Ladies and gentlemen, thank you for standing by. Welcome to the Cohen & Steers second quarter 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Thursday, July 21st, 2022. I will now turn the conference over to Brian Heller, Senior Vice President and Corporate Counsel of Cohen & Steers. Please go ahead.
Thank you, and welcome to the Cohen & Steers second quarter 2022 earnings conference call. Joining me are our Chief Executive Officer, Joe Harvey, our Chief Financial Officer, Matt Stadler, and our Chief Investment Officer, Jon Cheigh. I want to remind you that some of our comments and answers to your questions may include forward-looking statements. We believe these statements are reasonable based on information currently available to us, but actual outcomes could differ materially due to a number of factors, including those described in our accompanying second quarter earnings release and presentation, our most recent annual report on Form 10-K and our other SEC filings. We assume no duty to update any forward-looking statement. Further, none of our statements constitute an offer to sell or the solicitation of an offer to buy the securities of any fund or other investment vehicle.
Our presentation also contains non-GAAP financial measures referred to as adjusted financial measures that we believe are meaningful in evaluating our performance. These non-GAAP financial measures should be read in conjunction with our GAAP results. A reconciliation of these non-GAAP financial measures is included in the earnings release and presentation to the extent reasonably available. The earnings release and presentation, as well as links to our SEC filings, are available in the Investor Relations section of our website at www.cohenandsteers.com. With that, I'll turn the call over to Matt.
Thank you, Brian, and good morning, everyone. My remarks this morning will focus on our as adjusted results. A reconciliation of GAAP to as adjusted results can be found on pages 19 and 20 of the earnings release and on slide 16 through 19 of the earnings presentation. Yesterday, we reported earnings of $0.96 per share, compared with $0.94 in the prior year's quarter and $1.04 sequentially. Second quarter included cumulative adjustments to compensation and benefits and income taxes that increased our compensation-to-revenue ratio and lowered our effective tax rate. Revenue was $147.7 million for the quarter, compared with $144.4 million in the prior year's quarter and $154.3 million sequentially.
The decrease in revenue from the first quarter was primarily attributable to lower average assets under management, partially offset by one additional day in the quarter. Our effective fee rate was 58.2 basis points in the second quarter, compared with 57.6 basis points in the first quarter. Operating income was $64 million in the quarter, compared with $62.6 million in the prior year's quarter and $68.9 million sequentially. Our operating margin decreased to 43.3% from 44.7% last quarter. The second quarter included the cumulative adjustment to increase the compensation-to-revenue ratio. Expenses decreased 1.9% when compared with the first quarter, as lower compensation and benefits and distribution and service fees were partially offset by higher G&A.
The compensation-to-revenue ratio with the just mentioned cumulative adjustment increased to 34.77% for the second quarter and is now 34.25% for the six months ended, 50 basis points higher than our previous guidance. Notwithstanding a reduction in our incentive compensation accrual driven by lower revenue resulting from market depreciation, we continue to target hiring at senior positions which are key to our business plan, primarily in investments, information technology, and certain infrastructure support roles. The decrease in distribution service fee expense was primarily due to lower average assets under management in U.S. open-end funds, and the increase in G&A was primarily due to higher travel and entertainment and an increase in recruitment fees.
Our effective tax rate, which also included a cumulative adjustment, was 24.98% for the second quarter and is now 25.25% for the six months ended. The reduction in the effective tax rate from the first quarter was primarily due to lower state and local income taxes, partially offset by an increase in the impact of the non-deductible portion of executive compensation that was commensurate with a decrease in the previously forecasted pre-tax base. Page 15 of the earnings presentation sets forth our cash and cash equivalents, corporate investments in U.S. Treasury securities, and liquid seed investments for the current and trailing four quarters.
Our firm liquidity totaled $227.7 million at quarter end, compared with $180.7 million last quarter, and we continue to be debt-free. Assets under management totaled $87.9 billion at June 30, a decrease of $14.3 billion or 14% from March 31. The decrease was due to market depreciation of $12.5 billion, net outflows of $717 million, and distributions of $1 billion. The last time we recorded net outflows was the second quarter of 2019. Advisory accounts had net outflows of $408 million during the quarter, compared with net outflows of $42 million during the first quarter, as $769 million of inflows were more than offset by $1.2 billion of outflows.
