Cohen & Steers Inc (CNS) 2008 Q4 法說會逐字稿

Welcome to the Cohen & Steers fourth-quarter and 2008 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 session. (Operator Instructions)

I would now like to turn the call over to Mr. Salvatore Rappa, Senior Vice President and Associate General Counsel. Please go ahead, sir.

Thank you. Thank you and welcome to the Cohen & Steers fourth-quarter and full-year 2008 earnings conference call. Joining me are co-Chairmen 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 Marty, 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 the Risk Factors section of our 2007 Form 10-K, which is available on our website at cohenandsteers.com. I want to remind you that the Company assumes no duty to update any forward-looking statements.

Also, the presentation we make today contains pro forma, or non-GAAP, financial measures, which we believe are meaningful in evaluating the Company's performance. For detailed disclosures on these pro forma metrics and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued yesterday.

Finally, this presentation may contain information with respect to the investment performance of certain of our finds. I want to remind you that past performance is not a guarantee of future performance. For more complete information about the funds we will discuss today, including charges, expenses, and risks, please call 800-330-7348 for a prospectus.

With that, I will turn the call over to Marty.

Thank you, Sal. Good morning and welcome to our year-end or new year call. First, let me go through the numbers and then I will give you some commentary on the quarter and on the year.

Last night we reported a fourth-quarter loss per share of $0.05, which compares with a $0.43 per share profit a year ago. After adjusting for certain items which Matt Stadler will discuss with you in a few minutes, we had a profit of $0.04 per share.

For the year, we reported earnings per share of $0.60 compared with $1.60 in 2007. Again adjusting for certain items, in 2008 we would have earned $0.92 per share.

At year-end 2008, at our assets under management were $15.1 billion, which compares with $24.6 billion at September 30 and $29.8 billion a year ago.

As Bob mentioned in our call three months ago, clearly the elephant in the room for the quarter and, for that matter, for most of the year was and continues to be the markets. And since we spoke to you last, I must say that elephant has been on steroids.

It pretty much trumps everything else in the year, at least on a statistical basis. But we have some interesting developments at the Company that I would like to share with you.

First, it is notable that the vast majority of our asset decline in both the quarter and year was due to market depreciation. In addition, $2.1 billion of our asset decline was due to the necessity of reducing leverage in several of our closed-end funds that were required in order to maintain certain leverage ratios. This was strictly due to market movement, not investor redemption.

Retail net outflows for the year was $1.2 billion. Again, much lower than we would have expected in light of the very poor market conditions. I think it is gratifying that we have made a lot of inroads in a large number of platforms such as UMAs, 401(k) plans, and others for most of our investment strategies.

Institutional flows were essentially flat for the year. Again, encouragingly, we added seven net new accounts during the year. We also added six new accounts that have just begun to fund in 2009 and therefore are not in our year-end AUM statistics.

Based on the trends that we saw last year, institutional separate accounts account for 43% of our year-end assets; and that compares to 35% at year-end 2007.

A second point we would like to make is that our relative investment performance was outstanding last year, albeit with a negative sign in front of it. UBS in a recent report stated that 96% of our fund assets are above their peer group mean, and that is the best statistic in the industry, and it's one we hope to maintain.

A third point is that we made a decision to discontinue our banking segment. While this segment made very good profits for us in the past, as you know their revenues were very unpredictable and very volatile. We felt at this juncture that we wanted to direct 100% of our resources to our asset management business; and one of the items affecting our earnings was a charge related to this termination.

Fourth, we needed to address the dramatic decline in the markets. We faced some very difficult decisions. We needed to, for example, make sure that we could retain our talented investment teams, something that we would do no matter what our asset levels were. We had to build, not dismantle, our strong distribution, client service, and the infrastructure that supports them to ensure our client retention and future asset gathering.

As evidence of our commitment to our people, our headcount in the asset management business was 202 at year-end 2008, compared to 2008. Sorry; 202 at the end of 2008 versus 208 in year-end 2007. I hope that is clear; I am sorry for fudging that. We will do it over in the back room after this is over, to make it official.

Next thing we had to do was control all expenses that clearly are controllable. While we can't control the market, we certainly can control many aspects of our business. It is not a bad thing to do in any circumstances; and this will give us a lot more operating leverage when markets recover.

And finally, we remain dedicated to our diversification plans. Our large-cap value effort is paying off as we had hoped. We added seven new institutional accounts and platforms for this strategy in 2008. With our five-star MorningStar rating, we are confident that retail flows will follow when markets begin to regain confidence.

