Author Topic: BAM - Brookfield Asset Management  (Read 310759 times)

vince

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Re: BAM - Brookfield Asset Management
« Reply #940 on: March 13, 2019, 05:31:05 PM »
I know it's a tough question but anyone with good analysis of OAK wish to share what you think a good range is for their current earning power?  Not necessarily their current distributable earnings but normalized for what they should be earning assuming we are at a different point in the cycle and maybe also a growth rate going forward?  Do they give investors a model to calculate their intrinsic value simlar to how bam does? Thanks in advance


vinod1

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Re: BAM - Brookfield Asset Management Inc.
« Reply #941 on: March 13, 2019, 07:28:18 PM »
... BOR is a Reit and does not issue a K-1. It’s equivalent to BPY otherwise.

BOR, Spekulatius?

I spoke for you upthread, and now for Spekulatius.  BPR?

Yes BPR. Phat finger when using the phone.

:) Thanks!
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Spekulatius

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Re: BAM - Brookfield Asset Management
« Reply #942 on: March 13, 2019, 07:46:41 PM »
Anyone feels that OAK was selling out because they stagnated and losing ground relative to peers liked BX or Ares. They weren’t growing their AUM as fast than many others, probably because they were mostly confined to their distressed credit niche - but what do you do where there is little distressed debt? Their bran is aprobably a bit stale now. BAM gave the founders a way out, a broader platform, yet leave them in control for a while. I could be wrong, but this is my hunch.
To be a realist, one has to believe in miracles.

Cigarbutt

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Re: BAM - Brookfield Asset Management
« Reply #943 on: March 13, 2019, 08:54:05 PM »
I know it's a tough question but anyone with good analysis of OAK wish to share what you think a good range is for their current earning power?  Not necessarily their current distributable earnings but normalized for what they should be earning assuming we are at a different point in the cycle and maybe also a growth rate going forward?  Do they give investors a model to calculate their intrinsic value simlar to how bam does? Thanks in advance
Fascinating question.
1st @ Spekulatius: I don't agree as OAK has an entrenched contrarian culture and the way that the deal evolves over time underlines the long-term nature of their thinking. I think the combination is impressive and highly complementary.

For valuation and earning power, one can dissect the asset management fees, the incentive income (typically above 8%) and the investment income and also one could adjust for accrued carry. An interesting aspect is that, despite a relatively poor environment for their specialization for the last few years, they have been able to produce a net income average of 2.80$ per share over the last 5 years, which (using a PE of 15) shows that BAM paid a slight premium on that valuation measure for the first installment.

The Oaktree team describes themselves as bottom-up and cycle-agnostic (interesting given the content of Mr. Marks' memos) but AUM went from 36 in 2006 to 73 in 2009. AUM has remained flat for some time and what happens to earning power and valuation has a lot to do with where we are in the credit cycle.

I think they have now around 20B of uncalled capital commitment and typically raise capital before and during downturns in order to complete opportunisitc deployments.

The following may be useful in elaborating scenarios where OAK could potentially scale up their business (AUM size and profitability):
http://www.oecd.org/corporate/Corporate-Bond-Markets-in-a-Time-of-Unconventional-Monetary-Policy.pdf

The current credit environment is unique and this will be fun to watch, over time.

I also thought the following presentation by the CEO to be useful for vision, strategy and potential complementarity with BAM:
http://ir.oaktreecapital.com/phoenix.zhtml?c=212597&p=irol-eventDetails&EventId=5271846
« Last Edit: March 13, 2019, 08:55:46 PM by Cigarbutt »

chrispy

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Re: BAM - Brookfield Asset Management
« Reply #944 on: March 14, 2019, 06:06:00 AM »
Where do you guys/gals think the credit, real assets, and private equity from OAK will end up? BAM? Or will the respective parternships get each piece? Does BBU get credit or does it end up in a separate partnership?

villainx

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Re: BAM - Brookfield Asset Management
« Reply #945 on: March 14, 2019, 06:29:29 AM »
Anyone feels that OAK was selling out because they stagnated and losing ground relative to peers liked BX or Ares. They weren’t growing their AUM as fast than many others, probably because they were mostly confined to their distressed credit niche - but what do you do where there is little distressed debt? Their bran is aprobably a bit stale now. BAM gave the founders a way out, a broader platform, yet leave them in control for a while. I could be wrong, but this is my hunch.

