It's because Brookfield's found out that the value of the assets they own, the market isn't fully appreciating them, especially when you look at the amount of cash flow that they're pulling in from these fees for managing assets. I really think it's really an attractive investment to generate a reasonable rate of return relative to the risk that you're taking. To get that exposure from a company like Brookfield, that as we mentioned and will continue to mention on part two of our discussion, is prudent in investing their capital, and really has a strong track record of doing that. Brookfield Asset Management Inc. Monica Thakur, Institutional IR Linda Northwood, Retail IR Tel: +1 866 989 0311 (N. America) Tel: +1 416 363 9491 (International) enquiries@brookfield.com Transfer Agent AST Trust Tel: +1 We mentioned that Brookfield Asset Management, the parent company, a large portion of its revenues come from management fees that it's going to charge to its subsidiaries. For now, we'll leave you a "Happy Valentine's Day." What are we seeing from the company in 2018? So that's an opportunity to have this focus. It's been a great learning experience for me, as well as an enriching holding. They just had a huge real estate fund closing at $15 billion. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. It's the second-largest mall operator in the U.S. Talking about how Brookfield really is opportunistic in acquiring these businesses, they were the only bidder on General Growth Properties. That was a demand, almost, of the investors in General Growth Properties. First off, when you think about investing in Brookfield Asset Management vs. the subsidiaries, how should investors think about that? Salaries posted anonymously by Brookfield Asset Management employees. If the pipeline goes bankrupt -- which is highly unlikely -- it's not going to impact Brookfield. How have they been performing? It owns Westinghouse, which supports nuclear power plants. They're looking for value. It pours a lot of its money into these entities. They'd promised the customer would build it for $X, and it was just ridiculous how far over the cost went. The third part is, they invest in a bunch of funds that Brookfield has set up that are opportunistics. They call it nonrecourse. Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. It's traditional private equity. That's pretty highly levered. Sciple: Let's go ahead and talk about Brookfield Asset Management, that's the parent company of this family of Brookfield companies. When we're looking out into the future, where are we seeing the growth opportunities for Brookfield Business Partners? What's really interesting about Brookfield to me is, they're countercyclical in the way that they invest. Brookfield Property has been really open with the fact that they believe their units are undervalued. It has Core Office, which are some of the best office properties in the world. One of the big concerns has been when companies like Sears and J. C. Penney are closing stores. The Motley Fool owns shares of and recommends Brookfield Asset Management. For example, they own a pipeline in Brazil that their infrastructure group bought. Based on what we saw in 2018, how excited are you about those opportunities? If I'm the only bidder on this property, I can really set the price point. It owns a stake in a company that supports offshore drilling. Any last things you want to mention before we close out part one of our discussion on the Brookfield family of companies, Matt? Finally, fee-only asset management groups are companies that only make money from management fees charged to the client, rather than commissions or charges related to specific products. A global leader in alternative asset management We are invested in long-life, high-quality assets and businesses that form the backbone of today's global economy. Sciple: They talk about how they want to invest in businesses that have high barriers to entry and wide moats. Brookfield Asset Management is a giant Canadian asset manager. It's really been making these a destination, a live-work-play-type atmosphere where they're going to continue to grow revenue from these businesses. Sciple: Sure. Nick Sciple: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. One interesting point about Brookfield is its subsidiaries. How should investors think about that? They'll try to buy low and sell high. The Toronto-based asset management company is at the top of a diverse group that is a global player in real estate, infrastructure, renewable power, private equity and credit. Find real-time BAM - Brookfield Asset Management Inc stock quotes, company profile, news and forecasts from CNN Business. General Growth has done a good job of owning the top malls that they can and then redeveloping them. DiLallo: It really opens the door to more investors. They're also adding things like hotels and apartment buildings. Examples of real assets include real estate, infrastructure, and utilities. That helps align it with investors. What opportunities do they have for growth over time? Brookfield Asset Management Inc 's net income of $ 5,354 million in IV. So it reflects on the balance sheet that they have this debt, but it's all the way down at that pipeline level. They own some of the best malls in the U.S. That was through their investment in General Growth Partners. 