Cohen & Steers Inc (CNS) 2020 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the Cohen & Steers First Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded today, Thursday, April 23, 2020.

It is now my pleasure to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.

Thank you, and welcome to the Cohen & Steers First Quarter 2020 Earnings Conference Call. Joining me are our Chief Executive Officer, Bob Steers; our President, Joe Harvey; and our Chief Financial Officer, Matt Stadler.

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.

Our presentation also contains non-GAAP 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. Finally, I'd like to note that in accordance with our firm's work-from-home protocol currently in effect, each of our speakers are participating on today's call remotely.

With that, I'll turn the call over to Matt.

Thank you, Brian. Good morning, everyone, and thanks for joining us today. Before I discuss our first quarter results, I'd like to take a few minutes to report on our business continuity planning and capabilities in the context of the ongoing COVID-19 pandemic.

This week marks the sixth consecutive week that our U.S. employees have been in a work-from-home environment, longer in the case of some of our non-U. S. personnel. Like most firms, we experienced an adjustment period at the outset, which is to be expected, but we quickly transitioned, relying on our remote access capabilities to establish reliable lines of communication and an organizational routine. During this time working from home, we have been able to maintain both our work and control environments. Communication throughout the firm, which is critical, has been effective and without disruption, and all our departments and operations are functioning well. Our executive and management teams have been in regular communication throughout the crisis, both with each other and with employees. We continue to assess the chain of command for our executive team and portfolio managers so that we are prepared for various contingency scenarios, including should someone become temporarily unable to perform their responsibilities.

This quarter included $8.9 million of items that were excluded from our as-adjusted results. These items included $11.9 million of costs incurred in connection with the rights offering of our closed-end fund, the Cohen & Steers Quality Income Realty Fund, and $9.4 million attributable to our portion of unrealized losses on seed investments. The tax benefit associated with these 2 adjustments of $4.8 million as well as $5.8 million benefit related to certain discrete tax items have also been excluded.

My remaining remarks this morning will focus on our as-adjusted results. A reconciliation of GAAP to as-adjusted results can be found on Pages 14 and 15 of the earnings release and on Slides 16 and 17 of the earnings presentation.

Yesterday, we reported quarterly earnings of $0.61 per share compared with $0.58 in the prior year's quarter and $0.74 sequentially. Revenue was $105.8 million for the quarter compared with $93.9 million in the prior year's quarter and $109.8 million sequentially. The decrease in revenue from the fourth quarter was primarily attributable to lower average assets under management and 1 less day in the quarter. Average assets under management were $69 billion for the quarter compared with $62.8 billion in the prior year's quarter and $71 billion sequentially. Our implied effective fee rate was 56.7 basis points in the first quarter compared with 56.5 basis points in the fourth quarter.

Operating income was $40.4 million for the first quarter compared with $35.8 million in the prior year's quarter and $47.4 million sequentially. Our operating margin decreased to 38.2% from 43.1% in the fourth quarter, primarily due to higher compensation and benefits when compared to revenue. As you may recall, the fourth quarter included a cumulative adjustment to compensation and benefits to reflect actual incentive compensation to be paid, which increased our fourth quarter operating margin by 310 basis points. Expenses increased 4.7% on a sequential basis primarily due to higher compensation and benefits, partially offset by lower G&A. The compensation-to-revenue ratio for the first quarter was 36.5%, higher than the guidance we provided on our last call. The increase was primarily due to lower first quarter revenue than we had projected.

As I mentioned a moment ago, the fourth quarter included a cumulative adjustment to reflect actual incentive compensation to be paid, resulting in a compensation-to-revenue ratio of 31.5%. Compensation and benefits increased 1.6% sequentially after normalizing the fourth quarter for this adjustment. The decrease in G&A was primarily due to lower travel and entertainment expenses.

Our effective tax rate for the quarter was 27.4%, higher than the guidance provided on our last call. The increase was primarily due to the amplified effect of certain permanent differences on a lower-than-expected pretax basis.

Page 15 of the earnings presentation displays our cash, corporate investments in U.S. Treasury securities and seed investments for the current and trailing 4 quarters.

