Brookfield Asset Management Ltd. BAM-A-T is looking to buck the trend in a tough market for fundraising with plans to raise significant capital to invest in its areas of focus, including infrastructure, renewable energy and private credit.
The asset manager reported earnings for the first time as a standalone entity on Wednesday after it was spun off from parent Brookfield Corp. in December. The company raised US$93-billion in capital in 2022, including US$14-billion in the fourth quarter, which was its best fundraising year on record.
Even as available capital becomes more scarce while investors grapple with the uncertainty caused by high inflation and spiking interest rates, Brookfield is betting that it can continue to attract flows of institutional money that are increasingly going to only the largest asset managers with the broadest reach. It is also betting that its strength in asset classes that are most in demand because they generate stable income in volatile times will give it an edge.
“We’re increasingly seeing large institutional [limited partners] looking to concentrate their capital amongst a smaller number of managers, but those managers who can offer them a greater diversity of products,” said Connor Teskey, president of Brookfield Asset Management, on a Wednesday conference call.
“We do expect this to continue in the coming years and perhaps this is one of the reasons why we have such a robust and positive outlook for fundraising in 2023 when we know that there are some pockets of weakness for other market participants,” Mr. Teskey said.
Fundraising helped Brookfield Asset Management boost its fee-bearing capital to US1$418-billion, up 15 per cent over the past year. During the fourth quarter, the company closed new funds for its fifth flagship infrastructure fund, which now stands at US$22-billion, and its sixth flagship private equity fund, which reached US$9-billion.
After Brookfield quickly deployed about half of a $15-billion, climate-focused fund that launched in 2021 to make large investments in the global transition to a net zero economy, Mr. Teskey said Wednesday that it is intended to be only the first in a series of such funds. Brookfield plans to bring a second, “meaningfully larger” transition fund to market “sooner rather than later,” he said.
In a letter to shareholders, Brookfield chief executive Bruce Flatt and Mr. Teskey said the company expects to have three flagship funds in the market in 2023. And they predicted that the asset manager’s earnings should “at least double over the next five years.”
Brookfield Asset Management, which was spun off in December, reported higher earnings from fees in the fourth quarter, largely shrugging off the volatility in roiling markets.
Overall profit was down 9.5 per cent to US$504-million in the final three months of the year, including US$84-million earned from the spinoff on Dec. 9 to the end of the year.
But full-year profit was up 3 per cent to US$1.92-billion. And fee-related earnings increased nearly 8 per cent in the quarter to US$576-million, while distributable earnings – which adjust for items such as taxes and share-based compensation – rose 5.5 per cent to US$569-million.
For the full year, fee-related earnings were US$2.1-billion. The company now has approximately US$800-billion of assets under management.
The asset manager’s board declared a quarterly dividend of 32 US cents a share.
Analysts probed the company on Wednesday about its appetite for mergers and acquisitions, but Mr. Flatt said any larger deal would need to “hit a very high test,” adding: “We don’t have any expectations of something happening in 2023.”
On Wednesday, Brookfield Reinsurance – a subsidiary of Brookfield Corp. – announced a US$1.1-billion, all-cash deal to acquire specialty insurer Argo Group International Holdings Ltd., helping expand Brookfield’s U.S. insurance operations. Argo shareholders will have the right to receive US$30 in cash per share at closing, which is a 6.7-per-cent premium to the company’s closing share price on Feb. 7.