Joe Harvey will provide some color on our advisory flows as well as an update on our institutional pipeline of awarded unfunded mandates. Japan sub-advisory had net inflows of $23 million during the second quarter, compared with net inflows of $116 million during the first quarter. Distributions from these portfolios totaled $242 million, compared with $271 million last quarter. Sub-advisory, excluding Japan, had net outflows of $90 million as a new $131 million Global Real Estate mandate in the Middle East was more than offset by outflows from a number of clients who rebalanced their portfolios. Open-end funds had net outflows of $244 million during the quarter, with inflows into multi-strategy real assets and U.S. real estate being more than offset by outflows from preferred securities.
Distributions totaled $624 million, $556 million of which was reinvested. Let me briefly discuss a few items to consider for the second half of the year. With respect to compensation and benefits, we expect our compensation-to-revenue ratio will remain at 34.25%. We expect G&A to increase 10%-12% from the $25.4 million we recorded in the first half of 2022. We will continue to make incremental investments in technology, including the implementation of new systems, cloud migration, and upgrades to our infrastructure and cybersecurity framework. We also expect that both travel and entertainment and sponsored conference costs will increase. We expect our effective tax rate will remain at 25.25%. Now I'd like to turn it over to our Chief Investment Officer, Jon Cheigh, who will discuss our investment performance.
Thank you, Matt, and good morning. Today, I'd like to briefly cover three areas. First, our performance scorecard. Second, the current environment and how our major asset classes are performing. Last, I wanted to provide our perspective as to why we think our combined listed and private real estate investment platform will present such a unique and alpha-generating offering for investors. Turning to performance. In the second quarter, seven of nine core strategies outperformed their benchmarks. The last 12 months, eight of nine outperformed. Our low-duration preferred fund underperformed its primary benchmark, which it tends to do in down markets, but notably outperformed all major preferred funds over the last 12 months. Reflecting this very strong peer performance, Morningstar increased its rating this quarter from three to five stars.
Measured by AUM, 93% of our portfolios are outperforming their benchmark on a one-year basis, a modest decline from 98% last quarter. On a three- and five-year basis, 100% and 99% respectively of our AUM is outperforming. From a competitive perspective, 98% of our open-end fund AUM is rated 4- or 5-star by Morningstar, compared with 91% last quarter, largely as a result of the previously mentioned preferred upgrade and a timely upgrade of our MLP and Energy Opportunity Fund from 3 to 4 stars. While Q2, from an absolute return standpoint, was clearly challenging, our excess returns continue to be positive and with good breadth. As it relates to the market environment, during the quarter, the primary concern shifted away from inflation to the odds and shape of a potential recession.
Global equities were down 15.5%, and the Barclays Global Aggregate was down 8.3%. Real assets generally outperformed equities, and preferreds outperformed global bonds. Turning to our three major asset classes of infrastructure, real estate, and preferreds. Listed infrastructure was down 7.3%, but materially outperformed global equities' 15.5% decline in the second quarter, highlighting the downside protection and inflation beta characteristics of the asset class. Year to date through June 30, listed infrastructure has now outperformed equities by 16%, down 4% with equities down 20%. As I discussed last quarter, over the next 3 to 5 years, we believe listed infrastructure will see a significant increase in strategic allocations. First, because it provides a really good balance of income, fundamental stability, and inflation sensitivity.
Second, because over time, more investors should recognize listed infrastructure as an efficient and equally effective means to access the asset class versus private infrastructure. In the meantime, private infrastructure capital continues to find its way into the listed markets, either via outright M&A or via major asset purchases from listed companies. These transactions are coming at significant premiums compared to where the listed companies are trading, supporting our view that the public infrastructure markets are attractively priced relative to private market valuations. Shifting to real estate, higher rates and broader growth concerns have caused a slowdown in the private transaction market. As investors reevaluate both their hurdle rates plus appropriate underwriting, private market bid-ask spreads have widened and volumes have declined. Fundamentals have generally remained very strong due to favorable supply-demand characteristics, but we expect rent growth to decelerate as the economy weakens.