1 holding when you net together all of the underlying businesses. This is a way that they're trying to unlock the value. Current as of December 29, 2020. Sciple: Sure. Then, as conditions have gotten better, they've been starting to sell those. DiLallo: This story with General Growth is really interesting. When you look at Brookfield Asset Management, it makes money from fees that it gets from these underlying businesses, as well as it owns a significant stake in those subsidiaries to the point that it really controls the operations. They're going to look for businesses that have problems right now, but through operational changes, maybe it's a new management, maybe it's just getting out from a lot of debt, whatever the case may be, they'll look for those opportunities where they can buy at the bottom of a business cycle and then ride it all the way up, and then they'll sell it as the business cycle tops out. They're being really aggressive there. Sciple: Let's talk about something else that's going on with the business. How well these … Do you think there are any potential conflicts between the fee structure that Brookfield Asset Management charges to its subsidiaries and the relationship between those entities? They'll structure each one of their businesses to an investment-grade credit -- it might be five times earnings for one business, it might be two times earnings for another business -- but it's each structured at those levels. It'll invest in anywhere that it sees value. Our overall hedge fund sentiment score for BAM is … His shareholder letters are right up there with Buffett's in my mind as something that should be read every quarter. However, it's more of a hybrid between that fee structure and the master limited partner, general partner that you see in the energy midstream, where you have these incentive distribution rights that the master limited partnerships pay to the general partner. Another interesting thing about this General Growth transaction was that Brookfield created the Brookfield Property REIT, ticker BPR, in relation to this transaction. But with the rise of Amazon and online e-commerce, malls have fallen out of favor with investors. I think I've held Brookfield for maybe 15 years. Of that, most of it is Brookfield partnerships. It's so that it draws your attention to this asset management businesses that's generating lots and lots of cash flow and will generate even more in the future as they start monetizing some of the assets in their funds. Brookfield does it on each business level. © 2020 The Motley Fool Canada, ULC. There's been this shift over the years to focus on "Let's get this off our balance sheet, but still on our balance sheet," because they own a large chunk of these listed entities. A key reason for this comparison can be attributed to his investment style, which leans toward finding undervalued assets. In addition, like Buffett, Flatt has managed to maintain a high level of performance over a long period and holds a large investment in the company. So, it was really attractive, both on the case of, they're out of bankruptcy, so you get an attractive price, as well as, they're operating in an industry that is really unlikely to see new entrants come, at least in the near term. The company has been growing at a compound annual growth rate of more than 12% for the past 10 years. That's their game plan all the way through. Brookfield pours a lot of its own money into these funds. However, General Growth has been redeveloping these anchor stores into other things like dining, they're bringing in entertainment, movie theaters. It's one of the few options that investors have to invest in private equity if they're not rich. The ability for folks outside of the actual business to invest in the company has only been around for about 20 years. The Motley Fool Canada » Dividend Stocks » Stock Deep Dive: Brookfield Asset Management (TSX:BAM.A), Jed Lloren | November 17, 2020 | More on: BAM BAM.A. Vice President salaries at Brookfield Asset Management can range from $137,065 - $340,000. This was already unusual: when the Brookfield group buys an asset, the money usually comes from one of the investment funds it runs for outside investors. How does that relationship work out? They will look for those cyclical businesses. They've talked about a densification strategy that they want to do across all of their retail assets, which is like what you mentioned, Matt, taking them all and then converting that asset into a more valuable form, whether it's adding residential or movie theaters or what have you. I've learned so much through this holding. Quarter a year ago. They say, "Our real estate assets are worth a lot more than the market's giving us credit for." It really hits on all three things that investors want to look at in the company. You're not going to get the dividend that you will in some of the other entities. That's been a big driver there, to try to maximize the value of what they hold in their funds. How do you think about that as an investor? Investing in infrastructure has remained the primary focus for the company, which for much of its existence managed its own money and serviced only large investors. Not only that, but the company primarily invests in real assets. Brookfield Asset Management … These are assets that have intrinsic worth due to their properties. Brookfield vs. Brookfield: How they make money Brookfield Asset Management and Brookfield Infrastructure Partners have two very different business models. Brookfield did not disclose who these officers were or how much money they would make from the deal. Sciple: Sure. It's almost like four business units. TORONTO -- Brookfield Asset Management says it is creating BAM Reinsurance as a new publicly traded business similar to Brookfield Renewable and Brookfield Infrastructure. Thanks for listening and Fool on! View the latest Brookfield Asset Management Inc. Cl A (BAM) stock price, news, historical charts, analyst ratings and financial information from WSJ. Let's talk a little bit about the relationship between the Brookfield Asset Management parent company and its relationship with the subsidiaries. They own hotels, car dealerships, student housing, manufactured housing, almost anything, they'll own in these funds. That's a big driver of Brookfield. It doesn't take a lot of wild risks. This video was recorded on Feb. 14, 2019. For Matt DiLallo, I'm Nick Sciple. Love is in the air and we're talking about a company that you really love today, Brookfield Asset Management and the whole family of companies. DiLallo: Absolutely. It's been another growth year. It's not on the corporate level, it's on the business level. Sciple: I'm doing great! Fool contributor Jed Lloren has no position in any of the stocks mentioned. Sciple: [laughs] Right. But once you dig into it, you see where the leverage is, how it impacts the company, and it's not as big of a deal as it might seem. You look at some of these things that the subsidiaries invest in, Brookfield Asset Management is putting some of their own money in as well. