Brookfield Asset Management .(BAM) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - Fee-bearing capital (FBC) grew by nearly $100 billion over the past year to$539 billion, a 23% increase [9] - Fee-related earnings for Q3 were up 14% YoY to a record $644 million, or$0.39 per share [9] - Distributable earnings grew 9% YoY to a record $619 million, or$0.38 per share [9] - The company deployed nearly $50 billion over the past year, including$20 billion in Q3 alone, with over $100 billion of uncalled capital still available [40] - The company raised$21 billion in Q3, with credit accounting for more than half of the capital raised ($14 billion) [59] Business Line Performance - Real estate: Over$5 billion of real estate assets were sold, generating a 28% annualized return and a 2.5x multiple of capital [34] - Renewable power: Nearly $2 billion of equity proceeds were generated from renewable power asset sales, with an aggregate IRR of 27$800 million of equity capital [43] - Private equity: The acquisition of Network International for $2 billion of equity capital was completed, with plans to merge it with Magnati to form a combined payment processing platform across the Middle East [43] Market Performance - The company sees attractive investment opportunities, especially for large transactions or opportunities that need capital to grow [11] - There is a robust bid for high-quality cash-generative assets, which benefits the company given its investment makeup [12] - The company expects a significant return of capital to limited partners, which will support a constructive fundraising environment [12] Strategic Direction and Industry Competition - The company is focused on key themes such as private credit, AI infrastructure, and energy transition, which are shaping the future of the global economy [27] - The company is well-positioned in renewable power, infrastructure, and real estate, combined with its private equity and credit capabilities [27] - The company is investing in AI infrastructure, including a$30 billion semiconductor fabrication plant with Intel in Arizona and a large data center portfolio [21] - The company is also investing in nuclear energy through its acquisition of Westinghouse, which services approximately half the global fleet of nuclear power plants [24] Management Commentary on Operating Environment and Future Outlook - The company expects strong earnings growth to continue for the foreseeable future, with market headwinds turning into tailwinds [14] - The company is strategically positioned in areas that matter most, such as energy transition, AI infrastructure, and private credit [52] - The company aims to double its business over the next five years by expanding fundraising, growing its credit business, and entering new asset classes [67] Other Important Information - The company declared a dividend of $0.38 per share for Q3, payable on December 31, 2024 [79] - The company is simplifying its corporate structure to position itself for broader index inclusion, with plans to have 100% of the asset management company publicly traded [73][74] Q&A Session Summary Question: AI Infrastructure as a Dedicated Strategy - The company is considering AI infrastructure as a dedicated strategy, focusing on the infrastructure side of AI rather than private equity or growth [80][84] Question: Margins in the Credit Business - The credit business is viewed as lower margin, but the company has built its business to generate attractive margins through a combination of full fees and third-party SMA business [86][88] Question: Fundraising in Renewable and Transition Business - The company expects to hit its fundraising target for the renewable and transition business, with strong momentum in deployment and monetization [92][97] Question: Corporate Structure Changes and S&P 500 Eligibility - The company's corporate structure changes are aimed at increasing liquidity and broader index inclusion, with potential eligibility for the S&P 500 [98][100] Question: Expense Growth and Margin Expansion - The company expects margins to continue to improve, with Q4 expenses higher than Q3 and margins in 2025 higher than in 2024 [102][106] Question: Capital Raising Expectations for 2024 and 2025 - The company expects strong fundraising in 2024 and 2025, driven by flagship products and a favorable market environment [107][112] Question: Voting Rights and Tax Implications of Corporate Structure Changes - The corporate structure changes will have no impact on voting rights or tax implications for shareholders [115] Question: Insurance Portfolio and FRE Lift - The company is in the early stages of reshaping its insurance portfolio, with the FRE lift expected to accelerate over the next couple of years [118][120] Question: Uncalled Commitments and Fee Risk - The fee risk from uncalled commitments is modest, with 90% of commitments not expiring until after 2028 [124] Question: Outflows and Monetization Plans - The company expects strong inflows in 2025, with monetization activity leading to capital returning to LPs and then reinvested in new fund commitments [126][128] Question: Fee-Related Earnings and Fee Rates - The company expects to double its business over the next five years, driven by flagship funds, complementary strategies, and credit business growth [130][132] Question: Seller's and Buyer's Market Dynamics - The company is experiencing both a seller's and buyer's market, driven by robust demand for high-quality assets and a shortage of capital for new opportunities [133][137] Question: Wealth Infrastructure Fund Sales - The wealth infrastructure fund saw strong sales in Q3, driven by investor demand, with potential for new wealth products in private equity and credit segments [139][141] Question: BPG Management Fee Increase - The increase in BPG management fees was driven by capital raises and catch-up fees, as well as moving assets to BWS [142][143] Question: Insurance SMA Cadence - The company has ongoing conversations to add more insurance SMA clients, with the platform built to handle scale capital [148][151]