Executive Summary / Key Takeaways

• Cohen & Steers is a specialized global investment manager focused on real assets and alternative income, leveraging deep expertise and a strong performance track record to navigate evolving market cycles.
• The company achieved its third consecutive quarter of firm-wide net inflows in Q1 2025, totaling $222 million, signaling a potential shift towards organic growth after a period of macro headwinds.
• Strategic investments in new vehicles (Active ETFs, Private Real Estate, Offshore CCAVs) and enhanced distribution capabilities, particularly targeting the high-growth RIA channel, are key pillars for future AUM growth and market share capture.
• Despite recent market volatility and geopolitical uncertainty, management remains committed to its growth initiatives, viewing them as essential to capitalize on a macro environment potentially favoring real assets due to persistent inflation and the high opportunity cost of illiquidity in private markets.
• The firm maintains a strong balance sheet and provides clear guidance for 2025, including a stable compensation ratio and targeted G&A increases to fund strategic investments, positioning it for potential operating leverage expansion as AUM grows.

A Specialist's Edge in Real Assets

Cohen & Steers, Inc., founded in 1986, has carved out a distinct identity in the global investment management landscape as a specialist in real assets and alternative income. With headquarters in New York City and offices spanning London, Dublin, Hong Kong, Tokyo, and Singapore, the firm offers a focused suite of strategies including listed and private real estate, preferred securities, infrastructure, resource equities, commodities, and multi-strategy solutions. This specialized focus, honed over decades, forms the bedrock of its competitive positioning.

Operating in a competitive arena dominated by giants like BlackRock (BLK), Invesco (IVZ), Franklin Templeton (BEN), and State Street (STT), alongside numerous niche players and increasingly influential fintech disruptors and private market firms, Cohen & Steers differentiates itself not through sheer scale, but through depth of expertise and a proprietary investment process. While larger competitors boast vast AUM and extensive technological platforms enabling faster processing speeds and broader product suites, Cohen & Steers' "technology" lies in its specialized research, rigorous fundamental analysis, and active portfolio management. This intellectual capital is designed to generate alpha, or excess returns, for clients – a critical differentiator in an industry facing fee compression. The firm's performance scorecard, consistently showing high percentages of AUM outperforming benchmarks across various time periods (81% in Q1 2025, 89% 1-year, over 95% 3, 5, 10-year), serves as tangible evidence of this specialized "technology" at work. This performance edge supports stable fee rates, contrasting with the fee rate compression experienced by many peers.

The firm's history reflects a strategic evolution from its initial focus on U.S. REITs to a broader real assets and global platform, partly fueled by an early, strategic acquisition that facilitated global distribution. This journey has shaped its current strategy: leveraging its core strengths while adapting to significant industry shifts, such as the migration of wealth advisors to independent RIA firms, the growing preference for active ETFs, and the increasing adoption of private strategies in client portfolios.

Navigating Macro Shifts and Building Momentum

The period since mid-2022 has been characterized by a significant "regime change" in interest rates, presenting macro headwinds that impacted Cohen & Steers' business. Rising rates influenced investor sentiment, led to portfolio reallocations towards fixed income, and highlighted liquidity constraints in private investments, contributing to a period of net outflows. However, recent performance suggests a potential turning point.

For the three months ended March 31, 2025, Cohen & Steers reported total revenue of $134.5 million, an increase of 9.6% from $122.7 million in the prior year period. This growth was primarily driven by higher average assets under management, which rose to $86.8 billion from $80.2 billion year-over-year. Investment advisory and administration fees, the largest revenue component, increased by 9.9% to $126.8 million. The effective fee rate remained relatively stable, with slight increases in open-end funds (67.60 bps vs 66.20 bps) and institutional accounts (38.80 bps vs 37.80 bps), influenced by AUM mix shifts.

Operating income for Q1 2025 was $45.2 million, up from $40.3 million in Q1 2024, resulting in a GAAP operating margin of 33.6%, an improvement from 32.8%. As-adjusted operating margin was 34.7% in Q1 2025. Expenses increased by 8.3% to $89.3 million, primarily due to higher employee compensation and benefits (up 4.9% to $54.6 million, driven by incentive compensation) and increased general and administrative expenses (up 16.1% to $17.2 million, reflecting investments and non-recurring items).

Crucially, the firm achieved net inflows of $222 million in Q1 2025, marking the third consecutive quarter of positive firm-wide flows. This follows net inflows of $860 million in Q4 2024 and $1.3 billion in Q3 2024, signaling a potential reversal of the outflow trend seen during the peak of the rate hike cycle. Open-end funds led the inflows in Q1 2025 ($585 million), partially offset by anticipated outflows in institutional accounts ($366 million net outflows). This positive shift in flows, particularly in open-end funds and specific strategies like global listed infrastructure, suggests that the firm's strong investment performance and the perceived attractiveness of its asset classes in the current macro environment are beginning to resonate with investors.

