CNS AR24 Digital - Book - Page 54
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of our business, we are exposed to risk as a result of changes in interest and currency rates,
securities markets and other general economic conditions including inflation, which may have an adverse impact on the value
of our assets under management and our seed investments. The majority of our revenue is derived from investment advisory
and administration fees which are based on average assets under management. Accordingly, where there are changes in the
value of the assets we manage as a result of market fluctuations, our revenue may change.
The economic environment may also preclude us from increasing the assets we manage in closed-end funds. The
market conditions for these offerings may not be favorable in the future, which could adversely impact our ability to grow the
assets we manage. Depending on market conditions, the closed-end funds we manage may increase or decrease their leverage
to maintain target leverage ratios, thereby increasing or decreasing the assets we manage and the associated revenue.
Seed investments
Our seed investments included both liquid and illiquid holdings. Liquid seed investments are generally traded in active
markets on major exchanges and can typically be liquidated within a normal settlement cycle. Illiquid seed investments are
generally comprised of limited partnership interests in private real estate vehicles and our seed investment in CNSREIT for
which there may be contractual restrictions on redemption.
Our seed investments are subject to market risk. We may mitigate this risk by entering into derivative contracts
designed to hedge certain portions of our risk. The following table summarizes the effect of a ten percent increase or decrease
on the carrying value of our seed investments, which are presented net of noncontrolling interests, if any, as of December 31,
2024 (in thousands):
Carrying
Value
Liquid seed investments4net . $
Illiquid seed investments4net
$
Notional Value Hedges
68,858 $
94,283 $
(43,131) $
4 $
36
Net Carrying
Value
Net Carrying
Value Assuming
a 10% increase
25,727 $
94,283 $
Net Carrying
Value Assuming a
10% decrease
28,300 $
103,711 $
23,154
84,855
