Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen and Sears third quarter 2021 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach the operator, please press star 0. As a reminder, this conference is being recorded Thursday, October 21st, 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 Third 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 third 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.cohenandsteers.com. With that, I'll turn the call over to Matt.

Thank you, Brian. Good morning, everyone. Our 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. Yesterday, we reported record earnings of $1.06 share, compared with 67 cents in the prior year's quarter, and 94 cents sequentially. Revenue was a record $154.3 million for the quarter, compared with $111.4 million in the prior year's quarter, and $144.4 million sequentially. The increase in revenue from the second quarter was primarily attributable to higher average assets under management across all three investment vehicles and one additional day in the quarter, partially offset by a sequential decline in performance fees from certain institutional accounts. Our implied effective fee rate was 57.5 basis points in the third quarter, compared with 58 basis points in the second quarter. Excluding performance fees, our third quarter implied effective fee rate would have been 57.3 basis points compared with 57 basis points in the second quarter. Operating income was a record $70.4 million in the third quarter compared with $44.2 million in the prior year's quarter and $62.6 million sequentially. And our operating margin increased to a record 45.6 percent from 43.4 percent last quarter. Expenses increased 2.6 percent compared with the second quarter, primarily due to higher compensation and benefits, distribution and service fees, and G&A. The compensation-to-revenue ratio, which included a cumulative adjustment to lower the incentive compensation accrual, was 33.19 percent for the third quarter and is now 34.5 percent for the trailing nine months. The increase in expenses related to distribution and service fees was primarily due to higher average assets under management in U.S. open-end funds, partially offset by a favorable change in share class mix. And the increase in G&A was primarily due to higher travel and entertainment expenses, as well as costs attributable to preparation for a new closed-end fund that combines public and private real estate with preferred and debt securities. Our effective tax rate, which was 25.93 percent for the quarter, included a cumulative adjustment to bring the rate to 26.5 percent for the trailing nine months. The reduction in the effective tax rate from the second 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 $241 million at quarter end, compared with $185.6 million last quarter, and we continued to be debt-free. Total assets under management were $97.3 billion at September 30th. an increase of $1 billion or 1 percent from June 30th. The increase was due to net inflows of $1.3 billion and market appreciation of $469 million, partially offset by distributions of $718 million. This marks our ninth straight quarter of net inflows. Advisory accounts, which ended the quarter with $22.8 billion of assets under management, had net outflows of $311 million during the quarter. We recorded 1.1 billion of inflows, the majority of which were from existing accounts. Offsetting these inflows were 1 billion of outflows from an unexpected account termination after a client decided to eliminate its allocation to multi-strat real assets, as well as 300 million of client rebalancings. This account termination is unrelated to the one noted on previous calls. Bob Steers will provide an update on our institutional pipeline of awarded, unfunded mandates. Japan's sub-advisory had net outflows of 52 million during the quarter, compared with net outflows of 272 million during the second quarter. Distributions from these portfolios totaled 295 million, compared with 309 million last quarter. Sub-advisory excluding Japan had net outflows of 253 million primarily from a client that decided to convert its global listed infrastructure portfolio to passive. Open-end funds, which ended the quarter with a record $45.6 billion of assets under management, had net inflows of $2 billion during the quarter. Net inflows were primarily into U.S. real estate and preferred funds. Distributions totaled $276 million, $225 million of which was reinvested. Let me briefly discuss a few items to consider for the fourth quarter. With respect to compensation, we continue to refine our estimates as we approach year-end. Given our double-digit year-over-year growth in assets under management, revenue, and operating income, driven by our leading organic growth and strong investment performance, we reduced the compensation-to-revenue ratio from the previous quarter's guidance of 35.25 percent by 75 basis points to 34.5 percent. All things being equal, we expect our compensation to revenue ratio for the fourth quarter to remain at 34.5 percent. We now project that our GNA will increase by about 9 percent from the 42.6 million we recorded in 2020. And finally, we expect that our effective tax rate will remain at approximately 26.5 percent. Now I'd like to turn it over to Joe Harvey, who will discuss our investment performance.