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Cohen & Steers Inc (NYSE:CNS)
Q2 2019 Earnings Call
Jul 18, 2019, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Second Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, July 18, 2019.

I would now like to turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.

Brian Heller -- Senior Vice President and Corporate Counsel

Thank you, and welcome to the Cohen & Steers second quarter 2019 earnings conference call. Joining me are our Chief Executive Officer, Bob Steers; our President, Joe Harvey; and our Chief Financial Officer, Matt Stadler.

I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us. But actual outcomes could differ materially due to a number of factors, including those described in our most recent annual report on Form 10-K and other SEC filings. We assume no duty to update any forward-looking statement.

Also, our presentation contains non-GAAP financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation. The earnings release and presentation, as well as links to our SEC filings are available in the Investor Relations section of our website at www.cohenandsteers.com.

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

Matthew Stadler -- Chief Financial Officer

Thank you, Brian. Good morning everyone. As per usual in my remarks this morning will focus on our as adjusted results. As Brian mentioned, a reconciliation of GAAP to as adjusted results can be found on Pages 18 and 19 of the earnings release or on Slides 16 and 17 of the earnings presentation. Yesterday, we reported earnings of $0.62 per share, compared with $0.59 in the prior year's quarter and $0.58, sequentially.

Revenue was $101.8 million for the quarter, compared with $94.2 million in the prior year's quarter and $93.9 million, sequentially. The increase in revenue from the first quarter was primarily due to higher average assets under management and an additional day in the quarter.

Average assets under management were $63 billion compared with $58.7 billion in the prior year's quarter and $59.5 billion sequentially. Our as adjusted effective fee rate for the second quarter was 58.2 basis points compared with 57.5 basis points last quarter. The increase was primarily due to a favorable shift in asset mix as average assets under management in US open-end funds as a percentage of total average assets under management increased.

Operating income was $38.8 million for the quarter compared with $36.4 million in the prior year's quarter and $35.8 million sequentially. Our operating margin increased slightly to 38.2% from 38.1% last quarter. Expenses increased 8.2% on a sequential basis, primarily due to higher compensation and benefits distribution and service fees and G&A. The compensation to revenue ratio was 35.75% for the quarter. Consistent with the guidance we provided on our last call.

The increase in distribution and service fee expense was primarily due to higher average assets under management in US open-end funds and the increase in G&A was primarily due to higher T&E. Our effective tax rate for the quarter was 25.25% consistent with our previous guidance.

Page 15 of the earnings presentation displays our cash corporate investments in US Treasury securities and seed investments for the current and trailing four quarters. Our firm liquidity totaled $218 million compared with $183 million last quarter and stockholders equity was $256 million compared with $235 million at March 31. We remained debt free.

Assets under management totaled $62.4 billion at June 30, a decrease of $248 million from March 31st. The decrease was due to net outflows of $13 million distributions of $1.3 million and a $753 million conversion of certain institutional accounts to model based portfolios. These were partially offset by market appreciation of $1.8 billion.

Sub-advised portfolios in Japan had net outflows of $224 million during the quarter compared with $260 million during the first quarter. Distributions from these portfolios totaled $333 million compared with $361 million last quarter.

Sub-advised accounts excluding Japan had net outflows of $1 billion primarily due to the $906 million termination of a non-strategic relationship that we spoke about on our last call. In addition, sub-advised accounts included the previously mentioned conversion of $753 million to model based portfolios which are currently excluded from assets under management. The conversion which had no effect on revenue increased model based portfolios to approximately $4.2 billion.

Advised accounts had net inflows of $65 million during the quarter. Primarily from a $510 million funding of US and International Real Estate portfolios from our second German client that was included in last quarter's pipeline, partially offset by a $375 million rebalancing of US real estate and preferred portfolios by an existing client. Bob Steers will provide some color on the client rebalancing as well as an update on the institutional pipeline of awarded unfunded mandates.

Open-end funds which had a record $25.7 billion in assets under management recorded net inflows of $1.2 billion during the quarter, primarily into US real estate and preferred funds. Distributions totaled $810 million, $632 million of which was reinvested. Let me briefly discuss a few items to consider for the second half of the year. With respect to compensation and benefits, we expect to maintain a 35.75% compensation to revenue ratio. We project the G&A for 2019 will be in line with the $46 million we recorded in 2018.

