avatar Cohen & Steers Reit and Preferred Income Fund, Inc. Finance, Insurance, And Real Estate

Pages

  • Page 1

    COHEN « STEERS SS © © © © © © © © A 60 0 © © © © © © © © © ee © © © oe B) {60 ou 0 0 0 0 0. oe © © ve © © oe a. $$; @ @ ee vo | >) © 0 0 © © 2 o e © O a 8 e © 2019 AnnualReport Sustaining —DE Excellence


  • Page 2

    Cohen & Steers at a Glance Founded in 1986 Public since 2004 NYSE: CNS Employees: 328 In 4 cities across 3 continents New York | London | Hong Kong | Tokyo SENIOR INVESTMENT PROFESSIONALS 23 years 12 years average experience average tenure $72.2 billion in assets under management (AUM) INVESTMENT STRATEGY ($ BILLIONS) INVESTMENT VEHICLE ($ BILLIONS) Listed Real Assets $54.0 Institutional Accounts $31.8 U.S. Real Estate $31.0 Open-End Funds $30.7 Global/International Real Estate $13.5 Closed-End Funds $9.7 Global Listed Infrastructure $8.1 Real Assets Multi-Strategy $1.4 Alternative Income Solutions $17.6 Preferred Securities $17.6 Other Portfolios $0.6 STRATEGIES OUTPERFORMING THEIR BENCHMARKS 96% 97% 98% 100% (% of AUM) 1 year 3 year 5 year 10 year


  • Page 3

    ʍʌʭʔ5HVXOWV ASSETS UNDER MANAGEMENT (AUM) At Cohen & Steers, we help investors $ billions as of December 31 build better portfolios, providing access $72.2 $65.5 to specialized asset classes that offer $60.0 $57.9 $55.0 the potential for attractive total returns, diversification and income. We serve institutional and individual investors worldwide, providing distinctive solutions focused on listed real assets and 15 16 17 18 19 alternative income, including real estate securities, listed infrastructure and natural REVENUE resource equities, as well as preferred $ millions for the years ended December 31 securities and other income solutions. $410.8 $378.7 $381.1 Adding value through fundamental $328.7 $351.5 investment research and active portfolio management is the foundation of our business. 15 16 17 18 19 TABLE OF CONTENTS 2 Letter to Shareholders 8 Financial Highlights 9 Form 10-K 1


  • Page 4

    7R2XU6KDUHKROGHUV Sustaining Excellence As active asset managers face increasing pressure to deliver more for less, we are proud to have achieved one of the strongest years in our firm’s history, Martin Cohen capturing new investment and business opportunities through a commitment Chairman to the highest standards of excellence. In 2019, our investment team once again sustained its exceptional performance track record, underscoring the quality and depth of our talent. We continued to extend our product lineup and gain market share worldwide. Asset flows accelerated as the year progressed, driving record revenues and 6.5% organic growth in assets under management (AUM). We also invigorated our Robert H. Steers organization with key hires and promotions. Chief Executive Officer As we reflect on these achievements, we want to express our appreciation to our clients and stockholders for their trust, and to our talented team for their dedication to our vision. Our growth in the face of relentless headwinds for active managers reinforces our conviction in the core beliefs that have guided us for 34 years: Joseph M. Harvey There is no greater imperative for us than sustaining investment President 1 excellence, attained through teamwork, continuous improvement and talent development. Our focus on listed real assets and alternative income allows us to 2 concentrate our resources, creating a competitive advantage and providing differentiated solutions that address key investor needs. Consistent performance flows directly from the strength of our 3 franchise, built on a foundation of stable leadership, financial strength, sound governance and a culture of excellence and inclusion. Just as these ideas served as a roadmap for success in 2019, they remain key to positioning the firm for sustained performance and growth in the future. 2 COHEN & STEERS 2019 ANNUAL REPORT


  • Page 5

    Delivering Superior CULTURE OF EXCELLENCE Specialization alone is not enough. We cultivate a culture Investment Performance of excellence through an emphasis on teamwork, innovation and high-conviction investing. We also seek diversity of thought, experience and background, fostering an inclusive Our success as a specialist manager depends on our environment that leads to broader perspectives and better ability to consistently generate alpha, sustained through investment decisions. a collaborative culture and a commitment to continuous improvement and developing future investment leaders. We also take pride in our approach to management continuity. For us, succession planning is not a discrete PERFORMANCE event, but an integral part of our culture—starting with a focus on developing our next generation of investment Our underlying asset classes experienced strong performance talent. This includes providing portfolio management in 2019 against a backdrop of moderate economic growth, and leadership opportunities to those who consistently low interest rates and favorable credit conditions. On top generate alpha and inspire those around them. of this, we generated meaningful excess returns for our clients, with 8 of our 9 core strategies outperforming their We believe this commitment is one of the key strengths benchmarks for the year, and 97% and 98% of our AUM of our firm, resulting in continuity that extends beyond any outperforming on a 3- and 5-year basis, respectively.(1) single person and creates career opportunities for the firm’s future leaders. In our U.S. open-end funds, 89% of our AUM was rated 4 or 5 stars by Morningstar, driving increased adoption on A prime example was our decision last year to elevate distributor platforms.(1) In addition, our U.S. REIT fund Jon Cheigh to Chief Investment Officer. Jon joined the firm subadvised for Daiwa Asset Management was recognized in as a REIT analyst 15 years ago and has produced Japan as Morningstar’s Fund of the Year in the REIT category. outstanding results since assuming leadership of our global real estate investment team in 2012. His success and We believe this success reflects the “investment DNA” career path are a testament to what talented professionals embedded in our firm since its founding. Our focus on listed can achieve on our platform. Jon will continue to lead our real assets and alternative income allows us to concentrate global real estate strategies, supported by a deep, our resources and helps us attract professionals who are experienced team that will have opportunities to take on passionate about our asset classes and are experts in their additional responsibilities. field. We believe this creates advantages over generalist managers in terms of information gathering and processing, as well as decision making. We approach succession planning not as a discrete event, but as an integral part of our culture—starting with a focus on developing our next generation of investment talent. (1) See Performance Notes. 3


  • Page 6

    Growing Market Share Our Japan subadvisory business returned to positive flows by the end of 2019 following industrywide redemptions in 2018, a challenge we believe is now largely behind us. We also expanded our regulatory licensing in Japan, which We are investing more in global distribution—unifying will allow us to market more effectively to the country’s all channels under new leadership, focusing on markets corporate and public pension funds. that value what we offer, and optimizing our product lineup to reach a wider range of investors. We made a strategic decision last year to be more selective in our subadvisory businesses, terminating non-strategic EXPANDING OUR GLOBAL FOOTPRINT relationships and exiting our large-cap value strategy. While this move precipitated outflows in these segments, Our strategies were in high demand in 2019, benefiting from it positions us to focus on deeper relationships—encompassing the need for quality income, total return and diversification— multiple strategies and enabling richer interactions with as well as our strong investment performance. our investment teams, which should lead to more sustainable client partnerships aligned with our core capabilities. The wealth channel led the way, achieving record inflows and ending the year with strong momentum. Fueling the INTEGRATING OUR DISTRIBUTION TEAMS momentum, our funds were added to 19 research recommended lists. The registered investment advisor One market segment that underperformed its potential in (RIA) market became our largest open-end fund channel, 2019 was U.S. institutional advisory. To regain share in this achieving 19% organic growth and total assets of $8.7 billion. important market and to better capitalize on the global We expect RIAs will remain a source of growth in the opportunities that are emerging, we initiated a strategic coming years as advisors move to lower-cost, investment- realignment of our relationship teams. driven platforms. Organizationally, we broadened our relationship coverage approach and enhanced interactions In September, we appointed Dan Charles as Head of with advisor teams across platforms. Global Distribution, unifying our institutional and wealth management groups across all regions under his Last year also saw our recent investments in the retirement leadership. Dan’s reorganization plan—defined by a culture and bank trust markets begin to pay off, with both segments of One Global Distribution Team—seeks to improve contributing meaningful inflows for the year. In the defined collaboration and accountability, sharing best practices contribution investment-only (DCIO) segment, open-end fund from both markets to capitalize on the convergence net inflows increased to $676 million from just $9 million in taking place between channels. 2018, while net asset growth from bank trust and insurance companies increased 27%. These markets remain a high The team’s mission is to cultivate deeper relationships with priority for us in 2020, and we believe we are well positioned the largest, most sophisticated institutional investors and to increase our market share. financial intermediaries, building trust through education, advocacy and superior investment solutions. We believe this In the institutional channel, Europe and the Middle East had will position us to gain share in key institutional markets, a breakout year, as sovereign wealth and pension funds both in the U.S. and around the globe. already familiar with the benefits of private real assets are increasingly recognizing the merits of listed markets and the value of liquidity. 4 COHEN & STEERS 2019 ANNUAL REPORT


  • Page 7

    OPTIMIZING OUR PRODUCT LINEUP We expect innovative strategies such as these to provide new avenues for growth and compelling offerings for our Alongside our plans to sustain performance and gain clients, while also presenting opportunities for our next market share, we continue to enhance our product suite. generation of portfolio managers. Last year, we successfully initiated a soft close of the RE-ENGAGING THE CLOSED-END FUND MARKET 5-star Cohen & Steers Real Estate Securities Fund (CSI), underscoring our commitment to shareholders to deliver After a long hibernation, the market for closed-end funds on the fund’s investment objectives. Concurrently, we returned in 2019. Two key changes made this possible: repositioned our 28-year-old flagship U.S. REIT fund, sponsors are now paying the full front-end cost of closed- Cohen & Steers Realty Shares—which has a different end fund launches, and many funds are including term mandate than CSI—by adding a full range of share classes features that allow investors to tender shares at net asset and reducing its expense ratio. Our wealth advisor partners value (NAV) at a target date in the future. have embraced these changes, allowing us to increase our presence on a growing list of platforms. This revitalized the public offering market in 2019 and could broaden the investor base for closed-end funds. We believe We also transitioned the Cohen & Steers Dividend Value Fund the combination of 1) investing at NAV, 2) employing prudent to the Cohen & Steers Alternative Income Fund. The fund leverage at today’s low interest rates, and 3) selective now aligns with our strategic focus, combining our cross- use of private or less-liquid investments is a compelling team expertise in listed real assets and preferred securities to value proposition. deliver a multi-strategy vehicle designed to provide investors with tax-advantaged income and total return potential. We will continue to look for opportunities to provide solutions for investors seeking differentiated income In keeping with our philosophy of investment-driven product strategies, particularly in the area of tax-smart investing, development, we are building track records in thematic which has been an increasing area of focus in the portfolios such as small-cap and digital infrastructure, as well wealth channel. as next-generation real estate, focused on new-economy and specialty property types. We believe these strategies will appeal to pension funds and wealth investors globally as they contend with the impact of e-commerce on retail-heavy private property funds. We also launched a limited partnership for our Global Realty Focus strategy—which employs a concentrated approach and has a 12-year track record—to suit the needs of family offices, endowments and foundations. In keeping with our philosophy of investment-driven product development, we are building track records in thematic portfolios such as small-cap and digital infrastructure, as well as next-generation real estate. 5


  • Page 8

    Guiding Our Business Each of our specialist investment teams determines the best way to integrate ESG factors into their research process. For example, the real estate team develops an ESG score for each security in their universe, incorporating appropriate Understanding and integrating environmental, social environmental, social and governance issues. These include and governance (ESG) best practices—both in our corporate board structure and alignment; shareholder rights; business and in our investment decisions—is critical workforce and labor management; diversity and inclusion to delivering better results for our clients, while creating practices; energy, water and waste management; and a deeper sense of engagement for our employees. opportunities in Leadership in Energy and Environmental Design (LEED)-certified “green” buildings. These variables STRENGTHENING CORPORATE GOVERNANCE are then factored into cash flow growth projections and valuations. In fact, during the last year, the team decided Strong governance has been a cornerstone of to increase the magnitude of the ESG adjustment, reflecting Cohen & Steers since our founding. It’s one reason the importance of these factors in identifying risks and why we place great importance on having an active, opportunities for each company. independent Board of Directors. This is just one way we are enhancing our approach to ESG This past year, we welcomed Dasha Smith as our sixth integration. We have been a signatory to the Principles for independent director, expanding the Board of Directors Responsible Investment (PRI) since 2013, and we believe the to nine members. As Chief People Officer for the National PRI framework—combined with our proprietary approach Football League, Dasha brings considerable experience to ESG integration—promotes transparency and drives in human relations, as well as legal, marketing and engagement with the companies in our investable universe. operations excellence. BUILDING A DIVERSE AND INCLUSIVE CULTURE ENHANCING ESG INTEGRATION IN OUR INVESTMENT PROCESS We believe a culture of excellence, mutual respect and integrity creates the best environment for people to Just as we value strong corporate governance for our feel included, contribute ideas, make better decisions and company, it is also a key building block of our investment ultimately achieve better results for our clients. research process. In our experience, companies that embrace strong governance are more likely to implement With employees located around the world, we represent sound environmental and social practices, supporting many cultures, backgrounds, experiences and talents. better business models and enhancing shareholder value. It is important in our role as a global investment manager to foster an inclusive culture that encourages and inspires individuals to contribute their unique perspectives. A culture of excellence, mutual respect and integrity creates the best environment for people to feel included, contribute ideas, make better decisions and ultimately achieve better results for our clients. 6 COHEN & STEERS 2019 ANNUAL REPORT


  • Page 9

    We also acknowledge that building such a culture is a journey. Our commitment to diversity and inclusion focuses Positioning for the on four key pillars: Next 10 Years Education. We seek to build awareness and 1 understanding to strengthen our culture of inclusion and support. Looking ahead, we are focused on building upon the positive momentum we have achieved. 2 Leadership. We hold our leaders accountable for fostering an inclusive culture as they develop the Our investment performance remains strong as we continue next generation of leaders. This accountability to navigate the global market environment. We have a deep extends to all employees in creating an environment bench of talent taking on greater responsibilities. Our asset built on respect. classes are in demand, supported by the global search for income. We are resourcing and empowering our global Recruitment. We recognize there is significant distribution teams to grow our market share. We have 3 underrepresentation of women and people of color a solid pipeline of innovative strategies to deliver our alpha in our industry, especially in leadership roles. Our in different ways. And our financial foundation is as strong recruiting partners are expected to present diverse as ever. candidate pools for our open positions, providing opportunities to hire the best talent to help us excel Yet we are ever mindful of that maxim of finance: past in all areas of our business. performance is no guarantee of future results. We stand ready to embrace the challenges that lie ahead— Engagement. We support our employees who positioning our teams, our strategies and our platform to 4 build resource groups that foster an inclusive culture sustain excellence over the next decade and beyond. and encourage everyone at the firm to help solve business and community challenges. Examples include ongoing volunteerism, green initiatives and a women’s exchange for sharing ideas and experiences. This strategy is rooted in our drive to achieve sustained excellence, promoting increased representation, retention and engagement. Martin M ti CCohen h Robert H. Steers Joseph M. Harvey Chairman Chief Executive Officer President 7


