Cohen & Steers Inc (CNS) 2016 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and full year 2016 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded Thursday, January 19, 2017. I would now like to turn the conference over to Adam Johnson, Senior Vice President and Associate General Counsel of Cohen & Steers. Please go ahead, sir.

Thank you. Welcome to the Cohen & Steers fourth quarter and full year 2016 earnings conference call. Joining me are Chief Executive Officer Bob Steers; our President Joe Harvey; and our Chief Financial Officer Matt Stadler.

Before I turn the call over to Matt, 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 2015 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 non-GAAP financial measures which we believe are meaningful in evaluating the Company's performance. For disclosures on these non-GAAP financial measures and their GAAP reconciliations, you should refer to the financial data contained in the earnings release and presentation which are available on our website.

Finally, this presentation may contain information with respect to the investment performance of certain of our funds and strategies. I want to remind you that past performance is not a guarantee of future performance.

This presentation may also contain information about funds that have filed registration statements with the SEC that have not yet become effective. This communication does not constitute an offer to sell or the solicitation of an offer to buy these securities. For more complete information about these funds, including charges, expenses, and risks, please visit our website. With that, I'll turn the call over to Matt.

Thanks very much, Adam. Good morning, everyone. Thanks for joining us today. My remarks this morning will focus on our as-adjusted results, which exclude the after-tax financial effect associated with our seed investments, certain discrete tax items, and the effect of an accelerated vesting of certain restricted stock units that occurred in the first quarter of 2016.

Yesterday we reported earnings of $0.48 per share, compared with $0.41 in the prior year's quarter, and $0.51 sequentially. For the year, we reported earnings of $1.85 per share, compared with $1.71 per share last year.

Page 4 of the earnings presentation, which is available on our website, reflects the current and trailing four-quarter trend in revenue, and breaks out investment advisory fees by vehicle. Revenue was $89.5 million for the quarter, compared with $81.7 million in the prior year's quarter, and $94.4 million sequentially. The decrease in revenue from the third quarter was attributable to lower average assets under management. Average assets under management for the quarter were $57.4 billion, compared with $52 billion in the prior year's quarter, and $60.5 billion sequentially.

Operating income was $35.9 million for the fourth quarter, compared with $30.4 million in the prior year's quarter, and $37.3 million sequentially. For the year, operating income was $137.7 million, compared with $127.7 million in 2015. Our operating margin increased to 40.1%, from 39.5% last quarter. For the full year, our operating margin increased to 39.3%, from 38.8% in 2015.

Page 5 of the earnings presentation reflects the current and trailing four-quarter trend in expenses, which decreased 6.3% on a sequential basis, primarily due to lower compensation and benefits, and lower distribution and service fees. The compensation-to-revenue ratio was 31.7% for the quarter, lower than the guidance we provided on our last call.

The decrease, which was due to lower incentive and production compensation, brought the full-year compensation-to-revenue ratio to 32.5%, compared with our full-year guidance of 32.75%. The decrease in distribution and service fee expense was consistent with the decline in average assets under management in our US no-load open end funds.

As a result of a shift in the mix of taxable income from non-US to US, our full-year effective tax rate increased to 38%, up from our estimate of 37.75% last quarter. The fourth quarter rate of 38.7% included the cumulative effect of this rate adjustment.

Page 12 of the earnings presentation displays our cash, cash equivalents, and seed investments for the current and trailing four quarters, and indicates that portion of cash and cash equivalents held outside the US. Our firm liquidity totaled $239 million, compared with $224 million last quarter.

Stockholders' equity was $266 million, compared with $272 million at September 30. The balances for firm liquidity and stockholders' equity reflect the payment of a special dividend of approximately $23 million, or $0.50 per share made in December. Over the past seven years, we have paid $7.50 per share in special dividends. We remain debt free.

Moving to assets under management, which can be found on page 6 of the earnings presentation, our AUM totaled $57.2 billion at December 31, a decrease of $3.3 billion, or 5% from September 30. Assets under management in institutional accounts totaled $28.7 billion, a decrease of $1.3 billion, or 4% from last quarter. Open-end funds had assets under management of $19.6 billion, a decrease of $1.6 billion, or 8% from last quarter. AUM in closed-end funds decreased $421 million, or 4% from last quarter. For the year, assets under management increased $4.6 billion, or 9%.

