Why did reported net income rise even though the Asset Management Company's revenue fell?

The Manager's net income is driven mainly by its equity share of the Asset Management Company's earnings. Its ownership rose from about 25% to about 27% after the AEL share exchange, which lifted its share of income, even though the operating company's total revenue fell 7% to $916 million on lower carried interest and recoveries.

How much fundraising did BAM achieve, and is it sustainable?

BAM raised $68 billion in Q2 2024 and $140 billion over the last twelve months, its highest twelve-month total ever. Much of the quarter's total came from the $49 billion AEL insurance mandate, so the pace will depend on whether large insurance and private wealth flows continue. Management expects fundraising momentum to continue building through the rest of the year.

What does the reported FRE and DE growth mean for the business?

Fee-Related Earnings and Distributable Earnings are recurring measures that reflect the business's base fee income. Q2 FRE of $583 million and DE of $548 million are up modestly year over year, and annualized in-place figures of $2.5 billion and $2.4 billion point to continued growth as capital raised over the past year is deployed and begins to earn fees.

What is the dividend policy for the Manager?

The Manager intends to pay out approximately 90% of its Distributable Earnings to shareholders each quarter and reinvest the remainder in the business. Management's stated primary objective is to grow cash flow per share and distribute it through dividends or share repurchases.

What should investors watch for in the coming months?

Key items include the Investor Day on September 10, 2024, the expected closing of GEMS Education in Q3 2024, the Neoen take-private expected by Q1 2025, additional closes for the Global Transition and Real Estate flagship funds, and the significant asset monetizations management expects in the second half of 2024.

BAM 8-K SEC Disclosure

01—Abstract

Summary

Summary of the 6-K filed August 9, 2024. Cited figures are marked; the original filing is the authoritative source.

Brookfield Asset Management (BAM) reported Q2 2024 results in this 6-K (Exhibit 99.1 interim report, filed August 9, 2024), highlighting strong fundraising and growth in fee-bearing capital.

The company raised $68 billion^a in the quarter and $140 billion over the trailing twelve months, its highest ever for a twelve-month period. Fee-bearing capital reached $514 billion, up 17% year over year, largely driven by the $49 billion AEL insurance mandate. Fee-related earnings were $583 million and distributable earnings were $548 million for the quarter, with in-place annualized FRE and DE of $2.5 billion and $2.4 billion, up 11% and 12% year over year.

The Manager's own reported net income was $124 million^b for the quarter, up from $109 million, reflecting its roughly 27% stake in the Asset Management Company after the AEL share exchange. The Manager's Q2 results are largely a function of its equity pickup from the operating company rather than fee revenue directly. Asset Management Company revenues fell 7% year over year to $916 million, mainly because of lower carried interest and other recoveries, although base management fees rose 6%.

Management pointed to several sales processes and a second-half monetization pickup, along with the pending Neoen and GEMS Education acquisitions and an Investor Day scheduled for September 10. For investors, the key takeaways are the strong fundraising momentum, the growth in recurring fee earnings, and the volatility in carried interest that continues to drive reported net income.

Management's stated objective is to grow per-share cash flows and return them through dividends and buybacks. Management said the Manager intends to pay out roughly 90%^c of its distributable earnings quarterly.

02—Key points

Key Highlights

Record trailing twelve-month capital raised of $140 billion, with $68 billion raised in Q2 2024 alone.
Fee-bearing capital rose to $514 billion, up $74 billion or 17% year over year, largely from the $49 billion AEL insurance mandate.
Q2 2024 Fee-Related Earnings of $583 million (up 6% from $548 million a year earlier, based on the reported Q2 2023 figure) and Distributable Earnings of $548 million (up 4%).
In-place annualized FRE and DE of $2.5 billion and $2.4 billion, up 11% and 12% year over year.
Manager-level net income of $124 million, up from $109 million, driven by the higher equity stake (about 27%) in the Asset Management Company after the AEL share exchange.
Asset Management Company revenues declined 7% to $916 million, mainly due to lower carried interest and recoveries, though base management fees rose 6%.
Pending catalysts include the Neoen take-private (closing expected Q1 2025), GEMS Education (expected Q3 2024), nVent Electric's thermal business for $850 million, and an Investor Day on September 10, 2024.

03—Questions

Frequently Asked Questions

Why did reported net income rise even though the Asset Management Company's revenue fell?
The Manager's net income is driven mainly by its equity share of the Asset Management Company's earnings. Its ownership rose from about 25% to about 27% after the AEL share exchange, which lifted its share of income, even though the operating company's total revenue fell 7% to $916 million on lower carried interest and recoveries.
How much fundraising did BAM achieve, and is it sustainable?
BAM raised $68 billion in Q2 2024 and $140 billion over the last twelve months, its highest twelve-month total ever. Much of the quarter's total came from the $49 billion AEL insurance mandate, so the pace will depend on whether large insurance and private wealth flows continue. Management expects fundraising momentum to continue building through the rest of the year.
What does the reported FRE and DE growth mean for the business?
Fee-Related Earnings and Distributable Earnings are recurring measures that reflect the business's base fee income. Q2 FRE of $583 million and DE of $548 million are up modestly year over year, and annualized in-place figures of $2.5 billion and $2.4 billion point to continued growth as capital raised over the past year is deployed and begins to earn fees.
What is the dividend policy for the Manager?
The Manager intends to pay out approximately 90% of its Distributable Earnings to shareholders each quarter and reinvest the remainder in the business. Management's stated primary objective is to grow cash flow per share and distribute it through dividends or share repurchases.
What should investors watch for in the coming months?
Key items include the Investor Day on September 10, 2024, the expected closing of GEMS Education in Q3 2024, the Neoen take-private expected by Q1 2025, additional closes for the Global Transition and Real Estate flagship funds, and the significant asset monetizations management expects in the second half of 2024.

04—Continue

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