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

TD 3

[retiredcf]

Brookfield Asset Management Inc.

(BAM-N, BAM.A-T) US$44.71 | C$59.56

Q3/22 DE Beat; Tracking to a Record Year of Fundraising

Event

Q3/22 DE/share of $0.85/share was well above the Street/TDSI at $0.71.

Impact: SLIGHTLY POSITIVE

• Q3/22 Results: Core DE of $0.75/share beat our $0.69 forecast, driven by higher- than-expected contributions from insurance and financial assets. Realized carried interest/gains on principal investments also beat by ~$100mm, largely reflecting realizations in credit, and the sale of certain corporate financial assets.

• Fee-bearing Capital: FBC of $407bln was up 19% y/y and 4% q/q. The latest flagship infrastructure and private equity funds had first closes on $21bln and $8.4bln, respectively, in Q3/22, and BAM launched the next vintage of its opportunistic credit strategy in early November, which is expected to exceed the size of its $16bln predecessor. The latest flagship real-estate fund had a final close on $17bln, and the company had inflows of $14bln across other strategies, most notably for the perpetual private infrastructure fund and the infrastructure debt fund, as investors seek the high inflation linkage associated with infrastructure.

• Carried Interest: BAM recognized $131mm of gross carry in Q3/22, and is still seeing strong demand for cash-flow-generating, inflation-linked assets. The gross unrealized carried interest balance was up ~2% q/q to $7.8bln at BAM's share.

• Liquidity/Capital Deployment: BAM's dry powder is a record $125bln, and the current macro backdrop should present good opportunities, particularly for the insurance business, which has largely been sitting on cash until now, and the inherently countercyclical Oaktree credit franchise.

• Distribution of Asset Manager: Shareholders approved the distribution/listing of 25% of the asset management franchise, which should be complete by year-end.

  TD Investment Conclusion

  We view BAM as a core holding and see very substantial upside potential. The asset-management stub is trading at only ~12.8x 2023E FRE, a multiple that we find incredibly modest, considering that ~83% of the company's FBC is either very long- duration and/or perpetual, and in light of strong double-digit growth in FBC/FRE. We expect the listing of the asset manager to be an upside catalyst, even against a choppy market backdrop. Every 1x multiple point on 2023E FRE equates to ~$1.60/ share (~4% of the current share-price).