Introduction
Welcome to the world of Brookfield, where financial success and growth are at the forefront. In this article, we will delve into the strong financial performance of Brookfield in the third quarter and explore their promising growth initiatives. So, sit back, relax, and let's dive in!
Financial Performance Shines
Brookfield reported distributable earnings of $1.2 billion in the third quarter, contributing to a total of $6.6 billion in the last 12 months. These impressive figures were driven by strong operating performance across their businesses and the increased demand for assets in their markets. Capital inflows of $34 billion since the previous quarter further exemplify their financial strength.
Strategic Initiatives Make Progress
Brookfield's insurance solutions business has been making noteworthy advancements. They successfully closed two reinsurance transactions, taking on $12 billion of business and acquiring American National Group with $25 billion of in-place policies. These strategic moves demonstrate their commitment to expanding their capabilities and capital deployment into investments. The acquisition of American National Group is set to close early in 2022.
Embracing New Growth Strategies
Brookfield is committed to exploring newer growth strategies, and they have enjoyed strong fundraising momentum for their flagship funds. They have recently received regulatory approval for their private non-traded REIT and have initiated fundraising efforts for this product offering. These initiatives open up exciting opportunities for investors to participate in their success.
Positive Market Environment
With the global economy reopening and higher vaccination rates, Brookfield is well-positioned to capitalize on the favorable market environment. The strong GDP growth, improving labor markets, and constructive capital markets provide a solid backdrop for their businesses. Despite supply disruptions impacting wages and the price of goods, the prospect of low-interest rates for a longer period benefits Brookfield as owners of real assets and businesses.
Impressive Operating Results
During the quarter, Brookfield generated $1.2 billion in distributable earnings, driven by increased fee-related earnings and gains on principal investments. Realizations of carried interest and gains on principal investments contributed over $3 billion to their distributable earnings in the last 12 months. These results highlight their ability to deliver consistent returns to their investors.
Fundraising Remains Robust
Brookfield's fundraising efforts continue to be strong across their flagship funds. They have raised substantial capital for their opportunistic credit fund, real estate fund, and Global Transition Fund. In addition to these, they have launched fundraising for their sixth private equity fund, with a first close expected in early 2022. These ongoing fundraising endeavors reflect investor confidence in Brookfield's investment strategies.
Carried Interest Realizations Are Flourishing
Brookfield's maturing earlier-vintage funds have been generating significant carried interest realizations. They realized over $300 million of carried interest in the quarter, totaling $1.8 billion in the last 12 months. With the continued growth and scale of their funds, carried interest realizations are expected to increase further. This success highlights their ability to create value for their investors.
Investment Returns and Long-Term Success
Brookfield understands the power of compounding long-term returns. They have achieved remarkable returns of ±20% compound annualized return over the last 30 years, creating substantial wealth for shareholders. Their success is attributed to the strong investment performance of their funds and their client-focused approach. These long-term returns serve as a testament to Brookfield's expertise and dedication to delivering superior financial results.
Fee-Related Earnings Show Remarkable Growth
Brookfield's fee-related earnings have seen impressive growth, compounding at 33% over the past 10 years. This growth is attributed to the scale and profitability of their asset management business, which leverages their core competencies and permanent capital base. Brookfield's diversified fee revenues are stable, resilient, and provide predictable cash flows. Their commitment to operational efficiency and the realization of carried interest further contribute to their earnings.
Private Credit: The New Fixed Income
Brookfield has been expanding its credit platform through the growth of their Brookfield private credit franchise. With $30 billion in assets under management across seven strategies, they are well-positioned for significant growth. Their focus on direct lending, an evolving and attractive asset class, allows them to secure deals on an exclusive basis and maintain strict risk control. This focus on risk control and strategic partnerships has led to market-leading returns and minimal losses.
Private Equity: High Returns and Diversification
Brookfield's private equity business has a long and successful track record, managing $91 billion of assets globally. They have diversified their business geographically and by sector, offering private and public investment opportunities. Their flagship private equity funds have achieved a gross IRR of 28% since inception. Through their various strategies, such as growth investing and special investments, Brookfield continues to broaden their offering and deliver value to their clients.
Investor Day: A Glimpse into the Future
Brookfield hosted an annual Investor Day where they showcased their success and laid out their plans for the future. Their focus on real assets and businesses in a low-interest rate environment positions them for growth and continued success. They highlighted their growth areas, such as technology, insurance solutions, secondaries, and transition, and expressed confidence in their ability to deliver long-term results. The event also highlighted the achievements and prospects of their perpetual affiliates.
Closing Remarks
Brookfield remains committed to being a world-class asset manager, generating increasing cash flows and higher intrinsic value per share over the longer term. With their strong financial performance, robust fundraising, and successful growth initiatives, Brookfield is poised for continued success. Stay tuned for more exciting developments from this industry leader.
Sincerely,
Bruce Flatt
Chief Executive Officer
November 11, 2021