Offsetting this is still a very high cost to build, and as a result, we expect supply to be constrained. US REITs were down 14.7%, while global REITs were down 17.5%, reflecting growth concerns, particularly in Europe. Given the lag in private markets, coupled with the decline in REIT values, we believe we will likely see better returns from REITs relative to the core real estate market over the next 3 years. While this will take time, we would expect to see investors, both within the institutional and wealth channels, to rebalance some out of core private vehicles into the listed market, where valuations have repriced to be more compelling.
Shifting to preferred securities, fixed-income markets have been very challenging, with the focus from Q1 to Q2 moving away from being just about rate risk to now include concerns about credit and subordination risk as well. While in the shorter term, rates and spreads may continue to drift higher, the rapid reset in valuations is setting the stage for an attractive investment prospects in preferreds over the next three to five years. Today, all-in yields for essentially all fixed-income assets are well above 10-year averages, but preferreds in particular are favorably priced, and we believe term investors will be rewarded over time. Preferreds offer materially higher income rates than investment-grade corporate bonds, tax advantages that makes after-tax income attractive versus munis, and importantly, strong credit quality, with well-capitalized banks and insurance companies generally seeing earnings improve as rates and net interest margins rise.
In summary, for these three major asset classes, the tactical environment has worsened, and our asset classes have not been entirely immune. Adjusting to higher rates and slower growth is a process, but for longer-term investors who are looking through the tactical horizon, we think the strategic case for our asset classes remains intact while valuations have materially improved. I mentioned that my last topic would be to provide our perspective as to why we believe our combined listed and private real estate investment platform will present such a unique offering to investors. First, we believe our expertise in listed can bring alpha to private real estate. Second, our new real estate research and strategy function will help us to answer some of the bigger investment questions and provide new client solutions.
Each and every day, our large, highly experienced listed real estate team is embedded in the flow of information and insights. They're immersed in the worlds of real estate, macro, and all the upstream industries that impact real estate today, and more importantly, in the future. We think our team has a unique position at this intersection of the listed and private worlds of real estate. Our 30+-year track record in the listed market, which is as strong today as it ever has been, demonstrates our ability to identify economic inflection points, including good versus bad vintages, and when to be opportunistic versus safer. That we have anticipated shifts in the tailwinds or headwinds of different property types and sectors.
Last, that we know how to identify emerging management teams who are trustworthy, hungry, and able to execute perhaps well before they are accepted as being, quote-unquote, "institutional." Additionally, over the years, we have observed many instances where the listed market will anticipate some of these trends in advance of private markets. We believe we can selectively use these signals to guide how we think about the top-down on the private side. We expect a key pillar of this platform to be the newly created role of Head of Real Estate Strategy and Research. This position will report directly to me and sit between the listed and private real estate teams precisely to help drive our investment views and flesh out the major ideas which are important to us and to our clients, such as how is real estate valued relative to the broader capital markets?
Where is the real estate cycle headed? Where are there better opportunities, listed versus private, debt versus equity? More specifically, what are the big ideas within real estate the next 5-10 years that will drive and surprise investors, whether that be sector or region or some other critical theme? We have so much real estate knowledge, expertise, and transaction experience at Cohen & Steers today. Our investment teams are as strong as they've ever been. I think this integrated and complementary effort will help drive alpha across both listed and private for the next decade. With that, let me turn the call over to Joe Harvey.
Thank you, Jon, and good morning. The sharp turn in the macroeconomic, geopolitical, and market conditions in the first quarter gave way to a bear market in stocks and bonds in the second. In light of this, I'd say our business trends have been evolving about as expected. In terms of things we can control, we are performing well. Our investment performance is strong, and we continue to strengthen our distribution, develop new investment capabilities and vehicles, and expand and upgrade our talent. Today, I will walk through our business trends, then discuss our approach to managing during challenging market environments. In terms of planning and resource allocation, we recognize the Fed will need to act aggressively to subdue inflation. That may result in some type of recession, the shape and duration of which are currently unknowable, but an average recession is a good starting point.
Unlike the global financial crisis, we believe the financial system is fundamentally strong, so we don't foresee a financial crisis, but we do expect credit problems from weak hands and from balance sheets that are not built to withstand higher interest rates. While it's too early to predict what the shape of a recovery might look like, the underlying health of the financial system and the fact that the Fed will have capacity with interest rates to provide stimulus in the future both point to the potential for a decent recovery. That said, with the Fed being behind the curve, there is risk of a sustained phase of overcorrections which when combined with de-globalization and a higher level of embedded inflation, may create greater volatility in the business cycle. While markets were extremely challenging in the second quarter, our relative performance, as Jon reviewed, remains strong.
