Q3 2024 Press Release
Q3 2024
Brookfield Asset Management Letter to Shareholders
Overview
We generated record results in the third quarter. Fee-bearing capital grew to
Growth is being generated in all our business groups, with tailwinds provided by our global leadership position in energy transition, AI infrastructure and credit. We invested early into sectors which, today, are very much in favor
- renewable power, nuclear energy, data centers and semiconductor manufacturing, all of which are experiencing multi-decade investment growth cycles.
On the back of this growth, we generated a record
Growing Market Tailwinds Enabling Monetization of High-Quality Assets
While global economies and capital markets were more volatile over the past few years, our franchise excelled, with both strong deployment and fundraising. Market conditions are increasingly more constructive. Inflation has eased in most regions, central banks have begun to lower rates, and liquidity is returning to the markets. Since late 2023, the cost of borrowing has declined over 150 to 200 basis points, creating greater confidence among market participants and increasing transaction activity.
We are seeing greater monetization activity, leading to more capital returning to clients and providing for a more constructive fundraising environment across the industry. Given the high quality of our underlying portfolio, we have benefitted disproportionately from this trend and expect it to continue.
Within our portfolio, we have started to see this impact, demonstrated by more than
- In Real Estate, new supply is low across most sectors, financing markets have been steadily improving throughout the year, and underlying fundamentals remain strong, creating an attractive market for high- quality assets. We sold a total of
$5.4 billion of real estate assets in the past few months. These include ourUK Retail Parks Portfolio, a US Manufactured Home portfolio and the Conrad hotel inSeoul, Korea , which generated blended annualized returns of 28% and a multiple of capital of 2.5x. - In
Renewable Power , there is significant demand for stabilized, cash-generative businesses, particularly those that have a growth angle. We announced a total of$3.2 billion of asset sales in our renewable power and transition portfolio in recent months. The largest of these sales includeSaeta Yield , a leading independent developer, owner and operator of renewable power assets inSpain andPortugal ; our stake in First Hydro, a critical electricity generation and storage facility in theUnited Kingdom ; and a 50% stake
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in our Shepherds Flat onshore wind portfolio in
- In Infrastructure, demand is growing for stabilized, income yielding assets. We have announced a total of
$2.6 billion of infrastructure asset sales in recent months. This includes separate agreements to sell two Mexican regulated natural gas transmission pipelines, which generated an annualized retuof 22% and a multiple of capital of 2.2x.
Broader market stability should enhance our path forward by supporting ongoing growth and value creation across our business, while lower interest rates are supporting a recovery in yield-focused public stocks, including our
Business Group Updates
We saw strong growth across all our platforms, especially within Credit, which accounted for more than half of the
In addition to successfully monetizing numerous mature assets, we have been actively deploying capital, with
Highlights of our fundraising and deployment activity during the third quarter include:
- Fundraising: We raised
$2.2 billion of capital within the quarter, including:
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- An initial close of our
Catalytic Transition Fund for$2.4 billion , of which$1.4 billion was raised in the quarter. This new capital is in addition to the$1 billion anchor investment from ALTÉRRA announced previously atCOP28 .
- An initial close of our
- Deployment: Subsequent to the end of the quarter, we announced a new partnership agreement with Ørsted to acquire a
$2.3 billion stake in a premium portfolio of 3.5 GW of contracted operating offshore wind assets in theUnited Kingdom with a strong operating history.
Infrastructure
- Fundraising: We raised
$1.4 billion of capital within the quarter.
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- With lower interest rates and clients returning to cash yielding investments, we raised over
$500 million within our open-ended supercore infrastructure strategy, surpassing the capital raised for this strategy last quarter and making it our strongest quarter for fundraising in this strategy in over two years. We also raised nearly$800 million for our private wealth infrastructure fund.
- With lower interest rates and clients returning to cash yielding investments, we raised over
- Deployment: We completed the acquisition of a portfolio of 76,000 telecom sites in
India fromAmerican Tower Corp for$800 million of equity capital ($2.2 billion of enterprise value) in the fourth vintage of our flagship infrastructure fund.
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Private Equity
- Fundraising: We raised
$2.0 billion in the quarter, and last week announced two strategic commitments for ourMiddle East Partners fund. - Deployment: We completed the acquisition of
Network International for$2.0 billion of equity capital through the sixth vintage of our flagship fund and our middle east fund. Post-acquisition, we intend to combine Network with Magnati, ourUAE payment processing business, to create a leading payments platform in theMiddle East that will benefit from secular tailwinds and significantly expand our presence in the region.
Real Estate
- Fundraising: We raised
$1.6 billion of capital within the quarter. - Deployment: We deployed
$1.5 billion , including:
- Over
$500 million into numerous logistics portfolios acrossNorth America andEurope in our opportunistic flagship strategy.
- Subsequent to the end of the quarter, we made an offer to acquire
Tritax EuroBox , a publicly traded European logistics REIT, for approximately$730 million .
Credit
- Fundraising: We raised approximately
$14 billion of capital within the quarter, including:
$6.4 billion across Oaktree funds and strategies, including$1.5 billion in the twelfth vintage of our flagship opportunistic credit fund.
$1 billion raised across our partner managers -Castlelake , Primary Wave, and LCM.
- Inflows of
$4.5 billion of capital fromBrookfield Wealth Solutions , driven largely by institutional and retail annuity sales. We also raised$1 billion of third-party SMA capital from a largeU.S. life insurance company. We are targeting$50 billion for similar SMAs over the next five years.
