Cohen & Steers may not be a name wealth managers are overly familiar with. But that could be about to change as the US-based liquid real assets specialist pushes into the UK market.
The firm was founded in 1986 by Robert ‘Bob’ Steers and Martin Cohen who had the vision of creating the first asset manager dedicated to investing in listed real estate, head of sales and client service for EMEA Marc Haynes says.
Although the duo were “arguably too early” in advocating listed real estate investments, Haynes says the firm “took off in the mid-1990s” fuelled by the demand for Reits in the wake of the savings and loans crisis.
Thirty years later, Cohen & Steers is a global publicly-traded firm managing close to $59bn in assets. As the self-proclaimed “world leader in the liquid real asset space”, the firm has “lots of cash on the balance sheet” and has seen 10 quarters of net positive flows.
“The decision to go public in 2004 was enormously beneficial,” Haynes says. “It has provided liquidity, stability, a level of permanence and a long timeframe to develop the business. We are independent but there is a broad employee ownership of 55 per cent.”
Haynes adds: “Since 1986 other firms have entered the market, but we remain the world leader and are recognised globally for our market dominance. We have the largest Reits team in the world. Real estate is a local business and we can do that through our large team – we have 290 employees across the business.”
Cohen & Steers began internationalising their capabilities in 2003 when they expanded into the Asian market, entering the European market in 2004. The firm has also diversified beyond Reits, developing capabilities in “adjacent categories where we can add value through fundamental inefficiencies”, Haynes says.
In the US, as well as US and global real estate securities, the firm’s strategies cover global listed infrastructure, real assets, commodities, global natural resource equities and large-cap value and preferred securities.
Haynes says the preferred securities fund and global listed infrastructure strategies were a natural extension from the Reits products.
“In 2004 we started investing in global listed infrastructure; it is more similar than different to the listed real estate market. It was a natural progression to start managing money in the space.”
More recently the firm launched a global natural resources strategy for institutional investors following a lift-out of the commodities team from GE Asset Management in 2013 as well as a real assets fund that blends the firm’s capabilities in one vehicle.
But which strategies are available to UK investors?
The group recently launched sterling share classed for the Sicav versions of the Global Real Estate Securities fund ($85.3m) and the Global Listed Infrastructure fund ($5.6m) as well as a European Real Estate Securities fund (€49.1m), which launched in 2006, 2015 and 2002 respectively. The Global Preferred Securities fund also launched in May as Coehn & Steers looks to build out its presence in the UK and the rest of Europe.
With the low income conditions continuing, Haynes points out there is significant demand for asset classes offering higher income rates, and preferred securities are providing yields upwards of 5 per cent from investment grade issuers.
The preferred securities strategy “leverages the long track record of the US fund” although it is has been restructured to ensure it is tax efficient for non-US investors.
“Preferred securities are comparable to high yield but are issued by different companies, such as banks and insurers,” Haynes says. “There is plenty of evidence this is a good time to be launching this strategy.”
Haynes adds: “We have a global investment platform and a global client base. But Europe is under-represented from a client perspective. We are committed to building out our base across EMEA.”
The firm started building on its presence in London 18 months ago, appointing Mark Smith-Lyons as chief operating officer. Haynes was brought in to lead the distribution strategy and James Cahill hired as head of funds and sub-advisory sales EMEA last year. A junior hire followed, and the firm is looking to fill a further support resources role. “It is a small but focused distribution effort,” Haynes says.
Haynes, who began his career as a graduate trainee at Schroders in 2001, has held a number of distribution roles including a stint at Friends Provident, and was most recently at Greenwich Associates where he led the global asset management practice. “The first thing I did [at Cohen & Steers] was to create a thorough distribution strategy for institutional investors and wealth managers,” Haynes says. “We are focused on the top end of the market, such as fund of funds and family offices. We don’t have the boots on the ground to enter the UK advisory market. We are in the final stages of optimising our fund platform. We have had the funds on the ground for a while and are getting them registered in more markets, such as the UK and Switzerland.”