We expect that our effective tax rate will remain at approximately 25.25%, and notably effective July 1st, Cohen & Steers Realty Shares, our flagship mutual fund reduced this expense ratio by approximately 10% and introduced multiple share classes designed to enhance our ability to market within key wealth management channels.

Based on June 30, assets under management, the lower expense ratio is estimated to reduce second half investment advisory fees by approximately $2 million. However, incremental net flows into the new share classes would represent higher margin business as there is a lower revenue share component associated with them.

And now I would like to turn it over to Joe Harvey, who will discuss our invest performance.

Joseph Harvey -- President and Chief Investment Officer

Thank you, Matt, and good morning. Our investment performance both absolute and relative is very strong. Reflecting favorable macroeconomic conditions, ongoing returns from the investments we have made in our teams and processes and positive results from performance improvement efforts when they are needed.

In the second quarter and for the past year, seven of our nine core strategies outperformed their benchmarks. Measured by AUM, 95% of our portfolios are outperforming on a one-year basis, 97% are outperforming over three years, and 98% are outperforming over five years. The recovery in our one-year batting [Phonetic] average from 71% last quarter was half due to our core preferred strategy and 40% attributable to US real estate. Our three and five year batting averages have been consistent and high and 88% of our open-end fund AUM are rated four or five star by Morningstar.

Absolute performance for our asset classes in the second quarter was strong, but decelerated from the extraordinary pace in the first quarter. The macro shift toward a goldilocks environment that began powerfully in the first quarter continued with expectations for slowing but positive economic growth and benign inflation supporting a dovish Fed.

The progression in the quarter was a jump forward to anticipation of rate cuts in the US and the potential for another round of quantitative easing in Europe. It could be that without inflation, the lower amplitude of the economic cycle will prevent hard returns by the Fed and enable small tweaks to extend the cycle.

The specter of additional monetary stimulus by central banks unleased a scramble for yield globally. To illustrate, the average yield for 10-year sovereign bonds in the US, UK, Japan, France and Australia is just 0.6%, nearly $13 trillion or 12% of the global bond market has negative yields.

Not surprisingly, considering the yield squeeze, preferreds and infrastructure were our best performing asset classes in the quarter. Core preferreds returned 4.1% lifting year-to-date returns to 11.8%. We outperformed in the quarter. To share an investment perspective, as credit profiles in the corporate bond market deteriorate as measured by credit ratings and covenants, the credit profiles for preferreds which are predominantly issued by banks and insurance companies remain strong, in part due to regulatory guidelines. This should distinguish preferreds as investors put money to work, and a low yield environment.

Consistent with the scarcity of yield, asset consultants are increasingly recommending preferreds to their clients, which is expanding the market for what historically was a retail market.

Our low duration preferreds strategy returned 2.7%, and we underperformed slightly versus our primary benchmark. Low duration represents one of the two core strategies that underperformed. I'd add however that this strategy is meeting its income and capital stability objectives in the context of low rate duration.

While precisely benchmarking the unique strategies that we manage may be challenging at times, we are pleased with our low duration preferred performance. Global listed infrastructure returned 4.3% in the quarter and we outperformed.

For the past three quarters, infrastructure has performed well and various economic and market conditions, which reflects in our view the attractiveness of dividend paying equities and a low return environment. And the fact that more investors are adding infrastructure to their portfolios.

On past calls, we have discussed the $150 billion of dry powder and private equity infrastructure funds. We expect some of that capital to work its way into the public markets considering the challenges and buying private infrastructure assets. That dry powder has now grown to $200 billion and with leverage provides buying [Phonetic] power of $500 billion.

This quarter, several public companies announced privatizations by infrastructure funds. We expect several variations on this theme from asset level deals to privatizations to strategic corporate investments as well as IPOs as the private sector both private equity and the listed markets increasingly provide the capital necessary to fix and build our nation's and our world's infrastructure.

