Brookfield Asset Management .(BAM) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Fee-related earnings (FRE) for Q1 2024 were $552 million, with $2.2 billion over the last 12 months [26] - Distributable earnings (DE) for Q1 2024 were $547 million, with $2.2 billion over the last 12 months [26] - Fee-bearing capital grew by 6% year-over-year to nearly $460 billion, driven by strong inflows and capital deployment [28][29] - The company raised $20 billion of capital in Q1 2024, including $10 billion previously announced in February [28] - The company has over $100 billion of dry powder available for deployment, with $11 billion deployed in Q1 2024, primarily in credit products [30] Business Line Data and Key Metrics - Infrastructure business raised over $3 billion, including $2 billion for the Supercore Infrastructure strategy [34] - Renewable Power and Transition business held a first close for the second vintage of the Global Transition Fund at $10 billion [34] - Private equity raised $1.5 billion in Q1 2024, with several complementary strategies launched [35] - Real estate held a first close for the fifth vintage of the Opportunistic Real Estate Fund at over $8 billion [35] - Credit business raised nearly $6 billion within Oaktree funds, including $1 billion in sponsor credit and $1 billion in the 12th vintage of the Opportunistic Credit Fund [36] Market Data and Key Metrics - The company sold a 49% interest in ICD Brookfield Place, a premier office property in Dubai, for approximately $1.5 billion, marking one of the largest real estate transactions globally since the pandemic [10] - Over the past year, the company sold or is under contract to sell approximately $35 billion of assets across all businesses, generating strong returns on capital [10] - The company refinanced over $18 billion of borrowings, resulting in a decrease in the overall cost of debt [11] Company Strategy and Industry Competition - The company is focusing on long-term growth through flagship funds, complementary strategies, and the Brookfield Reinsurance platform [14] - The company has a leadership position in infrastructure, renewable power, transition, and credit, which are in high demand due to global megatrends like decarbonization, deglobalization, and digitalization [16] - The company is expanding its wealth solutions business, with Brookfield Reinsurance managing nearly $90 billion of insurance fee-bearing capital, including $50 billion from the AEL acquisition [18][19] - The company is consolidating its credit businesses under a newly formed credit group, which manages nearly $300 billion of assets under management [38] Management Commentary on Operating Environment and Future Outlook - The company expects excellent growth in overall results in 2024, driven by strong fundraising, capital markets execution, and strategic transactions [8] - The market environment is improving, with liquidity returning to capital markets and risk appetite increasing among investors [8] - The company expects fundraising to continue to build throughout the year, with three flagship funds expecting final closes in 2024 [14] - The company is confident in reaching its targets of doubling distributable earnings and reaching over $1 trillion of fee-bearing capital over the next four years [25] Other Important Information - The company declared a dividend of $0.38 per share for Q1 2024, payable on June 28th [31] - Bahir Manios, the CFO, will be stepping down at the end of May, with Hadley Peer Marshall taking over as the new CFO [13][32] Q&A Session Summary Question: Fund performance track records and market volatility - The company views the slight decline in fund performance as temporary, with expectations of a rebound as market conditions improve [44] Question: Castlelake deal structure - The company invested $500 million in Castlelake, with $350 million for a 51% stake in FRE and $150 million for carry and GP stakes [47] Question: Fundraising pace and flagship fund expectations - The company expects fundraising to be more balanced across quarters in 2024, with strong momentum in credit and real estate flagship funds [52][53] Question: Insurance business and AEL asset rotation - The company expects to deploy 1/3 of AEL capital into private funds, 1/3 into investment-grade credit, and 1/3 into liquid credit over the next 2-3 years [55][56] Question: Credit business competitive environment - The company sees strong opportunities in credit due to market disruptions, scarcity of capital, and its ability to provide certainty of capital and quick execution [59][60] Question: FRE margin and expense growth - The company maintains its guidance for low double-digit expense growth and expects FRE margins to improve as fundraising becomes more balanced and capital deployment increases [71][72] Question: Castlelake transaction multiple - The $350 million investment for 51% of Castlelake's FRE implies a forward-looking multiple of 9x, with $40 million expected over the next 12 months [75] Question: Oaktree incremental interest acquisition - The company invested $275 million for an additional 5% interest in Oaktree, with a multiple of 13.5x based on a formulaic calculation [77] Question: Impact of U.S. Department of Labor rules on AEL business - The company sees demographic trends supporting growth in the insurance business, with minimal disruption expected from new regulations [81][82]