BROOKFIELD ASSET MANAGEMENT LTD
TRANSCRIPT: Q4 2024 CONFERENCE CALL WEBCAST
February 12, 2025, at 9:00 a.m. (ET)
Corporate Speakers:
- Jason Fooks, Managing Director, Investor Relations
- Bruce Flatt, Chief Executive Officer
- Connor Teskey, President
- Hadley Peer Marshall, Chief Financial Officer
PRESENTATION
Operator
Hello. Welcome to Brookfield Asset Management's fourth quarter 2024 Conference Call and Webcast. (Operator Instructions). I would now like to hand the conference over to our first speaker, Mr. Jason Fooks, Managing Director, Investor Relations. Please go ahead.
Jason Fooks, Managing Director, Investor Relations
Thank you for joining us today for Brookfield Asset Management's earnings call. On the call today we have Bruce Flatt, our Chief Executive Officer, Connor Teskey, our President, and Hadley Peer Marshall, our Chief Financial Officer. Bruce will start the call today with opening remarks on the tailwinds driving our business, followed by Connor, who will highlight our success over the past year and how that positions us well for 2025. And finally, Hadley will discuss our financial results and business operations.
After our formal comments, we'll turn the call over to the operator and take analyst questions. Before we begin, I'd like to remind you that in today's comments including in responding to questions and in discussing new initiatives in our financial and operating performance, we may make forward-looking statements including forward-looking statements within the meaning of applicable Canadian and U.S. securities law.
These statements reflect predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U.S. and the information available on our website.
And with that, I'll turn the call over to Bruce.
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Bruce Flatt, Chief Executive Officer
Thank you. And good morning to everyone on the call. We had a strong 2024 as both earnings and capital raising continued to gain momentum throughout the year, reflecting the strong growth profile of our business and the increasingly positive sentiment in the market today. Over the past year, we raised over $135 billion including a record $29 billion of organic fundraising in the fourth quarter, deployed $48 billion and monetized $30 billion of investments, our strongest year across the board.
We expect this to continue as improving sentiment and increased liquidity in the capital markets is significantly favoring high-quality real assets. This has had and will continue to have an outsized impact on our portfolio, allowing us to finance our businesses at attractive levels, both increasing distributions and making assets easier to sell.
The 18% annual growth of our fee-bearing capital base to $539 billion enabled us to generate $2.5 billion of fee-related earnings and $2.4 billion of distributable earnings for the year. This year, we also benefit from the strategic investments we made to expand our credit origination capabilities and bolstering our fundraising organization across both institutional and private wealth channels as we look to expand and diversify our product offerings.
In addition, we added new partner managers and increased our investment in Oaktree. We want to spend a few minutes today speaking about the secular trends that will propel our business over the next decade and beyond. First, the alternative asset industry is poised to more than double. Growth is being driven by institutional investors steadily increasing allocation to private funds alongside high net worth financial advisors who are increasingly allocating to alternative strategies.
At the same time the rise of private credit introduces additional fundraising opportunities, whether from insurers seeking investment-grade solutions and the likely of inclusion of alternatives in retirement accounts. A second major trend is the ongoing consolidation of managers. Large clients are looking to streamline their relationships and want to allocate more to the largest managers with diversified global platforms and a proven track record. This should benefit our flagship strategies and also attract more SMAs where we can allocate client capital to both single strategies or across numerous businesses of ours.
Finally, we are strategically aligned with the largest themes of our time. Digitalization and the associated infrastructure build-out, which is being further accelerated by artificial intelligence, the increasing demand for power, especially low-cost clean power and the continued growth of private credit across all sectors.
Starting first with digitalization. Artificial intelligence, which continues to expand at a remarkable pace, is further propelling digitalization, creating significant opportunities
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for us to invest in areas such as data centers, telecom towers, fiber and semiconductor fabrication. At the same time our operating businesses are using AI to drive more automation and productivity, supply chain optimization and improved customer engagement, enhancing cash flows in order to support stronger investment returns.
