Brookfield Corporation · NYSE:BN
Brookfield — Brookfield Asset Management — Investor Day (October 2015)
122 slides from Brookfield's investor day presentation, Oct 7, 2015
Slide 1: Investor Meeting 2015
October 7, 2015 Brookfield Asset Management Investor Meeting 2015
Slide 2: Cautionary Note Regarding Forward-Looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Presentation contains “forward-looking information” within the meaning of Canadian provincial securities laws and applicable regulations and “forward looking statements” within the meaning of the “safe harbor” provisions of the United States
Slide 3: Overview
Overview BRUCE FLATT 3 | Brookfield Asset Management Inc.
Slide 4: We are one of the leading global managers of Real Assets
●●●●● We are one of the leading global managers of Real Assets 4 | Brookfield Asset Management Inc.
Slide 5: Our business strategy is simple and leverages our competitive advantages
Our business strategy is simple – and leverages our competitive advantages… 1 Source equity from clients seeking exposure to property and infrastructure returns 2 Use our access to large scale capital to invest on behalf of clients 3 Utilize our global reach to identify and acquire high quality real
Slide 6: …and we always try to be value investors
…and we always try to be value investors Excuse me…. Excuse me 6 | Brookfield Asset Management Inc.
Slide 7: We offer three distinct categories of investment opportunities to clients
We offer three distinct categories of investment opportunities to clients… FEE BEARING CAPITAL ~$100 billion $44 billion $36 billion $19 billion Listed Partnerships Private Funds Public Markets Notes/Assumptions: 1) As at June 30, 2015. 7 | Brookfield Asset Management Inc.
Slide 8: Which provide important benefits
Which provide important benefits Diversifies our sources of capital Provides options to clients Provides certainty of capital through turmoil Aligns duration of capital with strategy 8 | Brookfield Asset Management Inc.
Slide 9: We have built a best-in-class global portfolio of Real Assets
We have built a best-in-class global portfolio of Real Assets Canada UK, Europe, Middle East Asia & Australia $26 billion AUM $24 billion AUM $18 billion AUM ~3,000 employees ~7,000 employees ~2,000 employees United States $132 billion AUM ~7,000 employees South America $18 billion AUM ~11,000 emplo
Slide 10: Which are operated by our team of ~30,000 employees
Which are operated by our team of ~30,000 employees Enables us to enhance returns on capital Generates organic investment opportunities Provides an advantage in due diligence 10 | Brookfield Asset Management Inc.
Slide 11: We have utilized these competitive advantages to benefit our clients
●●●●● We have utilized these competitive advantages to benefit our clients… 11 | Brookfield Asset Management Inc.
Slide 12: We have established a strong investment track record
We have established a strong investment track record to continue to grow Vintages Gross IRR Real Estate 2006 – 2014 24% Private Equity 2001 – 2010 25% Infrastructure 2006 – 2013 16% Notes/Assumptions: 1) Flagship private funds’ gross IRR as of June 30, 2015. Excludes funds in market. Past performanc
Slide 13: Fee bearing capital increased to $100 billion
●●●●● This has enabled us to increase fee bearing capital to $100 billion … and we have been successfully putting that capital to work 13 | Brookfield Asset Management Inc.
Slide 14: We have led several large strategic transactions over the past 12 months
We have led several large strategic transactions over the past 12 months Canary Wharf Group (UK) Wind Energy (Ireland, Portugal) TDF Telecom Towers (France) Transportation Logistics (Brazil) Asciano (Australia) (in progress)* * There is no guarantee that Brookfield will be able to successfully execu
Slide 15: We continue to invest substantial capital in organic growth
And we continue to invest substantial capital in organic growth across all of our businesses Commercial Property Developments Wind Energy Infrastructure Assets (Manhattan West, U.S.) (Europe & North America) (Transportation Logistics, Brazil) 15 | Brookfield Asset Management Inc.
Slide 16: Expanding our asset management business has led to strong long-term returns
Expanding our asset management business has led to strong long-term returns Investment Performance Brookfield NYSE S&P 500 1 21% 7% 5 21% 17% 10 15% 8% 20 19% 9% Notes/Assumptions: 1) Total annualized return as at June 30, 2015 for the years noted. 16 | Brookfield Asset Management Inc.