Midstream energy performance was flat on an absolute basis after a strong rally in the first quarter and as the two factors that have been driving midstream moved in opposite directions. While oil was down slightly, improvement and high-yield credit helped offset oil. We underperformed in the quarter as market leadership within midstream has come from large cap, high quality companies that generalist have sought in the rotation into dividend paying equities.

Our portfolios are positioned in midstream securities that we believe are statistically cheap, yet are less appealing to generalize due to the smaller market caps or partnership structures. We continue to see a secular transition to better structures and better business models, we should begin to reduce the influence of oil and credit on how midstream trades.

Two of our core strategies that outperformed, but lag the equity and fixed income rally on an absolute basis were resource equities and multi-strategy real assets which includes real estate, infrastructure, resource equities, and commodities.

The sole factor that restrained these strategies performance was commodity prices, which declined 2% in the quarter. Attributable to trade wars and reflective of slower global growth. Resource equities returned 1% and we outperformed significantly. The multi-strategy real asset index also returned 1%. We outperformed in multi-strategy as each of the underlying portfolio sleeves outperformed.

Turning to our largest asset class, real estate. We are pleased with how it is performing on an absolute basis for our clients and with our relative performance. After a multi-year period of underperforming stocks and private real estate due to interest rate concerns, REITs began to outperform late last year. In the quarter, US REITs returned 1.8%, lifting the year-to-date return to 19.7%. With this recent move, REITs have reestablished dominance versus private core real estate by providing a return premium with liquidity. This is contrary to the return premium found elsewhere in private equity.

We are pleased with the positive diversified returns we continue to provide our clients. Global real estate performance was flat in the quarter, primarily due to a market pullback in Europe, reflecting economic concerns and some specific real estate issues notably increasing Brexit [Indecipherable] and proposals for residential rent control in Germany.

In the quarter, we outperformed in all three of our core real estate strategies, US, Global and International. For the past year, 95% of our real estate AUM has outperformed and 100% of our global real estate AUM has outperformed. We are observing amid the competitive pressures in our industry whether from indexing or for active managers to provide greater excess returns more consistently. That we are getting stronger as a investment organization.

When it comes to real estate, we have a market position that is unparalleled, enabling us to deliver performance consistently across a wide range of strategies and at substantial levels of AUM. We have done this over multiple portfolio manager regimes and our current team is among the best and deepest.

Our outperformance spans the broadest range of strategies offered from global or regional or by portfolio concentration level or by income or risk profile. And importantly, we have executed throughout periods of AUM growth and varying levels of market share. Specifically, today, our AUM is 2.7% of the market cap of US REITs, while over the long term, our market share has averaged 3.5%.

While some of the industry question our size, the data show there is zero correlation between our share of the market and our alpha in our core REIT strategy. This positions us well as pension and sovereign wealth funds, who says historically have invested exclusively in private real estate are now beginning to allocate to listed real estate to enhance their portfolios.

In closing, we continue to invest in our investment department. We are adding quantitative capabilities to supplement our fundamental processes, developing our next generation portfolio managers and adding to teams selectively to facilitate the progression of our succession plans.

We continue to allocate time and capital resources to develop new investment concepts and methods to deliver them. For example, in real estate, this includes an opportunistic approach that targets mid-teen returns, a risk managed strategy and a completion portfolio for core real estate investors.

Our philosophy of continuous improvement, and encouraging new ideas benefits our core strategies as alpha sources can be mined in our core portfolios in addition to be in packaged more discreetly and highly differentiated strategies.

It also helps us retain talent as our analyst and associates work on developing these strategies. And our next generation portfolio managers have greater career path opportunities.

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

Robert Steers -- Chief Executive Officer

All right, thank you, Joe. As Matt indicated firmwide AUM declined slightly in the quarter, but more importantly, we made significant progress toward our goal of improving growth rates and the products and segments which have historically been positive while also shifting into growth mode. In the sub-advisory channels that have recently struggled to deliver net organic growth. As you know by now, we have designed new strategies and structures to promote inflows and address the sources of past outflows.

On offense, we are focused on capitalizing on the continued strong investment performance that Joe just spoke of, and the currently favorable market environment for real assets and alternative income strategies. We're now in the market with a number of new products and delivery vehicles for both the wealth and advisory channels which I'll expand upon in a minute.