Second, upgrading power grids to meet large energy requirements will necessitate nearly doubling electricity generation, I'll repeat that again doubling electricity generation, along with transmission and/or battery capacity, which will continue to drive opportunities for our infrastructure and many of our other businesses. Renewables will be the biggest beneficiary of growing electricity demand because they are the cheapest option and offtakers will always absorb as much of the cheapest source of power before turning to more expensive forms of power. Yet digitalization is only part of the story driving unprecedented global clean energy needs.
As more countries are prioritizing energy security, development of renewables and nuclear power is the only path. With over $125 billion of AUM, deep operational expertise and a reputation as a partner of choice, we are well placed to capture this accelerating demand. Lastly, on private credit. Private credit remains a very attractive and growing asset class spurred by desire among borrowers for flexible capital solutions. Alternative managers with specialized industry expertise like us are well positioned to provide a full suite of large-scale customized financing solutions.
Our decades of experience in infrastructure real estate renewables, alongside our partner managers focus on corporate and asset-based lending enable us to source proprietary opportunities and underwrite credit risk effectively. We see considerable potential further growth in the years ahead. Adjacent to these, our real estate business is picking off some excellent properties at very attractive entry points. Similar to previous cycles, we are well positioned to capitalize on these dynamics and deliver exceptional returns. In recent months, we have seen interest growing meaningfully for our real estate strategies, indicating the first phase of a recovery. Together, these drivers are among the many that position Brookfield for long-term success, and we believe we are well positioned to deliver on our long-term goal of 15% annual growth in cash flow on a per share basis.
Our deep operational expertise and relationships across our five businesses will continue to enable us to identify compelling investments and generate excellent returns for our clients. At the same time powerful secular trends in digitalization, clean energy and private credit, as mentioned, will continue to drive growth, drawing more capital in markets where we have established a leadership position. Thank you for your ongoing support.
I will now hand it over to Connor, who will talk about the past year and how that positions us for the future.
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Connor Teskey, President
Thank you, Bruce. And good morning to everyone on the call. As Bruce mentioned, 2024 was an excellent year for our business. We delivered strong performance across our franchise, strategically expanded our capabilities and surpassed $1 trillion of assets under management.
Looking at the past year, 2024 was one of our most active years ever. We deployed approximately $50 billion, sourcing high-quality investments at very good values across each of our business groups. Highlights included Neoen, our public-to-private acquisition of a leading global renewables developer, GEMS Education, a prominent private education provider in the Middle East, and FirstEnergy, a large-scale U.S. electrical distribution company.
We also executed on a number of important agreements. For example, our landmark transaction with Microsoft, the largest of its kind, will supply over 10 gigawatts of renewable power over the next five years. And earlier this week, in partnership with the French government, we announced a EUR 20 billion infrastructure investment program to support the deployment of artificial intelligence in France.
All of the above is helpful in driving performance and adding to our strong track record of delivering for our clients. Although the M&A market was slower in 2024, there was a strong demand for essential assets and businesses with robust cash flows. Given the makeup of our portfolio, we were able to sell investments valued at nearly $40 billion, monetizing $30 billion of equity capital. A good example of this was the partial sale of our ICD Brookfield Place, which was one of the highest value real estate transactions ever completed in the Middle East.
We also made significant strides in expanding our capabilities, advancing our leadership position across the fastest-growing areas in the alternative space and laying the groundwork for our long-term growth. It was this time last year that we formally launched our credit group, which brought together our long-standing credit capabilities across the firm with our growing portfolio of credit-focused partner managers. The purpose was to coordinate our credit strategies across asset classes and to accelerate the growth of this business, and we are already seeing meaningful benefits of these efforts.
We continue to scale our strategies, build out new capabilities in key growth areas and expanded our platform with new clients and manager partnerships. As a result, 60% of this year's organic capital raise came from our credit business. Today our credit group is our largest business by assets with nearly $250 billion of fee-bearing capital and is poised to help drive continued growth in 2025.
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Our scale, strong relationships, global footprint and deep expertise in real asset and corporate credit have given us a meaningful advantage in building out our credit platform. These credit strategies benefit from proprietary deal flow, access to our specialized equity teams for underwriting and our operating capabilities to conduct thorough due diligence and enhance downside protection through asset management.
