Cohen & Steers, Inc. (NYSE:CNS) Q1 2024 Earnings Call Transcript

Cohen & Steers, Inc. (NYSE:CNS) Q1 2024 Earnings Call Transcript April 18, 2024

Cohen & Steers, Inc.  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers First Quarter 2024 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Thursday, April 18th, 2024. And I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.

Brian Heller : Thank you, and welcome to the Cohen & Steers First Quarter 2024 Earnings Conference Call. Joining me are our Chief Executive Officer, Joe Harvey; our Chief Financial Officer, Matt Stadler, and our Chief Investment Officer, Jon Cheigh. 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 first 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. 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.

Matthew Stadler : Thank you, Brian. Good morning, everyone. As in previous quarters, my remarks will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on Pages 13 and 14 of the earnings release and on Slides 16 through 20 of the earnings presentation. Yesterday, we reported earnings of $0.70 per share compared with $0.76 in the prior year’s quarter and $0.67 sequentially. Revenue was $122.9 million in the quarter compared with $126.3 million in the prior year’s quarter and $119 million sequentially. The increase in revenue from the fourth quarter was primarily due to higher average assets under management across all three types of investment vehicles and an increase in the effective fee rate partially offset by one fewer day in the quarter.

The fourth quarter included $1.3 million of performance fees. Our effective fee rate was 58 basis points in the first quarter, compared with 57.7 basis points in the fourth quarter. Excluding the $1.3 million of performance fees, the fourth quarter effective fee rate would have been 57 basis points. The increase in the first quarter fee rate was due in part to the termination of two institutional accounts with assets under management of $2.3 billion that eliminated their strategic allocation to real estate. These two accounts had lower than average fee rates. Operating income was $43.7 million in the quarter compared with $48 million in the prior year’s quarter and $41.3 million sequentially. And our operating margin increased to 35.5% from 34.7% last quarter.

Expenses increased 2% from the fourth quarter, primarily due to higher compensation and benefits, an increase in depreciation and amortization, and higher distribution and service fees, partially offset by a decrease in G&A. The compensation to revenue ratio for the first quarter was 40.5%, consistent with the guidance provided on our last call. The first quarter included full quarter effect of depreciating and amortizing fixed assets and leasehold improvements associated with our new corporate headquarters. The fourth quarter included only one month of depreciation and amortization expense. The increase in distribution and service fees was primarily due to higher average assets under management in U.S. open-end funds, and the decrease in G&A was primarily due to lower recruitment fees.

Our effective tax rate was 25.4% for the quarter in-line 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 $233.1 million at quarter end, compared with $318.8 million last quarter. Firm liquidity as of March 31, reflected the payment of employee bonuses in January, as well as the firm’s customary repurchase of common stock to satisfy withholding tax obligations arising from the vesting and delivery of restricted stock units to participating employees. It also reflected the funding of a portion of our capital commitment to Cohen & Steers Income Opportunities REIT, or recently launched non-traded REIT, which made its first real property investment in January.

And we have not drawn on our $100 million revolving credit facility. Assets under management were $81.2 billion at March 31st, a decrease of $1.9 billion, or 2.3% from December 31st. The decrease was due to net outflows of $2 billion — $2.3 billion of which was attributable to the two terminated accounts I mentioned earlier, and distributions of $610 million, partially offset by market appreciation of $679 million. Joe Harvey will provide an update on our flows and institutional pipeline of awarded unfunded mandates. Let me briefly discuss a few items to consider for the remainder of the year. With respect to compensation and benefits, we continue to take a disciplined and measured approach to both new and replacement hires, so that all things being equal, we would expect to maintain a compensation to revenue ratio of 40.5%.

