Brookfield Asset Management .(BAM) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2022, fee-related earnings (FRE) increased by 26% year-over-year, reaching $2.1 billion or $1.29 per share, driven by a 20% increase in fee revenues [28][29] - Distributable earnings also rose by 21% in 2022, totaling almost $2.1 billion or $1.28 per share [29] - The company raised $93 billion in capital for the year, a 30% increase compared to the previous year, marking a record year for the business [30] Business Line Data and Key Metrics Changes - The flagship funds raised a total of $37 billion, with significant contributions from the fifth infrastructure fund and the sixth private equity fund [31] - The insurance solutions business saw an increase of $23 billion in managed assets for the year [31] - The company closed the year with $418 billion of fee-bearing capital, a 15% increase from the prior year [30] Market Data and Key Metrics Changes - The global macro environment was characterized by elevated inflation and interest rate increases, leading to market uncertainty and volatility [7][8] - The reopening of markets in Asia has increased both supply and demand for goods and services globally, providing a boost to the world economy [8] Company Strategy and Development Direction - The company is focused on global secular trends of digitization, deglobalization, and decarbonization, which are expected to require trillions in investment over the coming decades [9][12] - The Brookfield Global Transition Fund (BGTF) aims to scale to over $200 billion within the next 10 years, focusing on decarbonization and emission reduction projects [16][20] - The company plans to launch several new funds in 2023, including a fifth flagship real estate fund and a second transition fund [32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to capitalize on investment opportunities despite market volatility [10][14] - The outlook for fee-related earnings is positive, with expectations for significant growth driven by new fund launches and expansion of perpetual strategies [33][34] Other Important Information - The company declared a quarterly dividend of $0.32 per share, payable on March 31, 2023 [35] - The asset management business has a strong balance sheet with no debt and over $3 billion in cash and financial assets [34] Q&A Session Summary Question: Insights on consolidation activity in the alternative space - Management noted that large institutional LPs are concentrating capital among fewer managers, benefiting Brookfield due to its diversified product offerings [38] - The company is open to M&A opportunities but will be selective, focusing on scalable and additive targets [39] Question: Composition of the transition fund portfolio - The transition fund has invested in U.S. renewable power developers and projects like carbon capture and battery storage, reflecting a strong execution and attractive opportunities [41] Question: Fundraising environment and its improvement - The increasing allocation towards alternatives and Brookfield's leading franchises in infrastructure, transition, and credit are driving a positive fundraising outlook [52] Question: Growth aspirations for the secondaries business - The company is well-positioned to take advantage of the growing secondaries market, leveraging its access to capital and knowledge of underlying assets [63] Question: Drivers of outflows in the credit and solutions business - Outflows were primarily in public securities and liquid credit strategies, but a rebound is expected due to Brookfield's strong position in the market [65]