Cohen & Steers, Inc. (NYSE:CNS) Q4 2022 Earnings Call Transcript

Cohen & Steers, Inc. (NYSE:CNS) Q4 2022 Earnings Call Transcript January 26, 2023

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers Fourth Quarter and Full Year 2022 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded, Thursday, January 26, 2023. 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: Thank you. And welcome to the Cohen & Steers fourth quarter and full year 2022 earnings conference call. Joining me are our Chief Executive Officer, Joe Harvey; our Chief Financial Officer, Matt Stadler; and our Chief Investment Officer, Jon Cheigh. 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 accompanying fourth quarter and full year earnings release and presentation, our most recent annual report on Form 10-K and our other SEC filings. We assume no duty to update any forward-looking statements.

Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund or other investment vehicle. Our presentation also contains non-GAAP financial measures referred to as, as adjusted 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 to the extent reasonably available. 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 will turn the call over to Matt.

Matt Stadler: Thank you, Brian. Good morning, everyone. Consistent with previous quarters, my remarks this morning will focus on our as adjusted results. A reconciliation of GAAP to as adjusted results can be found on pages 18 and 19 of the earnings release and on slides 16 through 19 of the earnings presentation. Yesterday, we reported earnings of $0.79 per share, compared with $1.24 in the prior year’s quarter and $0.96 sequentially. Revenue was $125.5 million for the quarter, compared with $159.7 million in the prior year’s quarter and $140.2 million sequentially. The decrease in revenue from the third quarter was primarily attributable to lower average assets under management across all three types of investment vehicles.

Our effective fee rate was 57.8 basis points in the fourth quarter, compared with 58 basis points in the third quarter. Operating income was $50.9 million in the quarter, compared with $8.6 million in the prior year’s quarter and $60.1 million sequentially. And our operating margin decreased to 40.5% from 42.8% last quarter. Expenses decreased 6.8% when compared with the third quarter, primarily due to lower compensation and benefits expenses, and lower distribution and service fees. Compensation and benefits expenses were lower in the fourth quarter when compared with the third quarter, primarily due to a reduction in incentive compensation to reflect the actual amount expected to be paid. This reduction was more than offset by the sequential decline in revenue, and as a result, the compensation to revenue ratio was 36.4% for the fourth quarter.

For the year, the compensation to revenue ratio was 34.9%, an increase of 40 basis points from last quarter’s guidance of 34.5%. And the decrease in distribution and service fees was primarily due to lower average assets under management in U.S. open-end funds. Our effective tax rate, which was 25.95% for the quarter included a cumulative adjustment to bring the rate to 25.4% for the year, an increase of 15 basis points from last quarter’s guidance of 25.25%. The higher effective tax rate was primarily due to the effect of the non-deductible portion of executive compensation on lower than forecasted pretax income. Page 15 of the earnings presentation sets forth our cash, cash equivalents, corporate investments in U.S. treasury securities and liquid seed investments for the current and trailing four quarters.

Our full liquidity totaled $316.1 million at quarter end, compared with $269.9 million last quarter. As mentioned on previous calls, our business has become more capital intensive, potential uses of capital range from funding the upfront costs associated with closed-end fund launches and rights offerings, seeding new strategies and vehicles, co-investing in private real estate vehicles and making various one-time investments to grow our firm infrastructure as our business scales. Our new corporate headquarters in New York City and the associated build-out and related technology infrastructure is an example of that. In order to provide us with the financial flexibility to pursue these opportunities, earlier this week, we announced that we arranged for $100 million three-year senior unsecured revolving credit asset.

As you know, we have historically been debt-free, meeting our capital needs and commitments organically. Consistent with that long-term philosophy, it would be our intent to repay any amounts for under the credit facility with cash from operations as soon as practical. Assets under management were $80.4 billion at December 31st, up slightly from $79.2 billion at September 30th. The increase was due to market appreciation of $3.5 billion, partially offset by net outflows of $1.1 billion and distributions of $1.2 billion. Assets under management declined to $26 — declined $26.2 billion from December 31, 2021. The decrease was due to market depreciation of $20.9 million, net outflows of $1.6 billion and distributions of $3.6 billion. Joe Harvey will be providing an update on our flows and institutional pipeline of awarded unfunded mandates.

