Cohen & Steers, Inc. ((CNS)) has held its Q1 earnings call. Read on for the main highlights of the call.
Cohen & Steers’ recent earnings call presented a mixed sentiment, reflecting both positive achievements and notable challenges. The company showcased strong investment performance and positive net inflows, alongside successful product launches. However, concerns were raised regarding declining revenue, institutional advisory outflows, and economic uncertainties tied to tariffs and a potential recession.
Strong Investment Performance
Cohen & Steers reported impressive investment performance, with 81% of its assets under management (AUM) outperforming benchmarks in the first quarter. The company achieved one-year outperformance at 89%, with three, five, and ten-year rates all exceeding 95%. Notably, excess returns were recorded at 257 basis points, 189 basis points, and 254 basis points over one, three, and five-year periods, respectively.
Positive Net Inflows
The company experienced its third consecutive quarter of net inflows, amounting to $222 million in Q1. Open-end funds demonstrated robust performance, contributing $585 million in net inflows, highlighting investor confidence in Cohen & Steers’ offerings.
End-of-Period AUM Growth
Ending AUM saw an increase to $87.6 billion from $85.8 billion in the previous quarter. This growth was driven by net inflows and market appreciation, underscoring the company’s ability to attract and retain investor capital.
Launch of Active ETFs
In February, Cohen & Steers launched its first three active ETFs, focusing on real estate, preferreds, and natural resource equities. The ETFs have shown positive early traction, particularly in the natural resource equities segment, indicating a promising start for these new investment vehicles.
Strong Performance of CNS REIT
The Cohen & Steers Income Opportunities REIT emerged as the top-performing non-traded REIT, delivering a return of 13.4% over the past year. This performance highlights the company’s expertise in real estate investment trusts.
Revenue and Earnings Decline
Despite positive inflows and performance, Q1 revenue declined to $133.8 million from the prior quarter, with earnings per share dropping to $0.75 from $0.78. This decline reflects the challenges the company faces in maintaining its financial metrics.
Institutional Advisory Outflows
The Institutional Advisory segment experienced net outflows of $108 million, with a significant decrease in the unfunded pipeline to $61 million from $531 million. This decline poses a challenge to the company’s institutional business.
Decreased Operating Margin
Operating margin decreased to 34.7% from 35.5% in the prior quarter. This reduction is attributed to lower average AUM and other factors, impacting the company’s profitability.
Challenges from Tariffs and Potential Recession
Economic uncertainties, including tariffs and a potential recession, present challenges to Cohen & Steers. These factors could impact market conditions and the company’s future growth outlook, adding a layer of complexity to strategic planning.
Forward-Looking Guidance
Looking ahead, Cohen & Steers provided guidance for the remainder of the year. The compensation ratio is expected to remain at 40.5%, consistent with the first quarter. General and Administrative expenses are projected to rise by 6% to 7%, driven by infrastructure investments and expenses related to the recent ETF rollout. The effective tax rate is anticipated to stay steady at 25.3%. Despite the challenges, the firm remains optimistic about its strategic priorities, focusing on the wealth channel and developing new vehicles to enhance its market position.
In conclusion, Cohen & Steers’ earnings call highlighted a blend of strong investment performance and positive inflows, countered by revenue declines and economic uncertainties. The company’s strategic initiatives, including active ETF launches and a focus on the wealth channel, position it for potential growth, albeit with challenges to navigate in the broader economic landscape.