We also invested in and partnered with managers with leadership positions in key areas of growth including within the private credit market. This year, we acquired a 51% stake in Castlelake, adding aviation and asset-based finance capabilities to existing Brookfield expertise in corporate and opportunistic credit, equipment and consumer finance, music royalties and NAV lending. This extended our leadership position as one of the most comprehensive credit managers in the alternative space. This is separate from our dominant franchises in infrastructure, renewables, real estate and private equity. Lastly, we scaled our investment-grade credit team to support growing client demand.
By leveraging the Brookfield ecosystem, we are sourcing and underwriting proprietary opportunities for our insurance clients who want investment-grade private credit. For example, our mandate with Brookfield Wealth Solutions continues to grow as their capital deployment needs expand. We have begun to offer these capabilities to other third-party insurers. Going forward, we expect significant growth in this channel.
Our progress over the past year and the investments we have made to expand our global footprint and fundraising channels positions us well for an excellent year for fundraising, deployment and monetizations in 2025. Transaction volume is further picking up, enabling managers across the sector to return more capital to their clients. This is, in turn, giving partners renewed liquidity, creating a more favorable backdrop for capital raising.
On the fundraising front, we expect our latest flagship rounds to be over 15% larger than their previous vintages. We are finishing raising two flagship funds, the fifth vintage of our real estate flagship fund and the second vintage of our global transition flagship fund, both of which are slated for final close in the first half of 2025. Our 12th opportunistic credit fund closed in January with a total strategy size of $16 billion.
As a reminder, our flagship franchises form the basis upon which we build our complementary strategies, which should contribute to much of our fundraising growth in 2025. Across our complementary strategies, we are seeing strong momentum for a number of new products such as our catalytic transition fund, our financial infrastructure fund, our Middle East private equity fund and our infrastructure structured solutions fund.
Other complementary strategies of note that are in the market are our second private equity special investments fund, the seventh vintage of our real estate debt fund and the fourth vintage of our infrastructure debt fund, already the largest strategy of its kind
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and expected to be meaningfully bigger than the previous vintage. The continued build- out of our complementary strategies including with our partner managers, will contribute more to our fundraising this year than ever before, while also serving to diversify both our business and our suite of products and strategies for our clients. Another area of significant growth is our insurance fundraising channel.
Annual inflows from this channel are on track to grow in excess of $25 billion per year across retail annuities, pension risk transfer and other initiatives. We are also expanding this channel as we expect to sign additional SMAs with more insurance firms this year. Lastly, our private wealth channel's growth over the past few years should continue. Alongside our drawdown funds, we have four dedicated private wealth strategies including infrastructure, real estate and two credit strategies.
We are very excited about what is to come on this front. Transaction volume picking up is good for fundraising, but it should also enable us to monetize investments in which our operating expertise has created value and our investments have been derisked, positioning 2025 to be a strong environment for capital recycling. Further, the year has started with a robust credit environment that is particularly favorable to our high- quality real asset focus.
Since the start of the year, we completed a $5 billion upfinancing of Clarios, our U.S.- based battery maker, which supported a $4.5 billion distribution to Brookfield and our partners, which compares to the $3 billion to acquire 100% of the business. While the scale of such a transaction is significant, pricing was broadly in line with previously issued debt and the offering was multiple times oversubscribed.
Similarly, we recently executed a $6 billion refinancing of our Intel investment, terming out the maturities far ahead of schedule and at much tighter rates than underwriting. While these examples are both specific and recent, we are seeing broad-based support for the financing of our high-quality portfolio, demonstrated by the more than $130 billion of financings we completed in 2024.
At the same time short-term dislocations alongside the long-term secular trends Bruce outlined are creating attractive entry points to deploy capital at compelling valuations. Trillions of dollars are needed to develop data centers, telecom towers, fiber, semiconductor manufacturing, automation assets and, of course power supply and transmission, all at a time while governments and traditional capital sources remain constrained. There are also select situations with near-term debt maturities that should create opportunities for us to acquire high-quality assets burdened by overlevered capital structures.