Slide 17: Markets are generally favourable for us
Markets are generally favourable for us Capital markets are fully functioning We don’t believe this investment cycle is over Volatility is good to ensure markets do not get complacent Commodities and some emerging markets are an exception An increase in U.S. interest rates will be positive Market vo
Slide 18: Our global reach provides a broad range of opportunities
Our global reach provides a broad range of opportunities In North America, we are using this environment to recycle capital by selling mature assets In Europe, the opportunity is to use long-term leverage at extremely low costs In Asia, we continue to methodically build our business and seek value i
Slide 19: We continue to see strong flows of Real Asset investment capital
●●●●● We continue to see strong flows of Real Asset investment capital 19 | Brookfield Asset Management Inc.
Slide 20: Institutional fund capital is growing exponentially
Institutional fund capital is growing exponentially 1970s $ 5 Trillion 2000s $ 30 Trillion 2010s $ 45 Trillion 2020s +$ 70 Trillion 20 | Brookfield Asset Management Inc.
Slide 21: With greater portions allocated to Real Assets
With greater portions allocated to Real Assets 21 | Brookfield Asset Management Inc.
Slide 22: The returns speak for themselves
The returns speak for themselves… 7% - 15% 8% 2% Bond Equity Real Asset Yields Yields Yields Source: Bloomberg and internal research. 22 | Brookfield Asset Management Inc.
Slide 23: Expected institutional allocations to Real Assets in the 2020s
And in the 2020s we expect upwards of 40% of institutional allocations to be to Real Assets Fixed Income Equities 25% 25% 10% Alternatives Infrastructure 20% & Other 20% Real Estate 23 | Brookfield Asset Management Inc.
Slide 24: This trend should continue irrespective of increases in interest rates
This trend should continue… irrespective of increases in interest rates Interest rates will only rise as the economy is improving Global growth is slow so it looks like we will continue in a relatively low interest rate environment We expect a return to ‘normal’ borrowing costs: 3% to 4% on a 10-yea
Slide 25: This should lead to larger funds
This should lead to larger funds Fund III Fund Size ($ billions) Fund II Fund I Number of Investors and Re-investment Rate 25 | Brookfield Asset Management Inc.
Slide 26: What does all this mean for Brookfield?
●●●●● What does all this mean for Brookfield? 26 | Brookfield Asset Management Inc.
Slide 27: We are well positioned to deploy this capital
We are well positioned to deploy this capital Geographic Reach Execution Operating Capabilities Capabilities Investment Industry Track Expertise Record Large Scale Capital 27 | Brookfield Asset Management Inc.
Slide 28: We remain focused on our value based investment methodology
We remain focused on our value based investment methodology Acquiring great assets Investing assuming we will own the assets forever Buying at less than replacement cost Financing prudently, as surviving downturns is paramount Acquiring when capital is scarce, as it indicates the right time The rest
Slide 29: Our current major priorities
Our current major priorities 1 Complete the over $20 billion of private fundraising targets and continue to deploy that capital wisely 2 Support our listed partnerships (BPY, BREP and BIP) to ensure that they are successful 3 Launch Brookfield Business Partners (BBP) 4 Harvest mature investments acr
Slide 30: Expanded range of products complement flagship funds
Expanded range of products complement flagship funds Expanded Real Estate and Infrastructure Finance Funds Private Core Office, Agriculture and Timber Funds Funds Geographic focused funds or sleeves of funds Distress Hedge Fund Public Additional long/short and long-only Infrastructure Funds Markets
Slide 31: Additional upside potential: major transactions and share buy-backs
With additional upside potential from always being ready for the unknowns ●●●●● Major transactions Share buy-backs for value 31 | Brookfield Asset Management Inc.
Slide 32: Bringing it all together
Bringing it all together… We should be able to compound invested capital at 12% to 15% Asset management cash flows are increasing towards $3.5 billion annualized At normal valuations, a share should be worth ±$150 in 2025 The biggest risks are interest rates, real asset allocations and execution Big
Slide 33: Q&A
Q&A 33 | Brookfield Asset Management Inc.
Slide 34: Public Markets
Public Markets CRAIG NOBLE 34 | Brookfield Asset Management Inc.
