No. of Recommendations: 5
And the subs are in my view not superior, not superior because the parent is constantly slicing out more fees. Investors scream buy the fee business while ignoring where the fees originate. Joe and Bob originated a real estate business and then began a fee business within the real estate business screaming its fees made all of it more valuable. Logic?
Above was posted on the Berkshire board, but replying here for obvious reasons.
It's true that listed affiliates pay BAM a fee, but I don't see anything wrong with this. For example, buying a BBU unit is simply a way for a retail investor to become a limited partner in BAM's private equity funds.
In BAM's private equity funds for example, BAM is the general partner and there are several limited partners in each fund including BBU, institutional investors, sovereign wealth funds, pension funds, etc. Buying a BBU unit simply means you instantaneously become a limited partner in all of the funds that BBU is already invested in.
When BBU says they bought a company, it's really BAM buying it and managing it with money from BBU and other limited partners. So BBU might end up with a 30% interest, with the rest distributed among other LPs.
In return for BAM's asset management efforts, all limited partners in the fund pay a fee, including BBU. Everybody gets a return, net of fees. BBU units are owned by retail investors, BN and individuals in management. Fees from listed entities are only a portion of total BAM fees.
I visualize all Brookfield employees, everybody we saw in the investor day parade, as working for BAM. BN and everybody else in the alphabet soup, whether listed or not, are just financial holding entities which give capital flexibility to management and choice to investors. Somebody please correct me if I am not thinking about this the right way.
