Cohen & Steers, Inc. Q1 FY2026 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers First Quarter 2026 Earnings Conference Call. As a reminder, this conference is being recorded Friday, April 17, 2026. I would now like to turn the conference over to Brian Heller, Senior Vice President and Deputy General Counsel of Cohen Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers First Quarter 2026 Earnings Conference Call. Joining me are Joe Harvey, our Chief Executive Officer; Mike Donohue, our Interim Chief Financial Officer; and Jon Cheigh, our President and Chief Investment Officer. 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 vehicles. 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 Mike.

Thank you, Brian, and good morning, everyone. My remarks today will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found in the earnings release and presentation. Yesterday, we reported earnings of $0.79 per share as compared to $0.81 sequentially. Revenue for Q1 increased from the prior quarter by 0.3% to $144.3 million. The change in revenue from the prior quarter was driven by higher average AUM, partially offset by two fewer days in the quarter. In addition, and as we noted in last quarter's earnings call, there were $1.7 million of performance fees recognized in Q4 related to certain institutional accounts. We typically don't recognize such fees early in the year and we have few performance fee accounts. Our effective tax rate during the quarter was 58.2 basis points. Excluding nonrecurring items, our fee rate was 58.4 basis points, which is slightly lower than the prior quarter. Operating income was $50.7 million during the quarter compared to $52.4 million sequentially. Our operating margin was 35.1% compared to 36.4% in the prior quarter. Ending AUM in Q1 was $93.1 billion, which was up from $90.5 billion at the end of Q4. This end-of-period change in AUM was driven by positive net inflows during Q1, primarily related to open-end funds. In addition, end-of-period AUM was positively impacted by market appreciation of $2.7 billion during the quarter. As a result, average AUM increased during Q1 to $94.4 billion as compared to $90.8 billion in the prior quarter. Joe Harvey will provide additional insights regarding our flows and pipeline shortly. Total expenses were higher compared to the prior quarter primarily due to increased compensation and benefits and distribution and service fees expense. Compensation and benefits were higher compared to the prior quarter as a result of the year-to-date compensation accrual true-up to actual that reduced compensation expense in Q4. The compensation ratio for the quarter was 40%, which was in line with the guidance we provided. Distribution and service fee expense was up due to the increase in average AUM, and G&A expense remained consistent with the prior quarter. Regarding taxes, our effective rate was 25.5% for the quarter on an as-adjusted basis. Our earnings material reports liquidity at the end of Q1 and prior quarters. Our liquidity totaled $343 million at quarter-end, which represents a decrease of $60 million versus the prior period. This quarterly change in liquidity is in line with prior years and driven by the annual incentive compensation cycle for the firm, which occurs in Q1. Let me now touch on a few items regarding guidance for the remainder of 2026. With respect to compensation and benefits, we would expect our compensation ratio to remain at 40% as we experienced in Q1. We expect G&A to increase in the mid-single digits for the year as compared to the prior year. Lastly, regarding 2026 guidance, we expect our effective tax rate to remain consistent at 25.5% on an as-adjusted basis. I will now turn it over to Jon Cheigh, who will lead the discussion of our business performance.

