Sometimes in investing one plus one equals more than two. Brookfield is betting that’s what will happen with their latest spinoff. On Monday, December 12th Brookfield Asset Management will spin off 25% of its investment management business. The purpose is to highlight the bargain valuation of the asset management business.
Thanks for the writeup Matt, a good opportunity to look at!
I checked the company’s Management Information Circular file concerning this distribution, seems like it’s the “asset management business” that’s going to retain 2/3 of future carried interest, not the new BAM.
Does this mean the corporation is actually going to retain 83% of look-through future carried interest?(33%+66.7%*75%)
Correct me if I’m wrong, or I misunderstood your words.
It's my lucky day! An article on my favorite company on my favorite investing blog! Brookfield entering the insurance business makes me a little nervous since it's not clear to me if many of these private credit investments being made by private equity firms aren't more risky than more traditional investment grade bonds and not just based on simply capturing an illiquidity premium and leveraging niche underwriting expertise to provide customized credit solutions, etc.
I'm not sure we will know until we go through another major downturn or recession. That being said they seem to have a competent team in place and it's definitely a promising avenue for additional growth. It also seems they've structured it in a way that would limit the blowback on the parent entity if the reinsurance business were to implode.
Hey, BN owns 73% of BAM however I know after a few years the carry split between BN and BAM changes. My question is (you seem to know a lot about this), does BN get 73% of whatever carry BAM gets? In that case BN would in total get well over 73% of all carry. Or does BN just get the agreed upon carry (I can't find what the split is after 5 years). Thanks
Re-cheking this idea as I think the asset management business is considerably undervalued given no debt, asset light and mostly locked-in fees. 4% (dividend) yield with 15% growth is a no brainer everyday in my opinion.
BN is quite a challenge to value as the market seems to be directly eliminating all the real state out of the balance. To the point where it seems a bit ridiculous. ¿Curious about your opinion on the spread between the value given a multiple of (possibly depressed future) earnings and liquidation value?
Agree with you that BN is extremely cheap. Any thoughts on what would compress the 50%+ NAV discount in the near to intermediate term?
My worry is that there's no real logical shareholder for BN now. It's just a holding company for various public entities + a private REIT. Anyone who wants exposure to those entities can buy those individually. I don't want this to turn into a Malone-style tracking stock with a huge NAV discount that never compresses. Thoughts?
Thanks for the tip Matt. I’m trying to dig deeper into the SEC filings but I'm struggling to find the details--any search for BAM or BN brings up filings pertaining to all of the Brookfield subsidiaries. Can you please point out some of the SEC filings that are related to the spinoff? Thanks in advance.
Thanks for the writeup Matt, a good opportunity to look at!
I checked the company’s Management Information Circular file concerning this distribution, seems like it’s the “asset management business” that’s going to retain 2/3 of future carried interest, not the new BAM.
Does this mean the corporation is actually going to retain 83% of look-through future carried interest?(33%+66.7%*75%)
Correct me if I’m wrong, or I misunderstood your words.
https://bn.brookfield.com/sites/brookfield-ir/files/2022-10/brookfield-final-circular-sedar-filing-version.pdf
Great job on this.
Great write-up focusing on what's important of the business and very well synthesized. Thanks for sharing Matt.
It's my lucky day! An article on my favorite company on my favorite investing blog! Brookfield entering the insurance business makes me a little nervous since it's not clear to me if many of these private credit investments being made by private equity firms aren't more risky than more traditional investment grade bonds and not just based on simply capturing an illiquidity premium and leveraging niche underwriting expertise to provide customized credit solutions, etc.
I'm not sure we will know until we go through another major downturn or recession. That being said they seem to have a competent team in place and it's definitely a promising avenue for additional growth. It also seems they've structured it in a way that would limit the blowback on the parent entity if the reinsurance business were to implode.
Hey, BN owns 73% of BAM however I know after a few years the carry split between BN and BAM changes. My question is (you seem to know a lot about this), does BN get 73% of whatever carry BAM gets? In that case BN would in total get well over 73% of all carry. Or does BN just get the agreed upon carry (I can't find what the split is after 5 years). Thanks
Hi Matt,
Re-cheking this idea as I think the asset management business is considerably undervalued given no debt, asset light and mostly locked-in fees. 4% (dividend) yield with 15% growth is a no brainer everyday in my opinion.
BN is quite a challenge to value as the market seems to be directly eliminating all the real state out of the balance. To the point where it seems a bit ridiculous. ¿Curious about your opinion on the spread between the value given a multiple of (possibly depressed future) earnings and liquidation value?
Thanks for your post and all your letters!
Agree with you that BN is extremely cheap. Any thoughts on what would compress the 50%+ NAV discount in the near to intermediate term?
My worry is that there's no real logical shareholder for BN now. It's just a holding company for various public entities + a private REIT. Anyone who wants exposure to those entities can buy those individually. I don't want this to turn into a Malone-style tracking stock with a huge NAV discount that never compresses. Thoughts?
Thanks for the tip Matt. I’m trying to dig deeper into the SEC filings but I'm struggling to find the details--any search for BAM or BN brings up filings pertaining to all of the Brookfield subsidiaries. Can you please point out some of the SEC filings that are related to the spinoff? Thanks in advance.