,182 Inflows 6,506 7,068 13,976 14,111 Outflows (3,944) (3,647) (7,598) (9,506) Net inflows (outflows) 2,562 3,421 6,378 4,605 Market appreciation (depreciation) 7,392 6,576 11,398 (8,750) Distributions (769) (1,039) (1,459) (1,710) Total increase (decrease) 9,185 8,958 16,317 (5,855)
Assets under management, end of period
$ 96,225 $ 66,327 Average assets under management$ 92,944 $ 62,232 $ 87,930 $ 65,657 25
--------------------------------------------------------------------------------
Investment Performance at
[[Image Removed: cns-20210630_g1.jpg]]_________________________
(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 atJune 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 atJune 30, 2021 increased 45.1% to$96.2 billion from$66.3 billion atJune 30, 2020 . The increase was due to net inflows of$12.5 billion and market appreciation of$20.4 billion , partially offset by distributions of$3.0 billion . Net inflows included$6.5 billion into preferred securities,$4.6 billion intoU.S. real estate and$944 million into global/international real estate. Market appreciation included$11.0 billion fromU.S. real estate,$4.8 billion from global/international real estate,$2.7 billion from preferred securities and$1.3 billion from global listed infrastructure. Distributions included$1.9 billion fromU.S. real estate and$790 million from preferred securities. Our organic growth rate for the twelve months endedJune 30, 2021 was 18.9%. The organic growth/decay rate represents the ratio of net flows for the period to the beginning assets under management. 26 -------------------------------------------------------------------------------- Average assets under management for the three months endedJune 30, 2021 increased 49.4% to$92.9 billion from$62.2 billion for the three months endedJune 30, 2020 . Institutional accounts Assets under management in institutional accounts atJune 30, 2021 , which represented 41.7% of total assets under management, increased 39.1% to$40.2 billion from$28.9 billion atJune 30, 2020 . The increase was due to net inflows of$2.5 billion and market appreciation of$10.1 billion , partially offset by distributions of$1.3 billion . Net inflows included$1.6 billion intoU.S. real estate and$519 million into global/international real estate. Market appreciation included$4.5 billion fromU.S. real estate and$4.1 billion from global/international real estate. Distributions included$1.3 billion fromU.S. real estate. Our organic growth rate for institutional accounts for the twelve months endedJune 30, 2021 was 8.8%. Average assets under management for institutional accounts for the three months endedJune 30, 2021 increased 44.2% to$39.1 billion from$27.1 billion for the three months endedJune 30, 2020 . Assets under management in institutional advisory accounts atJune 30, 2021 , which represented 57.6% of institutional assets under management, increased 51.6% to$23.1 billion from$15.3 billion atJune 30, 2020 . The increase was due to net inflows of$2.7 billion and market appreciation of$5.1 billion . Net inflows included$1.4 billion intoU.S. real estate,$713 million into global/international real estate and$587 million into preferred securities. Market appreciation included$2.3 billion from global/international real estate and$1.7 billion fromU.S. real estate. Our organic growth rate for institutional advisory accounts for the twelve months endedJune 30, 2021 was 17.8%. Average assets under management for institutional advisory accounts for the three months endedJune 30, 2021 increased 53.7% to$22.1 billion from$14.4 billion for the three months endedJune 30, 2020 . Assets under management inJapan subadvisory accounts atJune 30, 2021 , which represented 26.2% of institutional assets under management, increased 20.2% to$10.5 billion from$8.7 billion atJune 30, 2020 . The increase was due to market appreciation of$3.2 billion , partially offset by net outflows of$99 million and distributions of$1.3 billion . Net outflows included$219 million from global/international real estate and$147 million from preferred securities, partially offset by net inflows of$273 million intoU.S. real estate. Market appreciation included$2.5 billion fromU.S. real estate and$643 million from global/international real estate. Distributions included$1.3 billion fromU.S. real estate. Our organic decay rate forJapan subadvisory accounts for the twelve months endedJune 30, 2021 was 1.1%. Average assets under management forJapan subadvisory accounts for the three months endedJune 30, 2021 increased 26.8% to$10.3 billion from$8.1 billion for the three months endedJune 30, 2020 . Assets under management in institutional subadvisory accounts excludingJapan atJune 30, 2021 , which represented 16.3% of institutional assets under management, increased 34.0% to$6.5 billion from$4.9 billion atJune 30, 2020 . The increase was due to market appreciation of$1.7 billion , partially offset by net outflows of$69 million , primarily fromU.S. real estate. Market appreciation included$1.2 billion from global/international real estate and$270 million fromU.S. real estate. Our organic decay rate for institutional subadvisory accounts