Cohen & Steers (CNS) Q3 2025: Unfunded Pipeline Doubles to $1.75B, Signaling Institutional Allocation Shift
Cohen & Steers’ third quarter saw its unfunded institutional pipeline surge to $1.75 billion, the highest in nearly four years, as allocators reposition toward inflation-sensitive real assets and infrastructure. Expense discipline and margin expansion were evident, with new business momentum in active ETFs and private real estate beginning to offset legacy headwinds. With the Fed’s interest rate cycle pivoting and real asset valuations compelling, CNS is positioning for a broadened growth phase across both public and private platforms.
Summary
- Institutional Pipeline Inflection: Unfunded mandates more than doubled, highlighting renewed allocator demand for real assets.
- Expense Leverage Emerges: Revenue growth outpaced expenses, driving operating margin expansion and improving comp ratio.
- Active ETF and Private Real Estate Traction: New vehicles are generating revenue and positioning CNS for multi-channel growth.
Performance Analysis
Cohen & Steers delivered a quarter marked by top-line growth, margin expansion, and a sharp build in its institutional opportunity set. Revenue increased sequentially, supported by higher average assets under management (AUM) and a stable fee rate. Operating margin expanded to 36.1 percent, reflecting disciplined cost control and a lower compensation ratio, as total expenses held flat despite ongoing investments in talent and distribution. Notably, net inflows were positive at $233 million, bringing year-to-date inflows to $325 million, a marked shift from the outflow trend during the prior rate tightening cycle.
Open-end funds continued their positive momentum, posting five consecutive quarters of net inflows, while institutional advisory and sub-advisory channels saw moderate net outflows, largely attributable to client reallocations and retirement plan restructurings. The active ETF platform surpassed $200 million in AUM, with strong performance and peer-leading returns across its three flagship strategies. Private real estate also began contributing revenue, with the inaugural closed-end drawdown fund closing at $236 million and continued fundraising progress in the non-traded REIT segment.
- Pipeline Expansion: The unfunded institutional pipeline reached $1.75 billion, more than doubling the three-year average, dominated by U.S. REIT mandates but diversified across six strategies.
- G&A Normalization Ahead: General and administrative expenses are set to moderate to mid-single-digit growth in 2026 after a front-loaded 2025 driven by business development and ETF launch costs.
- Performance Consistency: Despite short-term underperformance in U.S. REITs, long-term excess returns remain robust, with over 93 percent of AUM outperforming benchmarks on a one-year basis.
The quarter’s results underscore a business model that is both diversifying and adapting, with operational leverage beginning to show as new initiatives scale and legacy cost drag abates.
Executive Commentary
"Our financial results were solid, flows were positive, our institutional pipeline built up meaningfully. New strategies and vehicles are gaining traction, and we are making progress on distribution initiatives."
Joe Harvey, Chief Executive Officer
"Expense management and discipline with revenue growth outpacing expense growth. Expanded operating margins as compared to both the prior quarter and prior year's quarter. Net inflows during the period. A multi-year high in our one but unfunded pipeline resulting from investment performance and our focus on sales and distribution."
Raja Dhikori, Chief Financial Officer
Strategic Positioning
1. Institutional Allocation Rebound
The $1.75 billion unfunded pipeline marks a major inflection in institutional demand, particularly for U.S. REIT strategies, which account for 66 percent of the pipeline. The rebound is driven by improved allocator confidence in the rate cycle, a search for inflation-sensitive assets, and reallocations from underperforming managers. The pipeline also includes mandates from retirement plans, annuity providers, and European institutions seeking global real estate exposure.
2. Product Innovation and Channel Diversification
Active ETF launches and private real estate initiatives are gaining traction, with early revenue generation and strong investment performance. The real estate ETF, preferred ETF, and resource equities ETF all rank number one versus peers since inception. CNS is on track to launch two additional ETFs in Q4, and private real estate products are expanding into the RIA (Registered Investment Advisor) channel, broadening the addressable market beyond traditional mutual funds.