This is particularly noteworthy in our view, given the rapid market regime changes over the past few years in terms of economic style and factor shifts. Our investment agility is likewise notable in light of our size, as illustrated by our market share and open-end funds of 36% in U.S. Real Estate, 13% in Global Real Estate, and 45% in preferred securities. Another compelling performance metric. 98% of our mutual fund AUM is rated four or five stars by Morningstar, compared with industry averages in the 40% range. Of course, larger fund shops have many more strategies, and it's hard to be great in everything. These ratings speak to both our excellent investment performance and our belief in the specialist business model.
In the second quarter, we had outflows of $717 million firmwide, following the $756 million of inflows in the first quarter. Outflows were recognized primarily in our preferred strategies, which began in the first quarter when the Fed commenced its tightening process. We also saw outflows from Global Real Estate, driven primarily by the redemption of opportunistic allocations made early in the pandemic. All other strategies had inflows in the quarter, led by our multi-strategy real assets portfolio. Again, not a surprise considering inflation and the strong absolute and relative performance of this portfolio. In our view, investor decisions have, for the most part, been rational. In open-end funds, we had outflows of $244 million in the second quarter, compared with inflows of $208 million in the first, ending 13 consecutive quarters of inflows.
U.S. open-end funds were negative at $178 million, and our UMA, SMA platforms had $74 million of outflows. For U.S. open-end funds, gross sales in the quarter were consistent with levels over the past year, yet redemptions were at a record high in the quarter. Our flagship preferred fund, Cohen & Steers Preferred Securities and Income Fund, drove our open-end results with $890 million of outflows. We also had outflows totaling $259 million from our core U.S. REIT funds, Cohen & Steers Realty Shares, and its institutional sibling. In one case, due to a large allocator, and in another case, due to two institutional clients' redemptions.
Our other US REIT fund, Cohen & Steers Real Estate Securities Fund, saw $558 million in inflows, its second highest in history, a portion of which was from a model allocation. The difference in flows in these funds demonstrates that investors are reconfiguring portfolios in different ways. Specifically, the buyers were adding inflation protection, and the sellers were reacting to the business cycle. In other cases, healthcare plans redeemed to create liquidity for operations. The underlying point, during market regime changes, it is not unusual to see logical but conflicting allocation trends. Our strongest flows were into our Real Assets Multi-Strategy Fund, which saw $362 million in inflows in the quarter, and that was catalyzed by inflation. We had more modest inflows into our listed infrastructure and Global Real Estate funds. Institutional advisory had net outflows of $408 million.
We had inflows from three new mandates totaling $200 million and $561 million from existing accounts. Unfortunately, withdrawals from opportunistic real estate allocations that were added during the pandemic by existing clients, together with a withdrawal by one client that had been using listed real estate to stay temporarily invested while waiting for private capital calls, contributed to net outflows. Of all of our business trends, these withdrawals are somewhat surprising, considering that REITs have meaningfully corrected and we believe represent much better value than the private market, which is in a price discovery process. While market volatility could slow activity somewhat in advisory, we see growing demand worldwide for listed real estate and infrastructure. Activity is robust in the U.S. and Middle East and is emerging in Asia. Our consultant ratings and relationships are strong and broadening.
This year, our institutional finals win percentage is 88%, which compares with a three-year average of 59%. Our won and unfunded pipeline was $1.5 billion, the same as last quarter, and again above our three-year average of $1.3 billion. $630 million of last quarter's pipeline was funded, and we won $672 million of new unfunded mandates. Measured by AUM, our pipeline is 57% Global Real Estate, 22% U.S. Real Estate, and 17% listed infrastructure. With respect to our business strategy, we plan to take a measured approach that balances the very positive long-term backdrop and demand for our strategies with the risk of recession and a more prolonged period of market volatility.
