Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen and Steers second quarter 2021 earnings conference call. During the presentation, all participants will be in the listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded. on Thursday, July 22nd, 2021. I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen and Steers. Please go ahead.

Thank you and welcome to the Cohen and Steers Second Quarter 2021 Earnings Conference Call. Joining me are our Chief Executive Officer, Bob Steers, our President, Joe Harvey, and our Chief Financial Officer, Matt Stadler. I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying second quarter earnings release and presentation, our most recent annual report on Form 10-K, and our other SEC filings. we assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund. Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation, as well as links to our SEC filings, are available in the investor relations section of our website at www.cohenandstiers.com. With that, I'll turn the call over to Matt.

Thanks, Brian. Good morning, everyone. Thanks for joining us today. My remarks this morning will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on pages 18 and 19 of the earnings release and on slides 16 through 19 of the earnings presentation. Please note that slide 19 of the earnings presentation, which was introduced last quarter, now also includes a reconciliation of the adjustments to operating income for the full year of 2020. Yesterday, we reported record earnings of $0.94 per share, compared with $0.54 in the prior year's quarter and $0.79 sequentially. Revenue was a record $144.4 million for the quarter, compared with $94 million in the prior year's quarter and $125.8 million sequentially. The increase in revenue from the first quarter was primarily attributable to higher average assets under management across all three investment vehicles, the recognition of performance fees, and one additional day in the quarter. Our implied effective fee rate was 58 basis points in the second quarter, compared with 57.3 basis points in the first quarter. Excluding performance fees, our second quarter implied effective fee rate would have been 57 basis points. no performance fees were recorded in the first quarter. Operating income was a record $62.6 million in the quarter, compared with $35.5 million in the prior year's quarter and $53.2 million sequentially. Our operating margin increased to 43.4 percent from 42.3 percent last quarter. The second quarter included a cumulative adjustment to reduce the compensation-to-revenue ratio. Expenses increased 12.6% compared with the first quarter, primarily due to higher compensation and benefits, distribution and service fees, and G&A. The compensation to revenue ratio, which included the just mentioned cumulative adjustment to lower the incentive compensation accrual, was 35.03% for the second quarter, and is now 35.25% for the six months ended. The increase in distribution and service fee expense was primarily due to higher average assets under management in U.S. open-end funds, and the increase in G&A was primarily due to higher professional and recruitment fees as well as an increase in travel and entertainment expenses. Our effective tax rate, which also included a cumulative adjustment, was 26.51% for the second quarter and is now 26.85% for the six months ended. The reduction in the effective tax rate from the first quarter was primarily due to the diminished effect of the non-deductible portion of executive compensation on a higher than previously forecasted pre-tax base. Page 15 of the earnings presentation sets forth our cash corporate investments in U.S. Treasury securities, and seed investments for the current and trailing four quarters. Our firm liquidity totaled $185.6 million a quarter end, compared with $124.3 million last quarter. We remain debt-free. Total assets under management was a record $96.2 billion at June 30th, an increase of $9.2 billion, or 11%, from March 31st. The increase was due to net inflows of 2.6 billion and market appreciation of 7.4 billion, partially offset by distributions of 769 million. Advisory accounts, which ended the quarter with a record 23.1 billion of assets under management, had net inflows of 1 billion during the quarter. We recorded 300 million of inflows from five new mandates and a record $1.2 billion of inflows from existing accounts. Partially offsetting these inflows were $493 million of outflows resulting from client rebalancings. Net inflows were evenly apportioned between U.S. real estate, global real estate, preferred, and global listed infrastructure portfolios. Bob Steers will provide an update on our institutional pipeline of awarded, unfunded mandates. Japan's subadvisory had net outflows of $272 million during the quarter, compared with net outflows of $204 million during the first quarter. As mentioned on last quarter's call, in January of 2021, a distribution rate cut was made to one of the funds we subadvised. Encouragingly, the rate of net outflows in this fund decelerated throughout the quarter, and we actually recorded net inflows for the month of June. Sub-advisory excluding Japan had net outflows of $375 million, primarily from a single client who decided to bring the portfolio management for a portion of the assets we manage for them in-house. Open-end funds, which ended the quarter with record assets under management of $43.5 billion, had net inflows of $2.1 billion during the quarter. This marks the 10th straight quarter of net inflows into open-end funds and the first time we have recorded net inflows into each of our 11 U.S. mutual funds. Net inflows were primarily into U.S. real estate and preferred funds. Distributions totaled $312 million, $260 million of which was reinvested. Let me briefly discuss a few items to consider for the second half of the year. With respect to our outlook for compensation, the double-digit sequential growth in our assets under management and revenue, driven by our industry-leading organic growth rate and our strong investment performance, is tempered by the fact we still have half a year to go. As a result, we reduced the compensation to revenue ratio by 25 basis points to 35.25% for the six months ended, and we expect that our compensation to revenue ratio will remain at 35.25%. As we resume certain business activities that had been restricted during the worst of the pandemic, we expect G&A will increase by about 12% from the 42.6 million we recorded in 2020. but only by about 3 percent from the 46 million we recorded in 2019. As was the case last quarter, the increase is primarily attributable to incremental investments in technology and global marketing, as well as higher recruitment costs associated with the hiring of certain key investment and distribution personnel. We expect that our effective tax rate will remain at 26.85 percent And finally, during the second quarter, in response to a client request, we converted the fee structure on two portfolios from a performance-based fee structure to a base fee only. This conversion resulted in the realization of the year-to-date outperformance. The increase in the base fee for these portfolios is not expected to have a meaningful impact on our overall effective fee rate. And with that, I'd like to turn it over to Joe Harvey, who will discuss our investment performance.