Very delighted with our infrastructure team. As you know, this is an area of great interest in the country -- and the world, for that matter. They have also made some good headway, most recently landing a very large institutional separate account as well as inclusion on a very important investment platform.

In summary, we have to recognize that the investment landscape has dramatically changed in the past year. We think that our investment strategies are extremely well suited to today's ongoing investor needs. This evolution is not likely to be over soon, and we continue to adapt as necessary and as we always have in the history of our Company.

Fortunately, our fortress balance sheet with $167 million in liquidity and not a penny of long- or short-term debt, gives us the financial capability not just to participate in any recovery, but to succeed far into the future.

Now I would like to turn it over to Matt Stadler for a summary of our financial picture.

Thanks, Marty. Morning, everybody. On December 5, we disclosed our plan to exit the investment banking business, and as a result we no longer have two business segments. Until we finalize the planned sale of our investment banking broker-dealer to an entity owned by the principals of the business, which we expect will occur during the first quarter, any results associated with investment banking activity will be reflected in discontinued operations. The results I will be speaking about today relate to our core asset management business, which is reflected in continuing operations.

Yesterday, we reported a loss of $2.1 million or $0.05 per share, compared with income of $18.1 million or $0.43 per share in the prior year, and a loss of $754,000 or $0.02 per share sequentially.

The fourth quarter of 2008 includes a $0.06 or share after-tax expense related to impairment charges on previously acquired intangible assets and a $0.03 per share after-tax expense attributable to severance and other employee-related costs. After adjusting for these items, earnings per share were $0.04.

The third quarter of 2008 included a $0.20 per share after-tax expense associated with previously disclosed losses on available-for-sale securities and a $0.04 per share increase to tax expense associated, again, primarily with available-for-sale securities. After adjusting for these items, earnings per share for the third quarter of 2008 were $0.22.

We reported revenue for the quarter of $28.9 million, compared with $63.1 million in the prior year and $48.9 million sequentially. The decline in revenue is primarily attributable to lower average assets resulting from market depreciation. Average assets for the quarter were $15.7 billion, compared with $33.1 billion in the prior year and $26.2 billion sequentially.

Our effective fee rate for the quarter was 65.5 basis points, down from 66.5 basis points last quarter. The decrease was primarily due to lower fee rates in our institutional separate accounts. Pretax loss for the quarter was $2.9 million compared with pretax income of $29.3 million in the prior year and pretax income of $4 million sequentially.

The fourth quarter of 2008 includes impairment charges of $4 million in severance and other related employee costs of $1.9 million. The third quarter of 2008 includes a charge of $10.5 million for losses on available-for-sale securities. After adjusting for these items, pretax income was $2.9 million and $14.5 million for the fourth and third quarters of 2008, respectively.

Our pretax operating margin was 12% for the quarter and 32% for the year. In computing our pretax operating margin, we added back the impairment and severance charges.

For the year, we reported income of $25.1 million or $0.60 per share, compared with income of $68.1 million or $1.60 per share last year. The 2008 results include $0.09 per share of adjustments related to the impairment and severance charges, and $0.24 per share for adjustments made in the third quarter associated with losses on available-for-sale securities.

The 2007 results include a $0.09 per share expense associated with the payment of additional compensation agreements entered into in connection with the offering of a closed-end mutual fund. After adjusting for these items, earnings per share were $0.92 and $1.68 for 2008 and 2007, respectively.

Moving to assets under management, as a result of the worst market conditions we have seen in a generation, our assets under management decreased to $15.1 billion from $24.6 billion at September 30. Market depreciation and delevering in our closed-end mutual funds accounted for most of the asset decline.

At year-end US REIT common stocks comprised 45% of total assets that we manage, followed by international REIT common stocks at 25%, preferreds at 10%, utilities and listed infrastructure at 7%, and large-cap value at 6%.

Assets under management in our closed-end mutual funds totaled $4.3 billion at December 31, a decrease of $4.3 billion or 50% from the third quarter. The decrease in assets under management was the result of market depreciation and the redemption of auction market preferred securities from certain of our closed-end mutual funds. For the year, assets under management in our closed-end funds decreased $6 billion, or 58%.

Our open-end funds had assets under management of $4.3 billion at December 31, a decrease of $2.7 billion or 38% from the third quarter. The decrease was due to market depreciation of $2.2 billion combined with net outflows of $473 million, the majority of which were from our international realty fund.

There was a deceleration in outflows in the quarter, with most of the net outflows occurring in October. So far in January, we have recorded net inflows into our open-end mutual funds.