From what I know of OAK, they famously either turned away or returned money at some point.  They probably could have expanded more aggressively but stuck to what they do best as well as being fair to their investors.  I think maybe even at the expense of shareholders?  You don't want to expand recklessly, but coming out of 2009, they certainly could have turned into more of a full offering type of asset manager, and they didn't do so aggressively.


John Hjorth

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Re: BAM - Brookfield Asset Management
« Reply #946 on: March 14, 2019, 06:32:29 AM »
Chrispy,

From what I am able to derive from the press release of yesterday, this BAM investment is - as of now - a "strategic" minority interest in Oaktree, constituting an ownership interest of approx. 62 percent, but not a controlling interest. The operational control over Oaktree remains at the B unit holders of Oaktree.

So I would expect [short term]- from an accounting perspective - one line consolidation of the Oaktree stake owned by BAM in BAM's group balance sheet, combined with BAM not adding all the Oaktree Funds in BAM's specification and list of Brookfield Funds [because BAM has no operational control over these funds].

Longer term, how the whole Oaktree/Brookfield current structure will amalgate into a fully integrated structure over some years I have no idea - the only thing I feel reasonable confident about is that it will be a frigging nightmare to follow and understand. [ : - D]
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chrispy

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Re: BAM - Brookfield Asset Management
« Reply #947 on: March 14, 2019, 06:57:28 AM »
John,

Ok that makes sense. Thanks for the clarity.

Peregrino

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Re: BAM - Brookfield Asset Management
« Reply #948 on: March 14, 2019, 07:43:47 AM »
Distributable earnings peaked in 2013 at $5.8/unit.  Last year they were $3.61/unit.  The bottom was $2.4/unit.  Mid-cycle level is anywhere from $4-5/unit. 

So they sold anywhere from 10-40% below cyclically adjusted levels.

Think they just got tired of being public.

walkie518

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Re: BAM - Brookfield Asset Management
« Reply #949 on: March 14, 2019, 07:52:11 AM »
Chrispy,

From what I am able to derive from the press release of yesterday, this BAM investment is - as of now - a "strategic" minority interest in Oaktree, constituting an ownership interest of approx. 62 percent, but not a controlling interest. The operational control over Oaktree remains at the B unit holders of Oaktree.

So I would expect [short term]- from an accounting perspective - one line consolidation of the Oaktree stake owned by BAM in BAM's group balance sheet, combined with BAM not adding all the Oaktree Funds in BAM's specification and list of Brookfield Funds [because BAM has no operational control over these funds].

Longer term, how the whole Oaktree/Brookfield current structure will amalgate into a fully integrated structure over some years I have no idea - the only thing I feel reasonable confident about is that it will be a frigging nightmare to follow and understand. [ : - D]
Marks likely is aiming for a succession plan but he doesn't want to unravel all of his hard work.

Brookfield is a great tie-up, however, as it isn't a distressed debt shop and Flatt is much younger than Marks. 

I think there will be greater benefits given Trump's tax act... there are all kinds of rules in place regarding who and how qualified opportunity zone funds work, and one of the odd rules is that at time of sale, the buyer needs to buy the equity interest to get to the asset rather than buying the asset outright.  This requires inside knowledge of the entity to avoid long-tail risks and now that this can be done in-house using the distributions on distressed bonds, Brookfield can create the ultimate tax efficient fund without material market risk or tax liability despite realization of assets...