Cohen & Steers Inc (CNS) 2007 Q1 法說會逐字稿

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  • Operator

  • Welcome to the Cohen and Steers first quarter 2007 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. (Operator Instructions) Thank you. I would now like to turn the call over to Mr. Sal Rappa, Senior Vice President and Associate General Counsel. Please go ahead, sir.

  • Sal Rappa - Senior Vice President and Associate General Counsel

  • Thank you and welcome to the Cohen and Steers first quarter 2007 earnings conference call. Joining me are co-Chairman and co-Chief Executive Officers Marty Cohen and Bob Steers, our President, Joe Harvey, and our Chief Financial Officer, Matt Stadler.

  • Before I turn the call over to Bob, I'd like to make the following remarks. Yesterday, we issued a press release announcing our first quarter results. The press release, which is available on our website at CohenandSteers.com, contains the information that we believe is useful in helping you evaluate our performance during the quarter.

  • I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements.

  • We believe that some of these factors are described in [technical difficulty] section of our 2006 form 10-K, which is also available on our website. I want to remind you that the company assumes no duty to update any forward-looking statements.

  • Also, the presentation we make today may contain proforma, or non-GAAP financial measures which we believe are meaningful in evaluating the company's performance. For detailed disclosures on proforma metrics and their GAAP reconciliation, you should refer to the financial data contained within the press release we issued yesterday.

  • Finally, this presentation will contain information with respect to investment performance of certain of our funds. I want to remind you that past performance is not a guarantee of future performance. This presentation will also contain information about certain funds and have filed registration statements with the SEC which have not yet become effective.

  • This communication shall not constitute an alternate sell or the solicitation of any offer to buy these securities. For more complete information about the funds we will discuss today, including charges, expenses, and risks, please call 1-800-330-7348 for a prospectus and see the press release we issued yesterday.

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

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Thanks, Sal, and thank you all for joining us this morning. As we've done in the past, I'm going to briefly highlight the headline numbers and then talk about some major accomplishments during the quarter. I'll ask Matt, our CFO, to expand and go into more detail on the headline numbers, and then I'll close with some thoughts and goals for the balance of the year.

  • As you've hopefully seen by now, for the first quarter we recorded earnings of $22.3 million, or $0.52 a share compared to $8.7 million or $0.22 a share last year. Assets under management reached a record $33.6 billion, which is an increase of 46% from $23 billion last year.

  • Investment banking had by far its best quarter ever in recording revenue of $15.7 million. Clearly, this was another strong quarter for Cohen and Steers. In addition, we made some good progress in further implementing our strategic plans by expanding our global investment team, filing and launching numerous new products, and expanding our global distribution capabilities.

  • Let me just spend a few minutes highlighting the major contributing factors to our first quarter results, and also mention some of the key strategic developments in the quarter.

  • First off, the strength in the quarter was a function of accelerating institutional and retail sales, and the strong M&A environment for our investment banking team.

  • As we said last quarter, the heavy lifting is, in fact, over with regard to the expansion of our institutional and retail sales team, and that with the passage of time, we anticipated that we would experience increased sales activity in both business segments. And that's exactly what we saw last quarter, so let me share with you some encouraging sales statistics with you.

  • The firm's total net assets, including both our retail and institutional segments, experienced net in-flows of $2.9 billion in the quarter, which is only slightly below the $3.1 billion which was recorded for the entire year last year.

  • Specifically, our retail team generated net flows into our open-end fund of $1.6 billion, and again that was only slightly behind 2006 full year total net flows of $1.8 billion. In the quarter, Cohen and Steers ranked among the top 10 bestselling fund families in the Merrill Lynch retail system, which given our narrow investment focus is truly an impressive accomplishment.

  • Turning to the institutional sales segment, net flows of $1.1 billion in the quarter exceeded 2006's full year net flows of $796 million, even after allowing for $459 million of rebalancing out of our U.S. reach strategies. Also, a strategically important development this quarter was the addition of both large cap value and preferred stock separate accounts, and at the end of the first quarter, U.S. REITs were only about 50% of our total assets under management compared to 69% one year ago.

