These are USD figures. GLTA
2023 Investor Day: The Moat Is Widening
Our Conclusion
BN and BAM held their joint Investor Day on a standalone basis (with the
remainder of the listed entities holding individual updates later this month),
providing updated insights on the emerging trends across its various
verticals. Herein, we provide our key takeaways from the day in addition to
the impacts to our investment thesis. While there exists a clear opportunity
for growth across all of its operating verticals, we highlight the outsized
growth we see within both the Credit and Insurance Solutions verticals,
which we believe are afforded a unique opportunity to leverage BN’s market-
leading ecosystem and depth of knowledge and relationships.
We maintain our Outperformer rating, keeping both our NAV estimate of
$52.00 and price target of $47.00 unchanged while acknowledging the
potential for increased valuation upside upon the realization and continued
re-occurrence of its substantial realized carry opportunity, in addition to the
rapidly growing distributable earnings stream from its insurance platform.
Key Points
Record Fundraising Despite An Uncertain Environment: Fundraising
remains a key driver for future DE growth. Having raised ~$74B over the
LTM and indeed with an expectation for a record $150B year, bringing fee-
bearing capital to in excess of half a trillion dollars, it is well on its way to
exceeding the five-year target of $1T in FBC. Notably, private credit (which
was a central focus of the morning session) is expected to see increased
opportunities as distressed borrowers turn to non-traditional lenders (or are
forced to sell), while the next real estate fund has the potential to become
one of the company’s best vintages (outsized returns have historically been
captured in periods of severe market stress).
Insurance Business Remains A Material Growth Lever: What was once a
negligible component in the overall Brookfield consortium now represents
~11% of total DE (with expectations of continued rapid expansion). The
acquisitions of American National and American Equity Life Holdings are
demonstrative of both the company’s commitment and ability to grow this
complimentary arm, providing not only access to >$100B in insurance assets
but also a matching mechanism for the long-duration insurance liabilities and
BN’s high-quality long-duration real assets (where we may see BN’s real
estate assets eventually find a new home).
Valuation Remains Deeply Discounted: Despite a track record of above
average historical returns, prudent capital management, and the added
benefit of an asset allocator afforded perpetual, highly liquid capital, BN
continues to trade at a steep discount to NAV (and Plan Value). While we
recognize the sensitivity that long-dated real assets have towards changes in
interest rates, the market, in our opinion, has overshot the discount to the
underlying fundamentals and value of Brookfield’s assets, which already do
not incorporate the substantial value of its carried interest.