We expect G&A to increase 5% to 7% for the year from the $55 million we recorded in 2023. As a reminder, 2023 G&A included an adjustment to reduce accrued costs associated with the implementation of our trade order management system. Excluding that adjustment, we would expect G&A to increase 3% to 5%. The majority of the increase is related to investments in technology, as well as costs associated with the relocation of our London and Tokyo offices. We continue to review all of our non-client related expenses. As I noted earlier, the first quarter included the full effect of depreciating and amortizing fixed assets and leasehold improvements from our new corporate headquarters. We expect the depreciation and amortization expense to approximate $9.5 million for 2024.

And finally, we expect that our effective tax rate will remain at 25.4%. Now I’d like to turn it over to our Chief Investment Officer, Jon Cheigh, who will discuss our investment performance.

Jon Cheigh : Thank you, Matt, and good morning. Today, I’d like first to cover our performance scorecard. Second, summarize the first quarter market environment for our asset classes. And last, I’d like to provide our latest investment viewpoint on why asset allocators should increase their exposure to real assets in a higher inflation regime. Turning to our performance scorecard. For the first quarter, 96% of our total AUM outperformed its benchmark, a marked improvement from last quarter’s 35%. When looking at our AUM on a one-year basis, 99% of our AUM outperformed its benchmark, which is up on our 2023 outperformance figure, 85%. This uptick in one-year performance can be attributed to our core preferred strategy, turning from relative underperformer to outperformer.

The preferred strategy has now outperformed for four straight quarters following its pullback in the first quarter of last year. As a result, 96% of our total AUM is now outperforming its benchmark on a three-year basis and 97% on a five-year basis. From a competitive perspective, 93% of our open-end fund AUM is rated 4 or 5-star by Morningstar, relative to 94% last quarter. All eight of our core strategies outperformed in the quarter, natural resource equities and low duration preferred strategies exhibiting the strongest relative performance. More specifically, low duration preferreds outperformed by roughly 200 basis points during the quarter, bringing its one-year outperformance to 640 basis points. Natural Resources for its part, also outperformed by 200 basis points, bringing its one-year and three-year outperformance figures to 400 basis points and 427 basis points, respectively.

I want to congratulate Portfolio Manager, Tyler Rosenlicht and his team for putting up this extremely compelling performance in this dynamic area requiring active management. Our global listed infrastructure portfolio also experienced strong alpha, outperforming its benchmark by 140 basis points, while global real estate and U.S. real estate outperformed by 120 basis points and 100 basis points respectively. We believe active management works in our asset classes, and the numbers clearly demonstrate that we are delivering value for our clients. Transitioning to market conditions, The prevailing risk on sentiment persisted into the first quarter, mirroring what we observed in the final quarter of last year. This dynamic unfolded even as expectations shifted regarding the Fed’s rate policy, reflecting resilient economic data, particularly in the U.S. In the first quarter, global equities saw a robust gain of nearly 9%, while global bonds experienced a decline of 2.1%, driven by a rise in the 10-year US Treasury yield of around 30 basis points.

US listed REITs, our largest asset class, were down 1.3% in the quarter. In light of the significant rally to end 2023, some pullback in REIT shares was to be expected. Strategically, we remain positive on listed REITs, as we continue to see attractive entry points and return prospects, even as the market digests sticky inflation and higher rates than the last [decade] (ph). Private real estate, as measured by the preliminary results for the NCREIF ODCE index, had total returns for the quarter of negative 2.4%. This is the sixth consecutive quarter of declines, which is consistent with the catching up process between private and listed returns. Since the end of the third quarter of 2022, listed REITs have now outperformed the ODCE index by 33%.

We believe investing at this stage in the cycle will capture the bottoming of prices in private real estate and deliver strong vintage returns over time. Already our team is beginning to see more compelling opportunities in both of our private real estate strategies. Real assets moved higher during the quarter, led by commodities and natural resource equities. Energy was the main contributor, given stronger than expected demand growth, which was driven by improving global PMI data and sustained OPEC+ cuts. This kept crude oil comfortably trading above $80 per barrel, even before the escalation of geopolitical risks in the Middle East. Listed infrastructure had modestly positive returns in the quarter but also trailed broader equity market performance with certain rate-sensitive sectors facing headwinds.