Thank you, Mike, and good morning. Today, I would like to discuss three topics: our performance scorecard, our outlook for 2026 in light of recent geopolitical events, and our long-term view of the economy, market regime, and asset allocation implications for investors. Starting with our performance scorecard, we have maintained our record of consistent, long-term outperformance. Over the past year, 86% of our assets under management have outperformed their benchmarks, and both our three- and five-year outperformance rates exceed 97%. Currently, 95% of our open-end fund assets are rated four or five stars by Morningstar, up from 90% last quarter. In summary, we are successfully achieving our primary goal of delivering exceptional long-term performance for our investors. Regarding the investment environment, as we approach 2026, we anticipated an acceleration and rebalancing of global growth, along with a broadening of market leadership. While this outlook was accurate early in the year, the ongoing conflict in the Middle East may have raised questions about that shift in market leadership. U.S. and global real estate investment trusts (REITs) increased around 10% through February, outperforming relatively stagnant equity markets as we experienced market rotation towards areas that had lagged behind in previous years. Despite some pullbacks in March, REITs still achieved positive performance for the quarter, with U.S. REITs up approximately 4% and global REITs rising about 1%. Listed infrastructure also held firm, rising by 8% during the quarter. Industries such as utilities and midstream energy continue to be critical in addressing short-term energy shortages and the ongoing demand for power driven by industrial growth and AI-related needs. Diversified real assets surged 12% this quarter, benefitting from robust performance in commodities and natural resource equities. As seen in 2022, real assets have proven to be valuable winners and diversifiers within a 60-40 stock-bond portfolio. The argument for including real assets in asset allocation remains strong. On the other hand, preferred securities and fixed-income assets experienced a slight decline this quarter due to renewed concerns about inflation, suggesting that monetary policy may have to remain tight for an extended period. As we refine our economic and market outlook for the remainder of 2026, we expect that the recent military de-escalation in the Middle East will persist in the coming weeks and months. We are aware that there will be fluctuations, but as long-term investors, our focus remains on the overall direction of progress. Consequently, our preliminary outlook for 2026 of expanding economic growth and financial markets stays unchanged. Looking beyond 2026, we see recent developments not as isolated incidents but as part of a longer narrative that will shape the markets for the next decade or more. For some time, we have noted that the global economy is undergoing a structural transition that is markedly different from the previous 30 years. We foresee four major themes that will significantly influence shifts in asset allocation. The first theme is deglobalization, which we refer to as geopolitical fracturing. For 20 years, the global economy thrived on cooperative trade relationships and smooth delivery of resources. This fostered a build-up of global supply chains, particularly in Asia, while leading to the deindustrialization of much of the developed world. However, for nearly a decade, we have been reminded of the fragility of this system, which, although it lowered consumer goods prices and boosted profit margins, also exposed the global economy to unexpected risks. In the past six years, we have faced four consecutive supply shocks: the pandemic, the War in Ukraine, tariffs, and now the Middle East conflict. These events reflect a shift in global power dynamics and alliances, rather than one-off occurrences. This geopolitical fracturing will drive a significant boom in fixed asset investments, surpassing what we saw from China in the 2000s, propelled by reindustrialization and remilitarization. The second theme is AI and technological disruption. While AI itself is a transformative force, it is fundamentally a hardware story rather than merely software. The leadership in AI will ultimately depend on compute capacity and the marginal cost related to power availability. The third theme concerns inflation uncertainty. Over the last decade, inflation has persistently fallen short of expectations. However, recent years have seen inflation consistently exceed forecasts, disproving earlier assumptions of a quick return to the stable low prices of the past. Although headline inflation has decreased from its recent highs, underlying pressures remain. According to our upcoming capital markets assumptions, we forecast U.S. consumer inflation to average 3% annually over the next decade—lower than recent peaks, yet well above the 1.6% experienced during the previous cycle and significantly higher than the Federal Reserve's long-term target of 2%. While AI could theoretically spur a productivity boom and be deflationary, the investments required to achieve such deflationary outcomes will be inflationary. Consequently, central banking in the coming decade will be challenging. We conclude that while inflation is likely to be higher than markets anticipate, the exact pathway and pace of inflation present significant market uncertainty and risk. The final trend is the shift away from low interest rates. Some of this shift relates to inflation and persistent fiscal deficits, and we believe the market continues to underestimate the fact that we will inhabit a more capital-intensive world, which is likely to lead to higher interest rates and credit spreads. As hyperscalers transition from being highly cash flow positive structures, we recognize that amidst these four major themes, some of the previous winners may continue to thrive, but structural changes generally disrupt market leadership. This process sees new players emerge while incumbents falter, with entirely new segments of the economy including natural resources and the fundamental support systems for construction, transportation, and energy delivery gaining prominence. This scenario presents a vast investment opportunity, albeit one that comes with the challenges of increased and more volatile inflation, as mentioned earlier. For our clients, our guidance is straightforward. First, diversification should encompass not just different asset classes or public versus private investments but should also extend to diversifying investment exposures across various economic drivers, inflation scenarios, and factors. Second, hard assets, including real assets, must comprise a significant allocation sourced from both equity and fixed income, serving as a diversifier and total return opportunity. Third, investors should leverage a wider array of tools, including private investments that offer unique exposure or illiquidity premiums. However, in today’s uncertain environment where traditional models may falter, the costs associated with illiquidity are heightened and should be approached with care instead of simply for quarterly statement diversification. We believe that the first quarter signifies the ongoing recognition of this major shift in market leadership, which will continue to unfold in the forthcoming chapters of this narrative. With that, I will turn it over to Joe.