Let me briefly discuss a few items to consider for 2023. First, regarding our expected compensation to revenue ratio, we intend to balance the anticipated revenue decline that will occur from our year-end assets under management being about 12% below 2022’s average assets under management with a disciplined approach towards human capital. In addition to the increase in compensation expense from higher stock amortization, salary increases and the full year impact of our 2022 new buyers. We plan on making controlled investments in our business in order to broaden our product programs, expand our public and private distribution efforts, and most importantly, to maintain our strong investment performance. As a result, we expect our compensation-to-revenue ratio to increase to 38.5% from the 34.9% reported in 2022.

Next, we expect G&A to increase 12% to 14% from the $52.6 million reported in 2022. The majority of this increase relates to costs associated with our new corporate headquarters at 1166 Avenue of the Americas. Excluding these lease costs, we would expect G&A to increase 4% to 6%. By relocating to 1166, we are able to expand our footprint in creating a next-generation state-of-the-art working environment at more favorable economic terms. In addition, we intend to make incremental investments during 2023 in our existing technology, including the implementation of new systems that will add efficiencies and expand our capabilities, cloud migration and upgrades to our infrastructure and security. And we expect that sponsored conferences in travel and entertainment costs will increase in 2023 as business travel resumes to more normal levels.

Finally, we expect that our effective tax rate will increase to 25.5%. Now I’d like to turn it over to our Chief Financial — Chief Investment Officer, Jon Cheigh, to discuss our investment performance.

Jon Cheigh: Thank you, Matt, and good morning. Today, I’d like to briefly cover three areas; first, our performance scorecard; second, how our major asset classes performed in the quarter; and finally, our 2023 investment outlook. In particular, I want to focus on real estate and topics such as how we expect public and private real estate to perform, our view on recent non-traded REIT redemptions and our initiative to be a market leader providing research and advice to clients across both public and private real estate. Turning to performance. In the fourth quarter, four of nine core strategies outperformed their benchmarks. Over the past 12 months, eight of nine strategies outperformed. While our batting average in the quarter was lower than normal, the magnitude of underperformance by strategy was generally modest and all related to strategies that ultimately outperformed in the year.

Measured by AUM, 74% of our portfolios are outperforming their bank on a one-year basis, a decline from 81% last quarter. The biggest driver of the decline was the performance of our U.S. real estate focused strategy, which is more concentrated and has had greater weightings in small top real estate stocks, which lagged during the year and the fourth quarter bounce back. This strategy had a 25-plus year track record, a 400-plus basis points of annual alpha. And while underperformance has occasionally happens, rectifying our track record here is a key investment priority. On a three-year and five-year basis, 99% of our AUM is outperforming, which is slightly down from 100% last quarter. From a competitive perspective, 98% of our open-end fund AUM is rated four or five stars by Morningstar, up from 97% last quarter.

For the quarter, risk assets broadly recovered with global equities up 9.9% and the Barclays Global Aggregate up 4.6%. Our asset classes were led by natural resource up 17.1%, international real estate up 10.3% and global listed infrastructure up 9%. Then by U.S. REITs up 4.1% and core preferred interest, excuse me, core preferred securities up 3.4%. Digging into the details, infrastructure continued to perform well, beating U.S. equities but modestly under deploying global revenues. This performance narrowed year-to-date performance to only down 4.9% in the year, handily beating very negative performing broader equity and fixed income indices. Subsector level performance started during the quarter was high, with cyclical subsectors such as railways and reopening plays such as airports and toll roads outperforming.

Midstream energy or pipelines reversed its earlier trend, underperforming in the fourth quarter but still ending the year as the best performing subsector. For preferreds, the November CPI report and subsequent inflation readings supported the Central Bank Hike Deceleration occurred in December. Central Banks remain pause when markets priced in volume inflation. They likely also began to price in a better growth outlook based on falling energy prices, warm winter weather and the China reopening the COIVD policy change. Overall, the risk reward profile in fixed income markets included. For real estate, international REITs led the way of 10.3%, benefiting from their same dynamics, including a weakening U.S. dollar, while U.S. REITs were up only 4.1%.