While segments such as marine ports and midstream energy had significant gains, the communication sector was challenged with tower company valuations impacted by elevated interest rates and modest near-term growth outlooks. Lastly, our core preferred security strategy delivered a return of 4.2% during the quarter, outperforming other segments of fixed income as credit spreads significantly narrowed. Exchange listed $25 par securities notably generated substantial total returns, [buoyed] (ph) by a scarcity of new supply early in the year and robust inflows into preferred securities, exchange-traded funds. Moreover, heightened activity in new preferred issuance and call activity signals a favorable environment, particularly within the institution OTC and CoCos markets.

I’d like to turn our attention to multi-strategy real assets and a topic that has been in the headlines for quite some time, a sticky inflation. Overall, markets now appear to be pricing in what our firm’s economist John Muth refers to as a no landing scenario, where sticky inflation leads to interest rate cuts this year, aligning closely with our own base case. That’s significantly less easing than compared to the six cuts the market had fully priced just a few months ago. We continue to see a strong case for real assets amid this regime of sticky inflation, higher for longer interest rates, elevated equity market valuations, and on the other hand a more attractive starting point for valuations in real assets. When you combine with other factors including commodity under investments, tight labor markets, geopolitics, and deglobalization, the regime shift makes real assets a vital component of a strategic asset allocation, especially with most investors still underweight inflation-sensitive allocations in their portfolios.

Take target date funds as one example. The average dedicated allocation to real assets in a target date fund is less than 5%. REITs and TIPS are just 1.7% and 2.8% respectively, while commodity allocations average just 0.1%. And multi-strategy real assets average less than 1%. Not only is this a low absolute allocation to inflation sensitivity, it also includes a near-zero dedicated allocation to natural resource equities and infrastructure. Why is this important? Diversified real assets have a demonstrated history of defending well against inflation surprises, whereas core stocks and bonds have tended to suffer simultaneously. Starting in 1991, a real assets blend comprising listed real estate, infrastructure, natural resource equities and commodities has outperformed global equities by 3.9 percentage points on an annualized basis and U.S. Treasuries by 10.2 percentage points during inflationary periods.

That gap becomes even more pronounced when the inflation rate is not just rising, but when the acceleration in inflation, exceeds consensus estimates. In other words, when we experience inflation surprises. Commodities, natural resource equities, and infrastructure in that order drove that outperformance. Moreover, as I mentioned earlier, these are the real asset classes most significantly under-represented in portfolios like target dates. In that same period, our real assets blend at a beta or sensitivity to global equities of 0.65, indicating that allocations to blended real assets help to reduce equity sensitivity in a portfolio. This could be important given today’s relatively high equity valuations, especially relative to higher interest rates.

Allocations to real assets have dampened volatility and improved risk-adjusted returns, while also helping to protect against inflation pressures. Using the last three years, which is when inflation started rearing its head as an example, 60-40 equity bond portfolio had annualized returns of 4.2%. If you added a 20% allocation to real estate to the same portfolio, reducing each of the stock and bond allocations by 10% each, the annual return would have been higher at 4.7% with lower volatility and reduced drawdowns. When industry observers are saying we face a retirement crisis, and especially as we enter a more challenging return environment, these differences matter. We know that markets go in cycles and can focus on certain themes. A few years ago, there was crypto.

Today, people wonder if they have enough AI exposure. We believe that in 5 years to 10 years’ time, investors will ask their advisors or CIOs, why didn’t we do a better job protecting our portfolios from inflation? We believe a well-constructed allocation of real assets aimed at generating strong returns, protecting against inflation, and reducing drawdowns will help to deliver better investor outcomes. We believe inflation and the need for real assets will emerge as the conventional wisdom over the next five years. With that, let me turn it over to Joe.