excludingJapan for the twelve months endedJune 30, 2021 was 1.4%. Average assets under management for institutional subadvisory accounts excludingJapan for the three months endedJune 30, 2021 increased 45.4% to$6.7 billion from$4.6 billion for the three months endedJune 30, 2020 . Open-end funds Assets under management in open-end funds atJune 30, 2021 , which represented 45.2% of total assets under management, increased 50.5% to$43.5 billion from$28.9 billion atJune 30, 2020 . The increase was due to net inflows of$7.6 billion and market appreciation of$8.2 billion , partially offset by distributions of$1.1 billion . Net inflows included$4.0 billion into preferred securities and$2.8 billion intoU.S. real estate. Market appreciation included$5.6 billion fromU.S. real estate,$1.7 billion from preferred securities and$637 million from global/international real estate. Distributions included$629 million from preferred securities ($463 million of which was reinvested) and$403 million fromU.S. real estate ($372 million of which was reinvested). Our organic growth rate for open-end funds for the twelve months endedJune 30, 2021 was 26.2%. Average assets under management for open-end funds for the three months endedJune 30, 2021 increased 54.7% to$41.5 billion from$26.8 billion for the three months endedJune 30, 2020 . 27 -------------------------------------------------------------------------------- Closed-end funds Assets under management in closed-end funds atJune 30, 2021 , which represented 13.0% of total assets under management, increased 46.8% to$12.5 billion from$8.5 billion atJune 30, 2020 . The increase was due to net inflows of$2.4 billion and market appreciation of$2.1 billion , partially offset by distributions of$556 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). Our organic growth rate for closed-end funds for the twelve months endedJune 30, 2021 was 28.3%. Average assets under management for closed-end funds for the three months endedJune 30, 2021 increased 48.7% to$12.4 billion from$8.3 billion for the three months endedJune 30, 2020 . 28 --------------------------------------------------------------------------------
Summary of Operating Information
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands, except percentages and per
share data) 2021 2020 2021 2020
U.S. GAAP
Revenue $ 144,269 $ 94,087 $ 270,016 $ 199,917
Expenses $ 84,572 $ 58,792 $ 158,381 $ 136,253
Operating income $ 59,697 $ 35,295 $ 111,635 $ 63,664
Non-operating income (loss) $ 8,536 $ 7,953 $ 13,489 $ (11,890)
Net income attributable to common stockholders $ 46,579 $ 28,520 $ 95,431 $ 49,092
Diluted earnings per share $ 0.95 $ 0.59 $ 1.95 $ 1.01
Operating margin 41.4 % 37.5 % 41.3 % 31.8 %
As Adjusted (1)
Net income attributable to common stockholders $ 45,917 $ 26,154 $ 84,546 $ 55,593
Diluted earnings per share $ 0.94 $ 0.54 $ 1.73 $ 1.15
Operating margin 43.4 % 37.7 % 42.9 % 38.0 %
_________________________
(1) These amounts represent the Company's as adjusted results. Please refer to
pages 34-35 for reconciliations of
Three Months EndedJune 30, 2021 Compared with Three Months EndedJune 30, 2020 Revenue Three Months Ended June 30, (in thousands) 2021 2020 $ Change % Change Open-end funds$ 69,706 $ 44,636 $ 25,070 56.2 % Institutional accounts 37,381 24,500 12,881 52.6 % Closed-end funds 27,261 17,512 9,749 55.7 % Investment advisory and administration fees 134,348 86,648 47,700 55.1 % Distribution and service fees 9,199 6,930 2,269 32.7 % Other 722 509 213 41.8 % Total revenue$ 144,269 $ 94,087 $ 50,182 53.3 % Revenue for the three months endedJune 30, 2021 increased primarily due to higher average assets under management across all three investment vehicles and the recognition of$2.3 million of performance fees from certain institutional accounts. •Total investment advisory and administration revenue compared with average assets under management in open-end funds implied an annualized effective fee rate of 67.4 bps and 67.0 bps for the three months endedJune 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 38.3 bps and 36.3 bps for the three months endedJune 30, 2021 and 2020, respectively. The increase in the implied annualized effective fee rate was primarily due to the recognition of performance fees for the three months endedJune 30, 2021 . Excluding the performance fees, the implied annualized effective fee rate for the three months endedJune 30, 2021 would have been 36.0 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 84.6 bps for the three months endedJune 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
June 30,
(in thousands) 2021 2020 $ Change % Change
Employee compensation and benefits $ 53,241 $ 34,320 $ 18,921 55.1 %
Distribution and service fees 18,848 12,518 6,330 50.6 %
General and administrative 11,466 10,726 740 6.9 %
Depreciation and amortization 1,017 1,228 (211) (17.2) %
Total expenses $ 84,572 $ 58,792 $ 25,780 43.8 %
Employee compensation and benefits expenses for the three months ended June 30,
2021 increased primarily due to higher incentive compensation of $12.5 million
and higher accelerated vesting of certain restricted stock units of $2.7
million .
