Brookfield Asset Management Inc.
(BAM-N, BAM.A-T) US$43.30 | C$59.18
Highlights of Fireside Chat with Bruce Flatt Event
Yesterday, BAM's CEO, Bruce Flatt, participated in a competitor conference and commented on several topics of interest.
Impact: POSITIVE
Fundraising Momentum: The fundraising environment has become more challenging in certain areas, particularly private equity; however, BAM is well- positioned in higher-demand areas: real assets (which offer inflation protection), transition investing, and private credit. The company expects Oaktree to be particularly active in deploying capital over the next ~24 months, and recently launched the fundraising for the next vintage of Oaktree's opportunistic credit strategy, which we believe has the potential to be substantially larger than its $16bln predecessor. BAM's latest flagship infrastructure fund held a first close on $21bln in Q3/22, which already surpasses the size of the last vintage ($20bln), and our sense is that demand has been sufficiently robust that the fund could hold a final close by early 2023. The company raised $15bln in just six months for its Global Transition Fund, an inaugural product, which is now ~50% committed/ invested, whereby BAM should be in the market with a successor fund next year, or perhaps even sooner.
Distribution of the Manager: Investors seem very attracted to the prospect of owning BAM's asset-management franchise in a pure-play vehicle that will have an ~90% payout ratio and no debt; however, we believe that investors may be underestimating the upside potential in the corporation. In particular, BAM has deployed ~$4bln of equity into insurance over the past ~2 years, with the float held largely in cash/financial assets for ~1.5 years, which the company is only just now redeploying into higher-yielding strategies (~8%-14%). Furthermore, Mr. Flatt indicated that BAM often sees interesting investment opportunities that are too big for its private funds, which it has been reluctant to undertake at the parent- company level, for fear of confusing investors, but would now feel comfortable executing on through the corporation. Also often overlooked, in our view, is that BAM's executive team will remain heavily invested in the corporation, and therefore highly aligned with shareholders, such that we expect the corporation to repurchase shares if they trade at a discount to intrinsic value.