In addition, strategies aimed at takeaways or market share gains to capitalize on our investment performance and competitive fees are also bearing fruit. On defense, we've eliminated several drags on growth by exiting the large cap value effort and stepping away from non-strategic sub-advisory relationships.

We believe that these actions aimed at improving AUM growth in combination with our decision to scale back sources of Organic Decay will enhance our firm wide growth prospects today and in the future.

I'm pleased to say as Matt indicated that the wealth channel had another outstanding quarter. Net inflows totaled $1.2 billion, which included $632 million of reinvested dividends. As has been the recent trend, inflows were heavily skewed to US REIT and preferred security strategies. Encouragingly, DCIO generated $164 million of net inflows, which represents the fourth consecutive quarter of positive flows and a 26% organic growth rate year-over-year. This is a good example of an important multi-year strategic investment that is now paying off. With regard to our plans to go on offense, we're now in the market with multiple new product initiatives that should be additive to long-term growth.

First, we've repositioned our flagship Cohen & Steers Realty Shares Fund by adding multiple share classes and reducing the expense ratio. Adding share classes will make this top quartile US REIT fund more widely available in the wealth and high net worth channels, and our decision to reduce shareholder expenses is consistent with our goal of gaining market share across channels by offering our top performing strategies at below median fees.

Second, we have converted our former large cap value open-end fund to the Cohen & Steers alternative income fund which will offer the best of Cohen & Steers income strategies and is designed to deliver a significant tax advantage dividend yield.

Lastly, we are now able to offer three of our most popular investment strategies midstream energy, preferred securities and US REITs, to high net worth investors through separately managed accounts or SMAs. The combination of high quality products, favorable market conditions and the introduction of new products that leverage our core capabilities should help to sustain our current momentum in well.

The advisory group turned in a solid quarter with $65 million of net inflows. During the quarter, $633 million of the beginning $903 million pipeline was funded and we were awarded $425 million of new mandates one of which a $75 million global listed infrastructure strategy was funded in the quarter. The end-off quarter pipeline stood at $620 million and we continue to experience strong finals and early stage search activity in real estate, preferred securities and infrastructure.

I think it's instructive to highlight one significant outflow in the quarter which depressed net inflows but that we view as a long-term positive. One of our longest standing and largest pension fund relationships for whom we have strategic allocation discretion over their listed real estate and preferred securities portfolios made a tactical decision in December to take advantage of the significant market decline by allocating an additional $375 million to this mandate.

Their aim was to capitalize on the discounts in listed real estate and they realized nearly a 19% return year-to-date. Consequently, they elected to repatriate $379 million of the $446 million of appreciated value. In our view, the successful outcome is a long-term positive and we anticipate that this relationship will continue to grow over time.

Lastly, advisory has also gone to market with new product offerings, including several highly concentrated portfolios and LP structures, and midstream portfolio within an annuity wrapper, and an opportunistic listed real estate strategy in a drawdown LT format. We expect that these new products will appeal to a wide range of institutional clients and contribute to long-term organic asset growth.

Due largely to the previously announced termination of a $906 million European global real estate relationship, the sub-advisory channel experienced $1 billion of net outflows in the quarter. Going forward, we're hopeful that by eliminating non-strategic relationships, were our -- our respective interests diverge or where the potential for a broader relationship is limited and by adding new intermediary clients committed to our asset classes, our sub-advisory business can return to positive growth.

Consistent with this goal, we are pleased to have entered into a new strategic OCIO relationship, which funded a $43 million global listed infrastructure mandate in the quarter, and we expect additional flows later this year.

Lastly, Japan sub-advisory outflows were $224 million in the quarter, which combined with distributions of $333 million, totaled a net $557 million. Both outflows and distributions have continued to decline, but it is still unclear when we will get back to equilibrium.

We continue to work with our partner to market the outstanding investment performance of all of these funds especially the US REIT portfolios. Looking ahead, I believe that our wealth and advisory businesses are especially well positioned to generate ongoing and significant organic growth.