We recorded total net in-flows of $707 million in the quarter, an annualized organic growth rate of 5%. This marks the ninth consecutive quarter we have recorded net in-flows. For the year, we recorded net in-flows of $6.7 billion a 13% organic growth rate.

Page 9 of the earnings presentation reflects net flows by investment vehicle. Institutional accounts recorded net in-flows of $655 million in the fourth quarter, an annualized organic growth rate of 9%. For the year, institutional accounts recorded net in-flows of $4 billion, a 15% organic growth rate.

Sub-advised portfolios in Japan recorded net in-flows of $109 million in the quarter, compared with $988 million of net in-flows last quarter. Net in-flows were primarily from US real estate portfolios. Distributions decreased by $28 million to $800 million, from $828 million last quarter. When including distributions, this is the first quarter since the fourth quarter of 2015 that we have recorded net out-flows.

For the year, sub-advised portfolios in Japan recorded net in-flows of $2.8 billion, which were offset by $3 billion of distributions. Sub-advised accounts excluding Japan recorded net in-flows of $40 million, with in-flows from global real estate portfolios being partially offset by out-flows from US real estate portfolios. For the year, sub-advised accounts excluding Japan recorded net in-flows of $111 million.

Advised accounts recorded net in-flows of $506 million during the quarter, which included a new institutional separate account mandate in Japan, the targeted market in our strategic plan for the region. Advised net in-flows were primarily for multi-strategy real assets, and global listed infrastructure portfolios. For the year, advised accounts recorded net in-flows of $1 billion. Bob Steers will provide some color on the level of activity and our institutional pipeline in a moment.

Open-end funds recorded net in-flows of $54 million during the quarter. Distributions, which included the payment of year-end capital gains, totaled $935 million, of which $706 million were reinvested. For the year, open-end funds recorded net in-flows of $2.8 billion, a 16% organic growth rate.

Let me briefly discuss a few items to consider for 2017 before turning it over to Bob. With respect to compensation and benefits, we expect the compensation-to-revenue ratio to be 32.75%, slightly higher than 2016, but in line with the guidance we provided on our calls last year.

We project G&A to increase between 4% and 5% from 2016. The increase can be broken down into three categories: Collective investment trust administration costs, strategic spends related to business development in the DCIO channel and in Europe, and the full-year effect of recently approved pricing adjustments for certain of our open-end mutual funds. Excluding these three items, G&A is projected to be flat year over year.

CITs are the vehicle of choice in the retirement channel, and they represent an important part of our real assets strategy. We recorded approximately $800 million of in-flows into CITs during 2016, with more than half occurring in the fourth quarter. These in-flows bring our AUM and CITs to about $1 billion across four real assets strategies. The increased costs for administering the CITs, which is accompanied by higher management fees, is a result of our recent success in this market.

DCIO and Europe both represent strategic opportunities for us, and our forecast for 2017 includes investments to promote asset growth from those areas. These investments, which include conferences and marketing costs, are targeted to certain institutional markets and financial intermediaries.

As part of our plan to increase market share, we reduced management fees and lowered expense caps for certain of our open-end mutual funds. The lower expense caps will result in higher year-over-year fund reimbursement costs.

Finally, we expect that our effective tax rate will remain at approximately 38% next year -- this year, 2017. Now I'd like to turn it over to Bob Steers.

Thanks, Matt, and good morning, everyone. As you know, the fourth quarter of last year was full of surprises, and dominated by politics. Immediately following the election, investors abruptly shifted away from investments benefiting from slow growth, low inflation, and interest rates, and into plays focused on fiscal stimulus, higher rates, and reflation.

The prospect of business-friendly leadership in Washington, characterized by tax reforms, reduced regulatory burdens, and incentives to hire and invest instantly unleashed animal spirits, which we expect will translate into the real economy in the form of higher growth rates sooner rather than later, notwithstanding the reality at the practical impact from new fiscal stimulus and tax policies will likely be a 2018 event.

Coincidentally, immediately post-election, equities went on a tear, led by financial service, defense, cyclical, and infrastructure plays, while fixed income and equity income investments suffered. With that back drop, US and global REIT indices got clobbered post-election, down about 3% and 6%, respectively for the quarter, as did preferred securities, down 3%. Conversely, commodities, resource equities, MLP indices each delivered solidly positive absolute returns of 3%, 7%, and 2% respectively.

