Brookfield Asset Management Voting Ord Shs Class A T.BN.PF.J

TD

[retiredcf]

Brookfield Asset Management Inc.

(BAM-N, BAM.A-T) US$47.03 | C$60.27

Highlights of Investor Meetings

Event

Yesterday, we hosted BAM for investor meetings in Montreal.

Impact: NEUTRAL

• Fundraising/Capital Deployment/Asset Dispositions: BAM is not seeing any slowdown in institutional fund-flows to alternatives, and the industry has only begun to tap the massive retail wealth market. The company expects to hold first closes on its latest flagship infrastructure/private equity funds in the near- term, which we see as potential share-price catalysts. Market volatility creates opportunities for a value-oriented investor like BAM (e.g., take-private deals), which should benefit returns on funds raised during this period. The company seems to have good visibility to its target of realizing up to $1bln of gross carried interest in 2022, and we believe that it is important to differentiate between private equity vs. real assets in assessing the risk to carried interest. Private equity, while a fast-growing part of BAM, is still just ~10% of fee-bearing capital, and tends to be more dependent on the IPO market for exits. In real assets, the current cash yield can generate up to ~50% of the preferred return; and the typical exit routes are still open (i.e., sales to strategic buyers/pension/sovereign wealth funds).

• Partial Listing of the Asset Manager: The strategic rationale for distributing/ listing a 25% stake in the asset manager is: 1) to establish a strong, decentralized management team; and 2) the potential to create a well-priced security that provides optionality for growth because it can be used as an M&A currency. We would expect BAM to be very selective on M&A due to the importance of cultural fit but could envision the company using M&A to quickly scale up in Asia/technology, much as it did in credit with Oaktree. Some investors are concerned that a higher valuation for the manager could be partially offset by a larger discount on invested capital at the corporation, but our experience is that many potential investors are deterred by the need to understand BAM's balance sheet, whereby a separately- listed asset manager should attract new investors, rather than cannibalize the corporation's existing investor base.

  TD Investment Conclusion

  We believe that BAM shares provide exposure to a world-class asset management franchise and a high-quality portfolio of real assets.