The balance sheet remains robust, with net liquid assets totaling $318.4 million at March 31, 2025. This liquidity, supported by a $100 million revolving credit facility and recent opportunistic capital raising, provides financial flexibility for strategic investments. The company has committed to invest up to $175 million in certain investment vehicles, with $66.3 million unfunded as of Q1 2025, demonstrating its commitment to seeding new strategies.

Strategic Pillars for Future Growth

Cohen & Steers is actively pursuing several strategic initiatives designed to capitalize on evolving market dynamics and drive future growth:

• Active ETFs: The launch of the firm's first three active ETFs in February 2025 (US real estate, preferreds, natural resource equities) is a significant step to expand the addressable market, particularly among RIA advisors who increasingly favor this vehicle structure. The long-term strategy includes developing ETFs for all core strategies, with "round two" already in progress.
• Private Real Estate Expansion: Building out the private real estate business is a key priority. The Cohen & Steers Income Opportunities REIT (CNS REIT) has shown strong performance relative to the average non-traded REIT and the NCREIF ODCE index, focusing on opportunistic acquisitions in open-air shopping centers. A new initiative to combine listed and core private real estate in a single vehicle for institutional investors is expected to launch in late Q2 2025, aiming for better risk-adjusted returns and liquidity.
• Distribution Enhancement: The realignment of the U.S. wealth distribution team and increased focus on the RIA and multifamily office segments are designed to capture growth in these fast-expanding channels and support the distribution of new products like ETFs and the non-traded REIT.
• Global Opportunities: The offshore wealth market, with its growing CCAV platform, and the potential "investing Renaissance" in Japan represent further avenues for AUM growth and diversification.
• Infrastructure Focus: Global listed infrastructure is highlighted as a strategy with significant interest, driven by secular trends like digitalization, power demand, and underinvestment, positioning the firm to capture new allocations and take share from competitors.

Management's guidance for 2025 reflects these strategic investments. The as-adjusted compensation ratio is expected to remain stable at 40.5%, while G&A is projected to increase by 6% to 7% compared to 2024. These expense levels are explicitly linked to funding infrastructure upgrades, the ETF rollout, and increased business development. The effective tax rate is expected to remain consistent at 25.3%. This guidance signals a commitment to investing for growth, with the expectation that these initiatives will contribute to revenue and potentially expand operating leverage as AUM scales.

Risks and the Path Forward

Despite the positive momentum in flows and strategic execution, Cohen & Steers faces notable risks. The macroeconomic environment remains uncertain, with potential for a U.S. recession, persistent inflation (exacerbated by recent tariff announcements), and market volatility impacting AUM and investor sentiment. The April 2025 tariff announcements, described by management as "more severe than expected," introduced significant uncertainty and boosted the odds of a slowdown, although the base case remains narrowly avoiding a recession.

Competition is intense across all segments, with larger firms leveraging scale and technology, and private market alternatives attracting significant capital. The unfunded pipeline in institutional advisory saw a notable decrease in Q1 2025, highlighting the challenge of translating activity into mandates amidst client reallocations and competitive pressures. Expected redemptions, though lower than previous quarters, still represent potential headwinds to AUM growth.

Execution risk on new initiatives, particularly the successful scaling of the ETF platform and the private real estate business, is also a factor. While early signs are positive (e.g., CNS REIT performance), achieving meaningful AUM in these new areas will require sustained effort and favorable market conditions.

However, Cohen & Steers' core investment thesis remains compelling: its specialized expertise in real assets and alternative income positions it favorably in a market environment where diversification, inflation sensitivity, and liquidity are increasingly valued. The argument that real assets are attractively valued compared to potentially overvalued broad equities, coupled with the growing recognition of the high opportunity cost of illiquidity in certain private markets, provides a potential tailwind. By investing strategically in new vehicles and distribution, the firm aims to broaden its reach and capture a larger share of investor allocations as the market cycle potentially shifts in its favor. The path forward hinges on continued strong investment performance, successful execution of its growth initiatives, and the ability to effectively communicate the value of its specialized strategies in a complex and evolving landscape.

Conclusion

Cohen & Steers stands as a specialized asset manager at a pivotal moment, transitioning from a period of macro-induced headwinds to one potentially marked by tailwinds for its core strategies. The return to firm-wide net inflows, coupled with a robust balance sheet and targeted investments in strategic growth areas like Active ETFs and Private Real Estate, underscores the firm's proactive approach to navigating industry evolution. While competitive pressures and macroeconomic uncertainty persist, Cohen & Steers' deep expertise in real assets and alternative income, validated by a strong performance track record, provides a durable foundation. The investment thesis centers on the firm's ability to leverage this specialization and its expanded distribution capabilities to translate a potentially more favorable market backdrop into sustained organic growth and enhanced profitability, offering investors exposure to a focused manager poised to capitalize on the evolving dynamics of the global asset management industry.