  • Page 10

    )LQDQFLDO+LJKOLJKWV 10 consecutive In 2019, Cohen & Steers achieved record assets under management and record revenues, benefiting from a favorable market environment for our asset years of classes, strong overall investment performance and increasing investor appetite for our strategies. revenue growth Revenues were $411 million in 2019, MARGINS an increase of 7.8% from last year ȉ Operating margin increased to 39.0% (39.6% as adjusted(1)) from 38.6% (39.1% as adjusted(1)) in 2018 16% growth DIVIDEND PAYMENTS in earnings ȉ Paid regular quarterly dividends of $0.36 per share in 2019 compared with Net income attributable to $0.33 in 2018 common stockholders was $2.79 ȉ A special dividend of $2 per share was paid in December 2019. Over the past per diluted share ($2.57 as 10 years, we have paid an aggregate of $13 per share in special dividends. adjusted(1)), compared with $2.40 ($2.40 as adjusted(1)) in 2018 ASSETS UNDER MANAGEMENT (AUM) ȉ AUM growth consisted of $3.7 billion of net inflows (vs. $1.2 billion of net outflows 25% increase in 2018) and $14.6 billion of market appreciation, offset by $4.0 billion of distributions in AUM ȉ Organic AUM growth was 6.5%, compared with 1.8% organic decay in 2018 ȉ Average AUM was $67.3 billion, compared with $62.2 billion in 2018 Assets under management were $72.2 billion at December 31, 2019, an increase of $14.3 billion from BALANCE SHEET last year ȉ No debt ȉ $204 million in cash, cash equivalents, U.S. Treasuries and seed investments, compared with $213 million at the end of 2018 KEY STRATEGY HIGHLIGHTS $ millions U.S. Global/International Preferred Global Listed Real Estate Real Estate Securities Infrastructure Net Inflows (Outflows) $1,935 ($173) $2,685 $14 Market Appreciation $7,346 $2,887 $2,406 $1,520 Distributions $2,886 $252 $597 $201 Change in AUM +26% +22% +35% +24% (1) The term “as adjusted” is used to identify non-GAAP financial information. See pages 31–32 of the 10-K, “Non-GAAP Reconciliations.” 8 COHEN & STEERS 2019 ANNUAL REPORT


  • Page 11

    )RUPʭʌ. TABLE OF CONTENTS PART I Page Item 1. Business 1 Item 1A. Risk Factors 6 Item 1B. Unresolved Staff Comments 13 Item 2. Properties 13 Item 3. Legal Proceedings 13 Item 4. Mine Safety Disclosures 13 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 14 Item 6. Selected Financial Data 15 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 38 Item 8. Financial Statements and Supplementary Data 39 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 39 Item 9A. Controls and Procedures 39 Item 9B. Other Information 39 PART III Item 10. Directors, Executive Officers and Corporate Governance 40 Item 11. Executive Compensation 40 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 40 Item 13. Certain Relationships and Related Transactions, and Director Independence 40 Item 14. Principal Accountant Fees and Services 40 PART IV Item 15. Exhibits and Financial Statement Schedules 41 Item 16. Form 10-K Summary 43 9


  • Page 12

    Sustaining Excellence 10 COHEN & STEERS 2019 ANNUAL REPORT


  • Page 13

    UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED December 31, 2019 OR O TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File No. 001-32236 COHEN & STEERS, INC. (Exact name ofregistrant as specified in its charter) Delaware 14-1904657 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 280 Park Avenue New York, NY 10017 (Addressof Principal Executive Offices and Zip Code) Registrant’s telephone number, including area code: (212) 832-3232 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which Title of each class Trading Symbol(s) registered CommonStock, $.01 par value CNS New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check markif the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act. Yes No O Indicate by check markif the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes O No Indicate by check mark whetherthe registrant (1) hasfiled all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No DO Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ($ 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No DJ Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large acceleratedfiler,” “acceleratedfiler’, “smaller reporting company”, and "emerging growth company"in Rule 12b-2 of the Exchange Act. (Check one): Large acceleratedfiler Smaller reporting company O Acceleratedfiler O Emerging growth company O Non-accelerated filer O If an emerging growth company, indicate by check markif the registrant has elected not to use the extended transition period for complying with any neworrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. O Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes No The aggregate market value of the voting commonstock held by non-affiliates of the Registrant as of June 30, 2019 was approximately $1.2 billion. There is no non-voting commonstock of the Registrant outstanding. As of February 18, 2020, there were 47,756,099 sharesof the Registrant's common stock outstanding. DocumentsIncorporated by Reference Portions of the definitive Proxy Statement of Cohen & Steers, Inc. (the Proxy Statement)to be filed pursuant to Regulation 14A of the general rules and regulations of the Securities Exchange Act of 1934, as amended, for the 2020 annual meeting of stockholders scheduled to be held on May 7, 2020 are incorporated by referenceinto Part IIl of this Form 10-K.


  • Page 14

    COHEN & STEERS, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page Part I Item 1 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Item 1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 2 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 4 Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Part II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . 16 Item 7A Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Item 8 Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . 39 Item 9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Item 9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Part III Item 10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . 40 Item 13 Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . 40 Item 14 Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Part IV Item 15 Exhibits and Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Item 16 Form 10-K Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 i


  • Page 15

    PART I Item 1. Business Overview Cohen & Steers, founded in 1986, is a global investment manager specializing in real assets and alternative income. Our specialties include real estate securities, listed infrastructure and natural resource equities, as well as preferred securities and other income solutions. Headquartered in New York City, with offices in London, Dublin, Hong Kong and Tokyo we serve institutional and individual investors around the world. Cohen & Steers, Inc. (CNS) was organized as a Delaware corporation on March 17, 2004. CNS is the holding company for its direct and indirect subsidiaries, including Cohen & Steers Capital Management, Inc. (CSCM), Cohen & Steers Securities, LLC (CSS), Cohen & Steers Asia Limited (CSAL), Cohen & Steers UK Limited (CSUK), Cohen & Steers Japan Limited (CSJL) and Cohen & Steers Ireland Ltd. (CSIL). CNS and its subsidiaries are collectively referred to as the Company, we, us or our. Our revenue is derived from fees received from our clients, including fees for managing or subadvising client accounts as well as investment advisory, administration, distribution and service fees received from Company-sponsored open-end and closed-end funds. Our fees are based on contractually specified rates applied to the value of the assets we manage and, in certain cases, investment performance. Our revenue fluctuates with changes in the total value of our assets under management, which may occur as a result of market appreciation and depreciation, contributions or withdrawals from client accounts, foreign currency fluctuations and distributions. This revenue is recognized over the period that the assets are managed. Investment Vehicles We manage three types of investment vehicles: institutional accounts, open-end funds and closed-end funds. Institutional Accounts Institutional accounts for which we serve as investment adviser represent portfolios of securities we manage for institutional clients. We manage the assets in each institutional account in accordance with the investment requirements of that client as set forth in such client’s investment management agreement and investment guidelines. The investment management agreements with our institutional account clients are generally terminable at any time. Advisory assets, which represent accounts for which we have been appointed as the investment manager, are included in our institutional account assets under management. As investment adviser, we are responsible to oversee certain daily operations and manage the assets in the account while adhering to the specified investment objectives. Subadvisory assets, which generally represent commingled investment vehicles for which we have been appointed as a subadvisor by the investment manager of that investment vehicle, are also included in our institutional account assets under management. As subadvisor, we are responsible for managing all or a portion of the vehicle's investments, while the investment adviser oversees our performance as subadvisor; the vehicle sponsor is responsible for decisions regarding the amount, timing and whether to pay distributions from the investment vehicle to its beneficial owners. Subadvisory assets also include assets of third parties for which we provide model portfolios. These assets generally represent commingled investment vehicles. We regularly provide the investment manager of that investment vehicle with a model portfolio of securities in accordance with the investment requirements of that client as set forth in such client’s investment advisory agreement and investment guidelines. These investment advisory agreements are generally terminable at will with 30 days’ notice. Open-end Funds The U.S. and non-U.S. open-end funds that we sponsor and for which we serve as investment adviser offer and issue new shares continuously as assets are invested and redeem shares when assets are withdrawn. The share price for purchases and redemptions of shares of each of the open-end funds is determined by each fund’s net asset value, which is calculated at the end of each business day. The net asset value per share is the current value of a fund’s assets less liabilities, divided by the fund’s total shares outstanding. 1


  • Page 16

    The investment advisory fees that we receive from the U.S. and non-U.S. open-end funds that we sponsor and for which we serve as investment adviser vary based on each fund’s investment strategy, fees charged by other comparable funds and the market in which the fund is offered. In addition, we receive a separate fee for providing administrative services to certain open-end funds at a rate that is designed to reimburse us for the cost of providing these services. The monthly investment advisory fee and administration fee, if applicable, paid by the open-end funds are based on contractual fee rates applied to each fund’s average assets under management. Our investment advisory and administration agreements with the U.S. registered open-end funds that we sponsor and for which we serve as investment adviser are generally terminable upon a vote of a majority of the fund’s board of directors on 60 days’ notice, and each investment advisory agreement, including the fees payable thereunder, is subject to annual approval by a majority of the directors of the fund’s board who are not "interested persons," as defined by the Investment Company Act of 1940 (the Investment Company Act), following the initial two-year term. Our investment advisory and administration agreements with the non-U.S. open-end funds that we sponsor and for which we serve as investment adviser are generally terminable at will with 90 days’ notice. Open-end funds also include assets of third parties for which we provide model portfolios. These assets generally represent commingled investment vehicles. We regularly provide the investment manager of that investment vehicle with a model portfolio of securities in accordance with the investment requirements of that vehicle as set forth in such vehicle’s investment advisory agreement and investment guidelines. These investment advisory agreements are generally terminable at will with 30 days’ notice. Closed-end Funds The closed-end funds for which we serve as investment adviser are registered investment companies that have issued a fixed number of shares through public offerings. These shares are listed on the New York Stock Exchange and cannot be redeemed by the fund’s shareholders. The trading price of the shares is determined by supply and demand in the marketplace, and, as a result, the shares may trade at a premium or discount to the net asset value of the fund. The investment advisory fees that we receive from the closed-end funds for which we serve as investment adviser vary based on each fund’s investment strategy, fees charged by other comparable funds and prevailing market conditions at the time each closed-end fund initially offered its shares to the public. In addition, we receive a separate fee for providing administration services to seven of the eight closed-end funds at a rate that is designed to reimburse us for the cost of providing these services. The closed-end funds pay us a monthly investment advisory fee and an administration fee, if applicable, based on a contractual fee rate applied to the fund’s average assets under management. Our investment advisory agreements with each closed-end fund for which we serve as investment adviser are generally terminable upon a vote of a majority of the fund’s board of directors on 60 days’ notice and are subject to annual approval by a majority of the directors of the fund’s board who are not "interested persons," as defined by the Investment Company Act, following the initial two-year term. Our Investment Strategies Each of our investment strategies is overseen by a specialist team, each of which is led by a portfolio manager, or a team of portfolio managers, supported by dedicated analysts. These personnel are located in our New York, London and Hong Kong offices. Each team executes fundamentally driven, actively managed investment strategies and has a well-defined process that includes top-down macroeconomic and bottom-up fundamental research and portfolio management elements. These teams are subject to multiple levels of oversight and support from the President, Chief Investment Officer, Chief Administrative Officer- Investments, Investment Risk Committee, Investment Operating Committee and Legal and Compliance Department. Some of our strategies may involve multiple asset classes and are overseen by investment committees led by senior portfolio managers of our specialist teams. Below is a summary of our core investment strategies: Real Assets Multi-Strategy invests in a diversified multi-strategy portfolio of listed companies and securities that generally own or are backed by tangible real assets, including real estate securities, global listed infrastructure, commodities and natural resource equities, with the objective of achieving attractive total returns over the long term, while providing diversification and maximizing the potential for real returns in periods of rising inflation and rising interest rates. 2


  • Page 17

    U.S. Real Estate Securities include a wide range of strategies distinguished by concentration, risk profile and income objective, as well as thematic portfolios designed to provide targeted allocations to specific sectors within the investable real estate universe. Each strategy invests in a portfolio of common stocks and other securities issued by U.S. real estate companies, including real estate investment trusts (REITs) and similar REIT-like entities. These strategies are managed by our dedicated U.S. real estate securities investment team and draw on the broad expertise of our global real estate analysts and portfolio managers. Investment objectives include total return, capital appreciation and income. Global Real Estate Securities include a wide range of strategies distinguished by geography, concentration, risk profile and income objective, designed to provide allocation exposure to listed real estate globally. Each strategy invests in a portfolio of common stocks and other securities issued by real estate companies, including REITs and similar REIT-like entities. These strategies draw on the expertise of our integrated global real estate securities investment team. Investment objectives include total return, capital appreciation and income. Global Listed Infrastructure invests in a diversified portfolio of U.S. and non-U.S. securities issued by infrastructure companies such as utilities, pipelines, toll roads, airports, railroads, marine ports and communications companies located in developed markets with opportunistic allocations to emerging markets. The investment objective is total return with a balance of capital appreciation and income. Midstream Energy and MLPs invests in a diversified portfolio of energy-related master limited partnerships (MLPs) and securities of companies that derive at least 50% of their revenues or operating income from the exploration, production, gathering, transportation, processing, storage, refining, distribution or marketing of natural gas, natural gas liquids (including propane), crude oil, refined petroleum products, coal or and other energy resources. The investment objective is total return with a balance of capital appreciation and income. Global Natural Resource Equities invests in companies involved in the production, extraction, or processing of commodities and natural resources. Specifically, the strategy invests in energy producers, metals and mining companies and agriculture- based businesses. The investment objective is total return. Preferred Securities and Low Duration Preferred Securities invest in diversified portfolios of preferred and debt securities issued by U.S. and non-U.S. companies. The preferred securities are issued by banks, insurance companies, REITs and other diversified financial institutions as well as utility, energy, pipeline and telecommunications companies. A consistent investment process underlies both our total return preferred securities strategy and our low duration preferred securities strategy, which seeks income and capital preservation. In addition, we offer variations on these strategies that may combine multiple strategies in a single portfolio. Individual portfolios may be customized to comply with client-specific guidelines, benchmarks or risk profiles. Strategies offered in closed-end funds typically use leverage. Our Distribution Network Our distribution network encompasses two major channels in the asset management industry. Our Wealth channel covers sophisticated financial intermediaries, including national and regional brokerage firms, registered investment advisers, and bank trusts. The U.S. registered open-end funds for which we serve as investment adviser are available for purchase with and without commissions through full service and discount broker-dealers as well as the significant networks serving financial advisers. Our institutional channel includes corporate, public defined benefit plans, public defined contribution pension plans and Taft-Hartley trusts, endowments and foundations, sovereign wealth funds, healthcare, insurance companies as well as other financial institutions that access our investment management services directly, through consultants or through other intermediaries. Competition We compete with a large number of global and U.S. investment managers, commercial banks, broker-dealers, insurance companies and other financial institutions. Many competing firms are parts of larger financial services companies and attract business through numerous channels, including retail banking, investment banking and underwriting contacts, insurance agencies and broker-dealers. Our direct competitors in wealth management are other fund and exchange-traded-fund (ETF) sponsors, including large nationally recognized investment management firms that have more diverse product offerings and smaller boutique firms that specialize in particular asset classes. We also compete against managers that manage separate-account portfolios for high-net- 3


