Brookfield Asset Management Ltd. Q2 FY2024 earnings call

Bruce Flatt's Remarks

• Strong results with $68 billion capital raised in Q2, now managing ~$1 trillion of assets.
• Over 125 years of history, focusing on essential assets with durable cash flows.
• Leader in backbone infrastructure, renewable and transition, and credit assets.

Connor Teskey's Remarks

• Global economy showing signs of improvement, with central banks cutting rates.
• Strong fundraising due to diverse product set, track record, and access to capital.
• Deployed or committed ~$20 billion in Q2, including acquisitions like GEMS Education, nVent Electric’s business, and a majority stake in a renewables development business.
• Credit business growing with 19% growth in fee revenues, acquisition of Castlelake to add to diversification.

Hadley Peer Marshall's Remarks

• Financial performance: $1.1B fee revenues in Q2, $4.5B over last 12 months. Fee-bearing capital at $514B, up 12% year-over-year.
• Fundraising: Raised $68B in Q2, including $53B from insurance solutions channel.
• Deployment: Deployed or committed ~$20B in Q2, with $6B across credit portfolio and $1.5B across real estate platform.
• Liquidity: $107B of uncalled fund commitments, $1.9B cash on hand.

Brookfield's segments include Credit, Private Equity, Renewable and Transition, etc. The Credit business has grown to over $300 billion of assets, with second quarter credit revenues up 19%. Private equity manages approximately $130 billion of assets. The renewable and transition platform is a leader with the largest fund of its kind. Fee-bearing capital surpassed $514 billion, with 87% of it associated with long-term or permanent capital.

Guidance

• Expect to bring in another trillion of AUM over the next four years.
• Credit business growth expected to continue with M&A deal pickup and acquisition of Castlelake.
• Deployment volumes expected to be robust throughout the remainder of the year.
• Annualized fee-related earnings at end of Q2 were $2.5B for FRE and $2.4B for DE, up 11% and 12% respectively over prior year quarters.

Risks

• Forward-looking statements subject to known and unknown risks, future events and results may differ materially from such statements.
• Market volatility and economic uncertainties could impact transaction activity and valuations.

Q: Can you talk about how Brookfield's unique position as the largest combined renewable power and infrastructure investor is showing up in deal pipeline and joint development of data centers and renewable power?

A: Connor Teskey mentioned the growth in infrastructure to support AI and cloud compute, with Brookfield being in a fortunate position to provide both data centers and renewable power. The market is maturing towards holistic solutions, and Brookfield is the largest player with leading exposure across both.

Q: What's the progress on backfilling BGTF I and when expected to be complete?

A: Connor Teskey said BGTF I has all deals needed to fill up and return focus to BGTF II, expecting to complete imminently with BGTF II already ~20% deployed.

Q: Talk about the opportunity for insurance business with $88B of fee-bearing capital, destination of mix and timeframe?

A: Connor Teskey said ~60% of AEL portfolio is in liquids, with rotation into funds mandates over next 1-2 years, having a material impact on FRE.

Q: Update on margins and target?

A: Hadley Peer Marshall said margins at 55% now, expecting improvement with operating leverage, aiming for north of 60% eventually.

Q: Thoughts on public markets overreacting to bad economic data?

A: Connor Teskey said market backdrop still constructive for transactions, growth above normalized, labor markets robust, credit spreads tightening, and interest rates beginning to lower.

Q: Growth of insurance segment post AEL assets?

A: Connor Teskey said run rating of AEL mandate will play out in numbers, insurance annuities and retail channel demand are growth levers.

Q: Insight on catalytic fund and M&A environment?

A: Hadley Peer Marshall said catalytic fund has overlap with existing investors, new investors, and competitive bidding is rational in constructive range.

Q: Larger scale exits and carry?

A: Hadley Peer Marshall said larger realizations from more mature fund vintages won't have carry for BAM, but still positive for client reinvestment.

Q: Impact of monetary policy on LP commitments and transactions?

A: Hadley Peer Marshall said declining interest rates are the biggest driver, creating constructive market environment for deal activity and institutional commitments.