CNS AR22 Digital - Flipbook - Page 10
The new regime
The market regime shift was indeed significant
in 2022.
The Federal Reserve and other central banks
responded to the spike in inflation that began in
2021 by raising interest rates and moving from
quantitative easing to quantitative tightening.
Bonds had their worst year on record. The
S&P 500 dropped 19.4% for the year. Listed
real estate, our largest asset class, fell 24.9%
in 2022, as measured by the FTSE Nareit All
Equity REITs index. Bubbles burst, including
special purpose acquisition companies and
cryptocurrencies. More recently, some U.S.
regional banks have faced investment portfolio
losses and liquidity challenges, leading to a
takeover by banking regulators.
The period of low rates and low inflation has
ended, transitioning to an expected longer-term
regime of slower growth, elevated inflationary
risks, and continued volatility.
2022 financial results
The firm’s financial results last year reflected the
market volatility. Assets under management
(AUM) declined from a record $106.6 billion at the
end of 2021 to $80.4 billion at year-end, largely
due to market depreciation. Organic growth
turned negative for the first time since 2018, with
net outflows of $1.6 billion, primarily due to client
rebalancing. Net income attributable to common
stockholders was $171.0 million ($182.3 million,
as adjusted(1)) in 2022 compared with $211.4
million ($197.9 million, as adjusted(1)) in 2021.
Real assets positioned for growth
As we start 2023, financial asset prices have
corrected, and the end of rate hikes appears
to be on the horizon. Market uncertainty is
elevated, and we may be somewhere around
the middle of the current macroeconomic cycle.
Based on our interactions with investors, we
believe they continue to be under-allocated to
real assets and allocations in portfolios are
increasing on a secular basis, particularly to U.S.
and global real estate, global listed infrastructure
and multi-strategy real assets. The regime shift is
providing an additional opportunity for investors
to increase allocations to real assets and
alternative income.
Listed real estate prices are going through a
bottoming process that we believe will present
attractive entry points in the coming year.
Against this cyclical backdrop, and supported
by a secular shift to embracing alternatives,
investors are increasing their adoption of real
estate securities. Institutional investors, including
U.S. pensions and sovereign wealth funds in the
Middle East and Asia, are driving increased
demand. Investors are complementing core
private real estate allocations with allocations to
listed REITs. We are also seeing some investors
move from passive to active management.
(1) The term “as adjusted” is used to identify non-GAAP financial information. See pages 33 to 35 of the Form 10-K, “Reconciliations of U.S. GAAP to As Adjusted Financial Results,” for reconciliations to the most directly
comparable U.S. GAAP financial measures.
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COHEN & STEERS | 2022 ANNUAL REPORT