Our relative performance in the quarter was mixed, with 6 of 10 strategies out-performing their respective benchmarks. Consistent with recent quarters, 88% of our open-end fund assets are rated four or five stars by Morningstar.

Let me quickly recap the flows by segment, and then update you on the progress of some of our most important initiatives and strategies. As you've already heard, firm-wide net in-flows in the quarter were $707 million, a 5% organic growth rate. The wealth channel had a modest $54 million of net in-flows in the quarter. Gross in-flows reached a record $2.6 billion; however, out-flows virtually doubled from the third quarter, mainly attributable to the short-term spike in interest rates.

Net in-flows into US REITs were $283 million, and our low duration preferred fund launched one year ago also took in a net $68 million, reflecting interest rate concerns. Conversely for the first time in three years, our flagship preferred securities fund experienced net out-flows of $312 million.

The advisory channel had a very strong quarter, with $506 million of net in-flows for a 23% organic growth rate. Notably, the source of the majority of in-flows confirms the progress of several of our strategic initiatives. $425 million went into our multi-strat real asset strategy.

The implementation of these fundings was through a recently launched series of real asset collective investment trust vehicles that we hope will play an increasingly significant role in penetrating the DCIO and institutional retirement marketplaces. Multi-strat real assets has produced four consecutive quarters of net in-flows, and for the year accounted for 38% of total advisory gross in-flows.

Separately, but equally important from a strategic point of view, we had $140 million funding of a global listed infrastructure mandate, which was awarded to us by a Japanese insurance company. As you may recall, two years ago we committed people and resources to develop the institutional market in Japan, and we are now beginning to gain some traction. Sub-advisory net in-flows in Japan were $109 million before distributions, and sub-advisory in-flows ex-Japan were $40 million.

Turning to the current advisory pipeline, we began the quarter with unfunded mandates of approximately $600 million, and ended with $330 million. In between, $425 million was funded, and $155 million was newly awarded. RFP activity remained strong, up 36% compared to the fourth quarter, and up 61% for the full year, led by US and global real estate, preferred securities, and multi-strat real assets.

I'd like to dedicate the next few minutes to highlighting and updating you on the progress of our more recent business development initiatives. This is especially timely, because although we're highly focused on carefully managing costs and seeking to deliver more for less, we are also selectively devoting additional resources to certain critical areas.

Our commitment to be among the leading global multi-strat real asset managers is more compelling now than ever, especially as we appear to be entering the reflationary stage of this global economic cycle. We think about multi-strat real assets as both an investment solution and our most powerful global marketing strategy. The multi-strat approach showcases not only our multi-strat capabilities, but each of the underlying real asset strategies, as well.

Equally important is delivering our expertise through the most cost-effective vehicles that the markets demand. As I mentioned, we are increasingly utilizing a series of real asset collective investment trusts to facilitate the low cost delivery of our real asset capabilities to the retirement markets.

In Europe and Asia, where historically we've only offered listed real estate funds, we are also well into the process of building a full lineup of active real asset strategies, and we've recently added a new active commodities fund to complement our previously launched global listed infrastructure fund.

In the US, our three-year multi-strat performance numbers are strong, and we will soon have a five-year track record, as well. As the flow data confirmed, institutions are beginning to embrace this strategy, and we anticipate that the wealth channel will follow. In an effort to sustain our superior investment performance and bolster our presence in the space, we will continue to grow the asset allocation, commodity, and resource equity teams.

Preferred securities and alternative income strategies also remain a critical component of our growth plans both here and abroad, and we will add to these teams as appropriate as we expand our asset base and product offerings. The strong flows into our recently launched low-duration preferred securities fund is a case in point. Additional product launches are planned for this year in response to the strong global market demand for these alternative income solutions.

Turning to our key business development initiatives, we are now entering year two of our DCIO and Japanese institutional efforts, and are just beginning our refresh in Europe. With respect to the US retirement opportunity, we plan to further build out our business development team, and implement changes to our fund share classes and fee structures to adapt to changing market conditions.