Even with fixed income yields rising, we still see the need for alternative allocations in portfolios that have total return, income, diversification, and inflation protection attributes. This, together with our outstanding investment performance, positions us well. In terms of protecting the downside, we have raised the bar for headcount additions, although we are continuing with key strategic hires to help execute our business plan. Our balance sheet is strong. Just as we have done in prior bear markets, we've taken a strategic approach to growth opportunities so that when we get to the other side, we're ready to gain market share. Market regime change can create opportunity, and our preferred securities business is a good example. While we've experienced recent outflows, as the cycle matures, considering the backup in preferred yields, as Jon outlined, we believe an attractive entry point will emerge.
Great business opportunities follow great investment opportunities, so we are developing strategy extensions and related vehicles centered around preferreds. I'll close with a brief recap of key priorities. The first is advising our clients in navigating this volatile market environment. This applies to all strategies, yet with the high-profile impact of inflation, we have an opportunity to educate on how to deploy our multi-strategy real assets solutions. Global listed infrastructure performance has shined this year, relatively, showing its all-weather investment attributes. If the economy becomes more volatile, infrastructure should continue to do well. We have a strong backlog of institutions evaluating infrastructure. We are focused on capital raising and private real estate and believe the regime change will set up a good vintage investment period beginning in 2023.
As Jon articulated, we see an opportunity to advise clients on real estate portfolio optimization and expand our market share with advisors in the wealth channel who don't currently use both listed and private real estate in a complementary fashion. In institutional advisory, we need to attract more clients to help offset the churn that invariably happens. In particular, we have an opportunity to capitalize on our strong consultant ratings and demand for listed real estate and listed infrastructure. Finally, we continue to invest in our talent and execute strategies to enhance our culture at Cohen & Steers. We've entered this cyclical downturn with strong momentum. While the markets have slowed our organic growth, we expect to emerge on the other side even stronger. Thank you for your interest in Cohen & Steers. Operator, could you please open the lines for questions?
Certainly. Thank you. If you would like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Again, to register for a question, that is the one followed by the four. Our first question comes from the line of John Dunn with Evercore ISI. Please proceed.
Thank you. Maybe, can we talk a little more on the private real estate effort? You know, maybe what are some of the milestones we should be looking for over the next couple of years? Then, how do you think about demand for private real estate assets? How's that tracking now versus the public option?
Hey, John. Good morning. It's Joe. I'll start and maybe invite Jon to add some color. Well, I think it was announced yesterday that Blackstone is going to have a record closing for its latest private equity real estate fund. So that demonstrates the demand for private real estate. You know, that's backward-looking. You know, Jon articulated the fact that REIT share prices have corrected. You know, in the private market that valuations are based on appraisals and tend to be smooth, and it takes a while for those valuations to be reflected in investment strategies.
Also, you know, in the private market, with uncertainty because of the changes in interest rates and the economic outlook, you know, there's really not transparency around, you know, where valuations are today, and that's going to be a process that will, you know, evolve over the next 6 to 12 months. You know, we see the best value in the listed market right now. Nevertheless, there's a good tailwind of private demand for real estate. In terms of our efforts, of course, we're starting from ground zero. We're in the market with a private equity opportunistic fund that has a capital appreciation objective. It's early in that process. We're going through our cornerstone capital-raising process.
We look forward to reporting on that in the coming quarters and over a year because that's the duration of that capital raising process. That vehicle is targeted toward institutions. We also believe there's an opportunity in the wealth market. You all are familiar with the capital raising that's been successful with non-traded REITs. We are in the planning process for a non-traded REIT. It's quite an endeavor. There too, we expect to report on our progress, you know, in the coming quarters. Jon, any color to add on-
No. I mean, the only thing I would add is, I mean, we know that investors are dealing with a bit of a denominator effect. Everything's moved down, so there's a bit less to allocate from a new commitment standpoint. That's a bit of a headwind, if you will, from a fundraising perspective. You know, when we look out, we know, and I'm sure you know that there's a number of folks that are going to have to deal with just legacy issues, meaning dealing with marks coming down, dealing with selling assets to create liquidity. We feel like we're more on the front foot in terms of our effort where all of our focus is on this vintage and growing from here.
Makes sense. Maybe across the pond, you know, could you talk about how things are shifting in your European SICAV business and maybe what the prospects might look like over the next couple of years?