Distribution and service fees expense for the three months ended June 30, 2021
increased primarily due to higher average assets under management in U.S.
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 ended June 30, 2021
increased primarily due to higher professional fees of $893,000 , $387,000 of
which was attributable to recruitment fees.
Operating Margin
Operating margin for the three months ended June 30, 2021 increased to 41.4%
from 37.5% for the three months ended June 30, 2020 . Operating margin represents
the ratio of operating income to revenue.
Non-operating Income (Loss)
Three Months Ended
June 30, 2021 June 30, 2020
(in thousands) Seed Investments Other Total Seed Investments Other Total
Interest and dividend income-net $ 817 $ 20 $ 837 $ 604 $ 289 $ 893
Gain (loss) from investments-net 7,778 - 7,778 7,317 - 7,317
Foreign currency gains
(losses)-net 223 (302) (79) (225) (32) (257)
Total non-operating income (loss) $ 8,818 (1) $ (282) $ 8,536 $ 7,696 (1) $ 257 $ 7,953 _________________________
(1) Seed investments included net income of$5.8 million and$3.6 million attributable to third-party interests for the three months endedJune 30, 2021 and 2020, respectively. Income Taxes Three Months Ended June 30, (in thousands, except percentages) 2021 2020 $ Change % Change Income tax expense$ 15,827 $ 11,086 $ 4,741 42.8 % Effective tax rate 25.4 % 28.0 % The effective tax rate for the three months endedJune 30, 2021 and 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. In addition, the effective tax rate for the three months endedJune 30, 2021 included the cumulative effect of a change in the Company's estimated effective tax rate for the year. 30 -------------------------------------------------------------------------------- Six Months EndedJune 30, 2021 Compared with Six Months EndedJune 30, 2020 Revenue Six Months Ended June 30, (in thousands) 2021 2020 $ Change % Change Open-end funds$ 130,309 $ 94,444 $ 35,865 38.0 % Institutional accounts 68,368 52,359 16,009 30.6 % Closed-end funds 52,592 37,134 15,458 41.6 % Investment advisory and administration fees 251,269 183,937 67,332 36.6 % Distribution and service fees 17,471 14,713 2,758 18.7 % Other 1,276 1,267 9 0.7 % Total revenue$ 270,016 $ 199,917 $ 70,099 35.1 % Revenue for the six months endedJune 30, 2021 increased primarily due to higher average assets under management across all three investment vehicles and higher performance fees from certain institutional accounts of$1.3 million . •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 six months endedJune 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 37.4 bps and 36.9 bps for the six months endedJune 30, 2021 and 2020, respectively. The increase in the implied annualized effective fee rate was primarily due to higher performance fees recognized for the six months endedJune 30, 2021 . Excluding the performance fees, the implied annualized effective fee rates for the six months endedJune 30, 2021 and 2020, respectively, would have been 36.1 bps and 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 88.5 bps and 84.8 bps for the six months endedJune 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 Six Months Ended June 30, (in thousands) 2021 2020 $ Change % Change Employee compensation and benefits$ 99,003 $ 72,937 $ 26,066 35.7 % Distribution and service fees 35,354 26,622 8,732 32.8 % General and administrative 21,840 34,314 (12,474) (36.4) % Depreciation and amortization 2,184 2,380 (196) (8.2) % Total expenses$ 158,381 $ 136,253 $ 22,128 16.2 % Employee compensation and benefits expenses for the six months endedJune 30, 2021 increased primarily due to higher incentive compensation of$19.0 million and higher accelerated vesting of certain restricted stock units of$3.8 million . Distribution and service fees expense for the six months endedJune 30, 2021 increased primarily due to higher average assets under management inU.S. open-end funds and a shift in the composition of assets under management into a higher cost intermediary. General and administrative expenses for the six months endedJune 30, 2021 decreased$12.5 million . The six months endedJune 30, 2020 included costs associated with the Cohen & Steers Quality Income Realty Fund, Inc. (RQI) rights offering of approximately$12.0 million . Operating Margin Operating margin for the six months endedJune 30, 2021 increased to 41.3% from 31.8% for the six months endedJune 30, 2020 . The six months endedJune 30, 2020 included costs associated with the RQI rights offering. 31 --------------------------------------------------------------------------------
