Executive Summary / Key Takeaways

• Cohen & Steers (CNS) is strategically positioned to benefit from a "reversal of fortune" in financial markets, where real assets, after a decade of underperformance, are poised for stronger returns due to attractive valuations, persistent inflation, and a growing need for portfolio diversification.
• The firm's core investment thesis is underpinned by its specialized expertise in real assets and alternative income, a robust active management approach consistently delivering alpha, and a strategic expansion into new distribution channels and investment vehicles like active ETFs and private real estate.
• Recent financial performance demonstrates resilience, with revenue growth driven by higher average assets under management and improving operating margins, despite a volatile macroeconomic environment and initial ramp-up costs for new initiatives.
• CNS is actively enhancing its competitive moat through technological differentiation in integrated listed and private real estate strategies, aiming to provide superior risk-adjusted returns and liquidity compared to traditional core private real estate.
• Key risks include continued market volatility, potential economic slowdowns impacting asset flows, and intense competition from larger, diversified asset managers and emerging fintech solutions, necessitating disciplined execution of its growth strategies.

The Resurgence of Real Assets: Cohen & Steers' Strategic Foundation

Cohen & Steers, Inc. (NYSE:CNS) stands as a global investment manager with a deep specialization in real assets and alternative income, a niche that has historically provided valuable diversification and inflation sensitivity to investor portfolios. Founded in 1986, the firm has cultivated a global footprint with offices in major financial hubs including New York City, London, Dublin, Hong Kong, Tokyo, and Singapore, strategically expanding its reach to cater to a diverse client base. This global presence, initially bolstered by a targeted acquisition that broadened its U.S. REIT strategy, underpins its ability to navigate and capitalize on varied market dynamics worldwide.

The investment landscape is currently undergoing a significant shift, moving away from a decade dominated by U.S. equities and private assets towards a renewed appreciation for real assets. While global equities and private assets delivered impressive double-digit annual returns through 2024, listed real assets, including global real estate and commodities, lagged significantly. However, this "reversal of fortune" is now taking hold, with real assets showing signs of outperforming broader markets in the first half of 2025. This pivot is driven by several macroeconomic factors: the end of ultra-low interest rates, stickier inflation, re-established fixed income allocations, and a heightened demand for true portfolio diversification beyond traditional stocks and bonds. Cohen & Steers is strategically positioned to leverage these trends, offering specialized expertise in listed and private real estate, preferred securities, infrastructure, resource equities, and multi-strategy solutions.

Technological Edge: Integrated Strategies and Alpha Generation

Cohen & Steers' core technological differentiation lies not in a proprietary hardware or software, but in its sophisticated, active management approach and its innovative integration of listed and private market strategies. This intellectual capital, honed over decades, enables the firm to consistently generate alpha and deliver superior risk-adjusted returns for its clients. The firm's investment performance scorecard is a testament to this, with 89% of its Assets Under Management (AUM) outperforming its benchmark in Q2 2025, and impressive 1-, 3-, 5-, and 10-year outperformance rates all exceeding 94%. Furthermore, 90% of its open-end fund AUM holds a 4 or 5-star rating from Morningstar (MORN), underscoring its competitive edge in fund performance.

A key innovation is the firm's approach to real estate. After a nearly two-year downturn, private real estate prices have reached a clear turning point, with seven consecutive quarters of negative returns giving way to four consecutive positive quarters. Cohen & Steers believes prices across several property types have bottomed and are beginning to appreciate, particularly in open-air necessity-driven shopping centers, which are a focus of its private real estate strategies. This conviction is demonstrated through the Cohen & Steers Income Opportunities REIT (CNSREIT), a non-traded REIT launched in January 2024. CNSREIT delivered an 11.6% total return for Class I shares in 2024 since its inception, ranking it second among peers and significantly outperforming the NCREIF ODCE Index's negative 2.6% return for the nine months through September 2024. This outperformance is attributed to its focused shopping center strategy and the alpha generated by its listed REIT sleeve, showcasing the tangible benefits of integrating listed and private real estate expertise.