  • As we've seen for over a year, the majority of our first quarter asset growth was into global and international strategies and away from U.S. REITs. This trend remains strong and in part explains the rise in our weighted average management fee to 67 basis points in the quarter.

  • So the bottom line for the quarter was our annualized organic growth rate of 38.5%, which reflects our strong investment performance and the progress that's been made in both our institutional and retail sales teams. And although the heavy lifting is behind us, we did make some important personnel additions during the quarter. Paul Osborne joined Cohen and Steers to lead our business development activity in Europe and is based in our London office.

  • Furthermore, we made significant additions to our U.S.-based consultant relations and client service teams to support the currently high levels of new account activity both here and abroad.

  • Turning to new product developments, we launched our European realty open-end fund during the quarter, and in addition we recently filed four new closed-end funds-- Cohen and Steers' Global Income Builder, Global Real Estate Income, Enhanced Dividend, and our Second Closed-end Opportunity Fund. Each of these funds will seek to deliver income and diversification, and will be managed by our established in-house investment teams.

  • As I've already mentioned, our investment banking group achieved a record $15.7 million in revenues in the quarter, which was mainly derived from merger advisory assignments. Last year's strong M&A environment continues to be very strong and our team is among the leaders in both the real estate and healthcare sectors. We're pleased that the current market activity remains high, and our pipeline is full.

  • With that, I'm going to ask Matt to expand on some of the first quarter results.

  • Matt Stadler - Chief Financial Officer

  • Thanks, Bob. Good morning, everyone. Yesterday, we reported record earnings of $0.52 per share, a 141% increase from the $0.22 per share reported in the prior year's quarter, and a 30% increase from the $0.40 per share reported last quarter. As Bob mentioned, the quarter included investment banking fees of $15.7 million, our highest quarter of banking fees ever.

  • We reported record revenue for the quarter of $76.8 million, a 103% increase from the prior year's quarter, and up 33% sequentially. Our net income for the quarter was a record $22.3 million, an increase of 156% from the prior year's quarter, and up 35% sequentially.

  • As a result of net in-flows across all three of our product lines, we have now recorded net in-flows in 10 out of the 11 quarters we have been a public company. Combined with overall market appreciation and the inclusion of assets acquired from Houlihan Rovers, our assets under management reached a record $33.6 billion.

  • Our overall organic growth rate for the last 12 months was 24%; 38% if you annualize the first quarter. We continue to broaden our product offerings with non-U.S. REIT common stocks, now comprising 49% of total assets, up from 31% last year. This includes international securities, which now comprise 25% of total assets, up from 6% a year ago.

  • Now I will review the performance of our two business segments. In our asset management business we reported record quarterly revenue of $61 million, up 63% from the prior year's quarter, and up 17% sequentially. Pre-tax income for the quarter was $26.8 million, up 85% from last year's quarter and up 17% sequentially. Asset management's pre-tax margin for the quarter was 45%, and again please remember that when we compute our pre-tax margin, we add back amortization of intangible assets which are primarily attributable to the non-compete agreements.

  • Now let's review the changes in assets under management. Assets under management in our closed-end mutual funds totaled a record $11.7 billion at March 31st, an increase of $351 million, or 3%, from the fourth quarter. The increase in assets under management was attributable to the issuance of preferred shares on two of our funds, the exercise of the underwriters over allotment for our closed-end opportunity fund launched last quarter, and market appreciation.

  • Our open-end funds had record assets under management of $11.5 billion at March 31st, an increase of $1.9 billion or 20% from the fourth quarter. The increase in assets under management was attributable to record net in-flows of $1.6 billion, led by $1.3 billion of net in-flows into our international realty fund, combined with market appreciation of $331 million. Our International Realty fund now has over $3.8 billion in assets since its launch in March of 2005.

  • Gross subscriptions for the quarter totaled $2.4 billion, our highest level ever, and our organic growth rate for the last 12 months for open-end funds was 48%, 66% if you annualize the first quarter.

  • Assets under management in our institutional separate accounts reached a record $10.3 billion at March 31st, an increase of $1.4 billion or 16% from the fourth quarter. The increase was comprised of record net in-flows of $1.1 billion, all into global and international portfolios, and market appreciation of $301 million. Our organic growth rate for the last 12 months for institutional separate accounts was 29%, 52% if you annualize the first quarter.

