Author Topic: BAM - Brookfield Asset Management  (Read 512039 times)

Spekulatius

  • Hero Member
  • *****
  • Posts: 4971
Re: BAM - Brookfield Asset Management
« Reply #530 on: July 01, 2018, 07:27:44 PM »
The more I study and analyze BAM, the more I like it over FFH for long-term capital appreciation.  I own both in size, but will likely not add to my FFH position, and contiutally add to BAM throughout time.   

Instead of using insurance as float, I wonder if Flatt thinks fee generation is similar from an AUM perspective, and carries a heck of a lot less risk!!

The risk is implicit- they may have to support their dependent vehicles.
Life is too short for cheap beer and wine.


John Hjorth

  • Hero Member
  • *****
  • Posts: 3143
Re: BAM - Brookfield Asset Management
« Reply #531 on: July 02, 2018, 02:23:26 AM »
For BAM to end up in trouble, the cash flow on overall level [in both BAM and BAM subs] has to break to such an extent, that FFO gets negative to a degree and over an extended period of time, so that the dry powder already in place isen't sufficient. So the way to think about such a scenario is to study the dry powder and what would have to happen [i.e. to RE vacancy rates, lease rates etc.] for this to incur.

I also think that it is worthwhile to study how did BAM operate and perform going through the GFC [i.e. '07 - '10]. [If I remember correctly, you can't go any longer back than '09 on the BAM website for financials, when BAM switched to IFRS - but one is able to grab Joel's BAM monster compilation via Twitter to do the reading.]

- - - o 0 o - - -

Being bullish on BAM is to me being optimistic about the whole world going forward will become a better place to live.
« Last Edit: July 02, 2018, 04:31:53 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

Spekulatius

  • Hero Member
  • *****
  • Posts: 4971
Re: BAM - Brookfield Asset Management
« Reply #532 on: July 02, 2018, 04:12:33 AM »
For BAM to end up in trouble, the cash flow on overall level [in both BAM and BAM subs] has to break to such an extent, that FFO gets negative to a degree and over an extended periode of time, so that the dry powder already in place isen't sufficient. So the way to think about such a scenario is to study the dry powder and what would have to happen [i.e. to RE vacancy rates, lease rates etc.] for this to incur.

I also think that it is worthwhile to study how did BAM operate and perform going through the GFC [i.e. '07 - '10]. [If I remember correctly, you can't go any longer back than '09 on the BAM website for financials, when BAM switched to IFRS - but one is able to grab Joel's BAM monster compilation via Twitter to do the reading.]

- - - o 0 o - - -

Being bullish on BAM is to me being optimistic about the whole world going forward will become a better place to live.

There were two asset managers in Australia that went belly up in 2008 - Allco and Babock & Brown. I think what did them in was that their sponsored vehicles got into trouble and they had significant leverage on the holding level (which held stakes in the units as well). This basically caused a margin call when the units value depreciated to the point where the value wasn’t  coveraging the debt any more. Allco‘s and B&B business model was almost identical to BAM, but BAM survived, while those entities did not. Studying what did B&B and Allco in nevertheless should be useful to find out what happens when credit market seize and the equity markets go down (which are typically related events).
« Last Edit: July 02, 2018, 10:16:36 AM by Spekulatius »
Life is too short for cheap beer and wine.

chrispy

  • Sr. Member
  • ****
  • Posts: 392
Re: BAM - Brookfield Asset Management
« Reply #533 on: July 02, 2018, 06:31:52 AM »
Is the purpose of Partners Value Investments to avoid that leverage in the holding company?

John Hjorth

  • Hero Member
  • *****
  • Posts: 3143
Re: BAM - Brookfield Asset Management
« Reply #534 on: July 02, 2018, 06:41:56 AM »
It actually more the other way around, chrispy.

PVF.UN is basically [for the most part] a levered play on BAM, the leverage used being preferred equity. [One more layer of leverage.]
« Last Edit: July 02, 2018, 07:10:06 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

chrispy

  • Sr. Member
  • ****
  • Posts: 392
Re: BAM - Brookfield Asset Management
« Reply #535 on: July 02, 2018, 07:56:54 AM »
Yes, I think my wording was unclear. Here is another attempt:

Is the leverage at Value Partners and not BAM to avoid blowing the company up in a downturn a la Allco and B&B?

John Hjorth

  • Hero Member
  • *****
  • Posts: 3143
Re: BAM - Brookfield Asset Management
« Reply #536 on: July 02, 2018, 08:13:56 AM »
chrispy,

The extra layer of leverage at PVF.UN is in that particular legal entity. So if BAM defaults on its financial obligations, PVF.UN will be in the toilet, too. Holders of ordinary units will loose control of the partnership, and the preferred unit holders will likely gain control, one way or another.

There is a separate topic for PVF.UN here on CoBF here.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

wisowis

  • Full Member
  • ***
  • Posts: 153

John Hjorth

  • Hero Member
  • *****
  • Posts: 3143
Re: BAM - Brookfield Asset Management
« Reply #538 on: July 07, 2018, 08:11:52 AM »
Just as follow-up on the post by wisowis: Bloomberg - Deals [July 4th 2018]: Enbridge Shakes Debt Woes With $3.3 Billion Sale to Brookfield.

The deal is discussed in detail in the Enbridge topic here on CoBF, too.
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

ValueMaven

  • Sr. Member
  • ****
  • Posts: 407
Re: BAM - Brookfield Asset Management
« Reply #539 on: July 07, 2018, 01:56:08 PM »
Amazing that they are able to move on deals like this honestly...

This is why I own BAM an have been buying more recently...

This is a deal Berkshire should have explored too - between Oncur and this, that is $10bn+ of very high quality, utility like earnings they have missed out on.