  • Page 18

    worth clients. In the institutional channel, we compete with several investment managers offering similar products and services, from boutique establishments to major commercial and investment banks. Performance, price and brand are our principal sources of competition. Prospective clients will typically base their decisions to invest, or continue to invest, with us on our ability to generate returns in excess of a benchmark and the cost of doing so. We are evaluated based on our performance and our fees relative to our competitors. In addition, individual fund shareholders may also base their decision on the ability to access the funds we manage through a particular distribution channel. As interest in real assets continues to increase, we may face increased competition from other managers that are competing for the same client base that we target and serve. Financial intermediaries that offer our products to their clients may also offer competing products. Many of our competitors have greater brand name recognition and more extensive client bases than we do, which could be to our disadvantage. In addition, our larger competitors have more resources and may have more capacity to expand their product offerings and distribution channels and capture market share through ongoing business relationships and extensive marketing efforts. However, compared to our larger competitors, we may be able to grow our business at a faster rate from a relatively smaller asset base and shift resources in response to changing market conditions more quickly. Regulation We are subject to regulation under U.S. federal and state laws, as well as applicable laws in the other jurisdictions in which we do business or offer our products and services. Violation of applicable laws or regulations could result in fines, temporary or permanent prohibition of engagement in certain activities, reputational harm and loss of clients, suspension of personnel or revocation of their regulatory licenses, suspension or termination of investment adviser and/or broker-dealer registrations, or other sanctions and penalties. CSCM, a New York-based subsidiary, is a registered investment adviser with the U.S. Securities and Exchange Commission (the SEC) and is an approved investment manager with the Luxembourg Commission de Surveillance du Secteur Financier (the CSSF), the Irish Financial Services Regulatory Authority (the IFSRA) and the Korean Financial Services Commission. CSCM has also obtained exemptions from registration that allow it to provide investment management services to institutions in Australia and Canada. CSCM is a registered commodity trading adviser and a registered commodity pool operator with the Commodities Futures Trading Commission (the CFTC) and is a member of the National Futures Association (the NFA), a futures industry self-regulatory organization. The CFTC and NFA regulate futures contracts, swaps, and various other financial instruments in which certain of the Company’s clients may invest. CSUK, our UK-based subsidiary, is a registered investment adviser with the SEC and the United Kingdom Financial Conduct Authority and is an approved investment manager with the CSSF. CSUK provides investment management services in several European Union member states pursuant to the Directive on Markets in Financial Instruments repealing Directive 2004/39/EC (MiFID II) and the Regulation on Markets in Financial Instruments (MiFIR). CSUK is subject to the Financial Services and Markets Act 2000, which regulates, among other things, certain liquidity and capital resources requirements. Such requirements may limit our ability to withdraw capital from CSUK. CSUK is also subject to certain pan-European regulations, including MiFID II, the Capital Requirements Directive and the Alternative Investment Fund Managers Directive (AIFMD). MiFID II and MiFIR regulate the provision of investment services throughout the European Economic Area and the Capital Requirements Directive regulates capital requirements. AIFMD regulates the management, administration and marketing of alternative investment funds domiciled in or marketed within the European Union and establishes a regime for the cross-border marketing of those funds. CSAL, our Hong Kong-based subsidiary, is a registered investment adviser with the SEC and the Hong Kong Securities and Futures Commission (the SFC) and is an approved investment manager with the CSSF and the IFSRA. CSAL is subject to the Securities and Futures Ordinance (the SFO), which regulates, among other things, offers of investments to the public and the licensing of intermediaries. CSAL and its employees conducting any of the regulated activities specified in the SFO are required to be licensed with the SFC and are subject to the rules, codes and guidelines issued by the SFC. In their capacity as U.S. registered investment advisers, CSCM, CSUK and CSAL are subject to the rules and regulations of the Investment Advisers Act of 1940 (the Advisers Act). The Advisers Act imposes numerous obligations on registered investment advisers, including recordkeeping, operational and marketing requirements, disclosure obligations and prohibitions on fraudulent activities. In addition, our subsidiaries that serve as investment adviser or subadvisor to U.S. registered funds are subject to the Investment Company Act, which imposes additional governance, compliance, reporting and fiduciary obligations. 4


  • Page 19

    CSJL, our Japan-based subsidiary, is a financial instruments operator (discretionary investment management and investment advisory and agency) registered with the Financial Services Agency of Japan and the Kanto Local Finance Bureau and is subject to the Financial Instruments and Exchange Act. CSJL supports the marketing, client service and business development activities of the Company and may serve as an intermediary for investment products managed by other affiliates. CSIL, our Irish subsidiary, is an Irish registered company. We have applied for a license to conduct regulated business in Ireland. CSS, a New York-based subsidiary, is a registered broker-dealer regulated by the SEC, the Financial Industry Regulatory Authority and other federal and state agencies. CSS is subject to regulations governing, among other things, sales practices, capital structure and recordkeeping. CSS is also subject to the SEC’s net capital rule, which specifies minimum net capital levels for registered broker-dealers and is designed to enforce minimum standards for the general financial condition and liquidity of broker-dealers. Under certain circumstances, this rule may limit our ability to withdraw capital and receive dividends from CSS. Because of the global and integrated nature of our business, regulation applicable to an affiliate in one jurisdiction may affect the operation of affiliates in others or require compliance at a group level. Employees As of December 31, 2019, we had 328 full-time employees. Available Information We file annual, quarterly and current reports, proxy statements and all amendments to these reports and other information with the SEC. We make available free of charge on or through our website at www.cohenandsteers.com our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. 5


  • Page 20

    Item 1A. Risk Factors Risks Related to our Business A significant portion of our revenue for 2019 was derived from a single institutional client. As of December 31, 2019, our largest institutional client, Daiwa Asset Management, which held most of its assets in U.S. REIT strategies in Japan subadvisory, represented approximately 7.8% of our total revenue for 2019. Approximately 31.9% of the institutional account assets we managed, and approximately 14.0% of our total assets under management were derived from this client. Investor demand for the products we subadvise for this client can be affected by, among other things, changes in the distributions paid by those products, the strength of the Japanese yen compared to the currencies in which the assets held in those products are denominated, and the market and regulatory environment in the Japanese mutual fund market. Changes in the distribution rates could decrease investor demand for these products, resulting in outflows of assets which would negatively impact our revenue and adversely affect our financial condition. A decline in the absolute or relative performance of real estate securities would have an adverse effect on the assets we manage and our revenue. As of December 31, 2019, approximately 61.7% of the assets we managed were concentrated in real estate securities. Real estate securities and real property investments owned by the issuers of real estate securities are subject to varying degrees of risk that could affect investment performance. Returns on investments in real estate securities depend on the amount of income and capital appreciation or loss realized by the underlying real property. Income and real estate values may be adversely affected by, among other things, unfavorable changes to tax laws and other laws and regulations applicable to real estate securities, the cost of compliance with applicable laws and regulations, interest rates, the availability of financing, the creditworthiness of tenants, and the limited ability of issuers of real estate securities to vary their portfolios promptly in response to changes in market conditions. If the underlying properties do not generate sufficient income to pay for ongoing operating expenses, the income and the ability of an issuer of real estate securities to pay interest and principal on debt securities or any dividends on common or preferred stocks will be adversely affected. A decline in the performance of real estate securities would have an adverse effect on the assets we manage and reduce the fees we earn and our revenue. Our growth and the execution of our real estate investment strategy may be constrained by the size and number of real estate securities issuers, as well as REIT ownership restrictions. Investments in real estate securities continue to play an important role in our overall investment strategy. Our ability to fully utilize our investment capacity and continue to increase our ownership of real estate securities depends, in part, on growth in the size and number of issuers in the real estate securities market, particularly in the U.S. Limited growth, or any consolidation activity in the real estate sector, could limit or reduce the number of investment opportunities otherwise available to us. In addition, increased competition for investment opportunities due to large amounts of available capital dedicated to real estate strategies, or a real or perceived trend towards merger and acquisition activity in the sector, could affect real estate valuations and prices. A limited number of investment targets could adversely impact our ability to make new investments based on fundamental valuations or at all, impair the full utilization of our overall investment capacity, and otherwise negatively affect our investment strategy. Our ability to increase our ownership, or maintain existing levels of ownership, may also be constrained by REIT ownership limits, which limit the percentage ownership of a REIT’s outstanding capital stock, common stock, and/or preferred stock. REIT charters generally grant a REIT the right to unilaterally reduce any ownership amount that it deems to be in violation of its ownership limits. Such charters do not typically provide for the elimination of such right even in the event a REIT has previously provided waivers from such limits or acknowledgements that ownership levels do not violate such limits. To the extent these ownership restrictions prevent us from acquiring new or additional real estate securities, or force us to reduce existing ownership amounts, our revenue and our ability to invest available assets and increase the assets we manage could be negatively affected. Seed investments made to support the launch of new strategies and products may expose us to potential losses on invested capital. Our success is partially dependent on our ability to develop, launch, market and manage new investment strategies and products. New investment strategies and products require an initial cash investment, time and sufficient resources as well as ongoing marketing and other support, including potential subsidies of operating expenses. 6


  • Page 21

    From time to time, we support the launch of new investment strategies and products by making seed investments in those strategies and products. Numerous risks and uncertainties are associated with all stages of the seed investment product life cycle, including investment performance, market risks, shifting client or market preferences, the introduction of competing products and compliance with regulatory requirements. Seed investments in new strategies and products utilize capital that would otherwise be available for other corporate purposes and expose us to potential capital losses, against which we may not hedge. To the extent we realize losses on our seed investments, our earnings and financial condition may be adversely impacted. Regulations restricting the use of commission credits to pay for research have increased, and may continue to increase, our operating expenses. On behalf of our clients, we make decisions to buy and sell securities, select broker-dealers to execute trades and negotiate brokerage commission rates. In connection with these transactions and subject to best execution, we receive commission credits to pay for eligible research and services from broker-dealers and other eligible service providers. As a result of regulations in the European Union, we previously determined to eliminate the use of commission credits to pay for research and eligible services for accounts within the scope of MiFID II. Our operating expenses increased due to the decision to pay for research and eligible services for these accounts. Depending on the evolution of market practices and regulatory developments, we may elect to pay for research and expenses globally, subject to applicable SEC regulations, to conform to market practices, which would further increase our operating expenses. We face substantial competition in all aspects of our business. The investment management industry is highly competitive, and investors are increasingly fee sensitive. We compete against a large number of investment products offered by other investment management companies, investment dealers, banks and insurance companies, and many institutions we compete with have greater financial resources than us. We compete with these firms on the basis of investment performance, diversity of products, distribution capability, scope and quality of services, reputation and the ability to develop new investment strategies and products to meet the changing needs of investors. Our actively managed investment strategies compete not only against other active strategies but also against similarly positioned passive strategies. The continuing shift in market demand toward index funds and other passive strategies reduces opportunities for active managers and may accelerate fee compression. In the event that competitors charge lower fees for substantially similar products, we may be forced to compete on the basis of price in order to attract and retain clients. In order to maintain our current fee structure in a competitive environment, we must be able to provide clients with investment returns and service commensurate with the level of fees we charge. To the extent current or potential clients decide to invest in products sponsored by our competitors, the sales of our products as well as our market share, revenue and net income could decline. The inability to access clients through third-party intermediaries could have a material adverse effect on our business. In recent years, a significant portion of the growth in the assets we manage has been from assets attributable to the distribution of our products through third-party intermediaries. Our ability to distribute our products is highly dependent on access to the client bases and product platforms of international, national and regional securities firms, investment advisory firms, banks, insurance companies, defined contribution plan administrators and other intermediaries, which generally offer competing investment products that could limit the distribution of our products. In addition, our separate account business, subadvisory and model delivery services depend in part on recommendations by consultants, financial planners and other professional advisors, as well as our existing clients. The structure and terms of the distribution arrangements with intermediaries, including fees or rebates paid by us or our funds to intermediaries to assist with distribution efforts, and the ability of our funds to participate in these intermediary platforms are subject to changes driven by market competition and regulatory developments. Our existing relationships with third-party intermediaries and access to new intermediaries could be adversely affected by continued consolidation within the financial services industry. Consolidation may result in increased distribution costs, a reduction in the number of third parties distributing our investment products or increased competition to access third-party distribution channels. There can be no assurance that we will be able to retain access to these channels. Loss of any of these third-party distribution channels, or changes to their structure and terms, or any reduction in our ability to access clients and investors through existing and new distribution channels, could adversely affect our business. 7