The U.S. saw significant sector dispersion with retail real estate up 17% to 33%, while sectors such as self-storage and residential were down 7% to 10% in the quarter. Global markets saw similar levels of performance dispersion with markets in Europe of 20% to 25% and Hong Kong and Australia up 12% and 18%, respectively. Phase COVID re-openings, combined with more divergent economic trajectories has strengthened the investment case for global real estate and the diversification it can provide. If we see this shift continue, I would expect investors to be can allocate more to global real estate, either incrementally or at the expense of U.S.-only REIT. So while the quarter was generally positive, where does that position us for 2023? At a high level, we believe inflation will continue to come down, but that it will stabilize at around the 3% level by year-end, which will prove to be the new rule.

In order to get there, we think we will likely experience an average recession. Last, we think that over time, long-term interest rates should be a bit higher than where they are today. With that as our backdrop, we see the economy transitioning to early cycle by the end of the year and positive returns for all of our asset classes in 2023. For preferreds, we see very good asset value, coupled with the fundamentals of our issuers remain very strong, particularly balance sheets. Bank’s non-performing loans are moving up, but very gradually and from very low levels. Meanwhile, net interest margins have expanded into the higher rate environment. So from preferreds, we would expect potentially double-digit total returns in 2025. For infrastructure, we continue to expect the asset class to perform well, but in the early cycle phase it typically performs more in line with global equities.

Despite that, we don’t count the table on infrastructure because of just 2023, our conviction in the asset class is in its long-term strategic role in the new regime where the criticality of infrastructure businesses means demand is less economically sensible, plus its pricing mechanisms tied to inflation will help even in a new normal inflationary environment. Those are multiyear benefits rather than for a single phase. In terms of how we see our biggest asset class real estate, in 2022, U.S. REITs were down roughly 25% as the listed asset class re-priced quickly to the chain macro environment. In contrast, reported private real estate values generally increased as they tend to be historically lagged as deal volume declines. For example, the NCREIF Odyssey Index , a measure of private real estate had a positive total return of 7.5% versus listed REITs of minus 25%.

In 2023, we expect this trend to reverse with listed outperforming private real estate, consistent with what we normally see in a transition to early cycle. This forward shift of listed outperforming private has already started. In Q4, NCREIF was actually down 5%, while listed REITs were up 4%. Historically, listed REITs have performed remarkably well after recessions. Since 1990, REITs have returned on average 10.8% 12 months after a recession and a notable 20.4% on average 12 months after early cycle recovery periods. Because of these lags, private real estate specifically declined on average, 11.8% in the 12 months following a recession. By understanding the leading and lagging behaviors of listed and private markets, real estate investors can assemble a much more efficient portfolio and tactically allocate at different times across the two asset classes.

We have always been the REIT experts, but we believe investors need integrated advice and research around both listed and private. And this is why we have committed over the last two years to build out our solutions and advice business. We strongly believe that our vantage point at this intersection of public and private real estate positions us to provide frameworks, models and guidance for investors to help them be better real estate allocators. As an example, we have recently been sharing our thoughts and views on the non-traded REIT redemptions, which have been in the news recently. First, these redemptions do not reflect broad economic or systemic risk. The redemption limits are designed to protect the funds from having to liquidate significant real estate holdings and discounted prices or materially boosting leverage in response to elevated redemption requests.

We do not see a disorderly unwind or panic selling scenario for real estate funds to meet retentions. MTRs also only represent 1% of the $21 trillion commercial real estate market. The non-traded REIT story is not one of systemic risk or commercial real estate crashing. It is simply that the investors are rebalancing away from prices they believe are expensive and are seeking higher returns in other asset classes, including listed real estate. We believe the redemption activity underscores the potential rebalancing opportunity that exists for investors to pivot out of private and into listed real estate. With that, let me turn the call to Joe.

Joe Harvey: Thank you, Jon, and good morning. I will first discuss our fourth quarter business fundamentals and then follow with a review of our 2023 corporate priorities. The fourth quarter was weak, measured by the fundamentals that we focus on, yet hopefully represents the climax of what I have characterized as the greatest macro regime change in my career. If the fourth quarter has mostly reflected investor reactions to regime change, then hopefully, the first half of 2023 will be the start of the transition to the next phase where after the resetting of financial asset prices, a new return cycle can follow. Our investment performance continues to be strong overall. One quarter does not change our strong long-term record and we remain well positioned to win investor allocations.