Our global reach and operational expertise alongside our scale gives us the capabilities to pursue transactions that few others can. We are entering 2025 with strong momentum across our business. Coupled with a more favorable market environment
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and our expanded suite of capabilities, we are optimistic about delivering strong results this year and beyond.
With that, we will turn the call over to Hadley to cover our financial results.
Hadley Peer Marshall, Chief Financial Officer
Thank you, Connor. And good morning to everyone. Today I have the pleasure of discussing our strong fourth quarter performance and announcing our 2025 dividend increase. We had record fee-related earnings, distributable earnings and fundraising in the fourth quarter. Fee-related earnings, or FRE, was $677 million or $0.42 per share in the quarter, up 17% from the prior year period, bringing FRE over the last 12 months to $2.5 billion. Given the operating leverage in our business, this growth also benefited our margins, which were 59% in the quarter.
Distributable earnings, or DE, were $649 million or $0.40 per share in the quarter, up 11% from the prior year period, bringing the last 12 months to $2.4 billion. The driver of growth in our earnings was related to our strong fundraising for the year that included $108 billion that became fee-bearing capital or FBC, and our deployment of which $21 billion became FBC. This was offset by $18 billion of capital return to clients and $9 billion of changes to mark-to-market valuations. All in, FBC grew by 18% over the past year or $82 billion to a total of $539 billion.
For the fourth quarter, we had our strongest organic fundraising quarter ever with $29 billion of capital raised across over 40 strategies. Breaking it down by group, in our renewable power and transition business, we raised over $4 billion of capital in the quarter. This includes $3.5 billion for the second vintage of our global transition flagship strategy, which now stands at $14 billion.
We expect to hold a final close of this fund in the first half of 2025. In our infrastructure business, we raised $2.5 billion of capital in the quarter including $700 million for our super core infrastructure strategy, our strongest quarter in over two years. We also raised nearly $700 million for our private wealth infrastructure fund, a strategy that continues to see strong demand. And finally, we raised $20 billion of capital in our credit group. This includes over $10 billion raised across Oaktree and our other partner managers. Much of this is not fee-bearing capital and will begin generating fees upon deployment.
We raised nearly $7 billion from insurance clients including Brookfield Wealth Solutions. And to round out our credit group, we launched our fourth vintage of our infrastructure debt fund. We're very pleased with the early momentum of this strategy that has seen growing client demand and expect it to be larger than its predecessor. Overall, our credit group raised over $100 billion in the year, the largest contributor to our fundraising in 2024.
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In summary, this quarter was a strong end to a year that brought in over $135 billion of capital, and this fundraising momentum across our diversified strategies is already carrying over to 2025. Another key strategic initiative we laid out last year was to simplify our corporate structure, positioning our shares for inclusion in a broader range of indices.
I'm pleased to report that last week, we closed on the transaction to swap Brookfield Corporation's 73% private ownership in our asset management business for an equivalent interest in public shares of Brookfield Asset Management. This transaction means that the full value of our asset management business, which is now approaching $100 billion, is now reflected in Brookfield Asset Management's market capitalization.
This step, along with other initiatives we have undertaken, set the stage for broader index inclusion soon, particularly within U.S.-based indices, allowing us to diversify our shareholder base and access deeper pools of public capital. Our strong balance sheet and our liquidity position gives us significant capacity to support growth initiatives.
We ended the quarter with $1.8 billion of liquidity comprised of cash, short-term financial assets and undrawn capacity on our $750 million revolving credit facility. And as a reminder, we continue to operate with no third-party debt on our balance sheet, but currently have capacity to issue up to $5 billion of debt at strong investment-grade levels, a capacity that can be used to fund significant growth in our business and that will only grow as our distributable earnings grows.
In conclusion, there is strong momentum for us to continue attracting scale capital from a diversified set of fundraising channels. We see strong opportunities to invest this money across all of our businesses and achieve capital recycling that will deliver attractive risk-adjusted returns for our investors.