Joseph Harvey : Thank you, John, and good morning. Today I’ll describe how our fundamentals started off the year, then discuss the opportunities we see in front of us. Our first quarter financial results were solid in-line with our expectations for improving returns in our asset classes based on a positive inflection in the interest rate cycle and continued repositioning in asset allocations. Some investors are legging into the new return cycle, while others are reassessing their strategic allocations in response to higher yield fixed income options. Most importantly, our relative investment performance is outstanding. In addition to the stats that Jon cited, I am proud of our one-year weighted average excess return of 309 basis points across all strategies.

Said simply, we are delivering for our clients. That said, our asset classes did not keep up with the [torrid pace] (ph) of the S&P 500, which returned 10.6% in the quarter, with our highest absolute return for a strategy at 4.2% for core preferreds. Listed real estate returns were modestly negative in all regions in the quarter after leading markets in the fourth quarter. Looking at firm-wide flows, we had net outflows of $2 billion in the first quarter. The major drivers were two large account terminations and advisory, both in global real estate. We announced last quarter the termination of a $1.5 billion account, and the other during the quarter was $744 million. Both clients eliminated listed REITs from their strategic portfolio allocations.

This was partially offset by net inflows of $569 million into open-end mutual funds. By month, firm-wide flows in January and February were negative, then March turned positive with $183 million in net inflows. Although We are disappointed to see some clients eliminate strategic allocations to REITs, even as we are on the cusp of a new return cycle. We are pleased to see wealth flows turn positive in each month to-date in 2024 and for total firm-wide flows to turn positive in March. Digging deeper into client segments, the $569 million in open-end net inflows was the first positive quarter after seven consecutive quarters of outflows and reflects the transition in the macro environment, with inflation declining and Fed interest rate policy transitioning to pausing.

Inflows were led by U.S. REITs and preferreds, with about $250 million of piece flowing into both our institutional U.S. REITs fund and our core preferred securities fund. The registered investment advisor segment drove REIT flows, and the wirehouse and independent broker-dealer channels led the preferred flows. Our offshore [CCAP funds] (ph) had modest inflows, continuing their positive trend. And we see momentum building as we continue to gain scale and sign up more platforms and advance advisor education for our offshore vehicles. Advisory had $2.2 billion in net outflows. In addition to the just mentioned global real estate terminations, we had two client mandates eliminate their strategic allocations to preferreds totaling $236 million.

We’ve seen some preferred clients replace preferreds with private credit. These outflows were offset by two account fundings totaling $269 million in global and U.S. Real estate. Sub-advisory had net outflows of $35 million, with relatively modest flows both ways. Japan sub-advisory had outflows of $312 million. The outflows in Japan were off trend and are primarily attributable to a sponsor diversifying their global real estate managers for a mutual fund wrap program. We previously had 98% of this allocation, and the sponsor believes manager diversification will make the vehicle more attractive, as these fund-wrap programs are becoming more popular in Japan wealth. We remain optimistic about the opportunities in Japan and will allocate additional sales support to help our partners gather assets in what we believe could be a broad-based investment resurgence following the reflation occurring in the country along with improved corporate governance, flows out of China, and new market highs on the [Nikkei] (ph) while cash on the sidelines remains high.

Our one unfunded pipeline was $1 billion compared with $1.2 billion last quarter and a three-year average of $1.2 billion. Tracking the changes from last quarter, $349 million funded from six accounts, $185 million was added to the pipeline from two mandates, and $80 million was removed for accounts funded at lesser amounts than expected. The two new mandates were in global listed infrastructure and U.S. real estate. We continue to see adoption of listed real estate, listed infrastructure, and multi-strategy real assets by many investor types worldwide. Turning to opportunities. The real estate fundamental, financing, and return cycle is in full swing. As we’ve discussed before, we believe that overall REIT share prices have bottomed and their next return cycle has commenced.