Non-operating Income (Loss)
Six Months Ended
June 30, 2021 June 30, 2020
(in thousands) Seed Investments Other Total Seed Investments Other Total
Interest and dividend income-net $ 1,421
$ 1,453 $ 1,211$ 831 $ 2,042 Gain (loss) from investments-net 12,263 74 12,337 (14,710) - (14,710) Foreign currency gains (losses)-net 414 (715) (301) (698) 1,476 778
Total non-operating income (loss) $ 14,098 (1)
_________________________
(1) Seed investments included net income of$9.4 million and net loss of$8.9 million attributable to third-party interests for the six months endedJune 30, 2021 and 2020, respectively. Income Taxes Six Months Ended June 30, (in thousands, except percentages) 2021 2020 $ Change % Change Income tax expense$ 20,288 $ 11,544 $ 8,744 75.7 % Effective tax rate 17.5 % 19.0 % The effective tax rate for the six months endedJune 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 six months endedJune 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 more than 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 EndedJune 30, 2021 Compared with Three Months EndedJune 30, 2020 Revenue Revenue, as adjusted, for the three months endedJune 30, 2021 was$144.4 million , compared with$94.0 million for the three months endedJune 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 endedJune 30, 2021 were$81.8 million , compared with$58.6 million for the three months endedJune 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 the three months endedJune 30, 2021 . Operating Margin Operating margin, as adjusted, for the three months endedJune 30, 2021 was 43.4%, compared with 37.7% for the three months endedJune 30, 2020 . Non-operating Income (Loss) Non-operating loss, as adjusted, for the three months endedJune 30, 2021 was$120,000 , compared with non-operating income, as adjusted, of$140,000 for the three months endedJune 30, 2020 . Non-operating income (loss), as adjusted, excluded the following for both periods: 32 -------------------------------------------------------------------------------- •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 endedJune 30, 2021 and 2020, respectively, was 26.5%. The effective tax rate, as adjusted, excluded the tax effects associated with items noted above, as well as discrete tax items for both periods. Six Months EndedJune 30, 2021 Compared with Six Months EndedJune 30, 2020 Revenue Revenue, as adjusted, for the six months endedJune 30, 2021 was$270.2 million , compared with$199.8 million for the six months endedJune 30, 2020 . Revenue, as adjusted, excluded the consolidation of certain of our seed investments for both periods. Expenses Expenses, as adjusted, for the six months endedJune 30, 2021 were$154.4 million , compared with$123.9 million for the six months endedJune 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 the six months endedJune 30, 2021 ; and •Costs associated with the RQI rights offering for the six months endedJune 30, 2020 . Operating Margin Operating margin, as adjusted, for the six months endedJune 30, 2021 was 42.9%, compared with 38.0% for the six months endedJune 30, 2020 . Non-operating Income (Loss) Non-operating loss, as adjusted, for the six months endedJune 30, 2021 was$238,000 , compared with non-operating income, as adjusted, of$263,000 for the six months endedJune 30, 2020 . Non-operating income (loss), as adjusted, excluded the following for both periods: •Results from our seed investments; and •Net foreign currency exchange gains and losses associated withU.S. dollar-denominated assets held by certain foreign subsidiaries. Income Taxes The effective tax rate, as adjusted, for the six months endedJune 30, 2021 was 26.9%, compared with 27.0% for the six months endedJune 30, 2020 . The effective tax rate, as adjusted, excluded the tax effects associated with items noted above, as well as discrete tax items for both periods. 