Market demand for our strategies, industry-leading performance and the launch of multiple new products in both channels are all supportive of sustained AUM growth. By addressing the two significant drags from sub-advisory flows, large cap value and non-strategic partnerships, this channel is now poised to return to positive growth going forward.

In combination, these market factors and new initiative should support continued market share gains and firmwide organic growth. I'll stop there and ask the operator to open the floor to questions.

Questions and Answers:


Thank you. [Operator Instructions] Our first question comes from Mac Sykes with G. research. The line is open. Please proceed.

Macrae Sykes -- G.research, Inc. -- Analyst

Good morning, gentlemen and congratulations on a solid quarter. I was wondering if you could just dig into the RIA channel, a little bit which products and vehicles are most in demand and then just to follow-up on that, what are the important aspects supporting and growing this channel?

Joseph Harvey -- President and Chief Investment Officer

Thanks for the question, Mac. In the RIA channel, it's not too dissimilar frankly from the traditional FA channel in terms of the flows into preferreds and to REITs. I would however, just point out that we do segment the RIA market into RIA -- super-RIAs in multi-family office and a number of our newer product launches SMAs etc, are designed for both RIAs, but also as we move up the size, scale to super RIAs and the multi-family offices. Some of our concentrated LP portfolios are appropriate also for not just institutional clients, but some of these multi-family office and super-RIA entities.

Macrae Sykes -- G.research, Inc. -- Analyst

Great. And just one other follow-up. In the past you've talked about real assets and their benefits in inflationary environment. Now, it seems that we may be in a kind of a lower inflationary environment, but demand still fits very healthy, but can you talk about sort of the messaging in terms of the benefits of real assets kind of in a different trend that we may be in?

Robert Steers -- Chief Executive Officer

Sure. Yes, you're right. For real assets broadly inflation protection is one benefit and we don't have inflation. So that has curtailed some of the interest in the broader real asset portfolios, which include the asset classes that are most sensitive to inflation commodities and resource equities, but stepping away from that because of the income profile of real estate and infrastructure. There is very significant demand for the characteristics of those strategies provide. So we do have a lineup of strategies that enables us to be live, if you will, and a variety of macroeconomic environments, and right now with the low rates and benign inflation, the interest is channeled mostly into real estate infrastructure and preferreds.

Macrae Sykes -- G.research, Inc. -- Analyst

Great. Thank you very much.


Our next question comes from John Dunn with Evercore ISI. The line is open. Please proceed.

John Dunn -- Evercore ISI -- Analyst

Hey, guys. Question on the closed-end fund side. We saw a BlackRock launch at closed-end fund where it paid distributors [Indecipherable] to get pretty high fee 12-year money, I know Bob, you said in the past that window was closed for that channel but where we are now, does it make sense for you and the industry to maybe look at launches again?

Robert Steers -- Chief Executive Officer

Great question. Yeah, that's -- I think the window is open and the new model does require sponsors to take care of all the upfront expenses which still makes, makes a lot of sense if you have the opportunity. So we've been in ongoing discussions with the major distributors on potential launches. We're also in discussions about potential RIAs issues because you may or may not have noticed, but a number of our closed-end funds are trading at premiums to their asset values. There is nothing I can tell you today that is going to happen, but the closed-end fund market is an important piece of our business. Market conditions as you observed have changed. And if there is an opportunity to capitalize on that, we'll be all over it.

John Dunn -- Evercore ISI -- Analyst

Got you. And then just a little more on the SMA areas, I mean, it's definitely a growth area. Do you have any idea like what's your early earnings expectations of where it may be growth rate or how big that piece that could be, and then the incremental margins of that business versus other vehicles?

Joseph Harvey -- President and Chief Investment Officer

Now, it's too early to share any early indications on any of these initiatives, including the repositioning of Realty Shares or now alternative income, but we do think that offering our key strategies in the SMA format, we'll raise -- not only raise money directly in the SMAs but we'll also enhance flows into the respective mutual funds as well as financial advisors want to use just one manager in each asset class, and so in the past, what worked against us is not having SMAs and again an advisor doesn't necessarily want, for example, a REIT manager for their -- for mutual funds, but a different manager for SMA. So there's going to be some synergy there. There is a tremendous amount of excitement from our sales force on our new alternative income fund. It is going to have a very significant yield, and both absolute and relative in the marketplace. It represents the best of Cohen & Steers and the performance numbers, as Joe alluded to earlier in each sleeve of this best of portfolio delivers outstanding performance well above benchmark. So I think the repositioning of CSR, the conversion to all ALT [Phonetic] income and the SMAs, I can't tell you the timing, but we think all three have very substantial potential.

