Open-end mutual funds are now 31.805 percent of Cohen & Steers' [profile] assets under management, and that percentage is on the rise.

On Wednesday the New York City-based, real estate-focused asset manager reported second quarter earnings per share of $0.49, beating out Q2 2013's $0.34 per share and surpassing analysts' expectation of $0.44 per share [earnings report] [See analysts' expectations here, here, here, here and here]. Revenue climbed 0.8 percent year-over-year to $78.4 million for Q2 2014 (ended June 30), beating analysts' expectation of $77.73 million.

Several key points came up yesterday in Cohen & Steers' earnings call with analysts [See the Seeking Alpha transcript of the call]:

1) Open end mutual funds are increasingly important to Cohen & Steers.

2) Performance is strong.

3) The sub-advisory channel just took a big hit, due to a single client.

4) Cohen & Steers is making a DC I-O push.

1) Open-end mutual funds are a big part of Cohen & Steers' growth. Its open-end mutual fund AUM rose 9.8 percent last quarter to $16.629 billion on June 30, thanks to $966 million in market appreciation and $515 million in net inflow. Yet overall AUM climbed 6.6 percent to $52.285 billion (still a record for the shop).

On the earnings call, chief financial officer Matt Stadler told analysts that Cohen & Steers' "effective fee rate" rose 0.3 basis points to 57.7 bps:

The increase was primarily due to the continued shift in the mix of our assets under management towards open funds ... It is notable that we have recorded net inflows into open-end funds in 19 of the past 21 quarters. If you annualize second quarter flows, open end funds had a 14% organic growth rate.

2) CEO Bob Steers says he's happy with his PMs:

Starting with investment performance, absolute and relative returns for all of our strategies were strong in the second quarter and for the latest 12-months. Including MLPs and commodities as core strategies, seven of nine teams outperformed their benchmarks in the second quarter and all nine teams outperformed for the latest 12-months. By any measure, our teams have been delivering strong and consistent alpha.

3) One dark spot in Cohen & Steers' earnings was the sub-advisory channel, specifically a single, now-former, unnamed client. Steers explained on the call:

The sub-advisory channel was the only weak segment in the quarter experiencing net outflows of $650 million. $506 million of the outflow came from a single large cap value relationship and as Matt mentioned, subsequent to the end of the quarter, the client informed us that they plan to terminate the remainder of the account which is approximately $960 million. While the loss of such a large relationship is disappointing, looking ahead we don’t foresee any additional accounts to be at risk and our outlook for future sub-advisory flows is now positive.

Later on the call, when responding to a question from Bank of America Merrill Lynch analyst Adam Beatty, Steers explained his more stable outlook for the sub-advisory business going forward:

But we had this one extremely large sub-advisory relationship who has taken money out previously and now terminated. And that's done …

The other sub-advisory relationships are all significantly smaller and generally focused on real estate and so on, and they are going fine. And not that dramatic either way … And I think following this quarter and the termination of the large cap value relationship, the sub-advisory channel is going to be much simpler and directionally will be following the other two channels [i.e. retail and institutional].

4) Last year Cohen & Steers hired 401(k) veteran Matt Gannon to spearhead defined contribution investment-only (DC I-O) efforts. And Steers is investing further in the fund firms' DC I-O efforts. On the earnings call, Steers explained the shop's DC I-O strategy when responding to a question from Sidoti & Co analyst John Dunn:

Well, we had mentioned previously that last year Matt Gannon joined us. Very successful and experienced leader in the DCIO marketplace. And we have worked together to put together a comprehensive business plan that ranges from making sure that we have, whether it's in our mutual funds, CITs, whatever the vehicles are, that we have the appropriate vehicles and structures for the large medium and small segments of the DCIO marketplace.

We are in the process of adding several senior national accounts people there to develop the relationships with record keepers and others and we are in the process there. And again, many of these institutes are aimed at gatekeepers including those involved in the DCIO marketplace. Now lastly, we are also going to, which is somewhat new for us, is add personal for direct sales in the DC marketplace and heretofore we have not had a significant effort in direct sales in our institutional group.

To dig a little deeper, read the full earnings call transcript, courtesy of Seeking Alpha, and the full earnings release. 

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