With our strong financial position and significant growth prospects ahead, I'm pleased to confirm that the Board of Directors of Brookfield Asset Management have declared a quarterly dividend increase of 15% to an annualized rate of $1.75 or $0.4375 per share per quarter. The dividend will be payable on March 31, 2025, to shareholders of record as of the close of business on February 28, 2025.
That wraps up our remarks for the morning. We'd like to thank you for joining the call and we'll now open up for questions. Operator?
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QUESTION & ANSWER
Operator
Our first question comes from Cherilyn Radbourne with TD Securities.
Cherilyn Radbourne, TD Cowen
You note in the letter to shareholders that we're in kind of an anomalous situation where conditions are favorable for both capital deployment and asset monetization. How long do you think that environment can persist? And I guess how do you position the business to take maximum advantage of it?
Connor Teskey, President
Good morning, Cherilyn. The dynamic in the market that you're seeing is very, very beneficial for us. What Cherilyn is referencing is on one side, there's tremendous liquidity in markets right now. Sentiment, particularly in the asset classes where we have leadership positions and the most activity is very, very robust.
Then lastly, there's a very significant pipeline of sales processes and bilateral discussions ongoing. And this creates a very attractive market for us to monetize our high-quality businesses into. At the same time the capital needs in the key themes that Bruce mentioned in his remarks are so significant that they really favor those investors with scale and operating expertise that creates an opportunity for us on the deployment side.
Then similarly, there are still a tail of situations of businesses that do not have appropriate capital structures in the current interest rate environment that create deep value buying opportunities for us across our core focuses. How long can this last? We very much expect it to last the duration of this year, which is why we're so bullish about the outlook for our business, and there is the potential it lasts longer than that.
Cherilyn Radbourne, TD Cowen
Great. Then separately, you mentioned the potential for the 401(k) market to be open to alternative strategies. What do you see as the likely timeline for that? And by how much would that increase the addressable market for alternative managers?
Connor Teskey, President
The timing of that is no doubt uncertain, but it seems increasingly positive each day. If and when this is to happen, we feel we're exceedingly well positioned. Our focus on
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long duration inflation index asset classes and credit would really lend us well towards appealing to that pool of capital. Therefore, it's something that we remain ready and focused on should the regulation change.
Operator
Our next question comes from Alexander Blostein with Goldman Sachs.
Alexander Blostein, Goldman Sachs
I was hoping we could start with a question around fundraising. In the shareholder letter, Bruce, I think you touched on your outlook for 2025, highlighting accelerating organic fundraising relative to 2024, which I think was about $87 billion. So could you expand, I guess on your outlook for '25 relative to what you saw organically last year? And what are some of the larger drivers that you expect to be contributing to this outlook?
Connor Teskey, President
For sure. So there's no doubt we're feeling very, very good about 2025 fundraising. You're absolutely right, we do expect it to be better than 2024. And maybe just to go through the components of that. If we think about our flagships, first and foremost, we have two flagships that are in the market that we expect to finish during 2025 and we expect to launch an additional flagship this year. Then turning to complementary strategies. We very much expect 2025 to be the largest year for fundraising ever for Brookfield in terms of complementary strategies. That's a function of one, both bigger sizes and two new additional products in the market.
Then lastly, if you look to our insurance as well as our high net worth fundraising channels, we expect those as well to be bigger than last year. So if you look at each of the components of our fundraising, they are all neutral or up versus 2024, and that is why we expect 2025 to be better.
Alexander Blostein, Goldman Sachs
Great. That's really helpful. My second question is around opportunities in an investment-grade private credit. Lots of optimism in this part of the market. I think most folks would argue that origination capabilities is really kind of like the binding constraint in growing in this part of the space. So I was hoping you guys could spend a couple of minutes on that. And in the past, you've highlighted about $100 billion of financing that you currently kind of do with the Street or sort of the flow that touches BAM ecosystem. How much of that do you think could internally be ultimately internalized, right, whether through the insurance sub or through third-party capital? And as you think
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Brookfield Asset Management Ltd. published this content on February 13, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 13, 2025 at 16:30:30.117.