  • Page 22

    Our growth could be adversely affected if we are unable to manage the costs associated with the expansion of our business. Our growth strategy continues to involve diversifying our investment management business to include products and services outside of investments in real estate securities. As part of the implementation of our strategy, we have emphasized the development of broader real assets strategies, including global listed infrastructure and midstream energy, and have expanded our geographical presence and capabilities as well as product and service offerings outside the U.S. As a result, our fixed costs and other expenses have increased to support the development of new strategies and products, to expand the availability and marketability of our existing strategies and products, to grow our potential client base, and to enhance our infrastructure, including additional office space, technology and personnel. The success of our business strategy and future growth is contingent upon our ability to continue to support the development of new strategies and products, to expand the availability of our existing strategies and products, and our ability to successfully manage multiple offices and navigate legal and regulatory systems both domestically and internationally. The cost of adequately supporting such growth and initiatives will have an effect on our operating margin and other financial results. Our clients may withdraw or reduce the amount of assets we manage or otherwise change the terms of our relationship, which could have an adverse impact on our revenue. Our institutional clients, and firms with which we have strategic alliances, may terminate their relationship with us, reduce the amount of assets we manage, shift their assets to other types of accounts with different fee structures, or renegotiate the fees we charge them for any number of reasons, including investment performance, redemptions by beneficial owners of funds we manage or subadvise, actual or perceived competition between the accounts we subadvise and our proprietary investment products, changes in the key members of an investment team, changes in prevailing interest rates and financial market performance. Certain investors in the funds we manage hold their shares indirectly through platforms sponsored by financial institutions that have the authority to make investment and asset allocation decisions on behalf of such investors. Decisions by investors to redeem assets may require selling investments at a disadvantageous time or price, which could negatively affect the amount of our assets under management or our ability to continue to pursue certain investment strategies. In a declining market or in conditions of poor relative or absolute performance, the pace of redemptions and withdrawals and the loss of institutional and individual separate account clients could accelerate. The occurrence of any of these events could have a material adverse effect on our revenue. Limitations on our ability to utilize leverage in the closed-end funds we sponsor could reduce our assets under management and revenue. Certain of the closed-end funds sponsored by us utilize leverage in the form of bank financing, which in the aggregate amounted to approximately $2.2 billion as of December 31, 2019. To the extent any closed-end fund sponsored by us elects or is required by regulation or the terms of its bank financing to reduce leverage, such fund may need to liquidate its investments. Reducing leverage or liquidating investments during adverse market conditions would reduce the Company’s assets under management and revenue. We could incur financial losses, reputational harm and regulatory penalties if we fail to implement effective information security policies and procedures. Our business is dependent on the effectiveness of our information and cyber security policies and procedures to protect our network and telecommunications systems and the data that reside in or are transmitted through such systems. As part of our normal operations, we maintain and transmit confidential information about our employees and clients’ portfolios as well as proprietary information relating to our business operations. We maintain a system of internal controls designed to provide reasonable assurance that fraudulent activity, including misappropriation of our assets, fraudulent financial reporting, and unauthorized access to sensitive or confidential information is either prevented or timely detected and remediated. However, our technology systems may still be vulnerable to unauthorized access or may be corrupted by cyber attacks, computer viruses or other malicious software code, or authorized persons could inadvertently or intentionally release confidential or proprietary information. The nature of these threats is constantly evolving and becoming increasingly sophisticated. Although we take precautions to password protect and encrypt our employees’ mobile electronic devices, if such devices are stolen, misplaced or left unattended, they may become vulnerable to hacking or other unauthorized use, creating a possible security risk. While, to date, we have not had a significant cyber security breach or attack that has had a material impact on our operations, there can be no assurance that our efforts to maintain the security and integrity of our information technology systems will be effective in the future. 8


  • Page 23

    Breach or other failure of our technology systems, including those of third parties with whom we do business, could result in the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the incident, additional security costs to mitigate against future incidents, regulatory penalties and litigation costs resulting from the incident. In addition, our increased use of mobile and cloud technologies could increase these and other operational risks, and any failure by mobile or cloud technology service providers to adequately safeguard their systems could disrupt our operations and result in misappropriation, corruption or loss of confidential or proprietary information. Moreover, loss of confidential client information could harm our reputation, result in the termination of contracts by our existing clients and subject us to litigation or liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. We maintain a cyber insurance policy to help mitigate against any potential losses relating to information security breaches. However, such insurance may only partially reimburse us for our losses, if at all, and if a claim is successful and exceeds or is not covered by our insurance policy, we may be required to pay a substantial amount to satisfy such successful claim. Failure to maintain adequate business continuity plans could have a material adverse effect on the Company and its products. Significant portions of our business operations and those of our critical third-party service providers are concentrated in a few geographic areas, including New York and New Jersey. Critical operations that are geographically concentrated in New York include portfolio management, trading operations, information technology, investment administration, and portfolio accounting services for our products as well as corporate accounting systems. Should we, or any of our critical service providers, experience a significant local or regional disaster or other significant business disruption, our ability to remain operational will depend in part on the safety and availability of our personnel, our office facilities, and the proper functioning of our network, telecommunication and other related systems and operations. We have backup systems and contingency plans, but we cannot ensure that they will be adequate under all circumstances or that material interruptions and disruptions will not occur. In addition, we rely to varying degrees on outside vendors for disaster recovery support, and we cannot guarantee that these vendors will be able to perform in an adequate and timely manner. Failure by us, or any of our critical service providers, to maintain up-to-date business continuity plans, including system backup facilities, would impede our ability to operate in the event of a significant business disruption, which could result in financial losses to the Company and our clients and investors. We could experience loss of client relationships if our reputation is harmed. Our reputation is important to the success of our business. We believe that the Cohen & Steers brand has been, and continues to be, well received globally both in our industry and with our clients, reflecting the fact that our brand, like our business, is based in part on trust and confidence. Our reputation may be harmed by a number of factors, including, but not limited to, poor investment performance, operational failures, the dissemination by current or former clients of unfavorable opinions about our services, changes in key members of an investment team or changes in our senior management and the imposition of legal or regulatory sanctions or penalties in connection with our business activities. If our reputation is harmed, existing clients and investors may reduce amounts held in, or withdraw entirely from, funds or accounts that we manage, or funds or accounts may terminate their relationship with us. In addition, reputational harm may cause us to lose current employees and we may be unable to attract new ones with similar qualifications or skills, which could negatively affect our operations. If we fail to address, or appear to fail to address, successfully and promptly, the underlying causes of any reputational harm, we may be unsuccessful in repairing any damage to our reputation and our future business prospects would likely be affected, and the loss of client relationships could reduce our assets under management, revenue and earnings. The failure of a key vendor to fulfill its obligations to the Company could have a material adverse effect on the Company and its products. We depend on a number of key vendors for various fund administration, fund and corporate accounting, custody and transfer agent services, information technology services, market data, and other operational needs. The failure or inability of the Company to establish backup for key services or the failure of any key vendor to fulfill its obligations could lead to operational issues for the Company and certain of its products, which could result in financial losses for the Company and its clients. 9


  • Page 24

    Risks Related to our Common Stock A significant portion of our common stock is owned or controlled by our Chairman and our Chief Executive Officer and their respective family members, which may limit the ability of other stockholders to influence the affairs of the Company. Our Chairman and a member of his family beneficially owned or controlled approximately 20.6% of our common stock as of December 31, 2019. In addition, our Chief Executive Officer and a member of his family beneficially owned or controlled approximately 24.8% of our common stock as of December 31, 2019. Such levels of ownership or control create the ability to meaningfully influence, among other things: the election of members of our board of directors, thereby indirectly influencing the management and affairs of the Company; the outcome of matters submitted to a vote of our stockholders; and any unsolicited acquisition of us and, consequently, potentially adversely affect the market price of our common stock or prevent our stockholders from realizing a premium on their shares. The interests of one or more of such persons may differ from those of other stockholders in instances where, for example, management compensation is being determined or where an unsolicited acquisition of us could result in a change in our management. The concentration of beneficial ownership in such persons may limit the ability of our other stockholders to influence the affairs of the Company. A sale of a substantial number of shares of our common stock may adversely affect the market price of our common stock, and the issuance of additional shares will dilute your percentage ownership in the Company. A sale of a substantial number of shares of our common stock in the public market, or the perception that such sale may occur, could adversely affect the market price of our common stock. Our Chairman and our Chief Executive Officer, together with certain of their respective family members, beneficially owned or controlled 9,749,328 shares and 11,734,949 shares, respectively, of our common stock as of December 31, 2019. Any of such persons may sell shares of our common stock in the open market, subject to any restrictions imposed by U.S. federal securities laws on sales by affiliates. In connection with our initial public offering in 2004, we entered into a Registration Rights Agreement with our Chairman and our Chief Executive Officer and certain trust entities controlled by certain of their respective family members that requires us to register under the Securities Act of 1933, as amended, shares of our common stock (and other securities convertible into or exchangeable or exercisable for shares of common stock) held by them under certain circumstances. In May 2018, we filed a Registration Statement on Form S-3 covering (i) the resale of up to an aggregate of 22,911,757 shares owned or controlled by our Chairman and our Chief Executive Officer and certain other persons and (ii) the offer and sale of an indeterminate number of shares by us to the public. The sale of a substantial number of shares of our common stock may adversely affect the market price of our common stock, and any additional shares that we issue will dilute your percentage ownership in the Company. Anti-takeover provisions in our charter documents and Delaware law may delay or prevent a change in control of us, which could decrease the trading price of our common stock. Our certificate of incorporation and bylaws and Delaware law contain certain anti-takeover provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company without negotiating with our board of directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company’s common stock. Certain of these provisions allow the Company to issue preferred stock with rights more senior to those of our common stock, impose various procedural and other requirements that could make it more difficult for stockholders to effect certain corporate actions, and set forth rules about how stockholders may present proposals or nominate directors for election at annual meetings. We believe these provisions protect our stockholders from coercive or other unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess acquisition proposals. However, these provisions apply even if an acquisition proposal may be considered beneficial by some stockholders and could have the effect of delaying or preventing an acquisition. In the event that our board of directors determines that a potential business combination transaction would be beneficial to the Company and its stockholders, such stockholders may elect to sell their shares in the Company and the trading price of our common stock could decrease. 10


  • Page 25

    Legal and Regulatory Risks We may be adversely impacted by legal and regulatory changes in the U.S. and internationally. We operate in a highly regulated industry and are subject to new regulations and revisions to, and evolving interpretations of, existing regulations in the U.S. and internationally. In recent years, regulators in the U.S. and abroad have increased oversight of the financial services industry, which may result in regulation that increases the Company’s cost of conducting its business and maintaining its global compliance standards or limit or change the Company’s current or prospective business. U.S. regulatory agencies have proposed and adopted multiple regulations that could impact the mutual fund industry. The SEC’s final rules and amendments that modernize reporting and disclosure and the implementation of a liquidity risk management program, along with other potential new regulations such as standardized fiduciary rules, could restrict the funds we manage from engaging in certain transactions, impact flows, increase expenses as well as compliance costs. In Europe, rules and regulations under MiFID II and MiFIR became effective on January 3, 2018. These have had, and will continue to have, direct and indirect effects on our operations in Europe, including increased costs for investment research and increased compliance, disclosure, reporting, and other obligations. There has been an increase in data and privacy regulations globally. In May 2018, the European Union’s General Data Protection Regulation (GDPR) became effective. The primary objectives of GDPR are to give individuals control of their personal data and to simplify the regulatory environment by unifying data protection regulation in the European Union. This has required us to extensively review our global data processing systems and procedures to comply with GDRP’s stringent rules. Compliance under GDPR has resulted in higher costs for increased disclosure and other obligations. Failure to comply with GDPR could result in fines up to the higher of 20 million euros or 4% of annual global revenues. Additionally, U.S. state data breach and privacy legislation, including the California Consumer Privacy Act, have come into effect requiring us to comply with stringent requirements, and we expect that there will be further regulation and legislation that will come into effect in the near future that will require us to comprehensively review our systems and processes and may result in additional costs. The U.K.’s exit from the European Union on January 31, 2020 (referred to as Brexit) may disrupt our business operations and impact our reported financial results as well as the liquidity and value of our investments. Brexit has caused significant geo-political and legal uncertainty and market volatility in the U.K. and elsewhere, which has continued during the Brexit negotiation process. CSUK’s ability to market and provide its services or serve as a distributor of financial products within the European Union could be restricted temporarily or in the long term as a result of Brexit. Our contingency plans for Brexit require the cooperation of counterparties or a regulator of financial services to make timely arrangements. While we believe it is in the best interests of counterparties and regulators to cooperate, we cannot guarantee that counterparties or regulators will cooperate or the timeliness of their cooperation. Our operating expenses have increased as we implement our plan to continue to market and provide our services and distribute our products in the short and/or long term. Although the full extent of the foregoing regulatory changes is still unclear, they may affect our business operations and increase our operating expenses. Our involvement in legal proceedings could adversely affect our results of operations and financial condition. Many aspects of our business involve risks of legal liability. Claims against us may arise in the ordinary course of business, including employment-related claims, and from time to time, we may receive subpoenas or other requests for information from various U.S. and non-U.S. governmental or regulatory authorities and third parties in connection with certain industry-wide, company-specific or other investigations or proceedings. In addition, certain funds we manage may become subject to lawsuits, any of which could potentially impact the investment returns of the applicable fund. We carry insurance in amounts and under terms that we believe are appropriate to cover potential liabilities related to litigation. However, we cannot guarantee that our insurance will cover all liabilities and losses to which we may be exposed, or that our insurance policies will continue to be available at acceptable terms and fees. As our insurance policies are due for renewal, we may need to assume higher deductibles or pay higher premiums, which would increase our expenses and reduce our net income. 11


  • Page 26

    The tax treatment of certain of our funds involves the interpretation of complex provisions of U.S. federal income tax law for which no precedent may be available and may be subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis. The U.S. federal income tax treatment of certain of our funds depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. U.S. federal income tax rules are constantly under review by the IRS and the U.S. Department of the Treasury, frequently resulting in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. Recent and ongoing changes to U.S. federal income tax laws and interpretations thereof could cause us to change our investments and commitments, affect the tax considerations of an investment in us and our funds and change the character or treatment of portions of our income. In addition, the Company may be required to make certain assumptions when electing a particular tax treatment. It is possible that the IRS could assert successfully that the assumptions made by us do not satisfy the technical requirements of the Internal Revenue Code and/or Treasury Regulations and could require items of income, gain, deduction, loss or credit, including interest deductions, be adjusted, reallocated or disallowed in a manner that adversely affects us and our clients. 12


  • Page 27

    Item 1B. Unresolved Staff Comments The Company has no unresolved SEC staff comments. Item 2. Properties Our principal executive office is located in leased office space at 280 Park Avenue, New York, New York. In addition, we have leased office space in London, Dublin, Hong Kong and Tokyo. Item 3. Legal Proceedings From time to time, we may become involved in legal matters relating to claims arising in the ordinary course of our business. There are currently no such matters pending that we believe could have a material effect on our consolidated results of operations, cash flows or financial condition. In addition, from time to time, we may receive subpoenas or other requests for information from various U.S. federal and state governmental authorities, domestic and international regulatory authorities and third parties in connection with certain industry-wide inquiries or other investigations or legal proceedings. It is our policy to cooperate fully with such requests. Item 4. Mine Safety Disclosures Not applicable. 13


