Brookfield moves forward with spin-off of asset management business

0

Brookfield Asset Management, one of the world’s largest alternative investment groups, is moving forward with the spin-off of its asset management business into a separate public company, in what is set to become the one of the biggest Wall Street quotes of the year.

Brookfield will divest a 25% stake in its asset management unit by the end of the year in a move aimed at simplifying the structure of the sprawling Toronto-based company and unlocking value for shareholders.

The group’s asset management unit manages $379 billion in fee-paying assets across real estate, infrastructure, renewable energy, credit and private equity on behalf of institutional investors. Brookfield also has more than $40 billion in directly held net assets, including direct real estate holdings such as Canary Wharf in London and significant stakes in publicly traded partnerships it has formed over the past decade.

Brookfield’s planned split, which was disclosed in an earnings release on Thursday morning and first reported by the Financial Times in February, comes as major listed alternative asset managers review their structures in a bid to attract public equity investors.

In recent years, competitors such as Blackstone, Apollo Global, KKR and Carlyle Group have moved from publicly traded partnerships to regular companies in an effort to attract mutual fund and index fund investors.

Both Apollo Global and KKR have acquired large insurance operations in the past 18 months as they use the balance sheets of large companies to support their growth.

Others, like Blackstone and recently listed buyout group TPG, hold virtually no direct investments on their balance sheets. Both businesses are valued for their fee-based revenue instead of the sum of those revenue streams and the business assets they own. Shareholders gave much higher valuation multiples to paying companies.

Brookfield is approaching Blackstone by splitting off part of its asset management business. He hopes the move will give shareholders an independent assessment of his fee-based earnings, divorced from their more complex ownership of real estate and public market interests.

Financial markets have evolved. What people like are asset-light models,” Brookfield chief executive Bruce Flatt told the Financial Times in February. “There seems to be a huge amount of shareholder value to unlock.”

Some analysts have valued Brookfield’s entire asset management business at over $75 billion.

In its first-quarter results released Thursday, Brookfield reported distributable income of $1.2 billion, down 52% from the same quarter a year ago as falling financial markets made it more difficult to sale of assets and the realization of investment profits.

The group’s fee-related revenue rose more than 20% to $501 million for the quarter, as $59 billion of new investor funds flowed into the group over the past year, including $5 billion in assets for its perpetual private infrastructure and real estate funds since the start of 2022.

Share.

Comments are closed.