How did Brookfield Asset Management's core earnings performance look in 2023?

Fee Revenues rose 8% to $4.4 billion and Fee-Related Earnings rose 6% to $2.2 billion. Distributable Earnings increased 7% to $2.2 billion, driven by fundraising and capital deployment, partly offset by lower permanent capital vehicle fees and higher costs as the business scales.

Why did net income decline compared with 2022?

Net income for the asset management business fell to $2.1 billion from $2.9 billion, mainly because 2022 included larger one-time items such as a $1.1 billion gain in other income and $909 million of redeemable non-controlling interests in consolidated funds. Realized carried interest also dropped to $51 million from $241 million, offset in part by higher unrealized carried interest of $348 million.

Is the dividend sustainable, and how is it funded?

The Manager paid $1.28 per share for 2023 and intends to pay about 90% of its Distributable Earnings to shareholders quarterly, reinvesting the rest. Its main income is its 25% interest in the Asset Management Company. The Manager also drew $256 million on a $500 million credit facility, partly to fund share buybacks, so investors should monitor leverage at the Manager level.

What are the main risks flagged in the filing?

Key risks include volatility in carried interest and performance income, redemptions in liquid and credit strategies, dependence on the Corporation under the relationship and services agreements, exposure to rising rates and inflation, foreign currency risk, and reliance on fundraising for growth. Investors should also consider how the firm's AUM methodology differs from peers.

How much capital does the firm have available to deploy?

Total deployable capital was $120.5 billion at year-end 2023, consisting of $2.8 billion of core liquidity and $85.7 billion of uncalled private fund commitments. About $47 billion of those commitments are not yet fee-earning, so future Fee Revenue depends on deploying that capital.

BAM 8-K SEC Disclosure — Mar 19, 2024

01—Abstract

Summary

Summary of the 6-K filed March 19, 2024. Cited figures are marked; the original filing is the authoritative source.

Brookfield Asset Management Ltd. (BAM) furnished its 2023 annual report materials, including sustainability disclosures and MD&A, on Form 6-K.

The filing reports that the firm managed $916 billion^a of assets under management (AUM) and $457 billion of Fee-Bearing Capital (FBC) at December 31, 2023, up from $418 billion a year earlier. About 86% of FBC is long-dated or perpetual, which supports earnings stability. Fee Revenues rose 8% to $4.4 billion, Fee-Related Earnings (FRE) rose 6% to $2.2 billion, and Distributable Earnings (DE), the metric the Manager uses as its primary performance measure, rose 7% to $2.2 billion.

At the Manager level, net income was $451 million^b, driven mainly by its 25% equity interest in the Asset Management Company. The Manager paid dividends of $1.28 per Class A share for 2023 and intends to distribute roughly 90% of its Distributable Earnings quarterly. The Manager's total equity fell by $292 million to $2.1 billion, reflecting share buybacks and distributions.

Its liabilities rose, mainly from $256 million^c drawn on its intercompany credit facility, which was used to fund share repurchases. Liquidity remained substantial. The asset management business reported core liquidity of $2.8 billion and total deployable capital of $120.5 billion, including $85.7 billion of uncalled private fund commitments.

Roughly $47 billion^d of those commitments do not yet earn fees, and once invested they are expected to add about $470 million of Fee Revenues. The filing also highlights growth in credit, infrastructure, and flagship fund fundraising, while noting risks such as carried interest volatility, redemptions in liquid strategies, and dependence on the Corporation under the relationship agreements.

02—Key points

Key Highlights

AUM reached $916 billion and Fee-Bearing Capital reached $457 billion at December 31, 2023, up $39 billion (about 9%) year over year, with 86% long-dated or perpetual in nature.
Fee Revenues grew 8% to $4.381 billion, driven by fundraising for flagship infrastructure, real estate, and private equity funds, plus growth in credit strategies.
Fee-Related Earnings increased 6% to $2.241 billion, while Distributable Earnings rose 7% to $2.244 billion, the firm's primary performance metric.
The Manager paid $1.28 per Class A share in 2023 and targets distributing about 90% of Distributable Earnings quarterly.
Asset management business net income was $2.137 billion, of which $1.839 billion was attributable to common stockholders, compared with $2.865 billion and $1.915 billion in 2022, a decline reflecting lower carried interest and other items.
Liquidity remains strong, with core liquidity of $2.8 billion and total deployable capital of $120.5 billion, including $85.7 billion of uncalled fund commitments.
Oaktree ownership increased to about 68% from about 64%, and the firm reported $164 billion of credit and other Fee-Bearing Capital, its largest strategy.

03—Questions

Frequently Asked Questions

How did Brookfield Asset Management's core earnings performance look in 2023?
Fee Revenues rose 8% to $4.4 billion and Fee-Related Earnings rose 6% to $2.2 billion. Distributable Earnings increased 7% to $2.2 billion, driven by fundraising and capital deployment, partly offset by lower permanent capital vehicle fees and higher costs as the business scales.
Why did net income decline compared with 2022?
Net income for the asset management business fell to $2.1 billion from $2.9 billion, mainly because 2022 included larger one-time items such as a $1.1 billion gain in other income and $909 million of redeemable non-controlling interests in consolidated funds. Realized carried interest also dropped to $51 million from $241 million, offset in part by higher unrealized carried interest of $348 million.
Is the dividend sustainable, and how is it funded?
The Manager paid $1.28 per share for 2023 and intends to pay about 90% of its Distributable Earnings to shareholders quarterly, reinvesting the rest. Its main income is its 25% interest in the Asset Management Company. The Manager also drew $256 million on a $500 million credit facility, partly to fund share buybacks, so investors should monitor leverage at the Manager level.
What are the main risks flagged in the filing?
Key risks include volatility in carried interest and performance income, redemptions in liquid and credit strategies, dependence on the Corporation under the relationship and services agreements, exposure to rising rates and inflation, foreign currency risk, and reliance on fundraising for growth. Investors should also consider how the firm's AUM methodology differs from peers.
How much capital does the firm have available to deploy?
Total deployable capital was $120.5 billion at year-end 2023, consisting of $2.8 billion of core liquidity and $85.7 billion of uncalled private fund commitments. About $47 billion of those commitments are not yet fee-earning, so future Fee Revenue depends on deploying that capital.

04—Continue

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