  • Page 28

    PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange (NYSE) and is traded under the symbol “CNS”. As of February 18, 2020, there were 33 holders of record of our common stock. Holders of record include institutional and omnibus accounts that hold common stock on behalf of numerous underlying beneficial owners. Payment of any dividends to our common stockholders is subject to the approval of our Board of Directors. When determining whether to pay a dividend, we take into account general economic and business conditions, our strategic plans, our financial results and condition, contractual, legal and regulatory restrictions on the payment of dividends by us and our subsidiaries and such other factors deemed relevant. On February 20, 2020, we declared a quarterly cash dividend on our common stock in the amount of $0.39 per share. Issuer Purchases of Equity Securities During the three months ended December 31, 2019, we did not make any purchases of our equity securities that are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934. Recent Sales of Unregistered Securities None. 14


  • Page 29

    Item 6. Selected Financial Data The selected consolidated financial data, together with other information presented below, should be read in conjunction with our consolidated financial statements and the notes to those statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K. Selected Consolidated Financial and Other Data (in thousands, except per share data) As of and For the Years Ended December 31, 2019 2018 2017 2016 2015 Consolidated Statements of Operations Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,830 $ 381,111 $ 378,696 (1) $ 351,497 (1) $ 328,655 Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 250,696 234,073 223,950 (1) 215,986 (1) 201,106 Operating income . . . . . . . . . . . . . . . . . . . . . . . . 160,134 147,038 154,746 135,511 127,549 Total non-operating income (loss) . . . . . . . . . . 27,415 (3,259) 5,654 7,892 (14,805) (2) Income before provision for income taxes . . . . . . 187,549 143,779 160,400 143,403 112,744 Provision for income taxes . . . . . . . . . . . . . . . . . . 40,565 (3) 34,257 (3) 67,914 50,593 48,407 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,984 109,522 92,486 92,810 64,337 Less: Net (income) loss attributable to redeemable noncontrolling interests . . . . . . . . . (12,363) 4,374 (547) 126 214 Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 134,621 $ 113,896 $ 91,939 $ 92,936 $ 64,551 Earnings per share attributable to common stockholders Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.85 $ 2.43 $ 1.98 $ 2.02 $ 1.42 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.79 $ 2.40 $ 1.96 $ 2.00 $ 1.41 Cash dividends declared per share Quarterly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.44 $ 1.32 $ 1.12 $ 1.04 $ 1.00 Special. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.00 $ 2.50 $ 1.00 $ 0.50 $ 0.50 Consolidated Statements of Financial Condition Cash and cash equivalents . . . . . . . . . . . . . . . . $ 101,352 $ 92,733 $ 193,452 $ 183,234 $ 142,728 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,213 224,932 108,106 54,544 71,334 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . 402,419 481,039 410,125 333,728 305,322 Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 135,304 144,201 86,794 67,061 62,212 Redeemable noncontrolling interests . . . . . . 53,412 114,192 47,795 853 11,334 Total stockholders’ equity . . . . . . . . . . . . . . . 213,703 222,646 275,536 265,814 231,776 Other Data (in millions) Assets under management (AUM) by investment vehicle: (4) Institutional accounts . . . . . . . . . . . . . . . . . . . . $ 31,813 $ 27,148 $ 30,896 $ 29,848 $ 27,253 Open-end funds. . . . . . . . . . . . . . . . . . . . . . . . . 30,725 22,295 25,188 21,177 18,696 Closed-end funds . . . . . . . . . . . . . . . . . . . . . . . 9,644 8,410 9,406 8,963 9,029 Total AUM . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,182 $ 57,853 $ 65,490 $ 59,988 $ 54,978 _________________________ (1) Amounts have been recast to reflect the Company’s adoption of the new revenue recognition accounting standard on January 1, 2018. See Notes 2 and 3 of the consolidated financial statements for further discussion of the Company's recently adopted accounting pronouncements and revenue, respectively. (2) Includes $8.2 million of unrealized losses related to the reclassification of one of the Company’s seed investments from available-for- sale to equity method and a $2.8 million other-than-temporary impairment. (3) Amount reflects the lower U.S. federal statutory tax rate of 21.0% due to the Tax Cuts and Jobs Act. (4) Prior period amounts have been recast to include model-based portfolios which were previously classified as assets under advisement. 15


  • Page 30

    Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Annual Report on Form 10-K and other documents filed by us contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect management’s current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “may,” “should,” “seeks,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative versions of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these forward-looking statements. We believe that these factors include, but are not limited to, the risks described in Item 1A. Risk Factors of this Annual Report on Form 10-K. These factors are not exhaustive and should be read in conjunction with the other cautionary statements that are included in this Annual Report on Form 10-K. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. Cohen & Steers, Inc. (CNS), a Delaware corporation formed in 2004, and its subsidiaries are collectively referred to as the Company, we, us or our. Executive Overview We are a global investment manager specializing in real assets and alternative income. Our specialties include real estate securities, listed infrastructure and natural resource equities, as well as preferred securities and other income solutions. Founded in 1986, we are headquartered in New York City, with offices in London, Dublin, Hong Kong and Tokyo. Our primary investment strategies include U.S. real estate securities, global/international real estate securities, global listed infrastructure, midstream energy and MLPs, real assets multi-strategy, preferred securities, low duration preferred securities and global natural resource equities. Our strategies seek to achieve a variety of investment objectives for different risk profiles and are actively managed by specialist teams of investment professionals who employ fundamental-driven research and portfolio management processes. We offer our strategies through a variety of investment vehicles, including U.S. and non-U.S. registered funds and other commingled vehicles, separate accounts, and subadvised portfolios. Our distribution network encompasses two major channels in the asset management industry. Our Wealth channel covers sophisticated financial intermediaries, including national and regional brokerage firms, registered investment advisers, and bank trusts. The U.S. registered open-end funds for which we serve as investment adviser are available for purchase with and without commissions through full service and discount broker-dealers as well as the significant networks serving financial advisers. Our institutional channel includes corporate, public defined benefit plans, public defined contribution pension plans and Taft-Hartley trusts, endowments and foundations, sovereign wealth funds, healthcare, insurance companies as well as other financial institutions that access our investment management services directly, through consultants or through other intermediaries. Our revenue is derived from fees received from our clients, including fees for managing or subadvising client accounts as well as investment advisory, administration, distribution and service fees received from Company-sponsored open-end and closed-end funds. Our fees are based on contractually specified rates applied to the value of the assets we manage and, in certain cases, investment performance. Our revenue fluctuates with changes in the total value of our assets under management, which may occur as a result of market appreciation and depreciation, contributions or withdrawals from client accounts, foreign currency fluctuations and distributions. This revenue is recognized over the period that the assets are managed. A majority of our revenue, approximately 92.1%, 91.8% and 91.1% for the years ended December 31, 2019, 2018 and 2017, respectively, was derived from investment advisory and administration fees for providing asset management services to institutional accounts as well as open-end funds and closed-end funds sponsored by the Company. 16


  • Page 31

    Assets Under Management By Investment Vehicle Years Ended December 31, (in millions) 2019 2018 (1) 2017 (1) Institutional Accounts Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 27,148 $ 30,896 $ 29,848 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,993 2,814 3,963 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,908) (3,558) (3,267) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (915) (744) 696 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,873 (1,074) 3,178 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,306) (1,962) (3,018) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 32 192 Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,665 (3,748) 1,048 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,813 $ 27,148 $ 30,896 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 44.1% 46.9% 47.2% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,301 $ 28,893 $ 30,682 Open-end Funds Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 22,295 $ 25,188 $ 21,177 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,484 8,963 9,702 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,745) (9,411) (6,541) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,739 (448) 3,161 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,881 (1,302) 2,230 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,177) (1,111) (1,188) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (32) (192) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,430 (2,893) 4,011 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,725 $ 22,295 $ 25,188 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 42.6% 38.5% 38.5% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,595 $ 24,276 $ 23,373 Closed-end Funds Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 8,410 $ 9,406 $ 8,963 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 12 — Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80) — — Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75) 12 — Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,823 (496) 949 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (514) (512) (506) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,234 (996) 443 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,644 $ 8,410 $ 9,406 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 13.4% 14.5% 14.4% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,381 $ 9,012 $ 9,343 Total Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 57,853 $ 65,490 $ 59,988 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,482 11,789 13,665 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,733) (12,969) (9,808) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,749 (1,180) 3,857 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,577 (2,872) 6,357 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,997) (3,585) (4,712) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,329 (7,637) 5,502 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,182 $ 57,853 $ 65,490 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67,277 $ 62,181 $ 63,398 _________________________ (1) Amounts have been recast to include model-based portfolios which were previously classified as assets under advisement. 17


  • Page 32

    Assets Under Management - Institutional Accounts By Account Type Years Ended December 31, (in millions) 2019 2018 (1) 2017 (1) Advisory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 12,065 $ 11,341 $ 9,068 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,918 2,101 1,822 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,351) (925) (868) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567 1,176 954 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,032 (484) 1,127 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 32 192 Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,604 724 2,273 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,669 $ 12,065 $ 11,341 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 49.3% 44.4% 36.7% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,752 $ 11,804 $ 10,280 Japan Subadvisory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 9,288 $ 12,672 $ 14,888 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 942 144 1,411 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,076) (1,250) (1,545) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (134) (1,106) (134) Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,475 (316) 936 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,306) (1,962) (3,018) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,035 (3,384) (2,216) Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,323 $ 9,288 $ 12,672 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 32.4% 34.2% 41.0% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,954 $ 10,608 $ 13,967 Subadvisory Excluding Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 5,795 $ 6,883 $ 5,892 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,133 569 730 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,481) (1,383) (854) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,348) (814) (124) Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366 (274) 1,115 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 — — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (1,088) 991 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,821 $ 5,795 $ 6,883 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 18.3% 21.3% 22.3% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,595 $ 6,481 $ 6,435 Total Institutional Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 27,148 $ 30,896 $ 29,848 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,993 2,814 3,963 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,908) (3,558) (3,267) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (915) (744) 696 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,873 (1,074) 3,178 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,306) (1,962) (3,018) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 32 192 Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,665 (3,748) 1,048 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,813 $ 27,148 $ 30,896 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,301 $ 28,893 $ 30,682 _________________________ (1) Amounts have been recast to include model-based portfolios which were previously classified as assets under advisement. 18


  • Page 33

    Assets Under Management By Investment Strategy Years Ended December 31, (in millions) 2019 2018 (1) 2017 (1) U.S. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 24,627 $ 29,241 $ 30,587 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,298 4,488 5,703 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,363) (5,158) (5,241) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,935 (670) 462 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,346 (1,151) 1,896 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,886) (2,561) (3,694) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (232) (10) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,397 (4,614) (1,346) Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,024 $ 24,627 $ 29,241 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 43.0% 42.6% 44.6% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,117 $ 26,605 $ 30,271 Preferred Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 13,068 $ 14,435 $ 10,797 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,726 4,503 5,168 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,041) (4,723) (2,635) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,685 (220) 2,533 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,406 (803) 1,645 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (597) (560) (540) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 216 — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,513 (1,367) 3,638 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,581 $ 13,068 $ 14,435 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 24.4% 22.6% 22.0% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,702 $ 14,237 $ 12,829 Global/International Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 11,047 $ 11,194 $ 9,456 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,541 1,975 1,520 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,714) (1,669) (1,071) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (173) 306 449 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,887 (254) 1,491 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (252) (199) (212) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 10 Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,462 (147) 1,738 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,509 $ 11,047 $ 11,194 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 18.7% 19.1% 17.1% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,718 $ 11,341 $ 10,327 _________________________ (1) Amounts have been recast to include model-based portfolios which were previously classified as assets under advisement. 19


  • Page 34

    Assets Under Management By Investment Strategy - continued Years Ended December 31, (in millions) 2019 2018 (1) 2017 (1) Global Listed Infrastructure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 6,517 $ 6,982 $ 5,712 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 601 872 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (699) (448) (376) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 153 496 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,520 (419) 970 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (201) (199) (196) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 — — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,559 (465) 1,270 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,076 $ 6,517 $ 6,982 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 11.2% 11.3% 10.7% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,455 $ 6,924 $ 6,506 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 2,594 $ 3,638 $ 3,436 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 222 402 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (916) (971) (485) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (712) (749) (83) Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 (245) 355 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61) (66) (70) Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (247) 16 — Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (602) (1,044) 202 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,992 $ 2,594 $ 3,638 Percentage of total assets under management. . . . . . . . . . . . . . . . . . . . . . . . 2.8% 4.5% 5.6% Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,285 $ 3,075 $ 3,465 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets under management, beginning of period . . . . . . . . . . . . . . . . . . . . . . $ 57,853 $ 65,490 $ 59,988 Inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,482 11,789 13,665 Outflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,733) (12,969) (9,808) Net inflows (outflows) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,749 (1,180) 3,857 Market appreciation (depreciation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,577 (2,872) 6,357 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,997) (3,585) (4,712) Total increase (decrease). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,329 (7,637) 5,502 Assets under management, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,182 $ 57,853 $ 65,490 Average assets under management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67,277 $ 62,182 $ 63,398 _________________________ (1) Amounts have been recast to include model-based portfolios which were previously classified as assets under advisement. 20


  • Page 35

    Investment Performance as of December 31, 2019 _________________________ (1) Past performance is no guarantee of future results. Outperformance is determined by comparing the annualized investment performance of each investment strategy to the performance of specified reference benchmarks. Investment performance in excess of the performance of the benchmark is considered outperformance. The investment performance calculation of each investment strategy is based on all active accounts and investment models pursuing similar investment objectives. For accounts, actual investment performance is measured gross of fees and net of withholding taxes. For investment models, for which actual investment performance does not exist, the investment performance of a composite of accounts pursuing comparable investment objectives is used as a proxy for actual investment performance. The performance of the specified reference benchmark for each account and investment model is measured net of withholding taxes, where applicable. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided by Cohen & Steers. (2) © 2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Morningstar calculates its ratings based on a risk-adjusted return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars and the bottom 10% receive one star. Past performance is no guarantee of future results. Based on independent rating by Morningstar, Inc. of investment performance of each Cohen & Steers-sponsored open-end U.S.-registered mutual fund for all share classes for the overall period at December 31, 2019. Overall Morningstar rating is a weighted average based on the 3-year, 5-year and 10-year Morningstar rating. Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages. This is not investment advice and may not be construed as sales or marketing material for any financial product or service sponsored or provided by Cohen & Steers. Changes in Assets Under Management - 2019 Compared with 2018 Assets under management at December 31, 2019 increased 24.8% to $72.2 billion from $57.9 billion at December 31, 2018. The increase was due to net inflows of $3.7 billion and market appreciation of $14.6 billion, partially offset by distributions of $4.0 billion. Net inflows included $2.7 million into preferred securities and $1.9 billion into U.S. real estate, partially offset by net outflows of $676 million from large cap value (which is included in “Other” in the table on pages 19-20). Market appreciation included $7.3 billion from U.S. real estate, $2.9 billion from global/international real estate, $2.4 billion from preferred securities and $1.5 billion from global listed infrastructure. Distributions included $2.9 billion from U.S. real estate and $597 million from preferred securities. Our overall organic growth rate was 6.5% for the year ended 21


