Yesterday, we reported record earnings of $1.06 a share compared with $0.67 in the prior year's quarter and $0.94 sequentially.
Revenue was a record $154.3 million for the quarter compared with $111.4 million in the prior year's quarter and $144.4 million sequentially.
Our implied effective fee rate was 57.5 basis points in the third quarter compared with 58 basis points in the second quarter.
Excluding performance fees, our third quarter implied effective fee rate would have been 57.3 basis points compared with 57 basis points in the second quarter.
Operating income was a record $70.4 million in the third quarter compared with $44.2 million in the prior year's quarter and $62.6 million sequentially; and our operating margin increased to a record 45.6% from 43.4% last quarter.
Expenses increased 2.6% compared with the second quarter, primarily due to higher compensation and benefits, distribution and service fees and G&A.
The compensation to revenue ratio, which included a cumulative adjustment to lower the incentive compensation accrual was 33.19% for the third quarter and is now 34.5% for the trailing nine months.
Our effective tax rate, which was 25.93% for the quarter, included a cumulative adjustment to bring the rate to 26.5% for the trailing nine months.
Our firm liquidity totaled $241 million at quarter-end compared with $185.6 million last quarter and we continued to be debt free.
Total assets under management were $97.3 billion at September 30, an increase of $1 billion or 1% from June 30.
The increase was due to net inflows of $1.3 billion and market appreciation of $469 million, partially offset by distributions of $718 million.
Advisory accounts, which ended the quarter with $22.8 billion of assets under management had net outflows of $311 million during the quarter.
We recorded $1.1 billion of inflows, the majority of which were from existing accounts.
Offsetting these inflows were $1 billion of outflows from an unexpected account termination after a client decided to eliminate its allocation to multi-start real assets as well as $300 million of client rebalancings.
Japan Subadvisory had net outflows of $52 million during the quarter, compared with net outflows of $272 million during the second quarter.
Distributions from these portfolios totaled $295 million compared with $309 million last quarter.
Subadvisory, excluding Japan, had net outflows of $253 million, primarily from a client that decided to convert its global listed infrastructure portfolio to passive.
Open-end funds, which ended the quarter with a record $45.6 billion of assets under management had net inflows of $2 billion during the quarter.
Distributions totaled $276 million, $225 million of which was reinvested.
Given our double-digit year-over-year growth in assets under management, revenue and operating income, driven by our leading organic growth and strong investment performance, we reduced the compensation to revenue ratio from the previous quarter's guidance of 35.25% by 75 basis points to 34.5%.
All things being equal, we expect our compensation to revenue ratio for the fourth quarter to remain at 34.5%.
We now project that our G&A will increase by about 9% from the $42.6 million we recorded in 2020.
And finally, we expect that our effective tax rate will remain at approximately 26.5%.
The third quarter felt like a transitory phase in the markets with the S&P 500 up 0.6% and low dispersion across sub-sector performance.
Reflecting that, commodities reached a seven-year high and were up 7% in the quarter, one of the top-performing asset classes.
The commodities rally has been broad-based with spot prices positive year-to-date for 80% of commodities.
Looking at our performance scorecard, in the third quarter and for the last 12 months, eight of nine core strategies outperformed their benchmarks.
Measured by AUM, 79% of our portfolios are outperforming benchmarks on a one-year basis compared with 99% last quarter.
On a three and five-year basis, 100% of AUM is outperforming.
The one-year figure declined primarily due to global real estate, where our batting average declined from 99% last quarter to 25% in Q3.
U.S. real estate returned 0.2% in the quarter and we outperformed in all of our sub strategies.
Year-to-date, U.S. real estate is up 21.6%, outperforming the S&P 500's 15.9%.
So far in 2021, $13 billion has flowed into REIT, mutual funds and ETFs, the largest inflow since 2014.
REITs have outperformed by nearly 400 basis points annually for over 40 years, while providing liquidity.
Global real estate returned negative 0.7% in the quarter.
Global listed infrastructure returned negative 0.25% in the quarter and we outperformed in all of our sub-strategies.
The dry powder amassed by private equity infrastructure managers reached a record $300 billion and provides fuel for our investment thesis that private equity capital will find its way into the listed markets to buy companies and assets with the latest example being the announced privatization of Sydney airport.
Preferred securities returned 0.6% for our core strategy and 0.2% for our low duration strategy.
Preferreds continue to look attractive in the fixed income world with yields of 4.8% for investment-grade preferreds in our core strategy and 4.2% for our low duration strategy.
For context, corporate bonds yield 2.25%, municipals yield 1.75% and high-yield yields 4.75%.
The benchmark for our multi-strategy real assets portfolio returned 1% in the quarter and we outperformed.
Over the past year, the real assets portfolio returned 32.5% compared with the S&P 500 at 30%.
September CPI increased 5.4% year-over-year and the core CPI was also up 4%.
In a surprise announcement, the Social Security Administration last week disclosed that future payments will be increased by 5.9%, the largest such increase in over 40 years.
Consumer spending surged 11.9% in the second quarter and 13.9% in the month of September.
Rent is a key category as it makes up over 30% of CPI.
Tenant rent jumped 0.5% in September which was the biggest monthly increase in 20 years.
Owners' equivalent rent, which is the accepted measure of what homeowners would pay if they had to rent their homes rose 0.4%, the most since 2006.
According to the New York Fed, consumers' median inflation expectations for the next three years is 4.2%.
At the risk of being repetitive and with the benefit of strong, absolute and relative returns from our real asset strategies, we achieved record AUM of $97.3 billion and over $100 billion intra-quarter; record open-end fund AUM of $45.6 billion and $1.3 billion of net inflows in the quarter.
As has been the case, recently, the wealth channel led the way with $2 billion of net inflows, representing 18% organic growth and our third best quarter on record.
From a product standpoint, we saw strength in preferred security strategies, which generated net inflows of $1.1 billion, and in real estate which had net inflows of $755 million.
In the advisory channel, due to a planned design change, we had an unexpected $1 billion termination of a high performing multi-strategy real asset portfolio, which resulted in $311 million of net outflows in the quarter.
Gross inflows remained strong, totaling $1.1 billion with U.S. real estate accounting for over two-thirds of that amount.
The pipeline of awarded but unfunded mandates is at $900 million and we recorded $550 million of mandates, which were both won and funded in the quarter, our second best result on record.
Japan Subadvisory net outflows were $52 million pre-distributions and totaled $347 million, including distributions.
Subadvisory ex-Japan had net outflows of $253 million as well, primarily driven by the termination of an offshore global listed infrastructure portfolio and modest outflows elsewhere.
We did bring on a new $83 million global real estate mandate in the quarter.

Summary:
Yesterday, we reported record earnings of $1.06 a share compared with $0.67 in the prior year's quarter and $0.94 sequentially.