Cohen & Steers Inc

Ladies and gentlemen, thank you for standing by. Welcome to the Coin and Sears third quarter 2022 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 an operator, please press star 0. As a reminder, today's call is being recorded Thursday, October 20th, 2022. I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel for Cohen and Steers. Please go ahead, sir.

Thank you, and welcome to the Cohen and Steers Third Quarter 2022 Earnings Conference Call. Joining me are our Chief Executive Officer, Joe Harvey, our Chief Financial Officer, Matt Stadler, and our Chief Investment Officer, John Che. 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 or other investment vehicle. 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. 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.cohenandsears.com. With that, I'll turn the call over to Matt.

Thank you, Brian, and good morning, everyone. Consistent with previous quarters, 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. Yesterday, we reported earnings of 92 cents per share compared with $1.06 in the prior year's quarter and 96 cents sequentially. The third quarter of 2022 included a cumulative adjustment to compensation and benefits that increased the compensation to revenue ratio. Revenue was $140.2 million for the quarter, compared with $154.3 million in the prior year's quarter and $147.7 million sequentially. Decrease from the second quarter was primarily attributable to lower average assets under management across all three investment vehicles, partially offset by one additional day in the quarter. Our effective fee rate was 58 basis points in the third quarter compared with 58.2 basis points in the second quarter. Operating income was $60.1 million in the third quarter compared with $70.4 million in the prior year's quarter and $64 million sequentially. And our operating margin decreased to 42.8% from 43.3% last quarter. Expenses decreased 4.3% when compared with the second quarter as lower compensation and benefits and distribution and service fees were partially offset by higher G&A. The compensation to revenue ratio with the cumulative adjustment referred to earlier increased to 35.04% for the third quarter. and is now 34.5% for the nine months ended, 25 basis points higher than our previous guidance. The decrease in distribution and service fee expense was primarily due to lower average assets under management in U.S. open-end funds, as well as a mixed shift into lower cost share classes. And the increase in G&A was primarily due to higher hosted conferences and an increase in travel and entertainment expenses. Our effective tax rate remained at 25.25%, consistent with the guidance provided on our last call. Page 15 of the earnings presentation sets forth our cash and cash equivalents, corporate investments in U.S. Treasury securities, and liquid seed investments for the current and trailing four quarters. Our firm liquidity totaled $269.9 million at quarter end, compared with $227.7 million last quarter. and we continue to be debt free. Assets under management were $79.2 billion at September 30th, a decrease of $8.7 billion, or 9.9% from June 30th. The decrease was due to market depreciation of $7.4 billion, net outflows of $598 million, and distributions of $680 million. Advisory accounts had net outflows of $220 million during the quarter, compared with net outflows of $408 million during the second quarter. Joe Harvey will provide some color on our advisory flows, as well as an update on our institutional pipeline of awarded unfunded mandates. Japan's sub-advisory had net inflows of $132 million during the third quarter, compared with net inflows of $23 million during the second quarter. This marks the third straight quarter of net inflows. Distributions from these portfolios totaled $235 million, compared with $242 million last quarter. Sub-advisory excluding Japan had net inflows of $211 million during the third quarter, compared with net outflows of $90 million during the second quarter. The third quarter included an inflow of $200 million from a new relationship into a U.S. real estate portfolio. Open-end funds had net outflows of $732 million during the third quarter, compared with net outflows of $244 million during the second quarter. The third quarter included a billion dollars of outflows attributable to an intermediary who, based on current market conditions, decided to eliminate its model allocation to U.S. REITs. Net inflows into multi-strategy real assets, global listed infrastructure, and global real estate were more than offset by net outflows from US real estate and preferred securities. Distributions totaled $293 million, $248 million of which was reinvested. Let me briefly discuss a few items to consider for the fourth quarter. Since the start of the year, market depreciation has resulted in a meaningful decline in our assets under management. And we have ended each of the past two quarters with assets under management that were lower than average assets under management. In response to the corresponding decline in revenue that this will present, we have reduced our incentive compensation accrual and increased our compensation to revenue ratio. In addition, with respect to new hires, the bar has been raised significantly, and we do not anticipate any meaningful headcount additions through year end. As a result, and all things being equal, we expect our compensation to revenue ratio for the fourth quarter to remain at 34.5%. We expect G&A to increase 12 to 13% from the 47.2 million we recorded in 2021. Although we continue to review discretionary spending in order to identify areas where we can reduce costs, 2022 included certain investments in technology including the ongoing implementation of a new trading and order management system that were necessary and are expected to result in future operational efficiencies. In addition, although our T&E has increased from last year, it is still below pre-pandemic levels. And finally, we expect our effective tax rate will remain at 25.25%. Now I'd like to turn it over to our Chief Investment Officer, John Shea, to discuss our investment performance.