Final CNS AR 2020 - Flipbook - Page 26
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, and the
growing availability of investment options to meet these demands, 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.
A significant portion of the assets we manage is 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.
Our growth could be adversely affected if we are unable to manage the costs or realize the anticipated benefits
associated with the expansion of our business.
Our growth strategy continues to involve expanding our business and 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 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 and launch 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, operations, and personnel.
Developing and implementing new investment strategies and products may require significant upfront management
time and attention, the hiring of highly-compensated personnel, seed capital commitments, and other financial resources,
including potential subsidies of operating expenses for an extended period of time, as well as ongoing marketing and other
support. The success of our business strategy and future growth is contingent upon our ability to continue to support and
invest in the development of new strategies and products, to generate sufficient assets under management and fee revenue at
the levels and within the timeframe anticipated in order to support the compensation and other costs and expenses underlying
such new strategies and products, to expand the availability of our existing strategies and products, and to successfully
manage multiple offices and navigate legal and regulatory systems both domestically and internationally. The upfront and
ongoing costs 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
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