  • Our investment banking segment had its best quarter ever, reporting revenue of $15.7 million, up from $5.6 million last quarter, and up from $705,000 in the comparable 2006 period. Our investment banking revenue remains very unpredictable.

  • The banking segment recorded a record $9.2 million pre-tax profit for the quarter, and the fees generated during the quarter were primarily attributable to merger advisory assignments.

  • Moving to expenses, on a sequential basis, expenses were up about 21% in the first quarter. Employee compensation and distribution and service fee expense comprised the majority of this increase. We mentioned on the last call that our compensation-to-revenue ratio for 2007 would remain below 30%. Our ratio for the quarter was 29%, which is about where it was for the fourth quarter. Therefore, the increase in compensation expense is in line with the revenue growth.

  • Generally, distribution and service fee expense will vary based on the asset levels in our open-end mutual funds. The sequential variance is in line with average asset growth.

  • Now turning to the balance sheet, stockholders' equity was $254 million and our cash, cash equivalents, and marketable investments totaled $165 million, down from $175 million last quarter. Please bear in mind that we utilized approximately $40 million of cash to satisfy employee tax obligations related to the delivery of restricted stock units in January. These are the stock units that were given to the (SARS) holders and gave rise to the non-compete that we amortized.

  • Let me briefly discuss a couple of items that will impact our second quarter. The first is our effective tax rate. Last quarter, we mentioned on the call that our effective tax rate for 2007 would be between 38% and 39%. Our rate for the first quarter was 38%, and we expect to maintain this rate throughout the rest of the year.

  • With respect to compensation, we expect to maintain a 29% compensation-to-revenue ratio for the second quarter.

  • And now I'll turn it back to Bob Speers to wrap up.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Great, thanks, Matt. I'm going to finish up by outlining some of our priorities for the balance of the year, and then I'll open it up to questions. First, I want to just mention that a core assumption underlying our future plans and strategy is that the potential size and growth of the international real estate market could, in fact, dwarf the U.S. REIT market.

  • And so from a macro standpoint, our goal is to sustain the positive trends that we're currently experiencing with respect to investment performance, organic growth, rising average fees, and investment banking. To accomplish these goals, we will need to expand our U.S. and especially our global investment teams to match the high levels of expected growth in those markets.

  • In addition, we plan to launch more global income-oriented strategies, and our first hedged products. These strategies will be aimed at both the retail and institutional markets.

  • Also, in order to sustain strong organic growth, we will also add to our institutional and retail sales and client service teams, as needed. Going forward, much of this activity may occur outside the U.S., where we are working to gain additional distribution relationships and market access. And while international and global strategies are currently enjoying very strong demand, we also plan to emphasize and grow our non-real estate dividend-oriented strategies.

  • And then lastly, we absolutely will continue to position and support our investment banking group so they remain at the forefront of the currently high level of M&A activity in the real estate and healthcare sectors.

  • With that, we'll open it up to questions.

  • Operator

  • (Operator Instructions) We'll pause for just a moment to compile the Q&A roster. Your first question comes from Cynthia Mayer with Merrill Lynch.

  • Cynthia Mayer - Analyst

  • Hi, good morning.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Morning, Cynthia.

  • Cynthia Mayer - Analyst

  • Just a follow-up on that list of areas that you're interested in expanding. I'm wondering if you could prioritize among them, and also when you say you're interested in expanding them, does that mean you would be interested in another acquisition like Houlihan in order to try to stay head of the expansion of international REITs, or do you mean more that you'd be interested in adding people sort of one, two at a time?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Well, I think that's two questions, because it relates to both expanding our global investment team and also our distribution. I would just comment that on the distribution side we don't need to make any acquisitions. We've got our footprint in place, and we're simply going to expand our sales business development client service in line with the volume of opportunities both in Europe and in Asia. I think maybe Marty or Joe, you might want to comment on our plans for expanding the investment team.

  • Matt Stadler - Chief Financial Officer

  • Sure. As Bob mentioned earlier, the global and international real estate securities opportunity is significant and that requires adding investment professionals in both portfolio management, research, and trading. So as we gain new accounts and add strategies, we'll expand those teams.