For the year, assets under management decreased $4.6 billion or 52%. The decrease was due to market depreciation of $3.4 billion and net outflows of $1.2 billion, almost all of which were from international realty fund. With respect to flows, we are encouraged by the recent trends that we are seeing.

Assets under management in our institutional separate accounts totaled $6.5 billion at December 31, a decrease of $2.6 billion or 28% from the third quarter. The decrease was comprised of market depreciation of $2.8 billion, partially offset by net inflows of $210 million.

There was a very positive trend in the flows throughout the fourth quarter. We had net outflows of $204 million in October, followed by net inflows of $181 million and $233 million in November and December, respectively. So far in January, we have recorded net inflows into our institutional separate accounts, including funding from mandates Bob mentioned on our last call.

For the year, assets under management decreased $4.1 billion or 38%. The decrease was due to market depreciation of $4 billion and net outflows of only $59 million. Net inflows of $464 million from large-cap value portfolios were offset by outflows from global international and domestic realty portfolios.

As Marty mentioned, we added seven net new separate accounts during the year, three of which are global; and we received five new subadvisory mandates.

Moving to expenses, on a sequential basis, excluding the restructuring and impairment charges in the fourth quarter, expenses were down about 27%. The decline was attributable to lower employee compensation, distribution and service fees, and G&A.

On our last call, we mentioned the compensation-to-revenue ratio is estimated to be 34.5% for both the fourth quarter and the year. That estimate included investment banking. Excluding investment banking, our projected compensation-to-revenue ratio for the fourth quarter and the year would have been about 32%.

The 42% ratio recorded in the fourth quarter is the result of revenue compression and the modification of our mandatory equity deferral compensation plan in order to generate more net cash for our employees. On a same-store basis, total bonuses were down by approximately 65%. Our full-year compensation-to-revenue ratio was 33.7%.

Generally, distribution and service fee expense will vary based upon the asset levels in our open-end mutual funds. The sequential variance is in line with the decrease in the average assets of our open-end load mutual funds.

We are focused on cost controls and are continuing our campaign to reduce controllable expenses. Many of the cost controls we have implemented did not take full effect in the fourth quarter. Although G&A is down about 6% sequentially, we expect to see a further decline in 2009.

Now turning to the balance sheet, our cash, cash equivalents, marketable securities, and seed capital investments -- excluding amounts attributable to the consolidation of our global real estate long-short fund -- totaled $167 million, compared with $164 million last quarter.

Since we are currently the sole investor in our global real estate long-short fund, the balance sheet in our 10-K will reflect approximately $35 million of assets and $11 million of liabilities related to the consolidation of the fund onto our books and records. This investment will be deconsolidated after we accumulate sufficient outside investors into the fund.

Our stockholders equity was $245 million, compared with $254 million last quarter.

With respect to the available-for-sale portfolio, the majority of the portfolio continues to be comprised of investment-grade preferred securities and seed capital investments in our mutual funds. Unrealized gains and losses are reflected in other comprehensive income; and therefore, the marks on these securities have been appropriately reflected in the liquidity position and stockholders equity balance that we just mentioned.

Let me briefly review a few items to consider for 2009. Consistent with our 2009 business plan, a larger amount of assets are projected to be managed outside the US in jurisdictions with lower effective tax rates. Therefore, we expect that our 2009 effective tax rate will be between 36% and 37%, slightly lower than the normalized tax rate of 38% that we recognized in 2008.

But as was the case this year, because our actual effective tax rate is higher than the 38%, given our capital loss carryforward position the actual effective tax rate next year will vary depending on the level of capital gains or losses that are realized during the year.

With respect to compensation, we currently expect our comp-to-revenue ratio to be in the high 30% range for 2009. The 2009 ratio incorporates the results of the recent staff reductions, which did not affect our asset gathering or investment management capabilities, and a decline in our average assets caused by the current market conditions we are experiencing.

As a result of the declining net asset values in certain of our closed-end mutual funds, we redeemed $2.1 billion of auction market preferred securities during the fourth quarter, in order for us to maintain the required leverage ratio. These funds have significant unused lines of credit in place to manage leverage ratios in accordance with market conditions and requirements.

Although the results are not predictable, please keep in mind that realized gains and losses will continue to fluctuate as a result of transactions in our available-for-sale portfolios and our global real estate long-short fund.

We are focused on cost controls, and all our controllable expenses continue to be under review. We expect to recognize an additional reduction in our G&A of between 10% and 15% from the fourth-quarter run rate.

