Brookfield asset profit misses, assets hit about $1 trillion

(Bloomberg) -- Brookfield Asset Management Ltd. said its assets under management rose to a record of approximately $1 trillion, and it reported profit that increased from a year ago but still missed analysts’ expectations.

“During the quarter, we raised a total of $68 billion,” Chief Executive Officer Bruce Flatt and President Connor Teskey said in a letter to investors, adding that it had raised $140 billion over the previous 12 months.

Distributable earnings for the second quarter rose to $548 million, or 34 cents a share, the Toronto-based firm said in a statement Wednesday. That’s slightly below 35-cent average estimate from analysts in a Bloomberg survey and up from $527 million a year earlier. Revenue dropped 7% to $916 million. 

Brookfield is among the publicly traded alternative asset managers that have sought to reach the trillion-dollar mark, in part by expanding into new strategies. 

But it is an outlier in how it calculates its assets. The firm, which also manages the assets of parent company Brookfield Corp., mostly includes the full enterprise value of companies in which it holds stakes — including debt — even if it doesn’t fully own the company. Brookfield views this practice as reflective of its roots as an operator of the businesses it owns.

By contrast, Blackstone Inc. counts only the equity value of the stakes held by its funds — excluding the leverage on the assets it buys — when calculating assets under management. Blackstone reached the trillion-dollar mark last year.

Brookfield expects deal activity to pick up now that central banks have begun cutting interest rates, Flatt and Teskey said in the letter. This, in addition to its fundraising efforts, will allow the firm to pursue large-scale transactions and exit some of its investments, they said.

“With several sales processes underway, we anticipate significant monetization activity in the second half of the year, at very attractive returns,” Flatt and Teskey said, adding that the renewable power and transition business is on track for a record year on both buying and selling assets.

Real estate markets, which had been roiled by the sharp rise in interest rates, “continue to show improvement, with tightening credit spreads and the return of liquidity to high-quality assets in the sector,” they said. 

The firm hunts for opportunities from owners that are either undercapitalized or have “inappropriate capital structure” — leading to “two large billion-dollar-plus transactions” of US multifamily apartments and industrial properties, they said.

Brookfield cited momentum in its credit business and “unprecedented opportunities” in its renewable power and transition business as growth engines during the quarter. Its inflows included $49 billion of insurance capital from American Equity Investment Life Holding Co., which it only started to manage on behalf of American Equity in the middle of the quarter. It also reported $4 billion in inflows from its renewable power and transition business and $1.1 billion from real estate.

The firm agreed to a slew of deals in the quarter, including acquiring a majority stake in French renewable developer Neoen SA; investing in Dubai-based GEMS Education, one of the world’s largest private school operators; and buying a stake in Gulf Islamic Investments’ logistics unit. 

During the quarter, Brookfield acquired an additional 5% stake in Oaktree Capital Management, bringing its current ownership to approximately 73%.

Fee-bearing capital climbed to $514 billion at the end of the second quarter, up 17% over the past year. Brookfield has said it aims to get to $1 trillion in fee-paying assets by 2028.

The company deployed and committed around $20 billion of capital during the quarter and had a total of $107 billion of dry powder. The board declared a quarterly dividend of 38 cents per share.

Shares of Brookfield fell about 2.5% to $39.15 at 12:23 p.m. in New York.

Mark Carney, chair of Brookfield Asset Management, is also chair of Bloomberg Inc.

This story has been published from a wire agency feed without modifications to the text.