ETFs for Better Income Yields

CSRE and CSPF collectively are really two great examples of our overall capabilities here at Cohen & Steers as a specialist manager in real assets and alternative income. If we look at CSRE first, our real estate active ETF, this reflects our over 38 years of innovation as an industry-leading real estate platform. That's what many of our clients know us for, and to your point, you're spot on.

Investors often look to real estate as an income source. Just to give you a sense, if you look at US REITs right now, they're yielding around 3.9%. The S&P 500 is yielding around 1.2 or so. But it's not just about income. If we look at the last 25 years, for example, listed real estate has delivered really strong returns as well. It's averaged around 9.9% annually versus 7.7% for the S&P 500, and at the same time, it's provided a lot of meaningful diversification benefits as well as inflation hedging properties.

So there's a lot going on with REITs that we think present an attractive opportunity, and we have to consider also that though REITs are exchange-traded securities, they're also real assets. They're hard assets. This presents a lot of inefficiencies in the market and a lot of opportunity for a manager like Cohen & Steers to add value. We look at both security selection and sector allocation as major drivers of our alpha.

If we look on the preferred side of things, our preferred and income opportunities active ETF ticker CSPF, this focuses primarily on generating high tax-efficient income. If you look at most preferred securities, they pay QDI, qualified dividend income, which is taxed at a much lower rate, typically around 20% versus your typical taxable bond that's taxed as ordinary income, which is for top earners, 37%.

So if you look today, preferred yields approximately 6.6% before taxes, and on an after-tax basis, it's about 4.6% for top earners. If you compare this to the landscape of fixed income, this puts them as one of the highest-yielding sectors in the bond world, especially on an after-tax basis. They also offer a lot of diversification from a sector standpoint. They have low sector overlap to other areas such as investment-grade bonds and high-yield bonds. They also have attractive correlations relative to other bond sectors as well, which we spend a lot of time talking about with our investors in terms of diversification in fixed income.