Thanks, Jon. You may hear a fire alarm in the background, but everything is fine, and we will continue. Today, I will discuss our key business trends from the first quarter and provide an update on our growth initiatives. Although we began the year with accelerating fundamentals on February 28, events like U.S. military actions and the situation in Iran changed the landscape. Typically, such situations lead to a slowdown in business activity as investors try to gauge the duration of the conflict and its potential economic impacts. Prior to the Iran situation, the U.S. economy showed signs of growth, but post-conflict, expectations lean towards stagflation, with significant uncertainty about its severity and duration. Additionally, before the conflict, investors were concerned about the existential risks posed by AI and issues related to credit and liquidity in private credit. We feel our liquid real asset strategies are well-positioned in this environment, favoring hard assets with low obsolescence, as liquidity becomes increasingly important to investors. The highlights for the first quarter include net inflows of $497 million and a robust unfunded pipeline of $1.7 billion, marked by strong velocity in continued fundings and new mandates, stable fee rates, solid absolute performance, and neutral relative performance. Our 1-, 3-, and 5-year relative performance remains excellent. We made significant progress with our growth initiatives, such as active ETFs, offshore SICAV open-end funds, our non-traded REIT, and our recently launched listed private real estate products for institutions. Flow highlights by investment strategy show that multi-strategy real asset inflows reached $142 million, marking the best quarter since Q3 2022. Our Preferred Securities faced $133 million in net outflows, which is the most substantial outflow since Q4 2021. Global listed infrastructure secured its fifth consecutive quarter of net inflows, amounting to $96 million after a record year in 2025. The total firm-wide net inflows of $497 million indicate positive organic growth for six out of the last seven quarters. We saw our seventh consecutive quarter of net inflows into open-end funds, with over $300 million in inflows for U.S. open-end funds and more than $100 million contributed into each of our U.S. real estate, preferred securities, and multi-strategy real asset strategies. Our active ETFs maintained their momentum with $224 million in third-party net flows during the quarter. Our international SICAV continued its net inflow streak with 25 out of the last 27 quarters, recording $62 million this quarter, particularly strong from the U.K. and South Africa. The most favored SICAV allocations were to our multi-strategy real assets and global listed infrastructure strategies. In terms of institutional trends, our advisory channel recorded its second consecutive quarter of net inflows, totaling $210 million, composed of five new mandates worth $287 million, partially offset by $76 million in terminations. Sub-advisory experienced $269 million in net outflows, primarily due to $164 million from Japan. While we faced net outflows from Japan sub-advisory for the past two quarters amid challenges in real estate flows, we have seen a slight improvement in our industry-leading market share there. The outflows in other sub-advisory areas were mainly due to normal rebalancing by existing clients, with two new mandates partially offsetting these outflows. Looking beyond the Iran conflict, I remain confident in our core strategies in relation to inflation, deglobalization, AI, and the shift towards hard assets. As inflation persists, our multi-strategy real assets portfolio is increasingly recognized as a high-value option. With energy becoming a pivotal focus again, our future of energy strategy—which invests in both conventional and renewable resources—could evolve from a tactical allocation to something more foundational. Resource equities seem to have the strongest supply-demand outlook, especially highlighted by the ongoing effects of the Iran conflict on resource pricing and markets. While stagflation could temper real estate returns, it's important to note that valuations have adjusted to normalized interest rates, and the fundamental cycle is positively turning as investors flock to tangible assets. Our global listed infrastructure strategy has demonstrated significant absolute and relative performance and is benefiting from the ongoing capital investment cycle. Given the growing concerns in the private wealth channel regarding liquidity in private vehicles, private infrastructure appears to be the