Our firm liquidity totaled $140 million at quarter end compared with $204 million last quarter. The decline in firm liquidity from December 31 was primarily due to the payment of bonuses and the firm's customary funding of payroll tax obligations arising from the vesting and delivery of restricted stock units on behalf of certain employees. And most importantly, we remain debt-free.

Assets under management totaled $57.4 billion at March 31, a decrease of $14.8 billion or 21% from December 31. The decrease was due to market depreciation of $15.3 billion and distributions of $671 million, partially offset by net inflows of $1.2 billion. Advisory accounts had net inflows of $697 million during the quarter, which included 4 new mandates: 3 of these totaling $66 million were included in last quarter's pipeline; and the other one, totaling $1 billion, was both awarded and funded within the quarter. Inflows from these 4 mandates were primarily into global real estate portfolios.

Additionally, we recorded $250 million of net inflows from client rebalancings. Partially offsetting these inflows were $622 million of outflows associated with 5 terminated accounts, primarily from U.S. and global real estate portfolios. Bob Steers will provide an update on our record institutional pipeline of awarded unfunded mandates.

Japan sub-advisory had net inflows of $280 million during the quarter compared with net inflows of $341 million during the fourth quarter. This marked the third consecutive quarter of net inflows from Japan sub-advisory after 8 straight quarters of net outflows. Distributions from these portfolios totaled $316 million compared with $308 million last quarter. Sub-advisory, excluding Japan, had net outflows of $175 million, primarily from client rebalancings out of U.S. real estate and global-listed infrastructure portfolios.

Open-end funds recorded net inflows of $67 million during the quarter as inflows into U.S. real estate funds were essentially offset by outflows from preferred securities funds. Distributions totaled $227 million, $176 million of which was reinvested.

Closed-end funds had net inflows of $315 million during the quarter due primarily to the successful rights offering of the Cohen & Steers Quality Income Realty Fund, which raised $401 million, including leverage.

Let me briefly discuss a few items to consider for the second quarter and remainder of the year. Notwithstanding our long-term plan to strategically expand institutional distribution efforts that we referred to last quarter, we are taking a deliberate and measured approach to new and replacement hires, which we expect will limit our headcount growth. As a result, we expect our compensation-to-revenue ratio to remain at 36.5%. We have undertaken a review of all of our expenses, which include, but are not limited to, application licenses, market data services and professional fees. Other costs, which will be lower as a result of the current environment, include sponsored and hosted conferences, marketing costs and travel and entertainment. We project G&A to be flat to 2% down from the $46 million we recorded in 2019. On our last call, we projected a 5% increase in G&A. We expect that our effective tax rate will remain at approximately 27.4%.

And finally, first quarter investment advisory fees included a true-up for performance fees and excluded the full quarter's effect of our newly funded advisory mandates. Considering these items and based on our March 31 asset mix, we project that our implied effective fee rate for the second quarter will decline by about 1 basis point from the implied rate I mentioned earlier.

Now I'd like to turn it over to Joe Harvey, who will discuss our investment performance.

Thank you, Matt, and good morning. This morning, I will review our relative investment performance, then share how our investment teams are operating in this environment and offer some perspectives about our major asset classes.

The macro environment in the first quarter was turned upside down in dramatic fashion, spinning from goldilocks with positive conditions for our asset classes to a crisis, humanitarian as well as economic, including a bear market and recession. Virtually no asset class was spared from the cessation of economic activity and concerns about the price and availability of credit and emerging balance-sheet stress.

Turning to our scorecard, in the first quarter 7 of our noncore strategies outperformed their benchmarks. For the last 12 months, 6 of 9 core strategies outperformed. Measured by AUM, 64% of our portfolios are outperforming on a 1-year basis, 77% are outperforming over 3 years and 99% are outperforming over 5 years. The decline in our batting averages from last quarter was primarily attributable to our preferred strategies, which have consistently outperformed long term but underperformed during the market decline in March. 95% of our open-end fund AUM is rated 4 or 5 star by Morningstar.