  • Page 36

    December 31, 2019, compared with organic decay of 1.8% for the year ended December 31, 2018. The organic growth/decay rate represents the ratio of net flows for the year to the beginning assets under management of the respective period. Average assets under management for the year ended December 31, 2019 increased 8.2% to $67.3 billion from $62.2 billion for the year ended December 31, 2018. Institutional accounts Assets under management in institutional accounts at December 31, 2019, which represented 44.1% of total assets under management, increased 17.2% to $31.8 billion from $27.1 billion at December 31, 2018. The increase was due to market appreciation of $6.9 billion, partially offset by net outflows of $915 million and distributions of $1.3 billion. Net outflows included $510 million from large cap value (which is included in “Other” in the table on pages 19-20) and $356 million from preferred securities, partially offset by net inflows of $231 million into U.S. real estate. Market appreciation included $3.0 billion from U.S. real estate and $2.4 million from global/international real estate. Distributions included $1.2 billion from U.S. real estate. Our organic decay rate for institutional accounts was 3.4% for the year ended December 31, 2019, compared with 2.4% for the year ended December 31, 2018. Average assets under management for institutional accounts for the year ended December 31, 2019 increased 4.9% to $30.3 billion from $28.9 billion for the year ended December 31, 2018. Assets under management in institutional advisory accounts at December 31, 2019, which represented 49.3% of institutional assets under management, increased 29.9% to $15.7 billion from $12.1 billion at December 31, 2018. The increase was due to net inflows of $567 million and market appreciation of $3.0 billion. Net inflows included $592 million into global/international real estate and $124 million into U.S. real estate, partially offset by net outflows of $92 million from large cap value (which is included in “Other” in the table on pages 19-20) and $69 million from global listed infrastructure. Market appreciation included $1.1 billion from global/international real estate, $803 million from U.S. real estate and $512 million from global listed infrastructure. Our organic growth rate for institutional advisory accounts was 4.7% for the year ended December 31, 2019, compared with 10.4% for the year ended December 31, 2018. Average assets under management for institutional advisory accounts for the year ended December 31, 2019 increased 25.0% to $14.8 billion from $11.8 billion for the year ended December 31, 2018. Assets under management in Japan subadvisory accounts at December 31, 2019, which represented 32.4% of institutional assets under management, increased 11.1% to $10.3 billion from $9.3 billion at December 31, 2018. The increase was due to market appreciation of $2.5 billion, partially offset by net outflows of $134 million and distributions of $1.3 billion. Net outflows included $180 million from preferred securities and $104 million from global/international real estate, partially offset by net inflows of $152 million into U.S. real estate. Market appreciation included $1.9 billion from U.S. real estate and $445 million from global/international real estate. Distributions included $1.2 billion from U.S. real estate. Our organic decay rate for Japan subadvisory accounts was 1.4% for the year ended December 31, 2019, compared with 8.7% for the year ended December 31, 2018. Average assets under management for Japan subadvisory accounts for the year ended December 31, 2019 decreased 6.2% to $10.0 billion from $10.6 billion. Assets under management in institutional subadvisory accounts excluding Japan at December 31, 2019, which represented 18.3% of institutional assets under management, were $5.8 billion at both December 31, 2019 and 2018 as net outflows were offset by by market appreciation. Our organic decay rate for institutional subadvisory accounts excluding Japan was 23.3% for the year ended December 31, 2019, compared with 11.8% for the year ended December 31, 2018. Average assets under management for institutional subadvisory accounts excluding Japan for the year ended December 31, 2019 decreased 13.7% to $5.6 billion from $6.5 billion for the year ended December 31, 2018. Open-end funds Assets under management in open-end funds at December 31, 2019, which represented 42.6% of total assets under management, increased 37.8% to $30.7 billion from $22.3 billion at December 31, 2018. The increase was due to net inflows of $4.7 billion and market appreciation of $5.9 billion, partially offset by distributions of $2.2 billion. Net inflows included $3.0 billion into preferred securities and $1.7 billion into U.S. real estate. Market appreciation included $3.7 billion from U.S. real estate and $1.6 billion from preferred securities. Distributions included $1.5 billion from U.S. real estate and $478 22


  • Page 37

    million from preferred securities. Our organic growth rate for open-end funds was 21.3% for the year ended December 31, 2019, compared with organic decay rate of 1.8% for the year ended December 31, 2018. Average assets under management for open-end funds for the year ended December 31, 2019 increased 13.7% to $27.6 billion from $24.3 billion for the year ended December 31, 2018. Closed-end funds Assets under management in closed-end funds at December 31, 2019, which represented 13.4% of total assets under management, increased 14.7% to $9.6 billion from $8.4 billion at December 31, 2018. The increase was due to market appreciation of $1.8 billion, partially offset by net outflows of $75 million related to decreases in certain funds' outstanding leverage and distributions of $514 million. Our organic decay rate for closed-end funds was 0.9% for the year ended December 31, 2019, compared with organic growth of 0.1% for the year ended December 31, 2018. Average assets under management for closed-end funds for the year ended December 31, 2019 increased 4.1% to $9.4 billion from $9.0 billion for the year ended December 31, 2018. Changes in Assets Under Management - 2018 Compared with 2017 Assets under management at December 31, 2018 decreased 11.7% to $57.9 billion from $65.5 billion at December 31, 2017. The decrease was due to net outflows of $1.2 billion, market depreciation of $2.9 billion and distributions of $3.6 billion. Net outflows included $670 million from U.S. real estate and $607 million from commodities (which is included in “Other” in the table on pages 19-20). Market depreciation included $1.2 billion from U.S. real estate, $803 million from preferred securities and $419 million from global listed infrastructure. Distributions included $2.6 billion from U.S. real estate and $560 million from preferred securities. Our overall organic decay rate was 1.8% for the year ended December 31, 2018, compared with organic growth of 6.4% for the year ended December 31, 2017. The organic growth/decay rate represents the ratio of net flows for the year to the beginning assets under management of the respective period. Average assets under management for the year ended December 31, 2018 decreased 1.9% to $62.2 billion from $63.4 billion for the year ended December 31, 2017. Institutional accounts Assets under management in institutional accounts at December 31, 2018, which represented 46.9% of total assets under management, decreased 12.1% to $27.1 billion from $30.9 billion at December 31, 2017. The decrease was due to net outflows of $744 million, market depreciation of $1.1 billion and distributions of $2.0 billion. Net outflows included $944 million from U.S. real estate and $546 million from commodities (which is included in “Other” in the table on pages 19-20), partially offset by net inflows of $550 million into preferred securities and $202 million into global/international real estate. Market depreciation included $372 million from U.S. real estate, $202 million from global listed infrastructure, $196 million from preferred securities and $171 million from global/international real estate. Distributions included $1.8 billion from U.S. real estate. Our organic decay rate for institutional accounts was 2.4% for the year ended December 31, 2018, compared with organic growth of 2.3% for the year ended December 31, 2017. Average assets under management for institutional accounts for the year ended December 31, 2018 decreased 5.8% to $28.9 billion from $30.7 billion for the year ended December 31, 2017. Assets under management in institutional advisory accounts at December 31, 2018, which represented 44.4% of institutional assets under management, increased 6.4% to $12.1 billion from $11.3 billion at December 31, 2017. The increase was due to net inflows of $1.2 billion, partially offset by market depreciation of $484 million. Net inflows included $631 million into preferred securities and $209 million into global/international real estate. Market depreciation included $119 million from U.S. real estate, $104 million from global listed infrastructure and $89 million from real assets multi- strategy (which is included in “Other” in the table on pages 19-20). Our organic growth rate for institutional advisory accounts was 10.4% for the year ended December 31, 2018, compared with 10.5% for the year ended December 31, 2017. Average assets under management for institutional advisory accounts for the year ended December 31, 2018 increased 14.8% to $11.8 billion from $10.3 billion for the year ended December 31, 2017. Assets under management in Japan subadvisory accounts at December 31, 2018, which represented 34.2% of institutional assets under management, decreased 26.7% to $9.3 billion from $12.7 billion at December 31, 2017. The decrease was due to net outflows of $1.1 billion, market depreciation of $316 million and distributions of $2.0 billion. Net 23


  • Page 38

    outflows included $966 million from U.S. real estate. Market depreciation included $224 million from U.S. real estate and $59 million from global/international real estate. Distributions included $1.8 billion from U.S. real estate. Our organic decay rate for Japan subadvisory accounts was 8.7% for the year ended December 31, 2018, compared with 0.9% for the year ended December 31, 2017. Average assets under management for Japan subadvisory accounts for the year ended December 31, 2018 decreased 24.0% to $10.6 billion from $14.0 billion for the year ended December 31, 2017. Assets under management in institutional subadvisory accounts excluding Japan at December 31, 2018, which represented 21.3% of institutional assets under management, decreased 15.8% to $5.8 billion from $6.9 billion at December 31, 2017. The decrease was due to net outflows of $814 million and market depreciation of $274 million. Net outflows included $546 million from commodities (which is included in “Other” in the table on pages 19-20) and $145 million from U.S. real estate. Market depreciation included $97 million from global listed infrastructure, $95 million from preferred securities and $29 million from U.S. real estate. Our organic decay rate for institutional subadvisory excluding Japan was 11.8% for the year ended December 31, 2018, compared with 2.1% for the year ended December 31, 2017. Average assets under management for institutional subadvisory accounts excluding Japan for the year ended December 31, 2018 increased 0.7% to $6.5 billion from $6.4 billion for the year ended December 31, 2017. Open-end funds Assets under management in open-end funds at December 31, 2018, which represented 38.5% of total assets under management, decreased 11.5% to $22.3 billion from $25.2 billion at December 31, 2017. The decrease was due to net outflows of $448 million, market depreciation of $1.3 billion and distributions of $1.1 billion. Net outflows included $771 million from preferred securities, partially offset by net inflows of $276 million into U.S. real estate and $118 million into global listed infrastructure. Market depreciation included $635 million from U.S. real estate and $493 million from preferred securities. Distributions included $566 million from U.S. real estate and $439 million from preferred securities. Our organic decay rate for open-end funds was 1.8% for the year ended December 31, 2018, compared with organic growth of 14.9% for the year ended December 31, 2017. Average assets under management for open-end funds for the year ended December 31, 2018 increased 3.9% to $24.3 billion from $23.4 billion for the year ended December 31, 2017. Closed-end funds Assets under management in closed-end funds at December 31, 2018, which represented 14.5% of total assets under management, decreased 10.6% to $8.4 billion from $9.4 billion at December 31, 2017. The decrease was due to market depreciation of $496 million and distributions of $512 million. Our organic growth rate for closed-end funds was 0.1% for the year ended December 31, 2018, compared with 0.0% for the year ended December 31, 2017. Average assets under management for closed-end funds for the year ended December 31, 2018 decreased 3.5% to $9.0 billion from $9.3 billion for the year ended December 31, 2017. 24


  • Page 39

    Summary of Operating Information Years Ended December 31, (in thousands, except percentages and per share data) 2019 2018 2017 U.S. GAAP Revenue (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,830 $ 381,111 $ 378,696 Expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250,696 $ 234,073 $ 223,950 Operating income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,134 $ 147,038 $ 154,746 Non-operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,415 $ (3,259) $ 5,654 Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . $ 134,621 $ 113,896 $ 91,939 Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.79 $ 2.40 $ 1.96 Operating margin (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.0% 38.6% 40.9% As Adjusted (2) Net income attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . $ 124,360 $ 113,849 $ 97,037 Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.57 $ 2.40 $ 2.07 Operating margin (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.6% 39.1% 40.9% _________________________ (1) The presentation for the year ended December 31, 2017 has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. (2) The “As Adjusted” amounts represent non-GAAP financial measures. Refer to pages 31-32 for reconciliations to the most directly comparable U.S. GAAP financial measures. U.S. GAAP 2019 Compared with 2018 Revenue (1) Years Ended December 31, (in thousands) 2019 2018 $ Change % Change Institutional accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,346 $ 104,327 $ 6,019 5.8% Open-end funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,730 168,273 19,457 11.6% Closed-end funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,502 77,270 3,232 4.2% Investment advisory and administration fees . . . . . . . . . . . . . 378,578 349,870 28,708 8.2% Distribution and service fees . . . . . . . . . . . . . . . . . . . . . . . . . 30,048 29,090 958 3.3% Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,204 2,151 53 2.5% Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,830 $ 381,111 $ 29,719 7.8% _________________________ (1) Prior period amounts related to model-based portfolios were reclassified from other (previously reported as portfolio consulting and other) to investment advisory and administration fees. Revenue for the year ended December 31, 2019 increased 7.8% primarily attributable to higher average assets under management in all three investment vehicles. For the year ended December 31, 2019: Total investment advisory revenue compared with average assets under management in institutional accounts implied an annual effective fee rate of 36.4 bps and 36.1 bps for the years ended December 31, 2019 and 2018, respectively. Total investment advisory and administration revenue compared with average assets under management in open-end funds implied an annual effective fee rate of 68.0 bps and 69.3 bps for the years ended December 31, 2019 and 2018, respectively. The decrease in the annual effective fee rate is primarily due to a reduction of the investment advisory fee rate and higher fund reimbursements related to the imposition of a cap effective July 1, 2019 by Cohen & Steers Realty Shares, Inc. Total investment advisory and administration revenue compared with average assets under management in closed-end funds implied an annual effective fee rate of 85.8 bps and 85.7 bps for the years ended December 31, 2019 and 2018, respectively. 25