Meantime, private real estate prices continue to adjust lower, primarily in response to the increase in the cost of debt capital. Last week’s announcement by Blackstone, taking private for $10 billion, the apartment income REIT at a 22% premium is a mile-marker signifying that there’s attractive value in the listed market. This transaction may indicate that capital will begin to be deployed in the private market as well. We expect several private real estate companies will test the IPO market this year, showing up balance sheets and gaining access to capital to take advantage of the private opportunities. We believe our listed and private real estate teams complemented by our real estate strategy group are at the intersection of this activity and taken together, our real estate franchise has never been stronger.

Our listed real estate team is very active, focused on the dynamism of the listed market at turning points and focusing on secular winners, cyclical mis-pricings, and companies that need capital. We also continue to expand our investment capabilities, recently laying groundwork for investing in certain CMBS segments, private companies, and the application of derivative strategies for clients that need different return profiles. Our private team is beginning to see improved pricing in some sectors such as shopping centers. Our strategy group helps us chart the course with a data-driven foundation while working with clients to help them with their strategic and tactical decision-making. We are pleased that preferreds are back on track after the regional bank scare in the first quarter of last year.

Over the past year, our core preferred strategy has returned 15.4% with 200 basis points of excess return over the benchmark. Our core preferred fund has returned to inflows. By contrast, our short duration fund LPX continued to have outflows as its yield still sees competition from short-term treasuries. That said, LPX has returned 11.5% over the past year. While we’ve seen some investors take preferreds out of their strategic allocations for now, the business seems to be normalizing as preferred performance has improved over the past year. We continue to invest in this effort, having funded a global preferred [feed] (ph) account in December 2022 that has demonstrated a strong return of 12.5% over the past year. And we are considering vehicle options for this broader opportunity set preferred strategy.

At the end of the first quarter, we launched our future of energy investment strategy by converting our midstream energy open-end mutual fund. The investment thesis behind this strategy. In order to meet the world’s growing demand for energy, we need growth in both conventional as well as renewable energy. And the conventional side will present extraordinary opportunities due to restraints in investment and supply. The strategic allocation will be benchmarked to the composition of energy usage between conventional and renewables, allowing investors to participate broadly in the energy transition. We believe the strategy is unique and presents alpha opportunities through strategic allocation, sector selection, and stock selection. This strategy is an extension of our infrastructure and resource equity teams core capabilities.

Turning to distribution priorities. We have many initiatives for the wealth channel, including allocating more resources to the RIA and multifamily office segments, as this is where we see the greatest rate of growth in assets. In addition, distribution of our non-traded REIT and the wealth channel is a top priority. The market’s adoption of active ETFs is gathering steam, and we are formulating potential plans for that type of vehicle. As mentioned earlier, we are gaining traction with our [CCAP] (ph) distribution plan and have added an intermediary-based sales professional in Singapore, complementing our institutional sales professional hired last year. Underpinning the rationale for these new roles is our belief that, based on the merit, investor portfolios are under-allocated to our asset classes, most notably in listed real estate, infrastructure, and multi-strategy real assets, as Jon described very well.

We recently published our annual report to shareholders under the theme Endurance. Please visit our website to read the letter to shareholders. We are proud that our team has navigated with the longest and most dramatic regime changes in a long time. We believe endurance aptly describes the tenacity of our team, the importance of staying focused for our clients, and the need to continually innovate. We are well organized and positioned to come out the other side stronger and are mobilized to help our clients allocate and take advantage of the return cycles to come. Thank you for listening. Abby, if you could please open the lines for questions.

Operator: Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of John Dunn with Evercore ISI. Please go ahead.

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Q&A Session

John Dunn: Thank you. Maybe could you talk about if you have any line of sight into any other like chunky institutional mandates that might be exiting over the next stretch and then also maybe take us through the puts and takes regionally of the institutional advisory business?