Our full-year 2016 DCIO net in-flows were $215 million, for a 9% organic growth rate, and we expect that number to improve this year. In the UK and Europe, we are finally fully staffed, and ready to pursue opportunities in the traditional defined benefit and financial intermediary markets. In the past, our focus has mainly been on the institutional marketplace.

We firmly believe that the global macro environment is now clearly moving in favor of real asset strategies. GDP growth rates, employment, and inflation readings are on the rise, and should accelerate as tax and regulatory reforms, together with fiscal stimulus, take effect.

Real asset and alternative income strategies are poised to gain further market share of asset allocations worldwide, and to effectively capitalize on these opportunities. While contending with our industry head winds, we plan to control costs where we can, spend where necessary to remain competitive, and selectively commit additional resources to our most compelling investment and business development opportunities. With that, I'd like to open the floor to questions.

Thank you.

(Operator Instructions)

Our first question comes from the line of John Dunn with Evercore ISI.

Hi. On the Japan infrastructure mandate, I think historically that market hasn't been super interested in infrastructure. Do you think maybe there's a shifting of investment appetite going on, where investors in that country are becoming more open to other income investments?

Sure, this is Joe Harvey. The Japan market has been most interested in US REIT strategies, and you can see that in our AUM. But as Bob talked about, our business strategy has been to broaden our distribution in Japan, which to include the institutional market, and to market our other strategies.

We do believe that there's interest in other of our investment strategies in Japan. Infrastructure is an example of that, but preferred securities is also an example of that. The driver there is the need for current income in a negative rate environment.

I think just to broaden that need out a little bit more, it's not just for income, but it's for investments that have more predictable results and total return potential, which you can get with preferreds and with infrastructure strategies.

Got you. Just to go a little bigger picture -- not to front-run what you might have in your year-end letter; but can you give us an update on what your take of the state of active management -- particularly post the election, where we've gotten some lower single-stock correlations and some more valuation dispersion. Do you think the same people still win in that new world we're in?

Well, that's a tough question. I think that the head winds for active management, both long-only and hedged, frankly, remain significant. Relative returns have been largely poor, and fee structures have been high. We firmly believe for ourselves the way to grow is to focus on delivering top quartile or better performance.

But candidly also, I think the big winners in active management going forward are going to be the most realistic about fees and how to efficiently deliver your active management, whether it's through new vehicles in Europe -- our commodity fund was created in an Ireland-based QIAIF structure, very efficient structure there.

I think you need great performance. You need, frankly, not to be a laggard or on the high end of the fee range. This is a particularly important time to understand that, because there's lots of money in motion. Obviously a lot of it's going to passive, but I think active Managers who operate in alternative strategies like we do, and as well as multi-strategy implementations, and can deliver those -- that performance efficiently, can be big winners.

Thanks, guys.

Our next question is from the line of Ari Ghosh with Credit Suisse.

Hi. Good morning, guys. Can you provide a little more color on the demand trends that you're seeing within your institutional channel -- specifically, if you're continuing to see strong interest for the US REIT products in the sub-advised channel, or if there's been some sort of a pivot to the other strategies?

I'm not sure we've seen any great shift in institutional demand for what we do, other than we've seen actually quite a substantial up-tick in institutional demand for preferred security strategies, which heretofore have largely been a focus of the retail or wealth market.

We're seeing consultants and institutions doing a lot more research on real assets. We're seeing a significant up-tick in institutional interest in preferred securities. Global listed infrastructure is also of interest. It's worth pointing out that the increasing demand for real assets in global listed infrastructure is so far mainly an institutional phenomenon. We really haven't seen the wealth channel substantially increase their interest there.

We believe that we're on the cusp of significant -- perhaps even dramatic inflation surprises starting this quarter. We have the view that we really are on the cusp of a substantial shift in sentiment, characterized by up-side surprises to growth, to inflation, and obviously interest rates will follow.

That's why we think that as we enter this reflationary environment, demand for real asset strategies of all kinds is going to move up substantially. I think that's what you're seeing in the institutional markets, because I think they tend to be more forward-looking than the wealth channel.

Got it, that's helpful. Then towards the end of last year, you lowered your expense, GAAP, and Management fees on several of your US retail products. I think you touched a little on that in the prepared remarks. I was just wondering what the feedback has been from the platforms, and if these planned costs have helped either regain existing or track new shelf space?

