10-Q: Cohen & Steers Reports Q1 2024 Results: AUM Dips Slightly Amid Market Volatility

Cohen & Steers' first quarter 2024 results show a slight decrease in assets under management and a dip in revenue compared to the same period last year, despite market appreciation.

Summary

• Cohen & Steers reported a decrease in total revenue to $122.7 million for the first quarter of 2024, down from $126.1 million in the same period of 2023.
• The company's assets under management (AUM) decreased slightly to $81.2 billion as of March 31, 2024, compared to $79.9 billion as of March 31, 2023.
• Net income attributable to common stockholders was $34.0 million, compared to $35.3 million in the first quarter of 2023.
• Diluted earnings per share were $0.68, down from $0.71 in the prior year's first quarter.
• The company experienced net outflows of $1.97 billion across all investment vehicles, partially offset by market appreciation of $679 million.
• Open-end funds saw a 3.5% increase in AUM to $37.7 billion, while institutional accounts decreased by 0.6% to $32.4 billion.
• Closed-end funds increased by 2.3% to $11.1 billion in AUM.
• The company's organic decay rate for the twelve months ended March 31, 2024 was (4.3%).
• The company has committed to invest up to $50 million in Cohen & Steers Real Estate Opportunities Fund, L.P. and up to $125 million in Cohen & Steers Income Opportunities REIT, Inc.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company has taken steps to raise capital and maintain its dividend, the decrease in revenue, net income, and AUM, along with net outflows, indicates a challenging quarter. The market appreciation is a positive, but it was not enough to offset the negative trends.

Positives

• The company experienced market appreciation of $679 million, which partially offset net outflows.
• Open-end funds saw a 3.5% increase in AUM.
• Closed-end funds increased by 2.3% in AUM.
• The company successfully raised $68.4 million through an at-the-market equity offering program.
• The company declared a quarterly dividend of $0.59 per share.

Negatives

• Total revenue decreased by 2.7% year-over-year.
• Net income attributable to common stockholders decreased year-over-year.
• Diluted earnings per share decreased year-over-year.
• The company experienced net outflows of $1.97 billion.
• The company's organic decay rate for the twelve months ended March 31, 2024 was (4.3%).
• Institutional accounts saw a decrease of 0.6% in AUM.

Risks

• The company's revenue is highly dependent on the value of assets under management, which is subject to market fluctuations.
• The company's seed investments are subject to market risk and may be illiquid.
• The company's business is becoming more capital intensive, requiring investments in new strategies and vehicles.
• The company is exposed to risks associated with changes in interest and currency rates, securities markets, and general economic conditions.
• The company's ability to grow assets under management in closed-end funds may be impacted by unfavorable market conditions.

Future Outlook

The company anticipates paying dividends subject to board approval and will consider various factors including economic conditions, strategic plans, and financial performance. The company intends to use the net proceeds from the recent equity offering for general corporate purposes, including seeding track record strategies and investment vehicles.

Management Comments

• Management believes that use of the as adjusted (non-GAAP) financial results provides greater transparency into the company's operating performance.
• Management believes the estimates used in preparing the condensed consolidated financial statements are reasonable and prudent.

Industry Context

The company operates in the competitive global investment management industry, specializing in real assets and alternative income. The results reflect the broader market volatility and investor sentiment impacting asset flows and valuations. The company's focus on real assets and alternative income positions it to capitalize on specific market trends and investor demand for these asset classes.

Comparison to Industry Standards

• Cohen & Steers' performance is comparable to other asset managers specializing in real assets and alternative income, such as Brookfield Asset Management and Blackstone, which also experienced fluctuations in AUM and revenue due to market conditions.
• The company's organic decay rate of (4.3%) is within the range of industry averages for asset managers facing similar market headwinds.
• The company's operating margin of 32.8% is competitive with other asset managers, although some larger firms may have higher margins due to economies of scale.
• The company's investment performance, as measured against benchmarks, is a key factor in attracting and retaining clients, and is comparable to industry standards for active management.

Related Party Transactions

• The company earned $89.8 million in revenue from affiliated funds, including investment advisory, administration, and distribution fees.
• The company has receivables due from company-sponsored funds of $34.6 million and payables due to company-sponsored funds of $0.2 million.
• The company has an advance to CNSREIT of $7.5 million, which will be reimbursed ratably over a 60-month period.

Stakeholder Impact

• Shareholders will receive a quarterly dividend of $0.59 per share.
• Employees may be impacted by changes in compensation and benefits.
• Clients may be impacted by changes in investment performance and asset flows.
• The company's financial performance may impact its ability to invest in new strategies and vehicles.

Next Steps

• The company will continue to monitor market conditions and adjust its strategies as needed.
• The company will focus on growing its assets under management and improving its financial performance.
• The company will continue to evaluate potential investment opportunities and allocate capital accordingly.
• The company will pay a quarterly dividend of $0.59 per share on May 23, 2024.

Key Dates

Keywords

Assets Under Management, Real Assets, Alternative Income, Investment Management, Real Estate, Preferred Securities, Infrastructure, Resource Equities, Commodities, Multi-Strategy Solutions