Finally, during 2009 fee waivers will expire on six of our closed-end funds. Based on December 31 asset values, this will generate approximately $1.5 million of incremental revenue in 2009.

Now let's open it up for questions.

(Operator Instructions) Mike Carrier, UBS.

Just one question on the institutional side of the business. I think across the industry, a lot of institutions have been sitting on their hands in terms of trying to figure out what they are going to in terms of reallocating and re-weighting their asset mix. It seems like your guys' has picked up.

I am just trying to get a sense versus the last six months, when you're looking at new competition for new mandates and the amount of activity that you are seeing, is that starting to pick up?

Then I know you mentioned that there were a few wins that you had but they haven't been funded yet. Could you just go over what the amount was?

Sure, Mike. It's Bob Steers. I think the activity on the institutional market for us has really been ramping up for three or four quarters now. It varies by investment strategy.

On the value side, as I think you are aware, our team has a top decile performance, one, three, and five years. The mutual fund got its three-year track record and five-star MorningStar rating at the end of the summer.

So institutional activity has been extremely strong there really for six or nine or 12 months. But as you know, it can take that long for searches to be completed and then funded.

So on the value side, this has all been brewing for a while. It continues to get stronger and stronger; and we expect this year to be very strong in asset gathering for value.

Several of the reasons besides our performance is the unusually bad performance of a number of value managers -- a lot of value managers -- which heretofore dominated both performance and asset gathering.

We are seeing a significant amount of manager firings; and we are in some cases winning mandates without even competing.

We are also seeing the manager risk issue favoring us, both particularly in value but also in our other mandates. Where managers whose platforms or parent companies are being spun out, sold, divested, what have you, or managers with leverage issues who have to cut back investment staff more than they otherwise would like to, that is troubling institutional investors.

So we are benefiting in value and also in real estate because of performance, because of stability of the platform, and there is a lot of manager changes going on out there.

That said, we are also seeing new mandates. We are seeing them on a global basis. We are seeing mandates in Australia, Europe on the real estate side. And we are also seeing a lot of platform activity with some of the larger financial institutions, the Fidelities, HSBCs, and others are continuing to launch new programs, but also eliminate managers who have been underperforming.

Okay, thanks. Then I guess one other question, and this kind of relates to a few areas that are more like strategic. But I guess when I look at the closed-end fund business, in the near term the AMPS have been replaced by some type of bank financing.

Just longer term, what do you think can replace it? Or is the closed-end fund model something that the industry kind of has to take a look at?

Then I guess the only other two things is just when I look at the cash level building, just comfortable continuing to hoard it, given the environment? And then longer term, just what kind of your options are for that.

Then maybe for Matt, just on the compensation -- and this is probably for the industry. But there is a lot of pressure just given how much pressure there is on asset levels and revenues. Anything else more like strategic that you guys could do or the industry could do, to try to lower the compensation but maybe draw it out over a longer period of time? Or just something to try to offset some of the near-term pressures. Thanks.

That was like a bundled question.

Why don't we have Joe talk about the AMPS issue? Marty can talk about cash, and then Matt talk about compensation.

Okay.

Well, with respect to closed-end funds, leveraged closed-end funds specifically, I think we have talked in the past about our strategy to capitalize our leveraged funds with a combination of AMP securities and bank lines of credit. So, that is the model we are using today.

It is very effective from a portfolio management perspective as it gives us a lot of flexibility to, as Matt mentioned earlier, tailor the leverage ratios to the investment environment and the guidelines for leverage in closed-end funds.

As the world looks today, we are very comfortable with the AMPS that we have. They give us a very low cost of borrowing. So I think we are at a pretty good steady-state with our leveraged closed-end funds today.

As it relates to new issues of closed-end funds, I think it is fair to say -- considering everything that has happened in the capital markets, everything that has taken place in the retail systems, the issues that you've had with leverage -- it is going to be extremely difficult to issue a new closed-end fund. Even though the math of using leverage in a closed-end fund, looking at the spreads you can achieve on a variety of asset classes relative to the cost of debt, is quite attractive today.

So in our planning, we are not factoring in new issues for closed-end funds.

On the cash side, we are very, very happy with our balance sheet management. We are happy that we didn't use our cash to buy back stock at a much higher price. We didn't leverage up the Company to do some positive spread scheme or also buy stock back.

You know, our assets fell by 40% in the fourth quarter, in one quarter alone. And we were not wavering in our commitment because we knew we had a strong balance sheet that could carry us through any storm that we had.