Increased Liquidity and Expanded Capabilities with New Partner Managers
Our balance sheet is very strong. We have significant cash on hand, zero debt, and are fully undrawn on our newly established
Our balance sheet is used for seeding new strategies that meet the objectives of our clients to drive management fee growth and investing in partner managers that are complementary to our existing business and can strategically expand our product offering.
We partner with managers that are leaders in their space and that can help accelerate our origination capabilities and broaden our investment strategies. Further, we look for partner managers that can benefit from our collaboration and can accelerate their growth as part of our Brookfield Ecosystem.
During the quarter, we closed on a few strategic transactions, including:
Castlelake :Castlelake is a market-leading,$24 billion AUM alternative asset manager specializing in asset-based private credit including aviation and specialty finance. We acquired a 51% non-controlling stake in the manager and its fee-related earnings as well as a small stake in its carried interest and principal investments. Additionally, Brookfield plans to allocate over$1 billion of capital under management toCastlelake strategies, enabling them to scale their funds and expand their strategies.
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SVB Capital : We completed our acquisition ofSVB Capital throughPinegrove Venture Partners , our venture investment platform formed with Sequoia Heritage, which now manages approximately$10 billion in assets.SVB Capital's 25-year track record in funds, private credit, and co-investments, alongside Pinegrove's existing expertise in venture secondaries and liquidity solutions creates a cohesive and dynamic venture platform that provides access to the innovation economy, designed to deliver tailored solutions for fund managers, founders, and limited partners in the venture capital ecosystem.
At our proportionate share, these two transactions have added approximately
Investor Day Summary
We hosted our Investor Day in September in
In summary, our heritage as an owner-operator and 25-year track record of being a best-in-class alternative asset manager has enabled us to reach
Expanding Client Capabilities to Meet Growing Demand Drivers
As the alternatives industry continues to grow, clients are increasingly demanding more from their managers- including global capabilities across a broad set of asset classes at scale, with products across the risk spectrum, and the opportunity for partnerships, SMAs and co-investments. We are using our scale to deepen our relationships with the largest institutional investors, while expanding our footprint into middle-market and family offices. As our strategic relationship with
Earlier this year, we announced the formation of
Growth Plans to Double the Size of our Business Over the Next Five Years
Our plan is to grow fee-bearing capital to more than
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Further upside to our stable earnings base is our carried interest potential - this is our second leg of growth. While BAM can expect to realize approximately
Enhancing Our Corporate Structure and Positioning Ourselves for Broader Index Inclusion
We continue to broaden our shareholder base and our access to the deepest pools of capital for our BAM shares.
Our public listing in
Our business fundamentals-including our stable, predictable earnings, an asset-light balance sheet, and strong growth prospects-make us an attractive investment. While we are pleased with our progress, there is still more we can do. One common theme we have heard has been the importance of broader index inclusion.
To that end, we are taking a few actions with the goal of positioning ourselves for broader index inclusion, and eventually to be eligible for the most followed, large cap
The steps we are pursuing are as follows:
- Changed Our Head Office to
New York
We have been operating as aU.S. company for twenty years. Our largest share of revenues, assets under management, and employees are based in theU.S. , as well as the majority of our institutional shareholders are U.S. investors and the majority of our shares are traded on theNew York Stock Exchange . This quarter, we changed our head office toNew York -already our largest office-and starting with our 2024 annual report, our financial reports filed with theSEC will be identical in form to those filed by otherU.S. domestic issuers. - Simplifying Our Corporate Structure
The second step involves simplifying our corporate structure. As a reminder, we originally spun off our asset management business as a privately held company with two shareholders:Brookfield Corporation , which privately holds 73%, and publicly tradedBrookfield Asset Management Ltd (NYSE/TSX: BAM), which currently owns the remaining 27% (these are the shares you own).
Brookfield Corporation will now exchange its private interest in our asset management business for public shares of BAM, on a one-for-one basis. This will significantly simplify our structure - publicly-traded BAM will then own 100% of the asset management business, allowing the market cap to accurately reflect the total market value of our asset management business, something closer to approximately$85 billion today.
Though this second step will not have an impact on shareholders or operations, it will require shareholder approval because we will be issuing approximately 1.2 billion shares of BAM toBrookfield Corporation in exchange for an equivalent number of privately owned shares of our asset management business, representing their 73% interest. As such, you will be receiving proxy materials over the next few weeks, and we will be holding a special meeting of shareholders to vote on this matter onDecember 20, 2024 . We expect to close the transaction early in 2025, subject to regulatory and other customary approvals.
We are excited about both these initiatives, which we believe will deliver great value to our shareholders. Simplifying the corporate structure of the asset management business should make it easier for investors to understand and accurately value our security. In addition, broader index inclusion should drive increased ownership among passive institutional investors and attract a broader base of active investors who benchmark against these indices. This increased recognition in the market should ultimately lead to a broader shareholder base.
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These efforts are aimed at ensuring our company can reach the broadest set of potential investors while having no impact to our operations, strategic plans or the tax profile of our dividends.
Closing
We remain committed to being a world-class asset manager by investing our capital in high-quality assets that easolid returns, while emphasizing downside protection. The primary objective of the company continues to be to generate increasing cash flows on a per-share basis, and to distribute that cash to you by dividend or share repurchases.
Thank you for your interest in Brookfield, and please do not hesitate to contact any of us should you have suggestions, questions, comments, or ideas you wish to share.
Sincerely,
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Chief Executive Officer |
President |
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Note: In addition to the disclosures set forth in the cautionary statements included elsewhere in this Report, there are other important disclosures that must be read in conjunction with, and that have been incorporated in, this letter as posted on our website at https://bam.brookfield.com/reports-filings.
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