  • One example of that is an addition we referenced in the release which is the addition of Scott Crowe, who was the Global Real Estate Securities Strategist at UBS. And he is a widely recognized investment professional globally, and we're thrilled to have been able to attract him to Cohen and Steers.

  • To create the capabilities to manage the strategies that Bob referred to, we are also in the process of creating a quantitative research and hedging team. We have the head of that group, who will start at the beginning of next month, and this team will work with our other investment teams to create hedged and other derivative strategies to change the investment characteristics of our existing long-only portfolios to access different markets.

  • Cynthia Mayer - Analyst

  • Okay, and acquisitions -- are you interested in any more acquisitions along the lines of Houlihan? I don't know if they exist.

  • Matt Stadler - Chief Financial Officer

  • Well, we don't (unintelligible). We don't see anything right now. We've been very successful in growing our business outside of the Houlihan Rovers acquisition by just bringing in the most talented people that we can find. And we like that model, and that's one we want to continue to repeat.

  • Cynthia Mayer - Analyst

  • Okay, and just one more question if I may, on the banking fees. Can you give any more color on was it one particular deal that contributed to the bulk of that, or just a bunch of little ones? Well --

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • There was one very large deal in there. There were a couple of other smaller fees, but there was one very large deal, and that was the majority of that.

  • Cynthia Mayer - Analyst

  • Okay, thank you.

  • Operator. Thank you, your next question comes from Mike Carrier with UBS.

  • Mike Carrier - Analyst

  • All right, thanks. Just have a question. You know, it seems like there's two kind of favorable drivers that you're well-positioned for. One is the international growth of the real estate market, and then the other is just the increase in kind of demand for both real estate exposure, and in particular the growth international real estate exposure for the institutional clients, particularly, like, pension funds. So is there one -- or, like, do you view both as your key drivers, or does one kind of outweigh the other?

  • Matt Stadler - Chief Financial Officer

  • You know, Mike, I think I mentioned this at the UBS conference, but it is an interesting phenomenon that there is tremendous demand on the part of not just institutions, but individuals, to have exposure to international markets. And there is probably no better way to access a foreign market than through its real estate, because it's that country, it's its economy, its real estate market, and its currency, and most other international investments are multinational companies, so you don't get the direct exposure that you can in global real estate or international real estate securities.

  • We think the world has caught on to that, and that's one of the drivers. But the other driver is there is this demand for alternatives, and real estate is in the alternative asset class for many investors. So the ability to access that alternative through the liquid markets based on the experience in the U.S. during the 1990s and 2000s where the securitization of real estate brought great liquidity to real estate markets and great opportunities for investors, that's now happening around the world.

  • So alternative investors are finding the global opportunities and even those that are not looking for just a real estate or alternative asset class, those that want international exposure are finding it in the real estate securities segment.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • I would just add that to try and put ourselves in front of that, in addition to offering virtually the full range of real estate securities strategies around the globe, we either already have and are executing plans to solicit and accommodate those capital flows in every major market around the world. So we have marketing -- we're actually already marketing or have plans to market both institutional and retail in every major market around the world.

  • Mike Carrier - Analyst

  • Okay, thanks. And then just on the -- I don't know if you guys -- you gave the non-U.S. re-exposure, but did you give the international kind of exposure of your real estate assets? Or do you have that?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Sure. Our (unintelligible) --

  • Mike Carrier - Analyst

  • --would be, like, a quarter, but. Like just your international real estate AUM as a percentage of total real estate AUM.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Sure. Well, I'll give the absolute numbers. In this category, put global portfolios, which do have an allocation to the U.S., international portfolios, or global ex-U.S and then regionally focused portfolios which are either Europe-only or Asia-Pacific. And the total AUM was $10.1 billion, and that compares with our AUM in U.S.-only portfolios, $15.7 billion.

  • Mike Carrier - Analyst

  • Okay. And then over the past I'd say couple quarters, you've had a favorable fee realization rate. You know, both in terms of the fee waivers, and then just the shipment to international funds. In going forward, in '08, we have some more fee waivers. And just given the change in the asset level, does that change in terms of the benefit?

