Brookfield Asset Management Inc.
(BAM-N, BAM.A-T) US$58.94 | C$74.22
Record Fund Inflows Should Drive Step-change Increase in FRE
Event
BAM reported Q3/21 results and provided a business update.
Impact: POSITIVE
Solid Q3/21 Results: Fee-related earnings grew 21% y/y to $451mm, on strong fundraising/deployment activity across the private funds and higher market capitalizations of the listed affiliates. FFO from invested capital was stable at $483mm, with strong same-store results partially offset by the impact of asset sales. Total FFO was $0.85/share, up 30% y/y, as BAM continues to harvest investments in a highly favourable capital-markets environment. Distributable earnings, a FCF proxy, totalled $0.77/share in Q3/21 and $4.23/share for the TTM.
Record Fund Inflows: Fee-bearing capital increased 18% y/y to $341bln, benefitting from record fundraising inflows of $34bln since the end of Q2/21, including $30bln for the flagship funds. The latest opportunistic credit fund has raised $16bln and should hold a final close in the coming weeks, a $9bln first close has been held on the next flagship real-estate fund ($17bln target), and a $7bln founders' close was held for the inaugural Global Transition Fund, which should hold a formal first close imminently. Fundraising for the sixth flagship private-equity fund commenced in late-September ($15bln target) and fundraising for the next flagship infrastructure fund should launch in early-2022 (likely ~$20bln-$25bln).
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Unrealized Carried Interest Higher: BAM recognized $304mm of gross carried interest in Q3/21 and $1.8bln over the TTM, with the franchise having reached a key inflection point, whereby at least one fund in each flagship series is now recognizing carried interest. The company generated $1.0bln of unrealized carried interest in Q3/21, and the gross unrealized carried interest balance, a forward-looking metric, increased 11% q/q to $5.9bln (at BAM's share), primarily due to higher valuations in credit, as well as in the flagship infrastructure, real estate, and private-equity funds.
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Record Liquidity: BAM has a record $80bln of available liquidity, including $14bln of core liquidity and $66bln of uncalled fund commitments. Capital deployment continues to be healthy, at $23bln in Q3/21 and $53bln for the TTM.
TD Investment Conclusion
We believe that an investment in BAM provides exposure to a high-quality portfolio of real assets, with the added leverage of a world-class asset-management franchise