Our investment teams are functioning at a high level, thanks in large part to our IT infrastructure and operations teams, who have facilitated a successful and complete transition to a work-from-home environment. In addition to our normal investment routines, we have implemented special research task forces focused on topics such as the virus, its trajectory and our country's and the world's ability to track and treat it, and how this crisis will change longer-term behaviors and business trends. Each team is continually re-underwriting base and bear case forecasts as our views evolve in order to synthesize our top-down macro road map with valuation regimes and guide portfolio decisions. In addition, our teams are spending a lot of time with clients to help them understand what is happening, and in many cases advising on how to deploy capital to take advantage of dislocations.

In navigating this recession, we are positioning in companies with the healthiest balance sheets because it will be difficult in the near term to predict the duration and scope of the virus and its economic impact and the extent to which cash flow interruptions will create balance sheet distress. We are focusing on what we can assess with some degree of confidence, which companies have balance sheets that we believe are likely to be strong enough to avoid equity dilution. Then we can identify distressed and fix-it opportunities as the economic effects of the recession ripple through.

Turning to our major strategies by AUM, U.S. REITs declined 23% and global real estate declined 29% in the quarter. We outperformed benchmarks in both our core U.S. and global strategies. The magnitude of the drawdown that REITs experienced would be surprising in most bear market scenarios, yet nobody would have realistically contemplated a complete cessation of business in some sectors, giving tenants economic and political cover to postpone or avoid rent payments. On one end of the spectrum, about 34% of our investment universe is directly affected, with hotels and gaming revenue trending towards 0 and regional mall properties being closed. On the other end, about 53% of the universe is comprised of businesses that are less or positively affected, including data centers, cell towers and warehouses.

In our underwriting, even considering the disruption in cash flow, our team believes that REITs have 2 to 3 years of liquidity. Banks, unlike during the Global Financial Crisis, are supportive in providing liquidity through lines of credit, term loans and in some cases, covenant relaxation. In addition, there have been a handful of unsecured bond deals since the crisis unfolded at reasonable all-in rates, a market that was completely closed during the GFC. Given our best thinking for new levels of cash flow, we believe that REITs globally are trading at the low end of their cash flow multiple and asset valuation ranges. As a result, we are seeing institutional investors who invest in both the private and public market shift capital to the -- where the markdowns have occurred, the public market. We're excited to help these institutions execute on these allocations, and we believe this may represent an inflection point for market share gains by private investing.

One milestone on topic is the long and growing list of private property commingled funds, both institutional and retail, that are enforcing withdrawal gates because appraised valuations are stale and uncertain. These redemption roadblocks are an important reminder of the value of liquidity and our franchise in listed real assets. It will take some time for opportunities to emerge in the private market, but ultimately, there will be problems with tenant bankruptcies and vacancies, leasing and completion of new construction, and refinancings or defaults on debt. When the opportunities emerge, the public market will provide the capital for REITs to capitalize on the opportunities. In fact, earlier this week, our real estate strategy provided equity to a net lease retail REIT to take advantage of potential acquisition opportunities.

Preferred securities declined 10% in the first quarter despite the collapse of the 10-year treasury yield. Credit spreads widened dramatically, and prices were impacted further by liquidity issues in the early phase of the drawdown. We underperformed in both our core and low-duration preferred strategies as we were more aggressively positioned in credit, and were overweight Europe and contingent capital securities, or CoCos, which are mostly obligations of European banks and tend to be below investment grade with higher beta.

Since the end of the quarter, preferreds have rallied almost 6%, thanks in part to the liquidity provided through the numerous monetary and credit support programs by the Fed and treasury. We have already recovered some of our underperformance and have performed well compared with peers.

Considering the banks represent over 50% of the preferred market, investors are wrestling with 2 questions. First, are U.S. banks healthy enough to weather loan losses and pay-preferred dividends? We believe that banks' much improved capital ratios, liquidity and profitability, further supported by dramatic policy measures, will encourage their continued payment of preferred dividends. The second question, what is the risk that European banks hit capital triggers or stop paying CoCo dividends? Here, too, we believe, for many of the same reasons as well as the ECB's affirmation of preferred dividends, the overall risk of dividend interruptions for our European Bank Holdings is unlikely. All things considered, with yields at 5.4% for domestic investment-grade preferreds and about 7% for CoCos, we believe there is ample compensation compared with corporate bonds yielding 3.3%.