most illiquid strategy. Consequently, we see global listed infrastructure as a valuable asset, whether as a standalone allocation or in conjunction with private options, ensuring adequate liquidity protection. Our corporate strategy for active ETFs is progressing very well. The total assets under management for our first five ETFs stand at $675 million. Flows are strong, investment performance is favorable, and we are achieving scale. Our ETF platforming efforts have accelerated, achieving our first placement on a major broker-dealer platform in the first quarter. We plan to convert our future of Energy open-end fund into an ETF mid-year and are preparing to launch a version of our multi-strategy real assets portfolio later this year. Additionally, we filed for ETF share classes to maintain flexibility in delivering our core strategies in the ETF format. Our non-traded REIT, Coasters Income Opportunities REIT, has built a portfolio of 11 properties valued at $650 million and continues to outperform its real estate peers with 10.6% annualized returns against a 4.3% peer average. Our focus on open-air shopping centers has led to strong occupancy rates of 97%, translating into significant pricing power for landlords. A key concern for CNS REIT in the short term is how redemption constraints in private wealth vehicles will influence investor interest in evergreen vehicles. As an industry, we must present these allocations as private strategies that provide liquidity when possible, and highlight the necessity of robust liquidity frameworks to safeguard investors in pursuing a long-term investment strategy. In real estate, as the return cycle becomes positive again, there is potential for this category to attract allocations that may have previously gone to private credit. Early data from March indicates a rise in redemptions from private credit and a surge in sales within real estate and infrastructure. Time will tell how this unfolds. We remain optimistic about the long-term advantages of blending listed and private real estate within wealth portfolios and believe we can offer compelling solutions across different liquidity profiles for investors. As previously mentioned, we launched an LP vehicle late last year that invests in both core private property funds and listed REITs. This strategy aims to provide a superior core allocation to institutional investors through an indexed approach to core funds while integrating listed REITs to boost returns without excessive volatility. We currently have $250 million in funding or commitments for this strategy, which is gaining traction among a growing number of asset consultants. I also want to touch on our short-duration preferred strategy. We have three open-end vehicles following the recent launch of a SICAV and an active ETF to complement our $1.9 billion open-end mutual fund and $1 billion closed-end fund. Our open-end vehicles now offer yields just below 6%, with average durations of 2.5 years and investment-grade credit profiles rated BBB-. U.S. taxable investors are realizing an extra 100 basis points of tax-equivalent yield. Compared to corporate bonds of similar duration, short-duration preferreds provide nearly 300 basis points of additional tax-equivalent yield, compensating for three notches of credit quality, shifting from A- to BBB. As yields on cash and other fixed-income investments have fallen, we are witnessing increased interest from investors in these strategies. Related to our core preferred strategies, we saw a return to positive flows in the quarter, potentially as a preferred substitute for private credit. I wouldn’t be surprised to see investors willing to accept lower headline yields in exchange for tax benefits from a portfolio of strong, transparent credits, predominantly from banks, insurance companies, and utilities, especially as uncertainty and a lack of transparency around credit quality in private credit arise. To wrap up, I’ll provide a brief update on distribution, which we have identified as a priority for 2026 and 2027. We have made significant progress in our efforts to enhance distribution, including expanded coverage of RIAs and international markets. Key hires have been completed, including a new Head of Japan, a Chief Operating Officer for distribution, and additional RIA sales positions. We also promoted Brad to lead our wealth strategy and brought on a wealth sales leader to Brad’s team. Moving forward, our approach to increasing the sales team will be based on success, with new additions linked to organic growth. That concludes our prepared remarks. Julianne, please open the lines for questions.