Joseph Harvey: Sure, John. Good morning. You know, right now we have one client that has about $90 million that they want to trim from their account. That’s a small number. But apart from that, we don’t have any accounts that we know will be terminated. In terms of the business globally on advisory, last quarter we talked about how our pipeline was represented in eight different countries. And that has not changed much. So when you go around the world, I would say that the largest market for advisory is in the U.S. But as we’ve talked about in the past couple of calls, we’ve seen more interest in Asia, which is a new trend relative to the past. And again, it’s mostly focused in listed real estate and listed infrastructure. While in Australia, you know, there’s — investors have invested in real assets, real estate and infrastructure in particular, you know, we’ve seen some opportunities to, you know, take business away from competitors as well as align with some intermediaries who are executing independent advisor growth strategies.

So Asia, I’d say, would follow the U.S., level of interest. The Middle East has been relatively dormant for listed allocations, but with the growth in AUM there, we could see some activity in the future. And then I just wrap up by saying in Japan, there’s something interesting going on with the investing markets there. In addition to adding some sales support to help our – our — and intermediary clients — gains sales support, we just brought on a new institutional salesperson and — so we see opportunity in Japan.

John Dunn: Got it. And then maybe you could give us a little more of a flavor of the change in the wealth management channel, which has been positive now for a little bit, more flavor on the demand and gross sales potential and is it sustainable for U.S. REIT and Preferred.

Joseph Harvey : Well, this started at the end of last year and I’d say the catalyst is the inflection in interest rates fed going from tightening to pausing. Of course, you know, that had a run early this year, but it has now reversed somewhat. So we could see a little bit of a pause in that. But as I said, we continue to see flows into wealth. And I’d say there’s part of the market that is anticipatory and working alongside our sales support that lays out the investment case for how our asset classes will perform in this part of the cycle. There’s another part of the market that’s a little bit more coincident. So we might see a little bit of pause in that, but based on our comments, we think that these new return cycles have begun. It doesn’t happen overnight. It unfolds over a period of time. So, we’re confident to be engaging in the wealth market at this point.

John Dunn : Thanks very much.

Operator: [Operator Instructions] And your next question comes from the line of Adam Beatty with UBS. Please go ahead.

Adam Beatty: Thank you and good morning. Just wanted to broaden out the discussion around preferreds a little bit and just maybe draw upon your historical experience. Obviously, trailing returns are good. Relative performance is probably better than good. So just giving your experience, when would you expect flows there to kind of get a little bit more traction? You mentioned competition from other short duration instruments. Do you need to spread over that to get preferred flows? And you also mentioned some competition from private credit and just wondering how you see that playing out. Thanks very much.

Jon Cheigh: Sure. Good question, Adam. So when any investor is Obviously evaluating how and when to allocate. So obviously they’re thinking about valuation fundamentals and whether we like it or not timing. I think, whether we’re talking about REITs or preferreds, I think most of the investors we talk to, they see the valuation case. I think there were parts of last year, there are concerns about some of the fundamentals with banks, credit, et cetera, but I think people are now comfortable with both valuation and the fundamentals. Now we’re just onto the timing part. And we saw some of the flows start to pick up because there was optimism that we’re at peak short-term rates. We think that that should still be the case. But what we see from most investors is they’re so-called legging into it in a few different steps.

And my guess is that when we actually see more clarity on terminal rates, that we’ll see even more flows come in. That would be my best guess. You know, in terms of –. So in terms of competition with short-duration competitive yield, right now, the investor view is, I’m getting a [5 or 5.5] (ph). That’s similar to where we are in low duration preferreds and their view is duration is a risk as opposed to an asset. To the extent interest rates go down, you’re going to want duration, right? And so that gets back to the extent we get to a peaking in long-term rates, all that money on the sidelines, which is in the front end of the curve, will want to go further out and own longer duration fixed income assets, equity assets, whatever the case might be.