Global-listed infrastructure declined 21% in the quarter compared with the global equity index decline of 22%. We enjoyed strong outperformance compared with our benchmark. As an asset class, infrastructure behaved less defensively than it has historically as some sectors have been directly hit by the fallout from the virus. We estimate that about 35% of the infrastructure universe is more affected by the crisis, most notably airports, oil and gas pipelines, toll roads and railroads. By contrast, 65% is less affected or benefits such as the case with cell towers. Just as with real estate, infrastructure investors can now find the best opportunities in the public market.

In closing, while we are disappointed in the value declines in our portfolios, we are pleased that we are effectively managing what is within our control. Looking forward, and acknowledging there are still many unknowns about the virus and the economy, we are planning for a longer so-called U-shaped rather than V-shaped recovery. There will be some permanent damage to our economy and to corporate, personal and government balance sheets, along with greater headwinds from higher debt levels, savings trends and contingency costs. It's likely that interest rates will stay low for a while, which should make the income generation of our asset classes appealing during a period when earnings power and growth are uncertain. Looking further out, considering the amount of fiscal stimulus that will have accumulated, the probability for higher inflation at some point has gone up. As a result, we believe that investors' needs for income, true diversification and liquidity will be even greater.

This is my fifth major bear market at Cohen & Steers. After each previous one, we found major investment opportunities, ranging from providing private placement growth capital to REITs in 1998 to capitalizing on discounts and preferred stocks during the tech boom in 2000 when income was shunned to recapitalizing REITs in the GFC. We believe that opportunities will emerge from this horrible crisis, and we are well positioned to find them.

With that, I'll turn the call over to Bob Steers.

Thank you, Joe. Good morning. I hope everyone listening today is healthy and managing well wherever you are.

As we all know by now, we're facing a health care and economic crisis that's unprecedented and for which there's no playbook to draw from. Fortunately, having managed through multiple crises over our almost 35 years, we've built a platform and culture that's resilient and well positioned to weather almost any storm and emerge stronger and better.

As always, we've been committed to keeping in place and supporting all of our teams, just as we did during the financial crisis. This is essential in order to promote trust and a productive, team-oriented culture and to deliver for our clients, even while coping with unexpected personal and professional challenges. Equally important is the unique platform that we've developed to support our teams. Maintaining our focus on listed real assets and alternative income strategies has positioned us to be a category killer in these unique asset classes. In addition, high insider ownership in combination with a debt-free and highly liquid balance sheet allows us to make the best short-term decisions to promote long-term success.

Under the circumstances, I couldn't be more pleased with our results in the quarter. As you know, due primarily to market depreciation, assets under management declined by 21% or almost $15 billion in the quarter. By contrast and despite these massive market headwinds, we achieved record sales in our institutional advisory channel. These inflows were broad-based and included existing clients opportunistically adding to their current mandates, along with multiple new relationships looking to capitalize on the market downdraft.

In addition, record gross sales in our wealth channel helped to largely offset the flight to cash that characterized retail investor behavior in the latter half of the quarter. The bottom line is that, even in the current environment, we recorded $1.2 billion of net inflows in the quarter, which is a tribute to our people and a validation of the power of our platform.

Specifically, the wealth channel delivered record open-end fund gross sales of $4.4 billion but also experienced record redemptions of $4.3 billion, resulting in positive net inflows of about $67 million. Outflows were dominated by preferred securities strategies, while our U.S. REIT funds saw net inflows. Not unlike the fourth quarter of '18 to the first quarter of '19 market environment, which saw a sharp drawdown followed by a rapid rebound in flows, the U.S. open-end fund outflows all occurred in the 3-week period from February 28 to March 20 and reverted back to net inflows the following week, and that has continued into April. We were also pleased to see continued net inflows in the DCIO and bank trust and insurance channels of $43 million and $133 million, respectively.

As you know, we're in uncharted territory, especially in the wealth channel, where virtually all branch offices are closed and our relationship managers must work from home. However, in some respects, this situation works to our advantage. Our focus, investment performance, thought leadership, fund recommendations and brand combined to give us continued access and a leg up versus our competitors through both digital and video outreach to leading advisory teams.