Notably, our market share, as measured by active open-end funds continues to expand in U.S. real estate, global real estate and global listed infrastructure, with U.S. real estate most notable at 37%. Our market share in preferreds has declined to 43%, which reflects more asset managers offering the strategy in response to investor views of preferreds as an attractive source of alternative income. We remain very competitive, thanks to our performance and what arguably is the broadest range of preferred strategies and vehicles in the market. Firm-wide outflows in the fourth quarter were $1.1 billion, led primarily by preferreds at $873 million, but notably, and for the first time ever, all of our core strategies experienced net outflows. Even though markets rallied in the quarter and all of our asset classes had positive returns, the outflows in the quarter had already been prompted by broader dynamics such as year-end tax loss selling and reallocations to cash and treasuries.

Open-end funds dominated outflows with $1 billion out. Both our core preferred mutual fund, Cohen & Steers Preferred Securities and Income Fund and our low-duration preferred mutual fund had outflows totaling $819 million. And U.S. REIT fund, our flagship Cohen & Steers Realty Shares had outflows of $276 million, which included the completion of the redemption by a large allocator that we mentioned last quarter. Our real estate fund, Cohen & Steers Real Estate Securities Fund, which has a broader opportunistic mandate had $210 million of inflows. Flows and other segments of our open-end fund category were small by comparison, but we had inflows for the 10th straight quarter into our offshore SICAV vehicles and outflows from our UMA and SMA vehicles in the U.S. Institutional advisory had outflows of $392 million.

While redemptions from COVID-driven opportunistic investments has subsided, asset owners have been trimming portfolios for various funding needs such as benefits, private investment commitments and overall rebalancing and light of market movements. Outflows from existing clients totaled $573 million. In the quarter, we had four new mandates fund a total of $242 million across four strategies, the largest being a global real estate mandate for $182 million from a European corporate pension fund. Sub-advisory ex-Japan was slightly positive at $27 million. Japan sub-advisory continues its trend of inflows with $281 million, which netted to $44 million after distributions. The rotation out of technology and growth and the strength in the U.S. dollar contributed to Japan sub-advisory inflows.

We expect to see increased marketing activity with our partners in Japan in 2023 as the country continues to reopen for business and we look forward to celebrating our 20-year anniversary with our key distribution partner, Daiwa Asset Management. Our one unfunded pipeline was $885 million at year-end, compared with $1.1 billion at the end of the third quarter and the three-year average of $1.3 billion. 72% of our pipeline AUM is in global real estate strategies, led by a recently won completion portfolio, which is a customized strategy designed to complement existing private holdings by expressing allocations in the listed market that are cheaper or cannot be expressed in the private market. 50% of our pipeline is in Asia-Pacific, which is consistent with our recent commentary about emerging demand in the region for listed real assets.

To set the table for our 2023 priorities, we are expecting that the macro environment over the next 12 months to 18 months will include the following elements. The Fed will over tighten and will endure an average recession as foreshadowed by the seemingly daily pace of corporate layout announcements. The futures markets indicate that we should see the peak of monetary tightening at some point this year. So sometime in 2023 and it’s unknowable exactly when we should see the emergence of a new return cycle as financial assets have already re-priced and markets anticipate Fed easing as the economy stagnates. Inflation is expected to remain a wildcard with root causes embedded in the system itself. In terms of investment strategy priorities, we believe that global listed infrastructure and multi-strategy real asset strategies are generally underrepresented in portfolios and will continue to gain share.

Although infrastructure has been defending very well in the current volatile environment, institutional allocations have averaged only 4.6%, compared with our targets of 6.6%. Our research has demonstrated how listed infrastructure can complement private infrastructure allocations through similar to slightly better returns and low correlations. We will continue to educate while broadening our investment offerings and universe to include energy transition and other secular opportunities. With respect to multi-strategy real assets, even though we expect inflation to come down, we believe investors are under-allocated to inflation solutions. We, therefore, expect demand to grow as the continuing risk of inflation states the case for insurance.

We are expanding our educational outreach through our real asset institute and our focus on customization, which includes plans to launch a solution using CIT vehicles to customize allocations for retirement plans. In terms of REITs and preferreds, we believe these asset classes are poised to benefit from the next return cycle and we expect to see attractive entry points over the next year. As Jon mentioned, listed real estate return cycles historically proceed private, so investors who utilize both markets and more and more are should be focused on allocated to the listed market now. We expect private real estate prices to correct and that listed REITs will see acquisition opportunities at values 10% to 20% lower than the peak in 2022 due to higher debt costs and slower growth.