In mid-May 2025, Cohen & Steers further solidified this technological differentiation by partnering with IDR Investment Management to launch a tactical listed and private real estate strategy for institutional investors. This integrated strategy aims to deliver historically higher returns, reduced risk, lower drawdowns, and improved liquidity compared to standalone core private real estate allocations. The firm highlights the "lead-lag dynamic" between listed REITs and private real estate, which creates timing-based windows of opportunity for knowledgeable investors, a strategic advantage its integrated approach is designed to capture. This focus on combining listed and private allocations extends to infrastructure, where the firm is exploring similar partnership arrangements, driven by a passion for building better, more diversified portfolios.

Competitive Landscape and Strategic Positioning

Cohen & Steers operates in a highly competitive asset management industry, contending with both large, diversified players and niche specialists. Its primary competitive advantage lies in its specialized expertise in real assets and alternative income, which allows it to carve out a strong position in segments where larger, more generalized firms may lack the same depth.

Compared to industry giants like BlackRock (BLK), CNS offers a more specialized value proposition. While BlackRock's scale and technological platforms like Aladdin provide immense efficiency and broad market access, CNS differentiates through its deep, focused expertise in real estate and infrastructure. This specialization can lead to superior margins through premium pricing on specialized funds and fosters stronger customer loyalty in niche segments. However, CNS may lag BlackRock in overall innovation speed due to BlackRock's larger R&D resources.

Against State Street (STT), a major financial services provider focused on institutional investors, CNS's customized solutions in real estate and fixed income can offer greater performance differences tailored to specific asset classes. While State Street's extensive servicing capabilities provide operational efficiency, CNS's global presence and expertise in commodities and real estate offer a unique differentiator. CNS's niche positioning allows it to exploit State Street's weaknesses in specialized sectors, though it may lag in overall financial health and cash flow generation due to State Street's broader service offerings.

When contrasted with Invesco (IVZ), an asset management firm with a wide array of products, CNS's infrastructure and commodities offerings provide specialized performance advantages, aligning with long-term trends in energy resources. Invesco's global expansion strategy may lead to faster growth in new markets due to its larger distribution network, but CNS's emphasis on real estate and infrastructure provides a unique value proposition. CNS leads in niche market penetration but could lag Invesco in overall efficiency and adaptability.

Finally, against Franklin Resources (BEN), which focuses on fixed income and equity, CNS's specialized approach in real estate and infrastructure offers distinct performance advantages. Franklin's broad market access might provide greater efficiency in client acquisition. CNS differentiates through its expertise in commodities and energy, but may lag Franklin in growth rates and R&D investment due to Franklin's larger scale.

CNS's market share in active open-end funds is significant, holding approximately 38% in preferred securities and mid-40% in U.S. REITs, demonstrating its strong brand recognition and client relationships. The firm is actively expanding its addressable market by investing in distribution capabilities, particularly targeting the fast-growing independent Registered Investment Adviser (RIA) segment and multi-family offices. This strategic realignment of its U.S. wealth distribution team, coupled with the launch of new vehicles like active ETFs, aims to capture new client segments and retain assets from advisors converting their business models.

Financial Performance and Operational Momentum

Cohen & Steers' financial performance in the first nine months of 2025 reflects a firm adapting to a dynamic market while investing for future growth. For the nine months ended September 30, 2025, total revenue increased to $412.31 million from $377.63 million in the prior year, a 9.2% increase. This growth was primarily driven by higher average assets under management. Investment advisory and administration fees from open-end funds, a key revenue driver, rose 14.2% to $214.51 million for the same period. The implied annualized effective fee rate for open-end funds also saw a slight increase to 67.40 basis points for the nine months ended September 30, 2025, up from 66 basis points in the prior year, largely due to a favorable shift in the mix of assets under management.

Despite strategic investments, the firm has maintained a disciplined approach to expenses. Operating income for the nine months ended September 30, 2025, grew to $137.43 million from $123.54 million in the prior year, resulting in an improved operating margin of 33.30% compared to 32.70%. Employee compensation and benefits, while increasing due to higher incentive compensation and salaries, were partially offset by lower amortization of restricted stock units. General and administrative (G&A) expenses also rose, reflecting increased business development activities, talent acquisition costs, and expenses related to new product launches like active ETFs.

Liquidity remains a cornerstone of CNS's financial strength. As of September 30, 2025, the company reported total assets of $801.61 million, with cash and cash equivalents at $98.05 million. The firm maintains a highly liquid balance sheet, comprising cash, U.S. Treasury securities, and liquid seed investments.