The advisory channel had a truly extraordinary quarter. Net inflows were $697 million, powered by the funding of 4 new mandates totaling $1.1 billion and $329 million of net additions to 12 existing client accounts. The vast majority of these positive flows were targeted to global real estate strategies as both new and existing clients look to capitalize on the steep market downturn and the arbitrage opening up between listed and unlisted real estate markets. Offsetting these inflows were 5 terminations totaling $622 million and modest outflows from rebalancing of $79 million. Lastly, we ended the quarter with a record pipeline of won-but-unfunded mandates totaling $1.6 billion. The unfunded pipeline includes $1.1 billion from 11 new awards but excludes $1 billion mandate, which was both awarded and funded in the quarter. The flow and pipeline activity reflect the market opportunity created by the current crisis, but also the value of our brand and platform with leading investors.

Japan sub-advisory recorded $280 million of net inflows before distributions in the quarter. This marked the third consecutive quarter of net inflows. Even after distributions, flows were roughly flat at negative $37 million.

Of strategic importance was the launch of our "next-gen REIT fund" with MUKAM as sponsor and SMBC Nikko as lead distributor. Although the marketing of this fund only commenced in mid-February, they were able to raise over $100 million in a challenging market. Sub-advisory ex Japan had net outflows of $175 million, driven by one client utilizing a momentum-driven algorithm. We are already seeing a reversal of these outflows and continue to be cautiously optimistic about the prospect for this recently repositioned channel.

I want to conclude by recognizing the effectiveness of our business continuity planning teams and how successfully all of our people have adapted to the new working environment. Portfolios are being managed, administered and serviced at the highest levels. The virtual surge in flows experienced in both the wealth and institutional channels speaks volumes about our platform, brand and relationship management. In a volatile and stressed environment, we have been the go-to manager of choice, gaining market share in our key real estate infrastructure and preferred security strategies.

Going forward, we remain focused on supporting our people and platform. In anticipation of a gradual return to more normal operations, we've assembled a task force with broad representation to identify the critical issues that we must address to ensure a safe and effective return to work. Our efforts will be directed towards keeping our people healthy and secure so that they can focus on what they do best, which is to deliver for our clients and each other.

With that, I'm going to ask the operator to open the floor to questions.

(Operator Instructions) Our first question from the line of John Dunn with Evercore ISI.

Kind of just an overarching question. You talked about how you were able to recap the REIT industry in '09. But I mean, it's going to be different this time around. But maybe if you could just talk about some of the areas where you're -- this time around, you're going to be able to take advantage of the big market drop we just went through?

Joe, would you take that?

Sure. John, so as we've talked about already, our existing clients are looking at the drawdowns that have happened and noting that valuations for global real estate and global-listed infrastructure are discounted versus the private markets. And of course, in environments like these become questions about what private market values are. So I guess the first level of opportunity is for our clients to take advantage of the discounts that have been presented in the public market. But as this evolves and the economic effects ripple through, different companies will see holes in cash flows and that could create, for some companies, some needs for equity capital. And there's another opportunity to step in and like we did in the Global Financial Crisis to provide equity so that companies can make it to the other side of the situation.

But it's always different. And I think, this time, our companies are in much better shape than they were in the GFC. And as we did earlier this week, we think that there's an opportunity to provide equity to companies to take advantage of opportunities. And in that situation, the company already had a very good balance sheet but operates in the retail net lease area and is going to see a lot of acquisition opportunities. So we provide them with more capital to have a war chest to take advantage of the opportunities.

So I think there'll be a couple of different buckets, and it's really going to fall out along the lines of which -- in the real estate area, which property sectors are more affected and which are least affected. So the ones that are least affected will have access to capital and will take advantage of opportunities; the ones that are more affected might need to have some balance sheet repair. And we're organized and positioned to take advantage of opportunities in all of those areas.

Got you. And then it's great to see that closed-end fund market window back opened after many years. It's a [high-key] product, locked up capital. Maybe you could just talk about the -- that look for demand there, not just for the rest of this year, but maybe over the next few years?

