Brookfield Asset Management (Earning review)

$BAM is the leader in alternative assets management and they are on the road to hit a trillion dollar of fee bearing capital in the foreseeable future.

It is an asset light and high margin business that is unappreciated by the market.

I have discussed the company before and feel free to read it in my previous post.

$BAM FY23 Earnings

Below is a quick snapshot on its earnings call and key metrics:

On leveraging cloud and AI for growth

“And the way those businesses are growing is through cloud and AI. And the way to deliver cloud and AI is through the build out of more data center capacity. This obviously presents a tremendous opportunity for our infrastructure business and its leading data center capacity or its leading data center platform. But perhaps one thing that we feel is not entirely recognized is with the new large scale data centers that are required to support the growth of cloud and AI, these are very large, computationally intensive and energy intensive, and therefore, putting one of them on a power grid has a destabilizing impact.

And the large tech companies want to put multiple data centers on each power grid around the world. And therefore, increasingly, in order to get your data center permitted, you have to come with a power solution as well. And in an indirect way, power is now on the critical path to growth for the large tech companies. And this is a real opportunity for Brookfield, because we are perhaps one of, if not the only provider who can provide not only scale data center capacity, but also scale clean energy solutions on a global basis to enable the growth of these large tech companies. And this is not a market opportunity for the future. This is a market opportunity right now. It lends itself to not only those that have the capital and the capabilities, but also those that put the work in, in the past and have the platforms and the pipeline available to service these growing technology companies.

And it’s been a huge driver of our business in both infrastructure and renewable power and transition. And to tie it all up with answering your question, I would expect renewables to continue to be somewhere between 35% and 50% of our global transition fund.”

On funds raising sources

“Certainly. So it’s obviously different fund to fund, but probably a rough rule of thumb that can be used is approximately 20 — approximately 50% of the capital we raised across 2023 came from re-ups from existing fund investors, 25% came from crossover investors, and 25% came from new investors. That’s probably a good rule of thumb breakdown. We are seeing that 25% from crossover investors at certainly the fastest growing of those three proportions. And that’s simply a function of our growing relationships with our clients and our ability to offer more products that that might meet their interests.

So the number today is about two. The average LP we have is in approximately two of our funds, two of our strategies. We think there’s lots of runway for growth in that number. We could see that number doubling over time. It is a process and something we work with our clients on, but we do need to see that number moving in only one direction.

On asset monetisation

And that uncertainty did not make for a robust environment for capital recycling and for monetizations. What we saw across real estate, as well as our other class — asset classes, like renewable and infrastructure, is high quality assets of small to medium size could still receive very, very attractive bids and we monetized assets across all of our platforms in that way. But what was more difficult in that environment was large scale monetizations. With increasing stability and interest rates, we do see that market coming back in 2024. It’ll take time. It will, we think, accelerate throughout the year. But the good news for us is we were able to use our scale to invest in 2023 when there were very few bidders. And we made the conscious decision to not force ourselves to realize assets in that market and more appropriately, wait for better times.

So, all in all, we do see liquidity accelerating throughout 2024, not only in real estate, but across our asset classes. And that’s simply a function of the uncertainty in the market increasingly being removed as interest rates stabilize.

Conclusion

The company performance has been average as they are gearing up their investment in 2023 with a huge spike in headcounts.

However, it has raised close to $90bil funds globally and it expected to continue for the foreseeable future especially with their expansion in reinsurance business.

2024 could be an exciting year for their distributable earnings growth due to 2023 efforts and they are just getting started.