33 -------------------------------------------------------------------------------- Reconciliations ofU.S. GAAP to As Adjusted Financial Results Management believes that use of the following as adjusted (non-GAAP) financial results provides greater transparency into the Company's operating performance. In addition, these as adjusted financial results are used to prepare the Company's internal management reports which are used in evaluating its business. While we believe that these as adjusted financial results are useful in evaluating operating performance, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance withU.S. GAAP. Reconciliation ofU.S. GAAP to As Adjusted Financial Results Net Income Attributable to Common Stockholders and Diluted Earnings per Share Three Months Ended Six Months Ended June 30, June 30, (in thousands, except per share data) 2021 2020 2021 2020 Net income attributable to common stockholders, U.S. GAAP$ 46,579 $ 28,520 $ 95,431 $ 49,092 Seed investments (1) (2,752) (3,885) (4,264) 5,703 Accelerated vesting of restricted stock units 2,664 - 3,752 - Rights offering costs (2) - - - 11,859 Foreign currency exchange (gains) losses-net (3) 162 (117) 371 (2,044) Tax adjustments (4) (736) 1,636 (10,744) (9,017) Net income attributable to common stockholders, as adjusted$ 45,917 $
26,154
Diluted weighted average shares outstanding 48,951 48,572 48,831 48,549 Diluted earnings per share, U.S. GAAP$ 0.95 $ 0.59 $ 1.95 $ 1.01 Seed investments (0.06) (0.08) (0.09) 0.12 Accelerated vesting of restricted stock units 0.06 - 0.08 - Rights offering costs - - - 0.25 Foreign currency exchange (gains) losses-net 0.01 - * 0.01 (0.04) Tax adjustments (0.02) 0.03 (0.22) (0.19) Diluted earnings per share, as adjusted$ 0.94 $
0.54
_________________________
* Amounts round to less than$0.01 per share. (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds as well as non-operating (income) loss from seed investments that were not consolidated. (2) Represents costs associated with the Cohen & Steers Quality Income Realty Fund, Inc. (RQI) rights offering which were recorded in general and administrative expense in the first quarter of 2020. (3) Represents net foreign currency exchange (gains) losses associated withU.S. dollar-denominated assets held by certain foreign subsidiaries. (4) Tax adjustments are summarized in the following table: Discrete tax items$ (10) $ 13 $ (10,249) $ (5,807) Tax effect of adjustments included above (726) 1,623 (495) (3,210) Total tax adjustments$ (736) $ 1,636 $ (10,744) $ (9,017) 34
--------------------------------------------------------------------------------
Reconciliation of
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands, except percentages) 2021 2020 2021 2020
Revenue, U.S. GAAP $ 144,269 $ 94,087 $ 270,016 $ 199,917
Seed investments (1) 105 (60) 199 (89)
Revenue, as adjusted $ 144,374 $ 94,027 $ 270,215 $ 199,828
Expenses, U.S. GAAP $ 84,572 $ 58,792 $ 158,381 $ 136,253
Seed investments (1) (134) (229) (230) (457)
Accelerated vesting of restricted stock units (2,664) - (3,752) -
Rights offering costs (2) - - - (11,859)
Expenses, as adjusted $ 81,774 $ 58,563 Operating income, U.S. GAAP$ 59,697 $ 35,295 $ 111,635 $ 63,664 Seed investments (1) 239 169 429 368 Accelerated vesting of restricted stock units 2,664 - 3,752 - Rights offering costs (2) - - - 11,859 Operating income, as adjusted$ 62,600 $ 35,464
Operating margin, U.S. GAAP 41.4 % 37.5 % 41.3 % 31.8 % Operating margin, as adjusted 43.4 % 37.7 % 42.9 % 38.0 % _________________________ (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (2) 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 Six Months Ended June 30, June 30, (in thousands) 2021 2020 2021 2020 Non-operating income (loss), U.S. GAAP$ 8,536 $ 7,953 $ 13,489 $ (11,890) Seed investments (1) (8,818) (7,696) (14,098) 14,197 Foreign currency exchange (gains) losses-net (2) 162 (117) 371 (2,044) Non-operating income (loss), as adjusted$ (120) $
140
_________________________
(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: June 30, December 31, (in thousands) 2021 2020 Cash and cash equivalents$ 111,229 $ 41,232 U.S. Treasury securities - 41,648 Seed investments-net 70,142 60,083 Current assets 79,422 70,208 Current liabilities (76,207) (93,870) Net liquid assets$ 184,586 $ 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. AtJune 30, 2021 , institutional accounts comprised 52.0% of total accounts receivable, while open-end and closed-end funds, together, comprised 47.5% 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 atJune 30, 2021 , there was no allowance for uncollectible accounts required. Current liabilities Current liabilities are generally defined as obligations due within one year, which 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:
© Edgar Online, source
