No. of Recommendations: 7
Missash listened to a presentation by Marty Cohen and Bob Steers at the Merrill Lynch "Banking and Financial Services" conference, conducted yesterday. Very interesting, especially regarding certain factors affecting Reits on the "macro" front.They are growing their business with these macro trend drivers in mind.....1)There is and there will continue to be a growing demand for income products; this demand is outstripping current supply.....2)There is and there will continue to be increasing securitization of real estate outside the U.S. Every major capital market now recognizes the Reit product.........Thus, CNS has bought a European firm specializing in R.E.; they have an office in Australia and just opened one in Hong Kong. They have expanded their product offerings beyond U.S. Reits. Thus, they are into global Reits, utilities, preferred stocks of R.E. and non R.E. comnpanies and have recently launched a large cap value product. They remarked that interest in and demand for international Reits is currently greater than for U.S. Reits. They currently have 20 billion dollars under management, including closed end funds, open end funds and institutional business. They have been growing AUM at a 30% compound annual growth rate, while maintaing profit margins and performance. Closed end funds presently make up 50% of AUM, but they were clear that this was just because these funds have had a marketing opportunity that they do not expect to continue. Much of their future growth will come from the open end fund arena and penetration of the institutional market to a greater extent. They have ample cash on the balance sheet and no long term debt. One word of caution to those of you who own one of their closed end funds. Apparently, some of the funds have a fee waiver burn off date, after which they will profit at the expense of the shareholder.....disclosure: Missash is a shareholder in CNS, believing they are a class act.
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No. of Recommendations: 2
Missah:
After losung some money in closed end funds over the past few years, I have decided that these financial product providers do make a lot of money ... for themselves. About a month ago I bought the following:

BLK (Blackrock) I am up 8%
CNS (Cohen & Steers) down about 3%
BSC (Bear Stearns) up about 5%
LEH (Lehman Bros) up about 3%
EV (Eaton Vance) up about 2%
JNC (Nuveen) up about 10% but owned a bit longer
LM (Legg Mason) up about 13% but owned quite awhile

So far it has been a good idea.
Norm
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Norm.....some time ago I tried to address the question of what metrics were important to compare when evaluating these type money management firms and where does CNS fall in this scheme of things. I'm new at this and need help. Perhaps I can get Reitnut interested in a discussion of this??...........Missash, who wonders whether an investment in CNS will work out better than an investment in one of their funds.
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Missah:
<<<Missash, who wonders whether an investment in CNS will work out better than an investment in one of their funds.>>> That was exactly my premise, although CNS is the only one I am down on. However it has been a very short time that I have owned most of them.
Norm
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I have emailed Reitnut and hopefully he will weigh in if he's not too busy tending to Sammy or composing the next "Essential Reit".
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hello missash,
i've had CNS on my watch list for several months now. and have never really gotten around to researching. do they track REITs or do they follow other asset managers, as far as day to day stock price gyrations?

i looked at CNS relative to a few other asset managers (AUM & mcap in $billions):

CNS AC BEN BLK
AUM 20 550 442 428
mcap 0.62 4.38 24.03 6.68
AUM/ 32.3 125.6 18.4 64.1
mcap
yld 2.50% 5.20% 0.40% 1.20%

AC is a company i've owned for years and may not be the best comparison, especially because of their MLP status.

BEN has a lot of fixed income type AUMs and BLK has a lot of closed end and ETF funds. i don't have growth of AUMs for any of the comparisons.

the AUM/mcap ratio shows AC the "cheapest" of the four, with CNS between BEN & BLK.

how much of CNS's AUM growth is from appreciation and how much is from inflow of funds? do they break this out when (or if) they release AUM info? do they even release monthly AUMs? i didn't see any press release from them.

thanks,
--tytthus
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No. of Recommendations: 2
Tytthus:
When I looked at CNS, I could only find about 5 qtrs of data related to their stock. I know they have been selling products much longer than that. Perhaps they were private until recently. Some of you might remember some time ago, when I sold a bunch of REIT's and replaced them with a group of banks and energy companys. I still own the energy stocks and they did very well. However the banks did not, to say the least; and I eventually sold all of them. I did want some financials though, so I thought about what to buy. I bought Legg then and BRO (Brown & Brown insurance). They have both done extremely well. I later bought Nuveen. I have never done well with closed end funds, although fortunately I never invested much in them. I never owned any REIT CEF's, but did and still do own UTF (a Cohem & Steers utility fund). It has been awful, although I must say VPU (Vanguard's Utility Viper) hasn't done any better (which I bought about the same time). I also owned HTR and BNA (fixed income CEF's) and did not do well with these either. One thing that is surprising about some of these CEF's, ETF's and Vipers is how few stocks some of them own. In some cases a few as 20. Also, the CEF's generally have very high expense ratios (I am sure that is not news to most of you). I got to thinking they must make a lot of money selling these products, so I decided to buy CNS, BLK, etc. instead of their products or other financials.
Norm
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Tytthus, <<<<<Assets under management reached $20.2 billion at September 30, 2005, a 25.5% increase from September 30, 2004. The year over year increase resulted from market appreciation of $3.2 billion coupled with net inflows of $938 million.>>>>>.This from their recent quarterly report, I think at least partially answers your question. Keep in mind that CNS has been a public company for only a little over one year.