Our firm is now organized with deep expertise and resources to help advise investors on allocations between listed and private real estate and implement customer solutions. With respect to preferreds, Jon characterized our favorable outlook and accordingly, we are looking for ways to invest in the business. By example, we have seen in a new preferred strategy that is more global in composition with a focus on the large universe of foreign currency-denominated preferreds outside of the U.S. Our other strategic priority is private real estate. With our expectation that prices should correct between 10% and 20%, we believe that sometime in 2023, we will see emerging opportunities to deploy capital. After several confidential filings on Wednesday, we publicly filed the registration statement for our non-traded REIT, Cohen & Steers Income Opportunities REIT.

Because we are in registration, that is all I can say at this time. In addition, we continue to focus on other private real estate investment strategies for institutional investors. Finally, we have integrated our private and listed real estate capabilities with our real estate strategy group led by Rich Hill. They will help identify the best property sectors, geographies and themes, while identifying where real estate is the cheapest. Looking at distribution priorities, we recently built a key position by hiring Kimberly LaPointe as Head of Wealth. Our core institutional and wealth teams are now fully staffed. Incrementally, we are adding resources to focus on distributing the non-traded REIT and providing advice for optimizing real estate portfolios in the wealth channel, specifically, how much real estate to have in the portfolio and how to divide that between listed and private.

And consistent with emerging demand for real assets in Asia, we are expanding our sales capabilities there. In closing, we are highly focused on our priorities and I believe well organized to pursue them. This year will be key in helping clients adapt to regime change in the next phase, which will include shifts in allocations between asset classes, including listed versus private. In each case, calibrating for how the return and risk profile has changed and anticipating the new return cycles. Our strategy with respect to resourcing is to ensure we have the talent to run the business, navigate regulation and execute the new initiatives right in front of us, such as private real estate, but we have set a higher bar with success based triggers for any other roles.

While some of our peers are announcing layoffs, we are in a phase of potential growth that requires resources, and we are committed to helping our clients achieve their objectives. Change creates opportunity and we are committed to capitalizing on this for our clients and for our shareholders. Thank you for listening. Operator, please open the lines for questions.

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Q&A Session

Operator: Thank you. Our first question comes from John Dunn from Evercore ISI. Please go ahead. Your line is open.

John Dunn: Thank you very much. Maybe just to start off with — on the micro side, fund wise, you talked about Realty Shares outflow and real estate securities inflow. What do you think in 2023 in the wealth management channel, what do you think is going to be inflowing versus outflow?

Joe Harvey: Well, as I mentioned, John, toward the end of last year, we — with recent down mid-20% as you normally would expect, we saw a tax loss selling. And I believe, as you have identified, looking at the mutual fund flow data, we have started to see improved flows this year, which kind of validates the shift from tax law selling back to investors capitalizing on the decline in prices and the potential positive entry point that I described. But I think both Jon and I complemented it a little bit, identified that we think that there are going to be really good entry points for — both for REIT investors in 2023 and so we would expect flows to improve for our open-end mutual funds.

John Dunn: Yeah. The first two we definitely show that. And then on preferreds, what do you think like the next okay demand rate environment is, not necessarily the, like when you — it’s a leader, but less of the drag?

Joe Harvey: John, could you repeat that? There’s some stack, so I didn’t hear the question.

John Dunn: Sure. On preferreds, what do you think the next step, like okay demand environment is rate wise?

Joe Harvey: Well, again, Jon laid this out the — was laying out a case for double-digit returns from preferreds. And one of the things that we have always experienced with preferreds and considering that they have some of the highest income levels of — in the fixed income world as investors are very attractive to them, particularly when you consider the tax benefits on top of that. So one of the things that’s the change at the margin is with fixed income yields up across the yield curve and across different sub-segment types, there’s more competition for income. But again, preferreds still have some of the highest income rates out there. So we are thinking that between that and what the capital appreciation opportunity, as Jon mentioned, a double-digit return opportunity. I think once investors see kind of an all clear signal from the Fed that we will see inflows into our preferred vehicles.