Slide 35: We have a robust and growing securities platform
We have a robust and growing securities platform1 Registered investment advisor currently managing $19 billion AUM Aligned with Brookfield’s core expertise and focus Focus on Real Asset securities globally – equity and debt Targeting excess investment returns over the long term Broad and diverse cli
Slide 36: We are a complementary fit within Brookfield
We are a complementary fit within Brookfield Broadens Brookfield’s real asset investment offerings Engages clients across multiple channels Research synergies – operational and capital markets Opportunities for diverse employee development 36 | Brookfield Asset Management Inc.
Slide 37: Our client base is global and diverse
Our client base is global and diverse… Over 100 clients Institutional and Retail Platforms AUM BY INVESTOR TYPE AUM BY GEOGRAPHY Other Insurance 6% Asia Pacific 3% 6% Canada Public Pension 9% 13% Financial 40% Europe Private Pension 11% 12% United States 71% Closed-End Funds Endowments & 12% Foundat
Slide 38: We have a robust and growing securities platform
… and we have a robust and growing securities platform 130 distinct portfolios 27 funds AUM BY VEHICLE TYPE AUM BY INVESTMENT STRATEGY Real Asset Hedge Funds 9% Multi-Strategy Solutions 5% Closed-End Funds 12% Real Asset Property Debt 32% Institutional 26% Open-End Separate Funds Accounts 13% 35% Su
Slide 39: We have strong investment performance
We have strong investment performance Flagship Strategies Assets Under Since Inception Benchmark Relative Supplemental Performance of Composites Inception Management (Net) (Annualized) (Annualized) Performance Long-Only Equity Strategies U.S. Real Estate Securities Value Income Sep-01 $1.9 billion 1
Slide 40: Our increased focus is on new Real Asset product offerings
Our increased focus is on new Real Asset product offerings Diversified Real Assets Renewable Real Asset Energy Debt Newer Strategies Natural Resources Real Asset and Income Energy 40 | Brookfield Asset Management Inc.
Slide 41: Our fundraising has been successful
Our fundraising has been successful • $12 billion of AUM growth since Q4 2011 • Strong recent momentum1 – $5 billion inflows 2014 – $3 billion inflows YTD 2015 PUBLIC SECURITIES GROUP AUM $20 $19 billion $18 CAGR 47% $16 $14 $12 $ Billions $10 $8 $7 billion $6 $4 $2 $0 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14
Slide 42: We are shifting our emphasis towards higher margin strategies
We are shifting our emphasis towards higher margin strategies • Targeting growth in profitability, along with growth in AUM • Exiting strategies not aligned with our mission GROWTH IN AUM $20 CAGR $19 billion 52% $16 $12 $ Billions $8 $7 billion $4 $0 4Q11 2Q15 Lower Margin Higher Margin Note: As of
Slide 43: Tailwinds for Real Assets remain strong
Tailwinds for Real Assets remain strong Sustained demand for real asset securities – Rapidly extending beyond early adopters – Institutional demand continuing to broaden – Increasing allocations from wealth management platforms Market dynamics driving investment strategy development and marketing pr
Slide 44: In Profile: Diversified Real Asset Securities Strategy
In Profile: Diversified Real Asset Securities Strategy Background Broad Exposure to Real Asset Securities1 • Evolved from client demand • Demand spans channels and geographies Cash 3% • Access to Brookfield’s public securities Natural Resources Infrastructure expertise in one solution 17% 30% Key St
Slide 45: Opportunities and Priorities
Opportunities and Priorities Focus on strong long-term investment performance Develop and support newer real asset investment offerings Continue momentum in North America, while deepening international client base Increase focus on wealth platforms globally 45 | Brookfield Asset Management Inc.
Slide 46: Q&A
Q&A 46 | Brookfield Asset Management Inc.
Slide 47: Fundraising: Private Funds
Fundraising: Private Funds LEO VAN DEN THILLART 47 | Brookfield Asset Management Inc.
Slide 48: We have strong fundraising momentum across our Private Funds
We have strong fundraising momentum across our Private Funds Well positioned for solid growth Compelling product offerings Large and growing investor base Significant investor demand for real assets A leading brand in real assets 48 | Brookfield Asset Management Inc.
