No. of Recommendations: 10
Do any of you guys conceptualize that on investor day you are listening to some very motivated hard core salespeople who are focused on raising $ for Brookfield to fee?
Actually my reaction was the exact opposite. I was thinking why are you guys publicly boasting about how you will make billions and billions in fees and carried interest. Is this really the best way to raise funds? Won't this put off prospective fund investors? Won't fund investors find a Vanguard style 'lower fees' pitch more attractive? I think fund raising happens elsewhere. To me investor day comes across as their annual attempt to shore up the share price, but it does seem increasingly desperate each year. Thou doth protest too much comes to mind, especially when they talk about plan value. Exact opposite of Berkshire where they couldn't care less about the share price!
The value people, if it isn't yet clear to you, is in the fee business.
Yes, the BAM spin off has made this very clear. BN market cap is 51 billion out of which 41 billion can be attributed to their interest in BAM.
If you add their share of all the listed entities (BAM, BEP, BIP, BBU) and subtract debt and preferred capital, that also comes to 41 billion, which interestingly is also BN's IFRS book value.
This means that if you buy BN now, for about 10 billion you are getting BPG, Insurance, Direct Investments (most of which are in real estate funds), future carried interest and some operating businesses. This is a 60% haircut to the IFRS values of these entities and ZERO value assigned to carried interest. It is undeniable that the market doesn't agree with BN's assessment of their real estate business and hasn't done so for a long time. Nevertheless, everything has a price and BN is seemingly dirt cheap now. Time will tell.
Fees and more fees, the game is perfectly obvious and it ain't investing acumen that's running this show.
No doubt fees and carried interest is the most valuable part of the business, but how can it be that they don't have investing acumen. Sovereign wealth funds and institutional investors are not fools. It's simply not possible to raise so much money year after year if the funds are not generating attractive returns which in turn is not possible without investing acumen. Being able to invest at scale in real estate, renewables, infrastructure, private equity and now increasingly in private credit and insurance seems like a lot of whole lot of investing acumen to me.