John Dunn -- Evercore ISI -- Analyst

Understood. Thanks.


[Operator Instructions] Our next question comes from the line of Michael Carrier with Bank of America. Your line is open. Please proceed.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Good morning, thanks for taking the question. Maybe first one, just on the model portfolios, you've given that you had the conversion in the quarter. Maybe just a few things on that, like one is, are you seeing you know increased demand that we are throughout the industry? How do you guys think about maybe the fee rate on those products? And I guess, that's $4 billion. It seems like you have enough scale. So it looks like something that the incremental margin would be still very attractive even if the fees are little bit lower, but just any color on how that kind of impacts the business and what you're seeing in terms of the growth outlook?

Matthew Stadler -- Chief Financial Officer

Thanks for the question, Mike. Look I think model based is going to continue to grow, there are intermediaries, such as the one we spoke of this quarter, is converting most if not all of our relationship to it, there is no economic impact and generally speaking, we view model based both from a portfolio management standpoint, but also an economic standpoint as really no different than traditional separate account. So we are getting of scale there and as you mentioned, it takes little or no additional effort to accommodate those additional assets. Just related to that on the sub-advisory side where some of these model based assets are going, we do anticipate adding OCIO relationships. As you know, the OCIO business or industry is growing quite rapidly. Some of those OCIOs utilized sub-advisor format some the model based and some just separate accounts, but we do expect significant growth from that channel and some of which will likely be model based.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Okay, that's helpful. And then maybe just, second question. You laid out, like a lot of initiatives in place that you guys have been working on, whether it's some of the new products, the new share classes, the fees, the SMAs and you guys had the performance, and it seems like at least from an asset class. The products are in demand, given the rate a backdrop. Just from a distribution standpoint, like are you starting to see traction maybe I know on the SMEs, as you said, it's still early, but on some of the other products initiatives that you have out there, whether it's in the US on the wealth side, are you like getting into more like portfolios and then outside the US in terms of the sub-advisory in terms of new relationships. Just any update on, how like the distribution traction is going -- given that you kind of repositioned some of these products and some of the growth initiatives?

Joseph Harvey -- President and Chief Investment Officer

Well, as I mentioned earlier, it's we've literally just hit the market with most of these new initiatives either in the last several months, some of which are actually still and just the rollout phase. So it's too soon to tell. But what isn't too soon to tell is again we've reiterated that we think this is the time in the industry where market share gains are -- were losses are going to occur. And we think that, we are in just incredibly strong position between our performance and our ability to deliver our strategies at fees that are at median or below median and we're gaining market share in all of our core strategies REITs, global REITs, preferreds we're even starting to gain market share in Midstream Energy and the formula is top decile or quartile performance with fair fees and we are gaining a lot of traction utilizing that strategy. Some of the newer strategies that we're talking about don't exactly fit into that mold because we're creating products that are institutional, super-RIA, foundation endowment clients are interested in, which tend to be highly focused or concentrated, thematic limited capacity. And in those strategies, we have different delivery vehicles and different fee structures, which are not oriented toward gaining market share. And so, those are two distinct strategies that we're employing. And -- but in the process, we absolutely believe that we're going to be gaining market share in all of our key strategies.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Okay, thanks a lot.


Our next question comes from Robert Lee with KBW. The line is open. Please proceed.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Great. Thanks for taking my questions. I'm just kind of curious, with all the new share classes, the SMA, obviously, as you've talked a length about focus to better penetrate the wealth channel but with all that, do you feel like -- do you have, are on enough platforms at this point or with all these changes, you first half to kind of get them on more platforms, and this is obviously designed for that and get on more approved list. Just trying to get a sense of you make all these changes but we really going to see like the impact more or like several quarters down the road as you first set the kind of get on more platforms and then more portfolios.