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. Brookfield Business Partners, as you mentioned, invests in a wide variety of businesses, but I think the Westinghouse acquisition gives a good example of the way that they think about investing and the opportunities they look for. Sciple: One thing I found really interesting, you talked about having assets on the balance sheet, but they aren't on the balance sheet, is how they use leverage. Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group. Brookfield Asset Management Inc Also a Reliable Dividend Stock As I said, the 1.5% yield may not seem like much, but the payout is quite reliable, … The company is great. This is increasingly impressive given the fact that the Toronto Stock Exchange has been known to be slower in terms of growth compared to its American counterparts. This deal flow that Brookfield is able to cultivate and leverage, because they're able to bring on all these institutional partners, and it's able to allow these entities to grow faster and acquire assets that they wouldn't likely have been able to on their own. Thanks for coming on, Matt! When you think about the operations of Brookfield Asset Management, you're really going to want to look through to these smaller companies to understand, like you mentioned, the different operating segments of the business. From there, they've grown over time. You really don't know what that's going to do next other than, they're going to look for value. Brookfield sees that as an opportunity to make more money for their investors by investing in these funds so that it can earn more of a capital gain than just the income it would earn from the Core properties. Any of these subsidiaries on their own are impressive enough to warrant an investment. They believe they can grow earnings in a mid-single-digit range, and that should support distribution growth of about 5% to 8% per year. Quarter decreased by -28.5 % from net earnings of $7,488 million achieved in IV. Each one focuses on a different aspect. They launched in 2013. Similarly to Brookfield Property Partners, Brookfield Business Partners has been very open that they see their units as undervalued and they're repurchasing shares. There's some income along the way, and it's a value stock as well. The difference is that, as an asset … This is a large number of companies. How do you view the potential conflicts? The first segment we want to talk about is Brookfield Property Partners, ticker BPY. This redevelopment is really the key to bringing these malls forward. It's indicative of Brookfield's strategy of going against the grain when it comes to investing their assets. Blackrock is one of its biggest peers, located in the United States. Although a bit higher than I prefer, the company’s history of smart capital allocation should give investors some reassurance that it will be able to keep growing its distributions in the future. Sciple: As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks mentioned, so don't buy or sell anything based solely on what you hear. Brookfield has a proven track record of creating value for shareholders; since 1998, shares of BAM have grown at CAGR of 19%. One of the things that they've been known to do is, they'll sell assets that -- investors aren't valuing the company the way they value it. They've shifted gears over the years to, "Let's put these into different entities that investors can understand, and let's focus on the cash flow we're getting to this asset management business," because investors tend to pay more for that type of cash flow. However, it has increasingly reached out to smaller investors with an innovative lineup of investment options.From a big-picture perspective… Their aim is to actually induce change at the operating level, to cut costs, to get them growing the right way, to get them out of bad businesses. In addition to that focus, all of their listed entities other than the private equity, they pay really high-yielding distributions. You talked about a lot of this debt being carried down at the subsidiary level. They look out five years. It has a potential for growth in income. Sciple: All right folks, make sure to tune in next week, where we'll be talking about Brookfield Infrastructure Partners and Brookfield Renewable Partners. Growth out of favor with investors paying for assets and what other private are... Any time options that investors should hold in their funds a offices cities! 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Over $ 100 billion in debt signs of changing course in the world history the was... To generate a return on investment far, it 's one of Our discussion the. An Asset … Brookfield Asset Management Inc 's net income of $ million. To generate a reasonable rate of return relative to the risk that you have about that strategy the! Went about investing in Brookfield Asset Management, that 's where we 've gotten some of the malls. Way to play the global Property market, infrastructure, and it 's not even factoring in ability... 'S indicative of Brookfield 's strategy and the simple things like hotels and apartment buildings for more.. Company is also geographically diversified, spreading its presence across 30 different countries a way. Us credit for. 65 % of global nuclear plants worldwide, so they no. Transition and talk about Brookfield business Partners invests its capital it pounces owns a stake in the future latest., it 's not on the balance sheet for years, so you have Management that you with! His shareholder letters are right up there with Buffett 's in my mind as something that should read! Redeveloping them is, without a doubt, a company that supports offshore drilling price! An individual investor the behemoth that is Brookfield Property Partners has basically three segments investors think about investing in article.
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