Hi, this is Todd Glickson. I just wanted to address that question as it relates to our platform partners. I think our relationships have always been strong, and the feedback we've gotten is that our price points have been competitive.

I think what we've seen, or we've taken a look at is not just the overall space, but also let's say the top three to five peers that we compete against. Our view was we just wanted to sharpen our pencils a little bit to make sure that to match our top-tier performance, our fees or were competitive. Again, for the most part they have been. This was really just a continued check-in to make sure they were. The feedback from the platform partners has been positive. We've really not gotten anything but really candid and positive feedback from them, in terms of our price points.

Got it. Thank you very much.

Our next question is from the line of Michael Carrier with Bank of America Merrill Lynch.

Thanks, guys. Matt, just a question on the expense guidance on the G&A. I think you mentioned the increase year over year, there's like three aspects of it. I just wanted to understand, is it pretty balanced between the three? I think on the last one, you mentioned some of the pricing changes. It sounded like that was more around one platform. Maybe the expectations on if you get more platforms to make changes with, or related to DOL, what that could mean?

Yes, I think the numbers that we're forecasting right now, the biggest of the three components is definitely the administrative costs on the CIT. But that's balanced with increase in revenue. A lot of that came in in the fourth quarter, so we haven't really seen a full year run rate on that. Those expenses are booked in G&A, but there will be a more than offsetting increase in revenue from that. That's a good margin business for us.

The other two are basically equal in size, and they're combined a little bit less than the CIT administrative cost. But there are things that should have returns on investment that are more tangible for us to see. In future calls, we'll be tracking growth in the DCIO space and in Europe, so that we can sort of together understand how those expenses are delivering asset growth or not.

Then as far as other fee cuts in DOL, to be honest that's still -- it's in process, and we're digesting a lot of information from a lot of the intermediaries. I would say it's not at the point where we could give anything definitive.

Michael, this is Bob. Related to DOL, what we do know is that our most important distribution partners are requiring new share classes to be launched. We filed for them. There are costs associated with adding those share classes and supporting them.

As Matt mentioned, the investments in DCIO and Europe we expect to more than pay for themselves in the form of significant increases in asset gathering. Whether it's conforming to the needs of our partners, distribution partners for DCIO, or the other DCIO -- not DCIO, DOL -- and related industry head winds, as Todd touched on.

In a sense, for those active strategies such as ours which can support organic growth because they are alternative and hard to replicate passively, this -- not unlike passive, this is an environment where in our view the key is to gain market share.

Performance is a key component. Having fees that are in line with our best competitors is a critical component here. We fully expect to gain market share. To the extent there are any fee pressures, we expect to more than make up for that in our asset gathering.

Okay, that's helpful. Then maybe just as a follow-up. Bob, you mentioned in the quarter, just given the reaction in the markets, we saw some impact on the flow side. It also seems like if we're in for reflation, the real assets and some of the strategies should do well and the demand should pick up.

I just wanted to get some sense, when you think about maybe the near-term reaction on some of the markets and how demand for the products play out, versus the reflation picks up, which products that you guys offer that you expect the demand to accelerate? I guess some of this is just your traditional maybe real estate versus some of the newer products that are more geared towards that. Where do you see demand? Maybe it's starting to play out in RFP activity, so any breakdown there or maybe it's still too early?

No, I think it's a critical question right now. I think that's the most important question. Immediately post-election, we saw the market became ebullient for growth and higher growth, higher inflation, higher interest rates. Not surprisingly, we had out-flows from our preferred securities fund. We had in-flows into the low duration preferred securities fund. Our other real asset strategies continued to plug along, do pretty well.

Also, last month our MLP fund hit their three-year mark and got their first Morningstar rating, performance is good. At the end of the day, in the short run, if we are entering a reflationary phase and if rates move up substantially, then we would expect pressure on our global preferred securities fund.

Periodically, you do see short-term pressures on US REIT flows, because they are viewed by some as interest-rate sensitive, which they can be in the very short run, but real estate will be a tremendous beneficiary in a reflationary cycle. In the intermediate to long term, in that environment our one preferred securities fund might be challenged, flow-wise; but real estate, natural resource equities, MLPs, global listed infrastructure, commodities, multi-strat, should all benefit.

Okay, thanks a lot.