3. Margin and Cost Architecture
Operating leverage is materializing as revenue growth outpaces expenses, with a compensation ratio of 40.25 percent and G&A growth set to moderate next year. Investments in talent, new office facilities, and distribution infrastructure are largely complete, positioning CNS to scale new business lines without proportional cost increases. The business is moving past the heavy investment phase into one of margin expansion as new revenue streams come online.
4. Real Asset Advocacy and Industry Positioning
CNS continues to champion listed real assets as a core portfolio diversifier, highlighting their inflation sensitivity, liquidity, and historical outperformance over private alternatives. Management is vocal about the under-allocation to listed REITs in institutional portfolios, emphasizing the opportunity to capture a greater share of the $1.5 trillion U.S. market cap. The firm’s advocacy extends to 401(k) plans, where listed vehicles offer daily liquidity and transparent pricing versus private alternatives.
Key Considerations
This quarter marks a strategic crossroads for Cohen & Steers, as it transitions from legacy outflows and heavy investment to a period of pipeline-driven growth and operational leverage.
Key Considerations:
- Pipeline Quality and Conversion: The ability to convert the $1.75 billion pipeline into funded mandates will determine the pace of AUM and revenue growth in 2026.
- ETF and Private Real Estate Scaling: Early traction in new vehicles must translate to sustained flows and profitability, especially as costs are already embedded.
- Margin Expansion Sustainability: Continued discipline in compensation and G&A is critical as new business lines scale and market conditions evolve.
- Interest Rate and Macro Sensitivity: Real asset strategies are poised to benefit from lower rates and sticky inflation, but remain exposed to macro shocks or a reversal in rate expectations.
Risks
Key risks include the potential for delayed or lower-than-expected pipeline conversion, especially if macro uncertainty or rate volatility returns. Legacy institutional outflows could persist if client reallocations accelerate. Execution risk remains around scaling active ETF and private real estate platforms, where costs are already in the system but revenue is still ramping. Market concentration and elevated equity valuations also pose portfolio construction and allocation risks for real asset managers.
Forward Outlook
For Q4 2025, Cohen & Steers guided to:
- Compensation ratio holding at 40.25 percent for the full year
- Full-year G&A growth of approximately 9 percent versus 2024, moderating to mid-single-digit growth in 2026
For full-year 2025, management maintained guidance on:
- Effective tax rate at 25.1 percent on an as-adjusted basis
Management highlighted several factors that will shape results:
- Continued net inflows in open-end funds and active ETFs
- Ongoing margin expansion as new initiatives scale and legacy cost drag abates
Takeaways
Investors should focus on the scale and quality of the unfunded pipeline, the ramp in new product revenue, and the sustainability of expense leverage as CNS pivots to a growth phase.
- Pipeline-Driven Growth: The doubling of the institutional pipeline is the clearest signal of a strategic inflection, but conversion and timing will be critical to watch in coming quarters.
- Multi-Channel Expansion: Active ETF and private real estate initiatives are beginning to bear fruit, but require continued execution and market adoption to deliver on their potential.
- Margin and Cost Focus: Operational leverage is emerging, but maintaining discipline as the business scales will be a key determinant of long-term profitability and valuation.
Conclusion
Cohen & Steers enters the final quarter of 2025 with a record pipeline and expanding product suite, positioning it to capitalize on allocator demand for real assets and infrastructure. The business is executing on margin discipline and multi-channel growth, but must now deliver on pipeline conversion and scale new initiatives to sustain its trajectory.
Industry Read-Through
The surge in unfunded mandates and allocator interest in inflation-sensitive real assets signals a broader pivot among institutional investors as they seek diversification away from concentrated equity exposures and passive allocations. Active ETF adoption, especially in real assets and preferreds, is gaining credibility as a viable channel for both retail and institutional flows. Private real estate’s integration with listed strategies points to a convergence theme, as allocators seek liquidity, transparency, and fee efficiency. Asset managers with differentiated real asset platforms and operational leverage stand to benefit most as the macro environment shifts and the next leg of the rate cycle unfolds.