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After losung some money in closed end funds over the past few years, I have decided that these financial product providers do make a lot of money ... for themselves.

(Just a general rant, not remotely directed at Norm) Like a regular mutual fund, even index funds, you've got to look at expense ratios. Too many people seek high dividend yield CEFs or ETFs & ignore expense ratio. Shouldn't do it w/ mutual funds, why do they think it's o.k. to ignore it in CEFs/ETFs?*

At any rate, along the lines of what you've done, I bought a bit of Barclays PLC (NYSE: BCS.) Up 5.4% from when I bought in July.

I've thought about buying CNS too.

jmc

*recently on an II board, someone asked about a CEF that was yielding 8.4% or so. The expense ratio was over 200 basis points! Egads!!!
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composing the next "Essential Reit".

Ack! On my first read through I read this as "composting the next 'Essential Reit'".

jmc, too much gardening?
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The presentation slides are available on the CNS corporate website:

http://www.cohenandsteers.com/downloads/finalMLConferenceV2.pdf

There's excellent detail concerning their geographic and product diversification.
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No. of Recommendations: 12
some time ago I tried to address the question of what metrics were important to compare when evaluating these type money management firms and where does CNS fall in this scheme of things. I'm new at this and need help. Perhaps I can get Reitnut interested in a discussion of this?

Missash, I cannot comment specifically on CNS, as I have never spent much time analyzing how my former rival REIT asset managers manage their portfolios. (I did, however, learn something about Ken Heebner's CGM REIT fund from a client of ours, who said Mr. Heebner was something of a madman, placing huge bets on specific sectors). But, I have always maintained that management "philosophy, tactics and style" was a very important but much overlooked and ignored consideration in selecting one's asset manager, whether it be segregated all-REIT accounts or REIT mutual funds, open- or closed-ended.

In fact, you have inspired me to devote the upcoming issue of The Essential REIT to a general discussion of this topic. I hope to get it done early in the week following Thanksgiving. Accordingly, I will set forth here in this post only a broad outline of the issues that investors should look for or raise with their REIT managers. Of course, mutual fund investors never get to ask specific questions, but some of the following issues might be easily studied by looking carefully at the published mutual fund reports, as filed with the SEC.

OK, here is my list of a dirty dozen categories, which will be filled in with (perhaps too much) detail in the coming issue of the newsletter. If you could ask these questions, watch your prospective REIT asset manager squirm!

1. Performance Goals, i.e., how does the fund manager define "success?" What are their criteria for earning their fees, and why shouldn't we simply buy an indexed mutual fund or ETF and save on your fees?

2. REIT Philosophy, i.e., what is most important in being successful as a REIT asset manager? How do you approach REIT investing -- as real estate or a real estate business, and how important is REIT management? Balance sheet? Corporate governance? Do you make "macro" calls, based upon your views of the US economy, or the prospects for certain real estate sectors? Why do you think you are any good at this?

3. The Nitty-Gritty of Stock Selection, i.e., which is most important, real estate prospects, NAVs, AFFOs, or value creation -- and how do you select specific stocks for the portfolio? How important is a dividend yield in your selection process? Why?

4. Managing Risk -- how do you define risk? Volatility -- or permanent loss of capital? And how do you control and reduce risk?

5. The Big Picture, i.e., do you have an absolute performance goal, or just relative to a benchmark? What do you do if you conclude that REIT stocks are, as a group, very expensive?

6. Home-runs or Singles, i.e., how do you weight real estate sectors within the portfolio? Are you wiling to put 50% of your assets into hotels? Do you feel you "must own" a REIT if it comprises 5% of the benchmark?

7. Managing Turnover, i.e., how important is turnover and avoiding capital gains taxes that will be imposed upon your investors? Do you even care?

8. Subjective Criteria, i.e., to what extent are all your decisions based upon your valuation models? When do you override them, and why?

9. Research -- what's the process, who does it, and how often do you talk with REIT management? How important are property tours -- or are they just a marketing device to attract clients?

10. Sell Discipline, i.e., when do you sell a stock, and why? And, though this overlaps question 7, does it make sense to sell a stock you think is 10% overvalued if many of your clients will lose more than 10% to capital gains taxes?

11. Liquidity: How important is this, and how many trading days will it take you to establish or dispose of a 2% position when you don't like what's going on or when you think a stock is overvalued? Be honest: Include ALL REIT accounts you manage, not just the size of one particular account or fund!

12. "Off-the-Wall" Investments, i.e., do you buy non-REIT stocks such as homebuilders? Real estate data providers or brokers? Foreign real estate? What is your view on mortgage REITs?

I think we could learn a lot by asking these questions; the difficulty, of course, is getting honest answers! But perhaps even asking ourselves these and other related questions as individual do-it-yourself investors can be helpful in our own investment process.

Ralph

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Especially in regards to Reitnut's 11th topic, any concern on CNS's $20 bil?

11. Liquidity: How important is this, and how many trading days will it take you to establish or dispose of a 2% position when you don't like what's going on or when you think a stock is overvalued? Be honest: Include ALL REIT accounts you manage, not just the size of one particular account or fund!
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