So I think that getting movement out of the short end to further along the curve is still back to when there’s conviction that we are at peak Fed funds. I guess in terms of private credit, you know, there’s — a few years ago, you know, we spent a lot of time educating wealth about the tax efficiency of preferreds and their yields. And, you know, some of the movement that Joe talked about on certain investors looking more towards private credit, of course, number one, those were investors that can handle illiquidity, so those were institutional investors. Number two, preferreds are much more tax efficient than private credit. Those were institutions that I imagine didn’t have the same after tax view of comparing, say 9% in private credit versus a 7% in preferred.

So as you know, the vast majority of our AUM within preferreds is in our wealth-facing channel, where, frankly, the tax-efficient yield has been a very powerful argument. So I suspect we will still have some comparison versus private credit and preferreds over time but it’ll depend as I said on is one having pre-tax view and after tax view, that kind of thing. I hope that helps.

Adam Beatty: Yes, absolutely, excellent, appreciate that. And then a little bit more maybe strategically, your commentary around target date funds and the 60-40 allocation and being broadly under allocated to real assets was pretty compelling. So just wanted to get a sense of how you’re thinking about long-term, you know, how Cohen & Steers can play into rectifying that, whether it’s, getting on retirement platforms, getting sleeves in target day funds, or other elements of your strategy. Thanks.

Jon Cheigh: Well, obviously, we try to spend a lot of time educating, whether it’s the record keepers, the target date managers, or the end investor on the importance of real assets. To be honest, for the end investor, I’m not sure they’re always looking at their underlying exposure in their target date. So I think, we need to educate on all three of those levels. Again, the end investor, the 401(k) committee of a given company, the record keepers, and the managers. So, you know, we’re going through that education process And we’re going to keep doing that. You know the way this goes that I said that five years from now or 10 years from now, one of those groups will say, why didn’t we do a better job? I talked about how over the last three years, if you just had real assets, you would have done 50 basis points better with lower drawdowns and volatility.

It may not seem like a lot, but again, target dates, when you’re talking about 10, 20, 30, 40 years and you’re compounding that, you know, you’re talking about, [4.2] (ph) versus [4.7] (ph), you’re basically, it’s like saying, you’re improving your return 12% and you’re compounding that. And so that’s an education process that we continue to have. You know — and we think over time there will be more success, but frankly, there needs to be some –. There probably needs to be some — I don’t want to say pain. What I would say is some remorse before there’s more action taken on this. I would say at the end of 2022, when the 60-40 did very poorly, a lot of people said, well, talk to me about real assets. At the end of 2023, when the 60-40 had a much better year, people thought, you know what, maybe that inflation was just a blip.

It was a moment in time. I think that towards the end of this year, there’s going to be more people saying, you know what, inflation goes in cycles, as it goes higher. It goes lower. It goes higher. That’s the lesson of the [70s] (ph) and its others. It needs to be part of my strategic allocation as opposed to I wish I had in 2022. So anyway, I think that’s the acknowledgement process that we’ll go through over the next 12 months.

Joseph Harvey : But I think broadly, just to add to that, it’s education of asset consultants, plan sponsors at this point in time, and ultimately to a lesser extent that the end users but it’s also having the right vehicles and having an ability to customize — customized strategies at some point. So with our mutual fund and with our – we have a collective investment trust or CIT, those are vehicles that are designed for that — the end user. And over time we could end up with some vehicles that will help us customize for different plan sponsor needs.

Adam Beatty: Yeah, that all makes total sense. No, I appreciate it. That’s all for me today. Thanks.

Operator: And that concludes our Q&A session. I will now turn the conference back over to Mr. Joe Harvey for closing remarks.

Joseph Harvey: Well, thank you, Abby, and thanks everyone for listening, and we look forward to talking to you next quarter.

Operator: And ladies and gentlemen, this concludes today’s conference call. You may now disconnect.