Sure. We're optimistic on our, you know, SICAV, you know, our offshore UCITS funds business, which is, you know, relatively small relative to our open-end fund business and our overall business. I didn't report on it in the quarter, but in our SICAVs, we had positive, very modestly positive flows in the quarter, and I think that's the eighth quarter in a row. I would attribute that to the new leader in sales that we put in place about a year and a half ago. He's been very influential, has a great business plan. You know, we're positive on the outlook for the SICAVs.
We've seen the best flows into our multi-strategy real assets portfolio, which, like in the U.S., not surprising in light of the inflation environment, that strategy has been, you know, in demand in Europe. You know, these funds are designed for more than Europe. You know, they're also designed for Asian investors. You know, we're beginning the process of laying some groundwork in Asia. You know, I mentioned in my comments the fact that preferreds are starting to shape up to, you know, create an interesting investment opportunity. I think we have some opportunities to create other preferred strategies, and one of them might be designed for Europe.
You know, in the U.S., we have our core preferred strategy, and we also have a low duration version of that. In our SICAVs, we have a similar core preferred strategy. We don't have a low duration version, so that's something that's on the drawing boards.
Thank you.
As a reminder, to register for a question, please press the one followed by the four. Our next question comes line of Marla Backer with Sidoti. Please proceed.
Thank you. As you know, consider some of these strategy extensions that you're you know contemplating and also as you're out there trying to raise capital for the private equity fund, I mean, do you feel that at the moment you have sufficient bandwidth in terms of your current sales and investment teams to support both these and other efforts?
That's a really good question. I'll make it a broader question. You know, based on the success that we've been having over the past several years with demand for our strategies and organic growth, you know, that has required us to hire more people in a lot of different areas.
You know, more specifically, to your question is, as we think about, you know, some strategy extensions of things that we already do, in preferreds, for example, there's really not any additional headcount we need to add to, you know, to execute on something like that, either from a product development standpoint, because we've been, you know, we've kind of rebuilt our product strategy team, but also from a sales standpoint because we, you know, we already have those personnel in place, and they're very adept and skilled in, you know, selling preferred strategies. As it relates to private real estate, you know, that's a different matter. We've had to add some specialists who have, you know, private real estate experience.
As we think about going into the wealth channel, potentially with a non-traded REIT, we'll, you know, need to have specialists in private real estate who will help support our existing sales team. Good question, and it's something that, you know, we've had the luxury of needing to add, you know, personnel to keep up with the demand for our strategies. You know, right now that's, you know, makes things a little bit more challenging in the volatile market environment. you know, we've been fortunate to be able to have the opportunity to, you know, add to our teams and capitalize on the new business opportunities.
Okay. Thank you. One follow-up, which is, you know, you talked about the expansion in the wealth channel. Does the consolidation that we've seen, the industry consolidation that we've seen and sometimes displacement of advisors, does that help or hinder your initiative there?
Well, I'll answer that two ways. You know, one, we see a big opportunity in the wealth channel broadly for both listed and private real estate. When I say broadly, you know, we've got the broker-dealer channel, we have the registered investment advisor channel, and then we have the more sophisticated, you know, family office type firms. You know, there's a migration happening taking place from the broker-dealers to independent RIAs. You know, all of these types of advisors use different types of implementations for real estate. Some use listed real estate, some, particularly the sophisticated family office businesses, they're accustomed to investing in private equity real estate vehicles.
With the development of the non-traded REIT vehicle, you know, that's, you know, been embraced by the wealth channels, but I think we're in early days of that adoption. I'm gonna tie this into Jon Cheigh's comments about the real estate strategy position that we've just filled here. We see a great opportunity to help educate these advisors on how to optimize real estate allocations in portfolios. This is something that we are passionate about because of being in the listed market. We know that things happen in the listed market first, and that informs what generally is gonna happen in the private market, and it creates asset allocation opportunities along the cycle. We think we're uniquely positioned to educate and help advisors optimize their real estate allocations.
Just on the topic of, you know, listed and private real estate in the, you know, broker-dealer or the wealth channel, you know, everyone's very familiar with what's happening with the growth of private in the wealth channel, and in particular, as it relates to real estate, the accelerating sales of non-traded REIT vehicles. Just some fun facts. If you look today, the market share of private real estate allocations has gone from 10% to 35% over the past three years. So, privates gain market share compared with, you know, the listed alternatives.
We see this as, on one hand, a challenge, but also an opportunity as we develop our approaches to private for the wealth channel.