  • And then I tried to look at just what the different fees are on the international products and the domestic. Do you have kind of like just a ballpark figure of where you see kind of the average fee of the international versus domestic, just so when the assets continue to shift and the international makes a bigger component, we try to get kind of the fee to AUM more on target?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • You want me to take the -- I can take the fee waivers. And we said, Mike, in the last call to TF '07 that we would have about $1.5 million of fee waivers that actually started in January, based on -- that $1.5 million is not based on 331 asset levels, but we've recorded already in the first quarter about $300,000. In '08, there's actually going to be the two that we had in '07, plus an additional two. One that would happen in August, and one that would happen in March. And based on current asset levels, that's about $2.5 million.

  • And then each of the subsequent years, they start to ratchet up a little bit more. So the '08 amount we're looking at now based on current asset level, is about $2.5 million. Our international portfolios generally are about a 10 or 15 basis point higher fee than our domestic. And it depends on the fund or the account, but that's in general, so that gives you a sense of the -- between the waivers and the 10 or 15 basis points higher fee, that's what we're experiencing today as the mix shifts.

  • And then the driver there is that our overall effective fee rate last year in the first quarter was about 61, 62 basis points, and now it's a little over 67. So with the $300,000 of fee waivers, that's really not moving the needle as much as the composition of the assets, which are more international. So that's a 10% increase in our effective fee rates.

  • Mike Carrier - Analyst

  • Okay, that's all. Thanks a lot.

  • Operator

  • Thank you. Next question is coming from Alex Blostein with Wachovia.

  • Alex Blostein - Analyst

  • Hi, good morning, guys. Just a quick follow-up on the investment banking, and I understand those fees tend to be lumpy. Any insight on the backlogs, I guess, and maybe how they compare to the end of the last quarter and year over year would be helpful.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • We wish we could have a handle on that, but as you know, in that business, deals don't get booked until they actually happen. We know that our bankers are very busy. They're involved in M&A activity which, as you know, is very big. A lot of healthcare deals, some real estate deals, and we're all going to know it together, at the same time, when it happens. But there's no way to really predict or give you some dimensions of what that could be in the future.

  • Alex Blostein - Analyst

  • Sure, okay. And on the quant. and the hedge product I guess you guys were talking about, is there a performance fee associated with it or can you give us any update on that front?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • It's in formation right now. We've put the team in place, and we're in the product development phase. And we're very optimistic. Some may, some may not have performance fees. We're more focused on the stability of income, so I don't think -- I don't believe you're going to see, at least in the near term, some big performance fee bump that maybe some other asset managers enjoy. It also takes time -- to the extent there are any of them, it takes time for those to kick in.

  • Alex Blostein - Analyst

  • Okay. And then just finally, sounds like the closed-end pipeline looks pretty solid. Any timeframe on when those are actually going to come to market?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • You know, we hope to do another one or maybe two this year. That's all subject to market conditions. The market is very strong right now, but as we've found, that can change in a month. So I think we feel pretty confident that we get at least one done this year, and if the conditions are right, we could possibly get two.

  • Alex Blostein - Analyst

  • Got you. All right, thanks for taking all my questions.

  • Operator

  • Thank you. Your next question is coming from Marc Irizarry with Goldman Sachs.

  • Marc Irizarry - Analyst

  • Oh, great, thanks. Hey, guys. It looks like the fish are really kind of jumping in the boat here, if you will, and the flows are incredibly strong. And I'm curious on capacity constraints in the in the business be it in institutional or retail or whichever channels, but I just would love to get some more color on A how you think about capacity and B, maybe what do you think capacity, in terms of asset growth for the business, or how asset levels are over time? Thanks.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Sure, well, I'll address the real estate securities area, which I think this question really applies to. One measure to look at our share of the market is to take our AUM and compare it with the market capitalization of our investment universe. In the U.S. today we're about 3.7%, or our AUM is 3.7% of the market capitalization here in the U.S.

  • If you do the same analysis internationally, we're at just .9%. So, looking at where the demand is, which is primarily for international and global portfolios, we believe that we have a significant amount of capacity, and that's -- looking at those measures is not the best way to look at what our investment capacity is, because it can change with market conditions, as well. But it's our view that our share internationally is very low, and gives us significant growth potential over time.