Clearly that was probably the worst storm that we have ever experienced; and frankly, we don't know what the future holds. There's a lot of -- we are very hopeful and we think that the markets will recover this year, and the country is moving on the right track. But you never know.

So our belief is that having a lot of cash is the best thing to have.

Finally, we do expect to see opportunities. We have been saying this for a while, but now with all this -- as Bob mentioned, with managers having some financial difficulties, with probably personnel at other firms maybe having second thoughts about staying with those firms -- there will be opportunities for us. And we are vigilant and looking for them; and having a strong cash position and a strong currency is paramount to us.

Okay, I guess with the comp, there is not -- it is driven a lot by the revenue. As I said in my prepared comments, that the compression in the revenue that we experienced in the fourth quarter was the reason why the comp ratio -- was one of the reasons why the comp ratio was higher relative to what we had forecasted.

One of the things that we did to combat that, not that it would increase a bonus number, but it increased the cash comp by modifying our mandatory plan and reducing the amount of compensation or bonus that was paid in equity. That does have a benefit of creating a lower overhang going into 2009 and 2010.

But the stock awards that we had issued in prior years, which were within the guidelines of what a lot of our peers had done, continued to get amortized in. So you are right that there is an overhang there.

We are constantly aware of that and working internally to think about ways of delivering compensation. There is nothing really out there that we can tell you right now that is a magic cure for the current state.

The best thing is just for the markets to rebound and obviously revenue to go back up. But we are dealing with the overhang. We did it now by reducing stock awards that were granted this month for the 2008 year, and we will continue to monitor it going forward.

Okay, thanks.

(Operator Instructions) Marc Irizarry, Goldman Sachs.

Great, thanks. Can you just quantify again how much deleveraging is potentially left, given your baseline scenario for markets?

Well, as Matt mentioned, in the fourth quarter, we deleveraged by $2.1 billion. That takes the leverage in our funds to the low 40% range, and that is a level that we are comfortable with, considering many factors -- the investment environment, the spreads we can achieve, and the guidelines by the rating agencies.

The only thing that could affect those leverage levels that we have currently would be a significant change in the investment environment, or a change by the rating agencies for how they approach the triple-A ratings on AMP securities.

Can you just share a little bit more perspective, maybe, on the REIT market in terms of how you're positioned? And what you are thinking the mileposts for recovery will look like over the next several months or quarters?

Sure. Well, it is pretty well documented now, the factors that have caused the REIT their market, a global recession and the credit crisis, both of which are extreme by historical standards.

We have been in a bear market now for almost two years, which is very long by historical standards. The price declines that we have seen are also at record levels.

All of that said, I think it is important to keep in mind that those price declines have discounted a decent amount of the fundamentals issues that we see in the private market.

We are actually quite excited about the opportunities today, based on the fact that we're working through the credit crisis. Valuations are very attractive. The dislocations that we've had are creating opportunities for us to deploy capital in companies who have balance sheet issues, to help them fix their balance sheets.

Based on our experience in the early 1990s, when we had a similar decline in the real estate industry, that turned out to be a very attractive investment environment.

The primary issue that the real estate industry faces today is the leverage issue. There are going to be an escalating amount of debt maturities in the private market. Clearly the public companies also have them.

We believe that public companies are much better situated to deal with their leverage maturities. They have more levers to pull, so to speak.

The strongest public companies will be big beneficiaries of the environment. As we saw in the early 1990s, they will access public capital. It may be expensive today, but that will improve over time. But they will have access to capital to take advantage of the distress in the private market.

As we look at the global world today, we don't see any huge mispricings by region. Every region of the world is now well into its downcycle in the economy and its real estate cycle.

If you look at our global portfolios, we are roughly 40% in the US, 42% in Asia, and 15% in Europe. The conditions are similar worldwide. They just happen to be at a little bit different point in their own respective cycle.

So in summary, we think we are a large part of the way through this bear market. We are getting very excited. Our teams are mobilized to work with the companies to help them access capital and in turn take advantage of the opportunities in the private market.

Great. Then just in terms of the product distribution, we are seeing the channel narrow as the players get bigger on the retail side, if you will. Obviously, your P&L is under pressure. Does that at all influence the way you think about standing alone in servicing the channel?

I mean, are you thinking outsourcing more administrative responsibilities? Or how should we think about a channel that is probably demanding more and a P&L that probably needs less?

You are talking about the wirehouse and RIA channels?

Yes, and then just retail broadly, some of the bigger platforms as well.