Okay, thank you.
The next question is from John Dunn with Evercore ISI. Please proceed.
Yeah. Maybe coming back to the U.S., can you talk a little bit about the state of the U.S. advisory business and, you know, also maybe what you're seeing across, you know, demand more, the other regions too?
Sure. You know, the U.S. advisory business is strong. You know, our flows this quarter, you know, don't really represent what's going on on the demand side because of the rebalancings and the redemptions, and particularly 'cause of the opportunistic allocations. Just to characterize advisory from the top down, demand is strongest in real estate, and right now it's been more for Global Real Estate than for U.S. Real Estate. It's also strong for listed infrastructure.
In terms of our multi-strategy real assets portfolio, I'd say it's not as strong there as you might expect, and one of the reasons is, you know, the advisory clients tend to wanna do asset allocation themselves rather than turn it over to us to do. Just digging into, you know, why real estate has been so strong, you just got a lot of institutional investors who historically have invested in core private real estate, and with the passage of time, they see the numbers on how listed performs relative to private, and you know, they. It's hard not to make an allocation to listed, you know, within an allocation that's, say, 5%-10% of your portfolio, just based on the numbers, based on the facts.
We see large state pension plans, for example, who have never allocated to listed real estate start to make those allocations. That's the type of thing that makes me really excited about our business. We are seeing the same thing around the world for some similar reasons, but also for some different reasons. We've been talking about the Middle East as being, you know, very strong for listed real estate and to a lesser extent infrastructure. You know, Middle Eastern investors have been big investors in private real estate over the years. You know, about two years ago, we started to see them allocate to listed.
It's in part because you know they have a lot of money to put to work and returns got to be pretty low and a lot of competition in the private market so that demand spilled over into the listed market. Only recently we started to see demand tick up in Asia and I think it's partly for some of the similar reasons but also because of the inflation dynamics. You know we're seeing some large sovereign funds begin to allocate to listed real estate and in other cases convert some passive allocations to actively manage listed real estate mandates. You know our team is in a very good shape. We like what everybody's doing.
Our consulting ratings are very strong. I would just say that we need to continue to bring more in the front door so that we can offset the redemptions that tend to happen from time to time from, you know, changes in allocations or, you know, changes due to, you know, the market volatility that we described. Hopefully that gives you some color on the advisory business.
Yeah, it does. Maybe just one last one from me. You touched on the valuation and kind of secular growth pieces, but could you give us a flavor and maybe kind of a thumbnail sketch of like the client-level conversations you're having on the institutional and wealth management side through the lens of inflation?
Yeah. I'm gonna ask Jon Cheigh to take that because he's right in the middle of those conversations.
Hey, John. Look, I'd say there's a diversity of conversations that is, of course, gonna happen across institutional and wealth. I would say that step one is people feel like they need more real assets in their portfolios. That's certainly one thing. I'd say the other thing is, in some cases, you have investors that thought, "I have gold, that's my real asset. I have real estate," or they have crypto. I think that our view is that there's a portfolio of real assets, you know, real estate, infrastructure, natural resource equities, commodities, that we think need to be put together in the right way, that all deliver on this. I wouldn't say inflation protection, but inflation sensitivity.
I'd say there's some education on people saying, "Well, I thought real estate was my only answer," or, "I thought commodities was my only answer," or, "I thought gold was my only answer." The reality is, like anything, you need to have diversified real asset exposure. I'd say it's good that people want more, and I think it's also good, you know, in the same way Joe talked about, you know, educating with clients and trying to help them, you know, implement in the right way. There's a lot of conversations about the right level and the right implementation. Whether that means we'll end up running multi-real asset portfolio for them, I don't know.
It could be that, or it could just be that they end up doing more real assets, and we deliver more REITs and infrastructure for them. Maybe it's just infrastructure, maybe it's just REITs. I think that it deepens our relationship because we're an expert on real assets, and we're an expert on all these asset classes. Does that make sense?
Great. Thanks very much.
Thank you. I would now like to turn the call back over to Joe Harvey, Chief Executive Officer, for closing remarks. Please go ahead.
Well, thank you everyone for listening and participating. We look forward to reporting our next quarter results in October. Have a great day. Thank you.
Thank you. That does conclude the call for today. We thank you for your participation. Have a great day.