  • Matt Stadler - Chief Financial Officer

  • I would add those international markets are growing, whereas the U.S. market is shrinking. You're getting a lot of taking private transactions in the U.S. On the other hand, outside the U.S. there's a big pipeline of companies in Germany, which has just adopted REIT legislation. There are major capital needs in Asia. The UK has had some success with its REIT legislation.

  • So this whole securitization model that we saw that was very favorable in the '90s and 2000s in the U.S. is starting to play out outside the U.S., so we feel we've got a low market share to begin with, and that market should be growing.

  • Marc Irizarry - Analyst

  • All right, and it sounds like you've made a lot of investments in order to be able to bring in these kind of flows on a ongoing basis. How should we think about the margin I guess on a longer-term basis, and when do you think you'll accelerate kind of the spending on the expense side of things?

  • Matt Stadler - Chief Financial Officer

  • Well I think that as Bob mentioned in his comments, a lot of the heavy lifting is already in the numbers, and we'll be fine-tuning from here. But I think the margins will have -- are in the 40 range. I think they'll sustain themselves there. We've been able to make the investment without sacrificing the margins.

  • So I think that as the flows continue and our business continues to develop, there'll be some fine-tuning on the infrastructure. But it's not going to be as wholesale as it's been over the last six to 12 months, where a head count's gone way up from a year ago.

  • So I think there'll be some of the expansion, but it won't be overly noticeable on the comp line, on the G&A line. The comp will stay at a ratio to revenue and the G&A line might go up a little with some travel, let's say, but overall, there's no surprises out there that I'm aware of.

  • Marc Irizarry - Analyst

  • Great, thanks. Nice quarter.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Thank you.

  • Operator

  • Thank you. Your next question is coming from Eric Veiel with T. Rowe Price.

  • Eric Veiel - Analyst

  • Hi, guys, I'm sorry, I got dropped from the call so I apologize if some of these were repeats. You were in the middle of giving a discussion about your tax rate when I got dropped. Can you just quickly repeat what you said you thought that would be this year?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • 38%. We said on the call that we thought it'd be between 38% and 39%, but it's coming in at around 38%, and we believe we'll be able to sustain that throughout the year.

  • Eric Veiel - Analyst

  • Great, thanks. And then I also picked up, at the very tail end of the discussion, about expense growth through distribution expansion, etc. Did you quantify any of that, in terms of actual dollars you thought or SGNA ratio changed?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • No.

  • Eric Veiel - Analyst

  • Okay. The closed-end funds that you announced or that were discussed in the press release, and then just a minute ago you answered a question saying that maybe one or two more were coming to market, is that in addition to the ones that you talked about earlier, or is that trying to get some of those that are in registration actually into the market?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • No, it's the ones that are in registration already.

  • Eric Veiel - Analyst

  • Okay. And just do you have any sense of just what the size of those could be, potentially? It seems like demand from the warehouse brokers for those types of products is going to be phenomenal. Is there any way to sort of size those?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • We never know going into it. We used to say here if we could raise $100 million, it's a go. Now that hurdle is clearly higher. But you just never know, because market conditions can change. What we really want or are most concerned with is having an investment strategy that is rational, that delivers value to the buyer or the shareholder, and that the investment community can really find attractive.

  • If we do that and the timing is right, then you could have a good raise, but there's just no predicting what that could be.

  • Eric Veiel - Analyst

  • Okay, great. Thanks very much.

  • Operator. Thank you. Your next question is coming from James Ellman with Seacliff Capital.

  • James Ellman - Analyst

  • Thanks a lot for taking my question. It was a fabulous quarter, and I was hoping you could give us a little bit of outlook just in terms of the investment banking side. I know that you mentioned earlier that it's difficult to quantify what the pipeline looks like, but is this likely the highest EPS quarter of the year?

  • And the second question would be if the investment banking side is able to continue hitting the cover off the ball, should we expect that the compensation ratio will have to come up? Most other investment banks, of course, have a much higher compensation ratio than 20% or 30%.