(Operator Instructions)

The next question is from the line of Ann Dai with KBW.

Hi, good morning. Thanks for taking my question. I wanted to start with some news that I saw around Fidelity cutting the dividend in their Japan REIT product. I'm curious, when you see one sponsor go, does that open the door for other distributors? Does it make it more likely that others will follow suit?

Then tacked on to that, last time we saw dividend cuts in these Japan REIT products we saw some meaningful out-flows out of them. Are we in a similar environment today, or are the Japanese investors so starved for income that even with the prospect of dividend cuts, they're still getting better total returns, so it's a different environment? I guess I'd just like some color on that.

Sure, well I think you answered your own question there. While we can't know for sure, there have been some dividend cuts in US REIT funds in Japan sponsored by firms other than our partner. Again, we don't have any visibility or input into their dividend policy, but the fact that other funds have cut I think affected -- may have affected our flows in the quarter in the market.

If that's true, maybe inferring that a dividend cut for our partner could be in the offering. If dividends are cut, as you pointed out historically, there have been out-flows following that for a period of time until there's a stabilization, and then the cycle resumes.

It's a good question. We don't have any definitive answers. Again, our partner has not reduced their distribution thus far, but we just don't have any visibility on where that might end up.

Okay, appreciate the color. To follow up on some of the DOL questions, I'm wondering if your conversations with distributors have changed at all in a meaningful way post election?

Not particularly. Most of the distributors -- and we've met with our largest have been -- as I think you know, have been proceeding under the assumption that DOL in some form will be implemented. In any event, even if it's not, I think most of them -- and we agree that the forces unleashed by DOL, that genie is out of the bottle.

Those best practices will likely be implemented. We're seeing new stripped-down share classes being requested. We're seeing revenue sharing becoming more uniform and applied evenly amongst the various fund sponsors. I don't see those trends changing, regardless of what regulatory reforms are enacted.

Okay, great. If I may just follow up on your comment around revenue sharing, what types of changes are you guys seeing in becoming more uniform? Is there pressure downward? Is it positive for you guys?

I think the answer to that varies by firm. The driver here is I think distributors don't want to ever be in a position to be accused of selling a particular fund family or fund shares, because that firm pays more revenue sharing, or any other kind of economics to the distributor. It's becoming unitized or standardized. Everyone's paying the same, or at least they approach to everyone is the same.

Our sense is that in some cases -- and it depends on the type of assets you have and the average size of account and what product it is. It's possible the total cost of revenue sharing could go up a bit, it could go down a bit. But the trend towards standardization is I think being well embraced throughout the industry.

Okay, thanks so much.

The next question is from the line of Mac Sykes with Gabelli.

Thank you for taking my question. Congratulations on a strong year. I just had one micro question and then one bigger question.

The first one was in terms of securities selection for the preferred strategies, I think you mentioned some challenges in a rising rate environment. What would some of the changes you would make there, if you do expect rates to increase?

Well, the preferred securities market is very unique. There are a lot of different types of security structures That's what's enabled us to add significant value consistently for our client portfolios.

In terms of our approach to managing with the macro outlook that we foresee, one thing we would do is reduce the duration in the portfolios. You can do that a variety of different ways, including owning more fixed to floating securities. A lot of tools at our disposal to reduce the duration. We've been well prepared for the environment that we foresee.

Thank you for the update on the DCIO. I just wanted to dig in a little bit more, get some granularity on how you are making progress? Has there been any level of concentration this year, or are you getting out on a lot more platforms? In terms of what is the lag time between the initial conversation with the platform and then getting implemented?

Well, in the first year, two years ago or so, we had to do -- one, we had to get leadership in place in both the wealth channel and the institutional channel. Once in place, they worked with Todd Glickson to evaluate whether we had the right share classes, fee structures, and so forth. Todd, you may want to comment on that briefly. Then once that was in place -- and that probably took most of the first year.

Last year was the first year where our specialists spent time developing relationships and getting on platforms. Todd, do you want to comment on some of the changes we made in preparation?

Sure. I think that it's two-pronged. First, after we finished table-setting, making sure we had the right share classes or the right fee structures, we have a focus first on the record keepers, making sure that we're working with the right record keepers, the right platforms, talking about our asset classes.

