Real estate manager Cohen & Steers reported $75.2 billion in assets under management as of Sept. 30, a decrease of 6.5% from $80.4 billion at the end of the second quarter and down 5% from $79.2 billion at the end of the year-earlier quarter.
Cohen & Steers attributed the decrease to net outflows of $47 million, market depreciation of $4.6 billion and distributions of $604 million.
"What's challenging is the regime change in the macroeconomy," said Joseph Harvey, CEO and president on Cohen & Steers' Oct. 19 earnings call. "This shift is taking a very long time, which, on reflection, is understandable considering that the cumulative effects of 12 years of monetary stimulus cannot be unwound in a quarter or two."
Factor in geopolitical tensions and two wars, "and the entirety of that macro landscape is less predictable and potentially fragile," Harvey said.
The increase in cost of capital and multiple compression is a challenge for businesses and asset owners, he said, which so far has manifested in the listed market but is developing in the private markets as well.
This regime change is affecting asset owners' decision making, Harvey said.
"The fact that investors can sideline their capital and earn over 5% in a riskless treasury bill while they wait to see how valuations and the economy evolve makes sense for now," he said. The open question is whether private valuations will settle out, which is slowing investors' investment decisions, across the board, Harvey added. Cohen & Steers' executives expect private real estate buying opportunities in 2024 as prices continue their correction, Harvey said.
Cohen & Steers is waiting to launch a nontraded real estate investment trust, which has completed its registration and review process with the SEC and all 50 states, until prices decline further in light of increased interest rates and slowing growth, he said.
"Our expectation has been that prices need to decline 25% to 30% and, to generalize, we believe we're about halfway there," Harvey said.