Sure, John. That's an interesting question. As you know, the closed-end fund market did open up last year and very early this year, and we were able to get our rights offering off in February. We had been scheduled to do an IPO in April. And about 1 month or more ago, we agreed to reschedule that for later this year in the September, October time frame. The underwriters who are committed to that transaction are as or more excited now about the investment merit of that IPO, mainly for a lot of the reasons you heard from Joe about the valuation opportunity in preferred securities in a yield-starved world. So our understanding is some other firms may be attempting to reopen the market in June or July. We'll see how that goes. But we think that the new structure, the new economics of the closed-end market are extremely favorable to investors. And as a result, as market conditions normalize, there'll be opportunities for both IPOs and rights issues and secondary offerings. And so we continue to be very enthusiastic about the prospects there.

(Operator Instructions) And our next question from the line of Mike Carrier with Bank of America.

Maybe first, Joe, just given the pandemic, I realize it's tough to predict, but how are you and the team just thinking about investing, particularly in real estate? I know you mentioned the comments on the strong balance sheet; that makes a ton of sense. But just in terms of the subsectors, what could potentially change in sectors that you have a bit more confidence in given this backdrop?

Sure. The way I think about it, there are going to be cyclical impacts that affect each sector differently. And then there -- which I think is the essence of the question -- there are going to be secular impacts. The most obvious secular issue relates to e-commerce and the effects that it's having on -- in a negative way on retail real estate. And I think that this situation will kind of accelerate some of the decline in the bricks-and-mortar retail real estate. On the other end of the spectrum, you've got e-commerce-related property sectors like cell towers and data centers, and they're thriving in a period of increased demand.

Then you have some sectors like office that maybe have some impacts of both the cyclical and the secular. So on the cyclical front, obviously, with the recession, that's going to impact demand as it normally would, and we'll have to sort through bankruptcies and nonpayment of rent. And in this cycle, this office sector will have to contend with co-working, which is really going to be tested as a business model, the WeWork overhang in a model that where you wanted to pack people more tightly and do so with, in many cases, noncredit tenants. So that will be an overhang for the market.

But to your question, looking a little bit further out, there's going to be negative effects on office demand and positive effects. The negative effects are, with the work-from-home experience, I think we're going to see more companies encourage work from home. On the other hand, we're going to want to see less square footage per person, and you might have companies disperse people to greater locations, which can have positive effects. I think it's pretty safe to say in the case of office for the near and immediate term that the situation is going to be negative. And you can go sector by sector and each one has its cyclical and secular factors.

Okay. That's helpful. And then, Bob, maybe just a follow-up on the institutional business. Both the flows and then the pipeline that you announced are really robust. And this is before a lot of the investments that you guys discussed last year that you were looking to put in place over the next few years. So I guess the question is, just a little surprised on like how quick maybe some of this stuff has come about and maybe what's changed. I mean, obviously, the valuations have changed, so that drives some of that. But are you seeing more traction with some of the institutional clients? Have any investments like started to pay off? Or is that just more to come over the next couple of years?

I think it's really both. I think it dates back to the Financial Crisis when institutional investors saw the incredibly unique transactions and resulting massive alpha that was generated out of that drawdown. We, over the last several years, have been working with clients on very unique opportunistic strategies, in some cases, even drawdown, distress and investing strategy and that sort of thing. So I think it's a combination of our brand and reputation, having delivered in the last bear market; two, working for years now with some of the most sophisticated investors in the world on more narrow, thematic, opportunistic strategies and our performance, obviously, had a big impact as well.

And so a lot of the assets coming in are being derived from large sovereign funds. But at the same time, our current pipeline of $1.6 billion is derived from 11 different mandates. And so the interest is broad. It's both from existing clients and new clients. And again, I think they see an opportunity. They also see that active management today, whether it's public or private real estate, and the real estate asset class is clearly the way to go. ETFs can't get out of the way of retail and those secular losers in the real estate market, whereas we can and we have. And we can also reposition in those property types that are cyclically depressed but have a bright outlook from a secular standpoint. And so some of the assets that we see flowing to us are coming out of a passive real estate strategy. So it's all of those things. We're still staffing up in our -- both our U.S. and non-U. S. institutional teams, and we're going to continue to make those investments.