John Dunn: Got you. So you talked a little bit about the private real estate effort. Can you give a little more kind of like say the union of not just NAV, but over the next few years, what do you think it’s going to develop into?

Joe Harvey: Sure. So really for the past two years, we have been building a private real estate team better and consistent with our philosophy, we didn’t try to go out and acquire something that was up and running and so we build it piece-by-piece. And I’d say we are gaining momentum on all fronts, including the capital raising front and I have outlined kind of two vehicles that we are working on, but most importantly, we — with commercial — our expectations that commercial real estate prices will correct 10% to 20% this year. I think there’s going to be a really great entry point for us to commence our track record. And that’s the thing that we are obsessed about, is making sure we get that timing right and considering the prior real estate business is a new business, so we started with a really great track record and so we are more focused on that than raising assets as fast as we can.

So the next phase will be to get the non-traded REIT up and running. And as I said, because we are in registration, we are not going to get into some of the things that are happening there. But our overall effort in private real estate is gaining momentum.

John Dunn: Got you. So this is a question I get. What do you think it takes to get U.S. infrastructure flows really going and kind of the potential timeframe? Is it in 2023 or is it more in the out years?

Joe Harvey: Well, I would say for infrastructure overall on the institutional side, it’s probably one of the most active areas that we have. Our pipelines and we characterize it in terms of things that are specific active searches and then behind that, there’s shadow pipelines with investors that are thinking about it. I’d say it’s one of the most active areas that we have. That’s been enhanced recently by how infrastructure has performed in this environment. On the wealth side, we have gotten a little bit of a pickup from all of the current administration focus on infrastructure spending. It’s been a great advertisement for infrastructure. So our flows into our open-end fund have improved. But I think it’s still early days in terms of a broader adoption of infrastructure in the wealth channel.

Jon Cheigh: John, I would only add. So we are seeing certainly more interest in the wealth channel for infrastructure. And our fund there, CSU was upgraded to five stars a few months ago. And so we have seen with all of our other funds, obviously, when you go from four to five stars, we can see a pretty meaningful share in investor interest were optimism.

John Dunn: Got you. So you guys have a lot of growth engines which ever been recognizing. But maybe to distill it down a little bit. If you think about your regions as being U.S., Asia, Europe and now like sovereign wealth funds in the Middle East. What’s like — what’s the number one thing in each of those regions that you think is going to do best in 2023?

Joe Harvey: Well, let me start with the U.S. Our wealth business is one of our larger businesses and so when the conditions are right for wealth that can really have the biggest impact on the business. I would say with some of the private real estate things that we are doing and Jon mentioned it, I mentioned it, in terms of our vision of being able to help the wealth channel with real estate allocations considering all of the mandates by the largest firms to increase alternatives, weightings and portfolios. I think that’s something that in time can really help our market share in the wealth channel. Just sticking with the U.S., there are — when you look at our shadow pipeline, there’s some very large pension plans that are conducting searches for strategies like U.S. real estate, global infrastructure and our multi-strategy real assets portfolio, which is consistent with the comments around investors.

Looking backwards, not needing inflation protection. That obviously has changed. So the U.S. is one of the biggest markets and considering our presence in both wealth and the institutional channel, I think, it have the biggest overall impact on the business. In Europe, we have talked about what’s going on in the Middle East and that’s most active in real estate and in infrastructure. Elsewhere in Europe, it’s one of the interesting things is that they have been allocating to our — also to our multi-strategy real assets portfolio. Asia is, as we have talked about in the past couple of calls, say on emerging demand front for listed real assets and that’s going to focus on mostly on real estate, but infrastructure to a lesser extent. And because of some of the mandates that we have won and the mandates that are and competition still were — we want to boost our sales presence in Asia, because if they now begun to adopt, we want to make sure we establish our market position.

These are mandates coming from sovereign well type funds from Thailand, Malaysia and Korea. But overall, just again, based on size and based on our presence, our rent order is U.S. The U.S. is the largest and most influential on the overall business. But the Middle East and Asia are kind of emerging areas of demand.

John Dunn: Right. Yeah. On that last one, can you frame for us the — what inning maybe we are in, in the shift from private real estate to public? And do you think, is that just a rebalancing thing or a couple of quarter thing or a multiyear thing?