  • Page 40

    Expenses Years Ended December 31, (in thousands) 2019 2018 $ Change % Change Employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . $ 143,431 $ 131,292 $ 12,139 9.2 % Distribution and service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,237 50,043 5,194 10.4 % General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,632 48,265 (633) (1.3)% Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 4,396 4,473 (77) (1.7)% Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250,696 $ 234,073 $ 16,623 7.1 % Employee compensation and benefits for the year ended December 31, 2019 increased primarily due to higher incentive compensation of $4.8 million, higher amortization of restricted stock units of $3.5 million and higher salaries of $2.0 million. Distribution and service fees expense for the year ended December 31, 2019 increased primarily due to higher average assets under management in U.S. open-end funds of approximately $3.8 million and an increase in sub-transfer agent fees on certain assets by one of the Company's intermediaries of approximately $2.3 million, partially offset by the impact of redemptions from a higher cost intermediary of approximately $1.0 million. General and administrative expenses for the year ended December 31, 2019 decreased primarily due to expenses of approximately $871,000 associated with the evaluation of a potential business transaction that the Company did not pursue that were included in the year ended December 31, 2018, partially offset by costs associated with the Cohen & Steers Quality Income Realty Fund, Inc. rights offering of approximately $346,000 as well as higher professional fees of approximately $100,000 for the year ended December 31, 2019. Operating Margin Operating margin for the year ended December 31, 2019 increased to 39.0% from 38.6% for the year ended December 31, 2018. Operating margin represents the ratio of operating income to operating revenue. Non-operating Income (Loss) Years Ended December 31, 2019 2018 Seed Seed (in thousands) Investments Other Total Investments Other Total Interest and dividend income—net. . . . $ 3,052 $ 3,664 $ 6,716 $ 6,754 $ 3,672 $ 10,426 Gain (loss) from investments—net. . . . 21,673 — 21,673 (14,264) — (14,264) Foreign currency gains (losses)—net . . 381 (1,355) (974) (1,702) 2,281 579 Total non-operating income (loss) . . $ 25,106 (1) $ 2,309 $ 27,415 $ (9,212) (1) $ 5,953 $ (3,259) _________________________ (1) Amounts included income of $12.4 million and loss of $4.4 million attributable to third-party interests for the years ended December 31, 2019 and 2018, respectively. For the year ended December 31, 2019, the Company's share of non-operating income from seed investments was $12.7 million, approximating a return of 19.0%. For the year ended December 31, 2018, the Company's share of non- operating loss from seed investments was $4.8 million, approximating a return of (6.9)%. Income Taxes Years Ended December 31, (in thousands, except percentages) 2019 2018 $ Change % Change Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,565 $ 34,257 $ 6,308 18.4% Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.2% 23.1% The effective tax rate for the year ended December 31, 2019 differed from the U.S. federal statutory rate of 21.0% primarily due to state, local and foreign taxes, partially offset by the reversal of certain liabilities associated with unrecognized tax benefits, the release of a portion of the valuation allowance associated with unrealized gains on the Company's seed investments and the effects related to the delivery of restricted stock units. The effective tax rate for the year 26


  • Page 41

    ended December 31, 2018 differed from the U.S. federal statutory rate of 21.0% primarily due to state, local and foreign taxes, partially offset by the reversal of certain liabilities associated with unrecognized tax benefits, tax effects related to the delivery of restricted stock units and an adjustment to the Company's transition tax liability in connection with the Tax Cuts and Jobs Act (the Tax Act). 2018 Compared with 2017 Revenue (1) Years Ended December 31, (in thousands) 2018 2017 $ Change % Change Institutional accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 104,327 $ 103,629 $ 698 0.7 % Open-end funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,273 162,601 5,672 3.5 % Closed-end funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,270 78,670 (1,400) (1.8)% Investment advisory and administration fees . . . . . . . . . . . . . 349,870 344,900 4,970 1.4 % Distribution and service fees . . . . . . . . . . . . . . . . . . . . . . . . . 29,090 30,747 (1,657) (5.4)% Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,151 3,049 (898) (29.5)% Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 381,111 $ 378,696 $ 2,415 0.6 % _________________________ (1) Amounts related to model-based portfolios were reclassified from other (previously reported as portfolio consulting and other) to investment advisory and administration fees. Revenue for the year ended December 31, 2018 increased 0.6% primarily due to a favorable change in the fee mix. For the year ended December 31, 2018: Total investment advisory revenue compared with average assets under management in institutional accounts implied an annual effective fee rate of 36.1 bps and 33.8 bps for the years ended December 31, 2018 and 2017, respectively. The increase in the annual effective fee rate reflected net outflows from lower fee paying accounts. Total investment advisory and administration revenue compared with average assets under management in open-end funds implied an annual effective fee rate of 69.3 bps and 69.6 bps for the years ended December 31, 2018 and 2017, respectively. Total investment advisory and administration revenue compared with average assets under management in closed-end funds implied an annual effective fee rate of 85.7 bps and 84.2 bps for the years ended December 31, 2018 and 2017, respectively. The net increase in the annual effective fee rate reflected the full-year effect of the realignment of administration fee rates across our mutual fund complex, which was approved by the mutual fund Board of Directors in June 2017 and became effective on October 1, 2017. Expenses Years Ended December 31, (in thousands) 2018 2017 $ Change % Change Employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . $ 131,292 $ 124,076 $ 7,216 5.8 % Distribution and service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,043 53,338 (3,295) (6.2)% General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,265 42,219 6,046 14.3 % Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 4,473 4,317 156 3.6 % Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 234,073 $ 223,950 $ 10,123 4.5 % Employee compensation and benefits for the year ended December 31, 2018 increased primarily due to higher salaries of $3.3 million, higher amortization of restricted stock units of $2.1 million and incentive compensation of $1.9 million, partially offset by lower production compensation of $1.1 million. Distribution and service fees expense for the year ended December 31, 2018 decreased primarily due to a continued shift in the composition of assets under management into lower cost share classes. General and administrative expenses for the year ended December 31, 2018 increased primarily due to higher research and market data expenses of approximately $1.2 million, higher recruiting fees of approximately $791,000, and expenses of 27


  • Page 42

    approximately $511,000 associated with the evaluation of a potential business transaction that we did not pursue. In addition, the year ended December 31, 2017 included refunds of foreign withholding taxes related to prior years of approximately $1.3 million. Operating Margin Operating margin for the year ended December 31, 2018 decreased to 38.6% from 40.9% for the year ended December 31, 2017. Operating margin represents the ratio of operating income to operating revenue. Non-operating Income (Loss) Years Ended December 31, 2018 2017 Seed Seed (in thousands) Investments Other Total Investments Other Total Interest and dividend income—net. . . . $ 6,754 $ 3,672 $ 10,426 $ 2,903 $ 1,430 $ 4,333 Gain (loss) from investments—net. . . . (14,264) — (14,264) 2,020 — 2,020 Foreign currency gains (losses)—net . . (1,702) 2,281 579 (516) (183) (699) Total non-operating income (loss) . . $ (9,212) (1) $ 5,953 $ (3,259) $ 4,407 (1) $ 1,247 $ 5,654 _________________________ (1) Amounts included loss of $4.4 million and income of $547,000 attributable to third-party interests for the years ended December 31, 2018 and 2017, respectively. For the year ended December 31, 2018, the Company's share of non-operating loss from seed investments was $4.8 million, approximating a return of (6.9)%. For the year ended December 31, 2017, the Company's share of non-operating income from seed investments was $3.9 million, approximating a return of 6.1%. Income Taxes Years Ended December 31, (in thousands, except percentages) 2018 2017 $ Change % Change Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,257 $ 67,914 $ (33,657) (49.6)% Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1% 42.5% The effective tax rate for the year ended December 31, 2018 differed from the U.S. federal statutory rate of 21.0% primarily due to state, local and foreign taxes, partially offset by the reversal of certain liabilities associated with unrecognized tax benefits and the tax effects related to the delivery of restricted stock units. The effective tax rate for the year ended December 31, 2017 differed from the U.S. federal statutory rate of 35.0% primarily due to tax charges of approximately $8.4 million, associated with the enactment of the Tax Act on December 22, 2017 and remeasurement of deferred and other tax balances aggregating to $4.3 million, partially offset by the reversal of certain liabilities associated with unrecognized tax benefits. 28


  • Page 43

    As Adjusted The term “As Adjusted” is used to identify non-GAAP financial information in the discussion below. Refer to pages 31-32 for reconciliations to the most directly comparable U.S. GAAP financial measures. 2019 Compared with 2018 Revenue Revenue, as adjusted, for the year ended December 31, 2019 was $410.4 million, compared with $380.4 million for the year ended December 31, 2018. Revenue, as adjusted, excluded the impact of consolidation of certain of our seed investments for both years. Expenses Expenses, as adjusted, for the year ended December 31, 2019 were $247.7 million, compared with $231.8 million for the year ended December 31, 2018. Expenses, as adjusted, excluded the following: The impact of consolidation of certain of our seed investments for both years; Amounts related to the accelerated vesting of certain restricted stock units for the year ended December 31, 2019; Costs associated with the Cohen & Steers Quality Income Reality Fund, Inc. rights offering for the year ended December 31, 2019; and Expenses incurred associated with the evaluation of a potential business transaction that we did not pursue for the year ended December 31, 2018. Operating Margin Operating margin, as adjusted, for the year ended December 31, 2019 was 39.6%, compared with 39.1% for the year ended December 31, 2018. Non-operating Income Non-operating income, as adjusted, for the year ended December 31, 2019 was $4.2 million, compared with $3.7 million for the year ended December 31, 2018. Non-operating income, as adjusted, excluded the following for both years: Results from our seed investments; and Net foreign currency exchange gains and losses associated with U.S. dollar-denominated assets held by certain foreign subsidiaries. Income Taxes The effective tax rate, as adjusted, for the year ended December 31, 2019 was 25.5%, compared with 25.3% for the year ended December 31, 2018. The effective tax rate, as adjusted, excluded the following: Tax effects associated with non-GAAP adjustments as well as discrete items for both years; The reversal of certain liabilities associated with unrecognized tax benefits for both years; and Tax effects related to the Tax Act for the year ended December 31, 2018. 29


  • Page 44

    2018 Compared with 2017 Revenue Revenue, as adjusted, for the year ended December 31, 2018 was $380.4 million, compared with $378.3 million for the year ended December 31, 2017. Revenue, as adjusted, excluded the impact of consolidation of certain of our seed investments for both years. Expenses Expenses, as adjusted, for the year ended December 31, 2018 were $231.8 million, compared with $223.7 million for the year ended December 31, 2017. Expenses, as adjusted, excluded the following: The impact of consolidation of certain of our seed investments for both years; Expenses incurred associated with the evaluation of a potential business transaction that we did not pursue for the year ended December 31, 2018; Amounts related to the accelerated vesting of certain restricted stock units due to a retirement for the year ended December 31, 2017; and Refunds of foreign withholding taxes recorded for the year ended December 31, 2017. Operating Margin Operating margin, as adjusted, for the year ended December 31, 2018 was 39.1%, compared with 40.9% for the year ended December 31, 2017. Non-operating Income Non-operating income, as adjusted, for the year ended December 31, 2018 was $3.7 million, compared with $1.2 million for the year ended December 31, 2017. Non-operating income, as adjusted, excluded the following: The impact of consolidation of certain of our seed investments for both years; and Net foreign currency exchange gains associated with U.S. dollar-denominated assets and liabilities held by certain foreign subsidiaries for the year ended December 31, 2018. Income Taxes The effective tax rate, as adjusted, for the year ended December 31, 2018 was 25.3%, compared with 37.8% for the year ended December 31, 2017. The effective tax rate, as adjusted, excluded the following for both years: Tax effects related to the Tax Act; The reversal of certain liabilities associated with unrecognized tax benefits; and Tax effects associated with non-GAAP adjustments as well as discrete items. 30


  • Page 45

    Non-GAAP Reconciliations Management believes that use of these non-GAAP financial measures enhances the evaluation of our results, as they provide greater transparency into our operating performance. In addition, these non-GAAP financial measures are used to prepare our internal management reports and are used by management in evaluating our business. While we believe that this non-GAAP financial information is useful in evaluating our results and operating performance, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with U.S. GAAP. Reconciliation of U.S. GAAP Net Income Attributable to Common Stockholders and U.S. GAAP Earnings per Share to Net Income Attributable to Common Stockholders, As Adjusted, and Earnings per Share, As Adjusted Years Ended December 31, (in thousands, except per share data) 2019 2018 2017 Net income attributable to common stockholders, U.S. GAAP . . . . . . . . . . . . . $ 134,621 $ 113,896 $ 91,939 Seed investments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,858) 5,552 (3,474) Accelerated vesting of restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344 — 522 General and administrative (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 871 (1,018) Foreign currency exchange (gains) losses—net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,909 (2,270) — Tax adjustments (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,002) (4,200) 9,068 Net income attributable to common stockholders, as adjusted . . . . . . . . . . . . . . . . $ 124,360 $ 113,849 $ 97,037 Diluted weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,297 47,381 46,979 Diluted earnings per share, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.79 $ 2.40 $ 1.96 Seed investments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.25) 0.12 (0.07) Accelerated vesting of restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.02 — 0.01 General and administrative (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.01 0.02 (0.02) Foreign currency exchange (gains) losses—net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . 0.04 (0.05) — Tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.04) (0.09) 0.19 Diluted earnings per share, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.57 $ 2.40 $ 2.07 _________________________ (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds as well as non-operating (income) loss from seed investments that were not consolidated. (2) Represents costs associated with the Cohen & Steers Quality Income Realty Fund, Inc. rights offering in 2019, expenses associated with the evaluation of a potential business transaction that the Company did not pursue in 2018 and refunds of foreign withholding taxes in 2017. (3) Represents net foreign currency exchange (gains) losses associated with U.S. dollar-denominated assets held by certain foreign subsidiaries. U.S. GAAP amounts for the year ended December 31, 2017 have not been recast to conform with the current period presentation as the impact to results was not material. (4) Tax adjustments are summarized in the following table: (in thousands) Years Ended December 31, 2019 2018 2017 Transition tax liability in connection with the Tax Act . . . . . . . . . . . . . . . . . . . . . . . $ — $ (123) $ 8,432 Remeasurement of deferred and other tax balances . . . . . . . . . . . . . . . . . . . . . . . . . — — 4,300 Reversal of certain liabilities associated with unrecognized tax benefits. . . . . . . . . (1,832) (2,758) (3,772) Delivery of restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (203) (947) 49 Tax-effect of non-GAAP adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 217 888 Other tax-related items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) (589) (829) Total tax adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,002) $ (4,200) $ 9,068 31