Our first question comes from John Dunn from Evercore ISI.

First on the advisory channel. You mentioned it's been 2 straight inflow quarters. Do you think you've moved to kind of a more sustainable place? And is it coming from more existing clients or new ones? And are you seeing potential for clients looking at multiple strategies?

Thanks, John. As we've been talking about for the past 3 or 4 quarters, we've seen an improvement in our institutional advisory business as broad conditions have become more favorable, more flexible in investor portfolios, and an end toward uping allocations to fixed income as clients continue to deal with liquidity in their private parts of their portfolio. But we now have a very strong pipeline, I think, for the third straight quarter at $1.7 billion. I talk about the velocity, meaning in the quarter, we were awarded $74 million of new mandates. There was another $45 million that was won and funded in the quarter. And then we also had another $490 million fund in the quarter. So that's good velocity and demonstrates that things have been loosening up in the institutional channel. We also just see more from an intangible perspective, increased activity by clients. It's not RFP business anymore, but we've seen a couple of large RFPs recently. So combined with the outlook that John laid out for our investment strategies, we're optimistic that the institutional advisory channel will continue to perform better and better.

Got it. Could you provide some insights on client acceptance of ETFs? Are you experiencing any cannibalization? Additionally, could you explain the demand across different sectors in wealth management and any potential for institutional activity in the future?

The tone surrounding active ETFs is very positive, as evidenced by our increasing flows. This success largely stems from our ability to deliver strong performance, which we have achieved. These ETFs are designed to showcase our core strategies. While there might be minor differences for distribution purposes, our performance remains robust. The potential use cases for these ETFs give us a lot of confidence in them. A significant trend among registered investment advisors is their shift to using solely ETFs instead of open-end funds. We're also achieving greater scale, enabling our products to be integrated into models. As I highlighted earlier, our real estate ETF has become the largest and is well recognized, and we've secured placement on a key major broker-dealer platform. Therefore, I am very optimistic about this vehicle. All indicators affirm our decision to invest in it, and we plan to continue offering our core strategies within these products. Regarding institutional interest, there's a need for scaling up, and we've had conversations with different asset consultants about our ETFs. While there are promising use cases, larger institutions typically prefer separate accounts.

Right. Okay. And then you went through the component pieces of the private real estate effort. Are you seeing rising demand? And since you don't have a lot of legacy assets and you're entering or ramping up in a good part of the cycle, is that a big part of the pitch? And maybe where do you expect demand to come from?

I'm not sure I understand the question, John. But as it relates to the private real estate business, when you look at private allocations in wealth, real estate has been the laggard. Private credit has been the leader, as I mentioned, that inflected in March. We'll see if that continues to play out. Infrastructure continues to have good growth. But we believe that based on our views and other analyses on the real estate cycle that you can see a rotation into the real estate strategies. We're seeing a little bit of that, but it's still early. Our approach to the wealth channel is that we believe that investors should have an allocation to both listed and private, and we're trying to coach our clients on how to do that and optimize those portfolios. With our non-traded REIT, as I mentioned, we are at the top of the leaderboard in terms of performance. And as we gain scale, we believe we'll have the ability to get platformed on more RIAs as well as wirehouse platforms in the future.

Yes. Yes, that's what I was driving at. And then maybe just one more, thinking about the theme of rotation of some money moving to non-U.S. strategies. Global real estate was positive this quarter. Are you seeing any interest in diversifying? And could that drive positive flows for global real estate this year and next?

We have been seeing more of that. Go back 1 year, 1.5 years, there weren't a lot of flows into global strategies except for global infrastructure. So I'm talking primarily about global real estate. That was primarily related to U.S. exceptionalism and related stock market performance. But as the world has turned, geopolitics have changed, and we've started to see better performance in international markets broadly. We've seen more interest and flows into our global real estate strategy. So I would expect that to continue. It's magnitude I can't say, but I definitely would expect to see our global portfolios have more interest.