Our next question from the line of Robert Lee with KBW.

This is actually Jeff Drezner on for Rob Lee. I hope everyone is doing well. I just had a -- I apologize, I missed the commentary around the April flows. Just curious if you can just cover that one more time.

Sure. As I mentioned in my comments, the outflows were roughly a 3-week phenomenon. And since that time, it's been a reversal. And although the circumstances are dramatically different versus the fourth quarter of '18 into the first quarter of '19 where we saw substantial outflows from preferreds in the fourth quarter only to see a complete reversal in the following quarter. And we're seeing a similar phenomenon here.

April-to-date flows are positive. And in fact, we have been -- we've experienced positive inflows in all 4 sectors: open-end funds, advisory, sub-advisory and even in Japan. And as you might expect, the inflows -- the greatest inflows are into our preferred securities strategy. So you never know whether that will continue or not. But given the fact that there seems to be some stabilization in the markets and markets are operating and functioning even in the current environment, it flows back in the preferred securities. Especially, Joe, in his comments, did discuss the fundamentals and preferreds are still solid. So it's entirely logical. And so thus far, April has seen broad-based positive flows.

Great. I actually had a quick follow-up on something. So the Japan sub-advisory inflows have been strong in the last couple of quarters, picking up from the beginning of 2019. And obviously, the back end of 2018, beginning there, too. I was wondering if you can maybe help understand and maybe quantify what's been propelling the stronger sales overall for the Japan sub-advisory segment.

Well, it's a few things. Good performance. Cohen & Steers, again, has been recognized as the top REIT manager in Japan; two, a continued demand for yield in that marketplace; three, some of the regulatory pressures which forced distributions to decline across the full range of Japanese REIT funds has abated. And so that has been a factor. You missed on the call that we launched a new -- a totally new next-gen REIT strategy with MUKAM and SMBC Nikko, which raised $100 million in from mid-February to the end of March, a very difficult time period. So we continue to diversify there. And we are also continuing to invest in and see very nice results in the Japanese institutional market as well.

Got it. Okay. And then one last quick thing. The -- I don't know if I missed this; it's been hard with the calls. But the -- did you quantify the unfunded backlog? Apologies.

Yes. Glad you asked. It's a record by a lot of $1.6 billion.

Our next question is a follow-up question from John Dunn with Evercore ISI.

Could you maybe give a little more color on global listed infrastructure outside of maybe midstream energy and like demand and conversations there? And then looking further down the road, eventually, do you think we'll ever see some retail demand for those [funds]?

Joe, do you want to tackle the fundamentals?

Well, yes. Sure. So in my comments, John, I identified the subsegments of infrastructure being directly affected. Some of them are pretty obvious, airports, for example. And then the pipeline segment, which has obviously been hit by the crash in energy prices. But then you have, on the other end of the spectrum, sectors that are beneficiaries like cell towers, and we invest in data centers as well and infrastructure. So same as with real estate, our teams are assessing all of the intermediate-term trends and changes in behavior. With infrastructure compared with real estate, you've got one interesting nuance, which is regulation that can be more in favor of public interest compared with private sector interest. So that's a unique aspect that our teams have to contend with. But -- so while you would have expected infrastructure to defend better in a generic bear market scenario because of those transportation-related sectors, it's -- it kind of was in line with the market decline this time.

As an asset class, we continue to see more and more interest institutionally. And we've had some existing clients add to their accounts. We have steady activity with new allocations. On the wealth side of it, it has not really taken a hold, and it's partly because investors -- or wealth investors don't really know where to put it in their portfolios. I will say that one trend that we are seeing is there was a lot of allocations made to the midstream energy subsegment of infrastructure. And because it's been uniquely affected by the oversupply in energy around the world, we're seeing some of those investors broaden out just their midstream-only allocations to convert it to a broader global-listed infrastructure allocation. So there's -- that's one positive trend on the wealth side.

And Mr. Steers, it appears there are no further questions at this time. I'll turn the call back to you. You may continue with your presentation or closing remarks.

Great. Thanks, everyone, for joining us this morning, and we hope everyone remains safe. And we will certainly stay in touch and look forward to speaking to you at the end of the second quarter. Thank you very much.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.