A $100 million senior unsecured revolving credit facility, maturing in August 2029, provides additional financial flexibility to support growth initiatives, including seeding new strategies and co-investing in private real estate vehicles. As of September 30, 2025, the company had committed to invest up to $175 million in certain investment vehicles, with $58.90 million remaining unfunded. The company's dividend policy aims for a predictable and growing quarterly dividend, with a recent declaration of $0.62 per share payable in November 2025.

Outlook and Strategic Initiatives

Management's outlook for Cohen & Steers is rooted in a belief that the macro environment is becoming increasingly favorable for its core real asset strategies. The firm expects its compensation ratio to remain consistent at 40.5% for 2025. Full-year G&A is projected to increase in the 7% to 8% range compared to 2024, driven by talent acquisition, business development, and infrastructure investments, including the completion of foreign office upgrades. This G&A growth is anticipated to moderate to the mid-single-digit percentage range after 2025, signaling that current investments are foundational for future, normalized growth. The effective tax rate is expected to remain stable at 25.3% on an as-adjusted basis for 2025.

A key growth driver is the firm's expansion into active ETFs. Following the successful launch of its first three active ETFs in Q1 2025 (U.S. REIT, preferred stock, and natural resource equities), which garnered $54 million in net inflows in their first full quarter, CNS plans to launch more active ETFs. This strategy directly addresses the trend of investment advisors shifting towards ETFs, with a survey indicating 43% expect ETFs to replace most or all of their open-end fund allocations. These vehicles are crucial for reaching new investors who exclusively use ETFs and for retaining assets from advisors converting their business models.

The firm is also doubling down on its private real estate initiative through CNSREIT, which continues to be a top performer among non-traded REITs. The focus on open-air shopping centers is proving to be a differentiated and alpha-generating strategy. While private credit has recently outpaced real estate in private wealth alternative strategies, management anticipates a capital shift towards real estate as price trends confirm a trough has been formed. The unfunded pipeline, which temporarily dipped to $61 million in Q1 2025, has since rebounded to $776 million by Q2 2025, reflecting renewed business activity and anticipated mandates, particularly in U.S. real estate and global listed infrastructure.

Risks and Challenges

Despite a positive outlook, Cohen & Steers faces several pertinent risks. Global economic conditions remain volatile, shaped by fiscal and monetary policy shifts and trade tensions. The "liberation day" tariff announcements in April 2025 introduced significant market volatility and raised the specter of a U.S. recession, which could slow the ramp-up of new initiatives. While real assets are generally less sensitive to tariffs than broader equities, natural resource equities could face direct pressure on EPS.

The cost of illiquidity in private allocations is another critical concern. Management acknowledges that the illiquidity return premium has been inconsistent, particularly showing a negative return in private real estate historically. Over-allocation to private assets can constrain investors' ability to rebalance portfolios optimally, especially during market downturns. This vulnerability underscores CNS's strategic emphasis on integrated listed and private solutions that offer enhanced liquidity.

Competition remains fierce, not only from large, diversified asset managers but also from the growing private credit market, which has diverted flows from preferred stock strategies. While CNS boasts strong market share in its core open-end fund categories, it must continue to innovate and execute its distribution strategies effectively to counter competitive pressures and retain assets. The firm also anticipates known redemptions totaling approximately $500 million, primarily due to client rebalancing and reallocations to private investments, which could impact near-term AUM.

Conclusion

Cohen & Steers is at a pivotal juncture, strategically leveraging its deep expertise in real assets and alternative income to capitalize on a shifting market paradigm. The firm's commitment to active management, demonstrated by its consistent alpha generation and top-tier fund performance, forms the bedrock of its investment thesis. Through innovative technological approaches, particularly in integrating listed and private real estate strategies, CNS is enhancing its competitive moat and offering differentiated solutions that address critical investor needs for diversification, risk reduction, and liquidity in a complex macroeconomic environment.

While challenges such as market volatility, competitive pressures, and the inherent costs of illiquidity persist, CNS's disciplined financial management, robust balance sheet, and strategic investments in new vehicles like active ETFs and its non-traded REIT position it for sustained growth. The firm's proactive expansion into high-growth distribution channels, notably the RIA segment, further strengthens its ability to capture market share. Investors should view Cohen & Steers as a resilient asset manager poised to thrive in a real assets-led market, driven by its specialized expertise, strategic innovation, and unwavering focus on delivering value in an evolving financial landscape.