Where specialized asset managers, so things like REITs, multi-asset real assets, are not as well represented as other asset classes are, although there's a significant amount of assets out there. We see that there's a lot of business for us to gain, and really some competitive take-away business, number one, by working with the biggest platforms.

Separately, because of our strong alignment with the wires, the biggest wires out there, we are also spending a lot of time with our wholesaling team putting DCIO specialists out there alongside of them, to work with our largest clients at the wires to educate them on our products, particularly those folks that are DCIO or retirement advisors. I think that two-pronged approach has started to get a little bit of traction, as you can see by our results. Next year, we're hoping to see additional success.

Great. Thank you for taking my question.

The next question is from the line of Glenn Schorr with Evercore.

Hi, thanks very much. Follow-up question on pricing on the mutual funds side. I was just curious, what kind of pricing adjustment did we see? Where did the fee structure go, from what to what?

Maybe the bigger picture is your performance is pretty darn good there. Is the requirement good performance and median or better performance of pricing versus the peer group? I'm just curious on how you chose those -- the price break?

I'm going to ask Todd to answer that question, but this is a critical, critical issue that we discuss virtually every day here. It's a completely new environment today and going forward, in that right spot on the efficient frontier in terms of what performance do you need and what are the right price points that optimize your opportunities to gain market share, that's really critical. Todd do you want to illuminate on that a little bit more?

Sure, and I think we touched on it briefly before. If you looked at our historic price point relative to peers, it's always been competitive. Separately, as you know, a lot of the funds have had exceedingly good full-cycle performance.

Our thought process was, as we move through this world where active management continues to be under a bit of pressure, we want it to be very thoughtful about how we looked at it strategically, built our business case as it relates to value proposition. It really is looking at the top 3, 5, 7, 10 competitors that we bump up against consistently. Although there may be 20, 30, 40, 50 players in the space, there really are -- there's a concentration of assets and success.

We really sharpened our pencil, so to speak, to make sure not only were we competitive with the overall peer group, but what we thought were our most meaningful competitors. I think that's kept us in good stead with our partners, and is really consistent with what we've done over time in our brand.

I would just add it's a dynamic environment out there. Whereas I think historically, fees change at a glacial pace, I think the market is moving rapidly in the active space, not just the passive space for fees. It's going to have to be monitored closely and actively managed.

I appreciate all those thoughts. Maybe the better side of the pricing conversations, I'm curious, where is the multi-strat real asset strategy price? As you move into the wealth management channel, what does that competitive landscape look like versus a more competitive historical space like in the real estate space?

That's a really good question. I think the answer is the multi-strat real asset product and the landscape is changing quickly.

If you start on the institutional side -- and I know your question was about wealth, but it's good to provide this background. We've seen strong demand on the institutional side of the business.

When you look at database providers, people that create peer groups, there's a strong peer group there of a group of significant managers of which we're a part of. That really helps the people that look for multi-asset real assets find us, find those types of managers, consultants, gatekeepers.

As you move to the wealth side of the business, and how they look at multi-asset real assets, it's not that different than how REITs preferred infrastructure was looked at X to Y years ago. There's an evolution in education of what the asset class looks like. We're working with our partners at places like Lipper and Morningstar to make sure there's the right categorization in those databases.

But it's safe to say, if you looked out and looked at real asset and real return managers, there is a growing confluence of managers with about $20 billion to $30 billion in assets. We're part of that leading group of managers there. We're looking to further educate, as we've always done with our advisor partners.

Where we're priced relative to our peers is not inconsistent with what we've talked about for other asset classes, which is we look at the overall group that we view as significant, and then have a focus on the top three or four managers, so we're right there.

I would just emphasize, Glenn, that as much as pricing matters as to what Todd just addressed, education as to how real assets fit into a broader portfolio of financial assets is equally important. Just keep in mind that we've been in a very long deflationary environment, one where certain of the sub-real asset strategies have performed very well.

Collectively as a group, we haven't been in a macro regime where they've been in favor. If we're heading into that regime, and we believe that we are, there's because of the deflation history, we think it's important to help our partners see how multi-strategy real assets fits into a broader portfolio.

Excellent, thank you very much.

There are no further questions at this time. I will now turn the call back to Bob Steers.

Great. Well, thank you all for joining us this morning. Happy New Year, and we'll speak to you in April. Thank you.

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