Robert Steers -- Chief Executive Officer

No, I don't think so. I think the only part of our business where we have, still have work to do to get on platforms is in Europe with our SICAV vehicles, but candidly, and here in the US, we have not had any issues with being deselected from platforms which as you know has been going on. I think our national accounts team has done an outstanding job at getting us the appropriate ratings, which for the most part are strong buy ratings or inclusions in models where our asset classes are in those models. And so -- now, I think that, CSR, Cohen & Steers Realty Shares is really the only existing product that frankly it was never designed to be broadly distributed. It was a participant in Schwab's [Phonetic] rollout of one source in 1991. So we're just bringing that fund up to date and getting, it's expense ratio in line with our corporate philosophy. So I think we're everywhere we need to be and we're just going to continue to talk to our relationships about our outstanding performance and the role that our asset classes can play in their portfolios.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Okay, and then just maybe a follow-up question on the more advisory or institutional channel. Obviously, also as you've talked about the length, made a lot of investment there new product structure strategies and whatnot. And your track record speaks for itself. So I mean is there -- are you happy with kind of the pace so far. I mean is there any sense that do you know, we have this compelling story for liquid, real estate and institutional investors is -- not enough institutional investors. It's not resonating with enough of then, do you have any concern about that and if so why do you think that maybe?

Robert Steers -- Chief Executive Officer

Actually and we've spoken about this both Joe and I in the past, we've never been more excited about the institutional opportunity as we've spoken about, we're seeing some of the world's largest investors who previously had only invested in real assets privately and through private investments are shifting into listed including infrastructure and Joe spoke to that in his comments, actually saw a headline from Blackstone's call that Jon Gray mentioned, they're having trouble putting out there infrastructure capital and it's very consistent with our thesis that one way or the other that money is going to be put out in the public market offers a large and appropriate opportunity there. So we're seeing benefits at several levels. One is asset gathering and level of activity while we don't share numbers, I would say that activity related to inquiries, searches, RFPs and so on, remain extremely high, level of finals activity is high and we except to win our fair share and gain market share both in real estate and in infrastructure. And I would also point out and again Joe spoke to it, maybe can add to my comment, there has been tremendous internal benefits to this now almost two-year-old project to respond to our clients and our markets interest in bespoke and unique strategies within our core strategies and it's really invigorated our investment teams and just created tremendous enthusiasm and momentum internally, which I think has benefited performance.

Joseph Harvey -- President and Chief Investment Officer

Absolutely, an example of that is a [Indecipherable] Matt may have talked about this in the past is we've seen it a strategy and a version of infrastructure, a small cap approach to it, and this plays to the theme of the private equity trying to find a home and looking to the public market, and as I mentioned on my comments earlier that we've seen a couple of privatizations announced earlier this year. And these are smaller cap infrastructure companies that are in the, the seed account, but it's an investment thesis, right. And it's something that we're not just mining in the seed account, we're mining in our broader portfolios as well. So it's the kind of the represents the DNA of our investment department, trying to find new sources of alpha great investment ideas and then putting them into our portfolios and/or -- and potentially developing a new strategy. So if I were a CIO of a sovereign wealth fund and wanted to allocate money to infrastructure, I'd put it into our small cap infrastructure portfolio, because it's a differentiated way to play a theme an investment thesis that everyone's talking about.

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

Great. Thanks for taking my questions. Appreciate it.


[Operator Instructions] Mr. Steers, there are no further questions at this time. I will now turn the call back to you. Please continue with your presentation or closing remarks.

Robert Steers -- Chief Executive Officer

Great. Well, thank you all for joining us this morning and we look forward to speaking to you next quarter. Thank you.


[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Brian Heller -- Senior Vice President and Corporate Counsel

Matthew Stadler -- Chief Financial Officer

Joseph Harvey -- President and Chief Investment Officer

Robert Steers -- Chief Executive Officer

Macrae Sykes -- G.research, Inc. -- Analyst

John Dunn -- Evercore ISI -- Analyst

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Robert Lee -- Keefe, Bruyette & Woods, Inc. -- Analyst

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