We don't really see a whole lot of change. We have really phenomenal relationships with the consolidated players, the Merrill Lynch, BofA. Merrill is our biggest, strongest relationship historically; but also Morgan Stanley, Smith Barney, Wachovia. We have penetrated well into most of their important platforms.

The UMAs, the UMA business, which as you know is evolving and growing together with SMAs, is probably our most rapidly growing source of asset growth.

So we are still completely committed to being a strong player in that channel. Understand that for the most part, outside of the value space, we are -- whether it's in real estate, infrastructure, preferreds, we are sort of the go-to guys in those niches.

So while some of the traditional style boxes may be crowded and costly to get good shelf space, we are really not having those problems in our core businesses, which are both less crowded and where we really dominate.

Do you expect to see an increase in the channel asking for more service?

And what is -- is that something like, or how are you thinking about managing the margin near term versus potentially balancing that need to service the channels?

Well, currently I think you are seeing a lot of uncertainty there. I don't think you can answer that question. You have had -- without going into specific names -- every major player with the exception of the non-wirehouse players are in a significant state of flux, and they are reevaluating everything they do.

So we are in the short run seeing a bit of paralysis. I think the major wirehouses are reevaluating programs, costs, and expenses related to that. And so everything is up in the air right now.

But frankly, in the short run we have actually seen these channels substantially cut back on costs and what they are asking their partners to put up, in recognition of the fact that everybody -- this is an industry phenomenon. It is not like there are some winners and some losers here. As you have seen over the last couple of weeks, everyone is being affected by the same trends and generally the same magnitude.

So it is not like there are some players out there who are very flush and can outspend their way to more access. That is just not the case.

You know, if I could add, what we are finding is that decision-making on investments is happening upstairs, not at the broker level. It's clearly at the broker level, but the whole platform idea is something that we have spent a lot of time and increased our account relationship managers; and they have made the sale.

They're making the sale to the asset allocator who is a senior investment person at the firm. And that goes for all of them, including in Europe, where we're on several platforms in Europe where they're making asset allocation decisions and then that is filtering down into client accounts.

So in a sense, though you need wholesalers and you need people out in the field, you really need professionals that can deal with consultants and with the decisionmakers on the asset side.

That's very helpful. Thank you.

Jeff Cozad, Stonerise Capital.

Wanda, can we move to the next question?

Jeff's line is open.

Hi, guys. I just wanted to get your perspective on REITs using stock to pay part of their dividends. As an investor, how do you guys view that?

If I might inject, that is probably an investment call that is a different one, which we would be happy to talk to you about.

But in general, our feeling is that paying stock instead of cash if you don't have to is not a great idea. Companies should just rightsize their dividend and pay cash, and that is basically it.

Okay, thanks, guys.

Jeff Hopson, Stifel Nicolaus.

Okay, thank you. A couple questions. In regard to REITs and the response that you are seeing from clients or potential clients, any concern that there is permanent damage to the asset class in how they are viewing REITs in the scheme of things, given the underperformance?

Then in terms of competition, anybody that you see amongst managers of REITs that maybe are falling by the wayside or anything like that? Any developments that you think might be important?

We haven't seen any existing clients waver with respect to how they view REITs. That said, we are monitoring closely -- not so much the absolute performance or returns, but the characteristics.

The extreme volatility that we've seen as the financial crisis has unfolded is understandable. We are absolutely convinced that it's temporary and simply reflective of the fact that real estate does require support in capital from the financial system.

So, the correlations and volatility statistics which in the near term have been uncharacteristic, we think there is no rational explanation to support the notion that this is a permanent new state for these securities.

And we don't really see any institutions or consultants concerned about that long-term. No one is happy with the characteristics and the performance over the last year; but again, other than the financial crisis there is no rational case to be made for this to be a secular change for these securities.

Yes, we are seeing competitors having some significant problems. If their assets are down as much or more as ours on a percentage basis, and if their one-, three-, five-year performance is poor, the potential to rebound over the next several years is not good.

So whereas our relative performance has improved substantially in this difficult environment, and our organization is intact and as deep as ever. Our prospects for participating and being a leading beneficiary of a rebound are high, whereas for others that is not the case and so they may be reevaluating their prospects.

Okay, thank you.

At this time, there are no further questions. Are there any closing remarks?

Well, once again, thank you for listening. Give us a call if you have any more questions, and we look forward to giving you more progress over the next quarters.

Thank you. This does conclude today's Cohen & Steers fourth-quarter and 2008 financial results conference call. You may now disconnect.