  • Page 46

    Reconciliation of U.S. GAAP Operating Income and U.S. GAAP Operating Margin to Operating Income, As Adjusted and Operating Margin, As Adjusted Years Ended December 31, (in thousands, except percentages) 2019 2018 2017 (1) Revenue, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,830 $ 381,111 $ 378,696 Seed investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (438) (694) (403) Revenue, as adjusted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,392 $ 380,417 $ 378,293 (1) Expenses, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250,696 $ 234,073 $ 223,950 Seed investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,323) (1,408) (789) Accelerated vesting of restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . (1,344) — (522) General and administrative (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (346) (871) 1,018 Expenses, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 247,683 $ 231,794 $ 223,657 Operating income, U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,134 $ 147,038 $ 154,746 Seed investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 714 386 Accelerated vesting of restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344 — 522 General and administrative (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 871 (1,018) Operating income, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 162,709 $ 148,623 $ 154,636 Operating margin, U.S. GAAP (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.0% 38.6% 40.9% Operating margin, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.6% 39.1% 40.9% _________________________ (1) The presentation for the year ended December 31, 2017 has been recast to reflect the Company's adoption of the new revenue recognition accounting standard on January 1, 2018. (2) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds. (3) Represents costs associated with the Cohen & Steers Quality Income Realty Fund, Inc. rights offering in 2019, expenses associated with the evaluation of a potential business transaction that the Company did not pursue in 2018 and refunds of foreign withholding taxes in 2017. Reconciliation of U.S. GAAP Non-operating Income (Loss) to Non-operating Income (Loss), As Adjusted Years Ended December 31, (in thousands) 2019 2018 2017 Non-operating income (loss), U.S. GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,415 $ (3,259) $ 5,654 Seed investments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,106) 9,212 (4,407) Foreign currency exchange (gains) losses—net (2) . . . . . . . . . . . . . . . . . . . . . . 1,909 (2,270) — Non-operating income (loss), as adjusted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,218 $ 3,683 $ 1,247 _________________________ (1) Represents amounts related to the deconsolidation of seed investments in Company-sponsored funds as well as non-operating (income) loss from seed investments that were not consolidated. (2) Represents net foreign currency exchange (gains) losses associated with U.S. dollar-denominated assets held by certain foreign subsidiaries. U.S. GAAP amounts for the year ended December 31, 2017 have not been recast to conform with the current period presentation as the impact to results was not material. 32


  • Page 47

    Changes in Financial Condition, Liquidity and Capital Resources Our principal objectives are to maintain a capital structure that supports our business strategies and to maintain the appropriate amount of liquidity at all times. Furthermore, we believe that our cash flows generated from operations are more than adequate to fund our present and reasonably foreseeable future commitments for investing and financing activities. Net Liquid Assets Our current financial condition is highly liquid, primarily comprising cash and cash equivalents, U.S. Treasury securities, seed investments and current assets. Liquid assets are reduced by current liabilities which are generally defined as obligations due within one year (together, net liquid assets). The Company does not currently have any debt outstanding. The table below summarizes net liquid assets: December 31, December 31, (in thousands) 2019 2018 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,352 $ 92,733 U.S. Treasury securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,807 49,748 Seed investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,130 70,757 Current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,927 52,628 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85,274) (78,461) Net liquid assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 178,942 $ 187,405 Cash and cash equivalents Cash and cash equivalents are on deposit with three major financial institutions and consist of short-term, highly-liquid investments, which are readily convertible into cash and have original maturities of three months or less. Cash and cash equivalents reflected special cash dividends of $2.00 per share, or $94.5 million, and $2.50 per share, or $117 million, paid on December 3, 2019 and 2018, respectively. U.S. Treasury securities U.S. Treasury securities are directly issued by the U.S. government and classified as held to maturity, with original maturities ranging from 12 to 24 months. Seed investments Seed investments are primarily comprised of Company-sponsored funds that we do not consolidate, securities held within the funds that we do consolidate, and securities held for the purpose of establishing performance track records. Seed investments are comprised of listed securities which approximate fair value, are generally traded in active markets and can typically be liquidated within a normal settlement cycle. Seed investments are presented net of redeemable noncontrolling interests. Current assets Current assets primarily represent investment advisory and administration fees receivable. At December 31, 2019, institutional accounts comprised 50.1% of total accounts receivable, while open-end and closed-end funds, together, comprised 46.8% of total accounts receivable. We perform a review of our receivables on an ongoing basis in order to assess collectibility and, based on our analysis at December 31, 2019, there was no allowance for uncollectible accounts required. Current liabilities Current liabilities are generally defined as obligations due within one year, which include accrued compensation, distribution and service fees payable, certain income taxes payable, and other liabilities and accrued expenses. Cash flows Our cash flows generally result from the operating activities of our business, with investment advisory and administration fees being the most significant contributor. 33


  • Page 48

    The table below summarizes cash flows: Years Ended December 31, (in thousands) 2019 2018 2017 Cash Flow Data: Net cash provided by (used in) operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,445 $ 72,598 $ 64,253 Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,949 (53,194) 5,709 Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170,130) (118,110) (60,423) Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,264 (98,706) 9,539 Effect of foreign exchange rate changes on cash and cash equivalents. . . . . . . . . . . . . . 1,355 (2,013) 679 Cash and cash equivalents, beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,733 193,452 183,234 Cash and cash equivalents, end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,352 $ 92,733 $ 193,452 We expect that cash flows provided by operating activities will continue to serve as our principal source of working capital in the near future. In 2019, cash and cash equivalents increased by $7.3 million, excluding the effect of foreign exchange rate changes. Net cash provided by operating activities was $141.4 million. Cash flows from operating activities primarily consisted of net income adjusted for certain non-cash items and changes in assets and liabilities. Net cash provided by investing activities was $35.9 million, which included $89.6 million of proceeds from the sales and maturities of investments, partially offset by $50.9 million of investment purchases. Sales and maturities of investments included maturities of U.S. Treasury securities of $33.3 million and sales of Company-sponsored funds of $37.3 million. Purchases of investments included purchases of U.S. Treasury securities of $32.9 million. Net cash used in financing activities was $170.1 million, including dividends paid to stockholders of $162.7 million, which included a special dividend of $94.5 million paid on December 3, 2019, repurchases of common stock to satisfy employee withholding tax obligations on the vesting and delivery of restricted stock units of $10.4 million, as well as distributions to redeemable noncontrolling interests of $43.5 million, partially offset by contributions from redeemable noncontrolling interests of $45.7 million. In 2018, cash and cash equivalents decreased by $98.7 million, excluding the effect of foreign exchange rate changes. Net cash provided by operating activities was $72.6 million. Cash flows from operating activities primarily consisted of net income adjusted for certain non-cash items and changes in assets and liabilities. Net cash used in investing activities was $53.2 million, which included $63.6 million of investment purchases, including the seeding of five new track record accounts and investment of $49.5 million into U.S. Treasury securities, partially offset by $13.8 million of proceeds from the sale of investments. Net cash used in financing activities was $118.1 million, including dividends paid to stockholders of $178.9 million, which included a special dividend of $116.9 million paid on December 3, 2018, repurchases of common stock to satisfy employee withholding tax obligations on the vesting and delivery of restricted stock units of $10.6 million, as well as distributions to redeemable noncontrolling interests of $10.9 million, partially offset by contributions from redeemable noncontrolling interests of $81.6 million. In 2017, cash and cash equivalents increased by $9.5 million, excluding the effect of foreign exchange rate changes. Net cash provided by operating activities was $64.3 million. Cash flows from operating activities primarily consisted of net income adjusted for certain non-cash items and changes in assets and liabilities. Net cash provided by investing activities was comprised of proceeds from sales of available-for-sale investments of $25.8 million, partially offset by purchases of available-for-sale investments of $16.9 million, including a seed investment of $10.0 million in a track record account for a new real assets multi-strategy portfolio and purchases of property and equipment of $3.2 million. Net cash used in financing activities was $60.4 million, including dividends paid to stockholders of $98.3 million, which included a special dividend of $46.3 million paid on December 13, 2017 and repurchases of common stock to satisfy employee withholding tax obligations on the vesting and delivery of restricted stock units of $9.1 million, partially offset by contributions from redeemable noncontrolling interest of $46.7 million. Net Capital Requirements We continually monitor and evaluate the adequacy of our capital. We have consistently maintained net capital in excess of the regulatory requirements for CSS, our registered broker-dealer, as prescribed by the Securities and Exchange Commission (SEC). At December 31, 2019, we exceeded our minimum regulatory capital requirement by approximately $3.3 million. The SEC’s Uniform Net Capital Rule 15c3-1 imposes certain requirements that may have the effect of prohibiting a 34


  • Page 49

    broker-dealer from distributing or withdrawing capital and requiring prior notice to the SEC for certain withdrawals of capital. During 2019, the Company made a capital contribution of $3.0 million to CSS. CSAL is subject to regulation by the Hong Kong Securities and Futures Commission. At December 31, 2019, CSAL exceeded its minimum regulatory capital requirement by approximately $10.0 million. During 2019, CSAL paid dividends totalling $32.5 million to its parent, Cohen & Steers Capital Management, Inc. CSUK is subject to regulation by the United Kingdom Financial Conduct Authority. At December 31, 2019, CSUK exceeded its minimum regulatory capital requirement by approximately $32.5 million. CSJL is registered with the Financial Services Agency of Japan and the Kanto Local Finance Bureau and is subject to the Financial Instruments and Exchange Act. In accordance with its license, CSJL is required to maintain regulatory capital, as defined, of approximately $460,000. At December 31, 2019, CSJL had stated capital in excess of this requirement. CSIL is an Irish registered company. We have applied for a license to conduct regulated business in Ireland. We believe that our cash and cash equivalents and cash flows from operations will be more than adequate to meet our anticipated capital requirements and other obligations as they become due. Dividends Subject to the approval of our Board of Directors, we anticipate paying dividends. When determining whether to pay a dividend, we take into account general economic and business conditions, our strategic plans, our results of operations and financial condition, contractual, legal and regulatory restrictions on the payment of dividends, if any, by us and our subsidiaries and such other factors deemed relevant. On February 20, 2020, the Company declared a quarterly dividend on its common stock in the amount of $0.39 per share. This dividend will be payable on March 12, 2020 to stockholders of record at the close of business on March 2, 2020. Investment Commitments We have committed to co-invest up to $5.1 million alongside Cohen & Steers Global Realty Partners III-TE, L.P. (GRP-TE). At December 31, 2019, we have funded approximately $3.8 million of this commitment. Our co-investment alongside GRP-TE is illiquid and is anticipated to be invested for the life of the fund. The timing of the funding of the unfunded portion of our commitment is currently unknown, as the drawdown of our commitment is contingent on the timing of drawdowns by the underlying funds in which GRP-TE invests. The unfunded portion of this commitment was not recorded on our consolidated statements of financial condition at December 31, 2019. Contractual Obligations and Contingencies The following table summarizes our contractual obligations at December 31, 2019: 2025 (in thousands) 2020 2021 2022 2023 2024 and after Total Operating leases. . . . . . . . . . . . . . . . . . . $ 11,995 $ 11,245 $ 10,882 $ 10,855 $ 963 $ — $ 45,940 Purchase obligations . . . . . . . . . . . . . . . 3,142 1,845 915 668 668 1,000 8,238 Other liability. . . . . . . . . . . . . . . . . . . . . 192 665 665 1,246 1,662 2,077 6,507 Total . . . . . . . . . . . . . . . . . . . . . . $ 15,329 $ 13,755 $ 12,462 $ 12,769 $ 3,293 $ 3,077 $ 60,685 Operating Leases Operating leases generally consist of noncancelable long-term leases for office space and certain information technology equipment. Purchase Obligations Purchase obligations represent executory contracts, which are either noncancelable or cancelable with a penalty. The Company’s obligations primarily reflected standard service contracts for market data. 35


  • Page 50

    Other Liability Other liability consists of the transition tax liability based on the cumulative undistributed earnings and profits of our foreign subsidiaries in connection with the enactment of the Tax Act. This tax liability, which is payable over eight years on an interest-free basis, is included as part of income tax payable on our consolidated statement of financial condition at December 31, 2019. Contingencies Due to the uncertainty with respect the timing of future cash flows associated with unrecognized tax benefits at December 31, 2019, the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $12.9 million of gross unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 14 to the consolidated financial statements for additional disclosures related to income taxes. Off-Balance Sheet Arrangements We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any leasing activities that expose us to any liability that is not reflected in our consolidated financial statements. Critical Accounting Policies and Estimates A thorough understanding of our accounting policies is essential when reviewing our reported results of operations and our financial condition. The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Our significant accounting policies are disclosed in Note 2 to the consolidated financial statements and should be read in conjunction with the summarized information below. Management considers the following accounting policies critical to an informed review of our consolidated financial statements as they require management to make certain judgments about matters that may be uncertain at the time the policies were applied or the estimates determined. Consolidation of Company-sponsored Funds The Company evaluates its investments in Company-sponsored funds at inception and thereafter, if there is a reconsideration event, in order to determine whether to apply the variable interest entity (VIE) model or the voting interest entity (VOE) model. This evaluation involves the use of judgment and analysis on an entity by entity basis. In performing this analysis, we consider the legal structure of the entity, management fees earned by the Company and the nature of the ownership interest and rights of interest holders in the entity, including the Company. If we determine that the entity is a VIE, we must then assess whether the Company absorbs a majority of the VIEs expected variability in which case it is deemed to be the primary beneficiary of the VIE. The Company consolidates VIEs for which it is deemed to be the primary beneficiary. The Company consolidates VOEs if we own a majority of the voting interest in the entity or when the Company is the general partner of the fund and the limited partners do not have substantive kick-out or participating rights. Amounts attributable to third parties in the funds that we consolidate are recorded in redeemable noncontrolling interests on the consolidated statements of financial condition and net (income) loss attributable to redeemable noncontrolling interests on the consolidated statements of operations. Investments Our investments are classified as equity investments at fair value, trading investments, held-to-maturity investments or equity method investments at the time of purchase and re-evaluated on an ongoing basis and at the date of each consolidated statement of financial condition. Investments classified as equity investments at fair value include securities held within the affiliated funds that the Company consolidates, individual securities held directly for the purpose of establishing performance track records and seed investments in Company-sponsored open-end funds where the Company has neither control nor the ability to exercise significant influence. Investments classified as trading investments represent debt securities held within the affiliated funds that the Company consolidates and individual debt securities held directly for the purpose of establishing performance track records. Held-to-maturity investments represent fixed income securities recorded at amortized cost. Equity method investments represent seed investments in affiliated funds in which the Company owns between 20-50% of the 36

  • View More

Get the full picture and Receive alerts on lawsuits, news articles, publications and more!