Haynes says that as a relatively unknown firm in Europe their number one goal is to demonstrate their value and relevant proposition. The firm is already seeing an increased interest in Reits and real assets, which he says is likely to be boosted by rising interest rates as investors shun fixed income in favour of inflation protection.
Real estate securities have had a chequered past, Haynes admits, and weren’t great businesses prior to the introduction of the Reits structure.
While the quality of UK listed property companies has changed dramatically since Reits were introduced in the UK in 2007, investors’ perception has been slow to change, he says, which is partly to do with investors continuing to flock to Oeics investing in direct property. “The large domestic offerings such as Standard Life, L&G and Aviva, which own the asset management and the distribution, have done a lot to drive flows into open-ended funds at the cost of investors being aware of Reits as an alternative way to access real estate.”
Even by international standards UK investors have been slow off the mark to consider the $1.8trn global listed real estate market. The US, Australia and the Netherlands have long been investors in Reits, adopting them in 1960, 1969 and 1971 respectively.
“Investors’ needs don’t differ dramatically by geography,” Haynes says. “Investors in the same demographics in the US should largely be investing in the same way in the UK. During the global financial crisis and after the EU referendum we saw direct property funds locked up.
“That will happen again and investors will increasingly look for alternative ways of investing. Flows into Reit funds will be positive over coming years.”
Next in the pipeline for UK investors is a Sicav version of the real assets fund, which Haynes says will fill a gap in the market.
Haynes says: “There is a common thread in what we do. We invest in tangible assets that are available in liquid form. The listed market is core to the firm’s philosophy.
“In the short term Reits behave like equities but over the long term they behave like their private counterparts. We are the only asset manager dedicated to managing real assets across the spectrum. It gives us an enormous edge.”
Cohen & Steers is a global investment manager specializing in liquid real assets, including real estate securities, listed infrastructure, commodities and natural resource equities, as well as preferred securities and other income solutions. Listed on the New York Stock Exchange, Cohen & Steers has $59bn in assets under management. The firm is headquartered in New York, with offices in London, Hong Kong, Tokyo and Seattle.
$59bn Assets under management as at 31 March
290 Employees globally
55% Employee ownership of the firm
1986 Year the firm was founded
Ryan Hughes, head of fund selection at AJ Bell
Cohen & Steers is another US manager trying to make headway in the UK with its property and infrastructure strategies. It is clear that it is focusing on specialist strategies, but historically it has been a challenge for specialist US managers to really succeed. Best known for property securities investing, the firm has managed to gather significant assets over the years through their relative value approach that focuses on stock picking. The challenge will be for Cohen & Steers to start to really establish itself and demonstrate a commitment to the UK market that gives investors’ confidence that they warrant long-term investment.
Justine Fearns, Research manager at Chase de Vere
Cohen and Steers recently opened a London office and has plans for a Dublin-based commodities fund, making the longer running US strategy available to UK and European investors. Established in 1986, it built its name in real estate securities but a focus on income and real returns means it now runs a much broader range of strategies in the US. Like any firm coming to the UK, it will need to establish presence, which takes time. In the commodity space it will also need to differentiate from or outshine offerings from existing trusted brands, which will be no mean feat. Patience and commitment to the market will be key to its business strategy.
Darius McDermott, Managing director Chelsea Financial Services
Cohen & Steers has a strong reputation globally for managing real assets such as infrastructure, commodities, natural resources and real estate securities funds (they were one of the first to have dedicated Reit funds in the US in the 1980s).
They are far less well known in the UK, where they are just starting to make a move into the wholesale and institutional markets. They could gain some traction, especially if inflation sticks and people look for investments that can react positively to rising prices, and if commodities have indeed bottomed, as some suggest.
They have a large global investment team and we like the fact the company has remained a specialist in its field, rather than trying to offer all things to everyone.