  • Sal Rappa - Senior Vice President and Associate General Counsel

  • Mr. Ellman? Mr. Ellman, we're having difficulty hearing your question. I'm sorry, if you could speak up a little louder.

  • James Ellman - Analyst

  • I'm sorry; okay, I'll try. Can you hear me now?

  • Sal Rappa - Senior Vice President and Associate General Counsel

  • Yes, much better.

  • James Ellman - Analyst

  • All right, I'm sorry about that. Obviously, the investment banking business did extremely well this quarter. Could you give us a little bit of an idea -- I realize you mentioned it's difficult for you to tell us much about the pipeline, but could you tell us if this is likely going to be the high EPS quarter for the year?

  • And secondly, if the investment bankers are able to continue bringing in large deals like they did this quarter, will the compensation ratio likely rise, as they have to be compensated for bringing in those deals? Thank you.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Well, I think it's -- I wouldn't say, necessarily, I would put any ceiling on what could be raised in a quarter, but with that I'd say that there is no normalized number. I mean, previous to this quarter, our high water mark was $10 million, but for the whole year last year it was about $18. So, we've got $15.7 in the bank now. The pipeline is strong. You just don't know how that's going to manifest itself on the on the revenue line going forward.

  • So I can't really be predictive there for you, but I wouldn't necessarily put a limitation on there. But I think everything's got to be looked at in a historical fashion, with the team and looking at some of the history of what's been booked before.

  • With respect to the comp, the ratio that we're looking to is including all the elements of comp, including whatever the bankers get. So I wouldn't necessarily think that in our -- the way we think about things, that there would be a correlated increase in our ratio because of additional revenue. We've got that under control.

  • James Ellman - Analyst

  • So just in terms of trying to model things out a bit, just to pencil something in, should we be annualizing the number that came from the investment bankers for this quarter?

  • Matt Stadler - Chief Financial Officer

  • I wouldn't --

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • You know what, we're just not going to give you any guidance as the answer, because we're not in a position to do that.

  • James Ellman - Analyst

  • All right, thank you.

  • Operator

  • (Operator Instructions) Our next question is coming from Cynthia Mayer with Merrill Lynch.

  • Cynthia Mayer - Analyst

  • Hi, thanks for the follow-up and I apologize if you answered this already, but I'm just wondering on the demand for the separate accounts which has been so strong, how much of that is from U.S. institutions versus non-U.S. institutions like Daiwa, and where do you see that going?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • In the quarter, the vast majority was from non-U.S. institutions. Going forward, we would expect the strength from non-U.S. institutions to continue; however, we also see some very encouraging trends from U.S. institutions and for non-real estate strategies as well in the institutional marketplace.

  • So our hope is that we have the best of all worlds, where institutions like Daiwa continue to be strong, but we see substantial increases in other institutions, both here and abroad. And spanning our products beyond real estate.

  • Cynthia Mayer - Analyst

  • Is that something you've won but has not yet funded, what you're talking about? Which is a non-REIT separate account?

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Like investment banking, activity levels are high. But until we have something to announce, we can't really talk about it. But right now, the environment is favorable.

  • Cynthia Mayer - Analyst

  • Okay, thank you.

  • Operator. Thank you, your next question is coming from Peter Vaill with Fontana Capital.

  • Forrest Fontana - Analyst

  • Hi, good morning. It's actually Forrest, thanks. My questions have been answered, but an excellent job, gentlemen. You continually deliver on everything you've outlined. Good work.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • We've come a long way since the road show, huh?

  • Forrest Fontana - Analyst

  • Yes, you've come a long way, and you hit on your plan, and you guys are really a role models. So I thank you, and encourage you to keep up the good work.

  • Bob Steers - Co-Chairman and Co-Chief Executive Officer

  • Thank you.

  • Matt Stadler - Chief Financial Officer

  • Thanks.

  • Operator. Thank you. At this time, I would now like to turn the floor back to Sal Rappa for any closing remarks.

  • Sal Rappa - Senior Vice President and Associate General Counsel

  • Well, thank you all very much for joining us, and we'll speak to you again next quarter. Thank you.

  • Operator

  • Thank you, this concludes today's Cohen and Steers conference call. You may now disconnect.