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

TD

[retiredcf]

As mentioned, it's on their Action Buy List with a $79.00 target. GLTA

Brookfield Asset Management Inc.

(BAM-N, BAM.A-T) US$45.43 | C$59.17

Core DE Up 28% Y/Y; Spinning Out 25% of the Asset Manager Event

Q1/22 DE of $0.73/share was slightly above the Street/TDSI at $0.69/$0.68, on higher-than-expected disposition gains on principal investments.

Impact: SLIGHTLY POSITIVE

• Strong Q1/22 Results: Core DE increased 28% y/y, reflecting 21% growth in fee- related earnings and higher distributions from principal investments. Fee-bearing capital of $379bln was up 19% y/y and 4% q/q, and BAM expects 2022 to be another record year for fundraising, with significant first closes on the latest flagship infrastructure and private equity funds anticipated in Q2/22. BAM recognized $303mm of gross carried interest in Q1/22, which may position it to outperform vs. its target of realizing up to $1bln in 2022.

• Asset Manager Spin-out: BAM intends to spin out a 25% stake in the asset manager by year-end. The distribution has an expected value of ~$12.00/share (~$20bln public float) and should be tax-free for Canadian/U.S. shareholders. The spin-out will be a pure-play alternative asset manager, and is expected to have a 90% dividend payout ratio, while the surviving corporate entity, which will own 75% of the manager plus the balance-sheet investments, will remain focused on long-term capital appreciation. We believe that a spin-out will make the manager's financial results much easier to analyze and compare vs. the peers, which should attract a larger investor base and higher valuation multiple. Other benefits include the optionality of using the new security/currency for M&A, and the potential to attract wider Brookfield brand recognition, which should be valuable as the retail wealth market becomes an increasingly important fundraising channel. With BAM's share-price down ~25% year-to-date, and the peers down ~23-35%, we are not surprised that confirmation of the spin-out did not provide a positive share-price catalyst; however, we would argue that the high likelihood of a spin-out, along with BAM's relative scale and attractive weighting to real assets (including a leading position in infrastructure/renewables and first-mover advantage in impact investing) have contributed to BAM's relative outperformance vs. the peers. We also note that BAM has repurchased $170mm of shares year-to-date, something which it does opportunistically.

  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.