Our next question comes from Mac Sykes from Gabelli Funds.

Joe, I wanted to ask about the historical context of shifts to real estate strategies. As we consider the items you've mentioned this morning, when you're educating capital allocators at larger platforms that are changing these models, what are some of the catalysts driving that change? Is it interest from advisers, recent returns indicating outperformance of the asset class, or interest rates? Could you elaborate on some of the indicators we should pay attention to in anticipation of larger allocations to real estate?

Mac, this is Jon Cheigh. Well, first of all, of course, we're talking with all of the intermediaries about real estate, but of course, all of our asset classes, including infrastructure, preferreds, and natural resources. But specifically to real estate, look, it's a combination of investors thinking about the interest rate cycle as well as the fundamental supply and demand cycle. And so I've said a few times that when you look over the last 3 or 4 years, sometimes people would say, 'Oh, well, real estate has done poorly because interest rates are higher.' And that's really only half the story. The other reality is that we had too much new supply that got built, which weakened fundamentals. So over the last several years, REIT earnings have probably grown at 2%, 3%, or 4%, while the S&P was growing at 10%, 11%, or 12%. So yes, it's an interest rate story, but it's also a fundamental story. So when they revisit the story today, what they're looking at is the S&P is a lot more expensive from a valuation standpoint than it was 3 or 4 years ago. It seems like the earnings growth is beginning to decelerate, and we all know about the market concentration within the S&P and, in some cases, concerns about the significant amount of CapEx that’s occurring. So there's a question of how is the S&P looking on a price-to-earnings basis versus on a free cash flow basis because you know just as well how capital-intensive the S&P 500 is becoming at the top end. So some of it is as far as real estate versus broader equities—valuations look better. The interest rate adjustment has happened. So being in this 4% to 5%—4% to 4.5% range is the new normal, as I talked about. But what we're also talking to them about is the reacceleration of earnings or fundamentals. So that 2% to 3% growth of REITs will probably be more like 5% or 6% this year, and 7% or 8% next year. So I'd say that's the fundamental inflection is probably the bigger thing that our investors are focused on. This kind of goes back to one of the earlier questions on shifts we're seeing on the advisory channel. We've had a lot of conversations with investors over the last few years, and I think they understood the valuation story. But they were focused on is today the right day? Why 2024, why 2025, why 2026? Real estate fundamentals are slow-moving. They're not going to go from being below average to above average in one quarter, and so it's taken a couple of years. We've digested some of that excess supply, and that's why I think the story for 2026 to 2027 is about improving fundamentals and stable interest rates and attractive valuations. That's why we're seeing some of those shifts, whether it's in the public markets but also within the non-traded REIT side. Again, a lot of money went into private credit, but as Joe talked about, as that money is looking for the next opportunity you're beginning to see it in the flow data, but we're certainly starting to hear it—well, real estate lagged; other things have gone up; it seems like a place to pivot back to. So I think we're early in that pivoting process.

Just one other question on the private credit side, as you compete, I think a lot of the sales channel adviser-driven component has been some of the fee structures with some of these products. coming with pretty large fee structures and incentives to the adviser. And with your products, actually much more rationally priced and compelling, I believe. But how do you sort of compete with that where the adviser centers? Maybe a more compelling yield perspective from you and liquidity and all that stuff, but yet they come with lower adviser incentives in terms of the sales component.

Well, I'm not too familiar with the adviser incentives that you're talking about. But what we think about every morning we get up is delivering investment performance and managing risk. So we—as it relates to the private real estate strategy—need to deliver a good total return with a balance between current income and capital appreciation and not take undue risk.

So as it relates to the fee structure for that vehicle, we've made it very investor-friendly compared with the peer group.

We have no more questions.

Thank you, Julianne. We look forward to reporting our second quarter results in July. Meantime, if you have any questions, please reach out to Brian Meta, and we'll talk to you soon. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.