Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| Taking all of this into account, we are very busy, focused, and excited about the investment opportunities for active managers amidst regime change |
| Amidst this latest rate-induced pullback in listed REITs, we still see low comparative supply of space, pricing power, and strong balance sheets |
| energy infrastructure and the attractive free cash flow generation |
| Turning to our outlook, we believe we are well positioned by way of our corporate strategy, how we're organized, and the clarity of our priorities |
| We believe the consensus on this topic is in the early stages of shifting, and this will help generate strong returns and new investor allocations for our real assets, natural resources, and energy-oriented strategies |
| Positively, our performance this quarter was led by preferred securities, most notably low-duration preferreds, which outperformed by 100 basis points and is now up 60 basis points for the year |
| It's a unique approach by bringing both of our teams together to have an information advantage and an idea advantage and in some cases, putting both types of investments in a vehicle is very compelling |
| In terms of the things within our control, our relative performance continues to be strong, and we have invested prudently in new strategies such as private real estate, and have seeded new strategies such as infrastructure opportunities and the future of energy |
| Our flow results were better than what may have been expected considering the market environment |
| In the near term, we believe preferreds will continue to perform well due to attractive yields, potential for strong total returns as we approach the peak of monetary policy tightening and solid fundamentals as highlighted by healthy bank earnings this quarter |
| Energy was the winner in the quarter, with oil prices up 29% and energy equities up 12% |
| Indeed, we maintain our conviction that listed markets today are priced for strong forward returns, and particularly so versus private markets |
| And we expect its production to grow by 155% over the next several decades, which will help satisfy growing energy demand |
| Commodities were the big story, up 4.7%, as energy and the petroleum complex surged on deeper OPEC+ production cuts, as well as falling Russian crude oil exports and stronger global demand, which pushed Brent crude oil prices to 10-month highs in the mid-90s |
| And we believe this feature will create attractive investment opportunities on both sides of the equation |
| Offsetting these dynamics, midstream energy continues to perform well with the industry up 2.5% on the quarter and now up 7% on the year, as investors appreciate the scarcity value of U.S |
| Needless to say, our objective is to start the non-traded REIT with a good track record, while taking advantage of an attractive investment period |
| Japanese interest rate increases have not kept pace with the rise in global rates and the US dollar has been strong versus the end, both dynamics helping REIT flows in Japan |
| We're optimistic about business opportunities in Asia as investors adopt allocations to listed real assets |
| And so, as we demonstrate what we can do on the investment side, I think they'll receive us very well |
| Considering valuations in the fundamental picture, we believe investors have an attractive entry point over a multi-year horizon |
| The cost structure supporting the initiative is in place and we believe private real estate is a strategic investment that will provide meaningful operating leverage |
| So, I wouldn't say right now that there's necessarily a trend on that front, but it was certainly positive to see it improve recently |
| The institutional channel was positive in the quarter with $190 million of net inflows in advisory and $123 million of net inflows through sub advisory |
| For the last three, five, and 10 years, our performance track record remains nearly perfect at 95%, 97%, and 100%, respectively |
| For the first seven months of the year, cooling inflation and rising prospects for a soft landing drove positive listed market returns |
| When looking at the prolonged energy transition picture, we believe that blending traditional energy with alternative investments can also create a compelling risk-return profile for investors |
| The reception of our approach to investing in private real estate and also including some investing and listed alongside of it has been received very well |
| De-globalization and the shifting geopolitical world order provide added catalysts for our view that inflation will be more prevalent, interest rates will be higher for longer, and central banks will continue to be reactive |
| Our resource equity strategy is particularly well-suited for the macroeconomic environment we envision |
| Statement |
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| Turning to the market environment, the quarter was challenging for most asset classes with global equities down 3.3% and global bonds declining 3.6% |
| Also impacting the electric space has been the likely negative impact of both higher cost of capital and lingering supply chain issues impacting returns for new renewable energy projects |
| And our operating margin decreased to 35.5% from 36.4% last quarter |
| All major utility subsectors, electric, gas, and water were down between 7% and 11% during the quarter |
| In addition, after five straight quarters of surpluses, the quarter's expected deficit of 1.5 million barrels per day was the largest since the fourth quarter of 2021, and drove OECD supply inventories further below their five-year average |
| And it's just been a more challenging business |
| Market depreciation in our asset classes late in the third quarter resulted in quarter-end assets under management being approximately 6% lower than our average assets under management |
| Real estate, in our view, had already priced in a 4% treasury yield environment, but clearly struggled with the 10-year pushing closer to 5% by the end of the quarter |
| But this quarter, market attention shifted back to concerns about stubborn inflation and high rates, along with new concerns over fiscal deficits and debt sustainability |
| Cell tower companies have also been impacted by both higher interest rates as well as lower customer leasing activity |
| This quarterly decline in listed markets implies that we should expect continued write-downs within private markets |
| While a slight disappointment, we would caution reading too much into the short term |
| Factor in geopolitical tensions and in some cases outright conflict including two wars and the entirety of that macro landscape is less predictable and potentially fragile |
| What's challenging is the regime change in the macro economy |
| And then in the first half of 2023, people thought, Oh, that was just a bad year |
| REITs, declined by 8.6% for the quarter, underperforming U.S |
| During the third quarter, the emergence of bond vigilantes focusing on the US federal deficit and potential for sticky inflation caused bond yields to rise, furthering the higher for longer view and pressuring valuations on risk assets |
| But I think when -- as I said in my remarks, the market declines in the end of the third quarter sets us up for a larger decline in full year revenue than what we had forecasted, so we needed to make an adjustment |
| For example, US REITs declined 8.6% |
| At the same time, the demise of traditional carbon-intensive energy, such as crude oil and natural gas, has been greatly exaggerated |
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