Slide 49: We are targeting significant growth in private fund capital commitments
We are targeting significant growth in private fund capital commitments To date, we have raised private funds with $57 billion of capital, inclusive of $37 billion from third-party investors We currently have five funds in the market totalling $23 billion, of which $8 billion has been raised to date
Slide 50: Our flagship private funds have seen significant growth
Our flagship private funds have seen significant growth over the past several years Private Property Infrastructure Equity $7,000+ $10,000+ $4,000+ $4,500 $7,000 $1,000 (2012) (2013) (2011) (US$ in millions) 1) Excludes co-investments. 50 | Brookfield Asset Management Inc.
Slide 51: Our private funds are consistently hitting performance targets
Our private funds are consistently hitting performance targets FLAGSHIP PRIVATE FUNDS1 Target Gross IRR2 Gross IRR3 Net IRR3 Infrastructure 10% – 15% 16% 15% Real Estate 18% – 20%+ 24% 20% Private Equity 20%+ 25% 18% Notes/Assumptions: 1) The table outlines the performance of the private investment
Slide 52: Brookfield's DNA is embedded in our flagship funds
Brookfield’s DNA is embedded in our flagship funds Focus on high-quality, best-in-class assets with strong risk-adjusted returns Strong operational expertise in the assets we buy Proprietary deal flow through Brookfield’s global network 52 | Brookfield Asset Management Inc.
Slide 53: Brookfield's DNA is embedded in our flagship funds
Brookfield’s DNA is embedded in our flagship funds Successful track record of capital deployment through various market cycles Ability to deliver co-investment opportunities Strong and established investment track record 53 | Brookfield Asset Management Inc.
Slide 54: We continue to develop and launch funds
We continue to develop and launch funds In the last twelve months we have launched a number of niche funds in real estate and infrastructure Expect to launch new and successor specialized products in the next twelve months Utilize our core competencies and best-in-class investment professionals to e
Slide 55: Large and growing investor base
●●●●● Large and growing investor base 55 | Brookfield Asset Management Inc.
Slide 56: We are in more markets, connecting with more investors
We are in more markets, connecting with more investors around the globe Seoul Toronto Tokyo Shanghai New York Hong Kong Los Angeles London Singapore Dubai Sydney More than 20 senior sales professionals supported by a group of 30 client service specialists 56 | Brookfield Asset Management Inc.
Slide 57: Our investor base continues to grow
Our investor base continues to grow with 40% of investors investing across multiple funds NUMBER OF INVESTOR COMMITMENTS TO PRIVATE FUND INVESTORS MULTIPLE FUNDS ~320 Multiple Funds One Fund 40% 60% ~40 2008 Q2 2015 57 | Brookfield Asset Management Inc.
Slide 58: Our investor base continues to diversify
Our investor base continues to diversify across investor type and geographic region PRIVATE FUND CAPITAL PRIVATE FUND CAPITAL BY INVESTOR TYPE BY GEOGRAPHY Other High Net Worth Europe & Middle East 6% Private Pension 5% 14% 9% Australia 8% Insurance 46% South America 2% 8% 7% Asia Pacific 11% Financ
Slide 59: Growing investor channels to ultra-high net worth investors
We are growing our investor channels to include ultra-high net worth investors through private banks and RIAs Dedicated team of fundraising professionals focused on high net worth investors, bank channels and registered investment advisors Established relationships with several private banks to dist
Slide 60: Our funds have received positive endorsements from major consultants
Our funds have received positive endorsements from major consultants Products increasingly receive approval/buy ratings from major consultants Consultant endorsements are expanding our investor base, contributing to our success To date we have raised $10 billion of capital from investors who utilize
Slide 61: Significant investor demand for Real Assets
●●●●● Significant investor demand for Real Assets 61 | Brookfield Asset Management Inc.
Slide 62: Investors are increasing their allocation to alternatives and real assets
Investors are increasing their allocation to alternatives and real assets Growing real asset market as investors seek diversification, reduction of overall portfolio risk and stable, predictable returns Almost half of institutional investors globally have invested in real assets in the last three ye
Slide 63: Investors' long-term allocations to infrastructure and real estate
Investors’ long-term allocations to infrastructure and real estate are continuing to increase Investors’ Allocation Over the Long Term1 INFRASTRUCTURE REAL ESTATE Decrease Decrease 11% 11% Increase Increase 34% 44% Maintain 44% Maintain 55% 1) Source: Preqin, as of June 2015. 63 | Brookfield Asset M
Slide 64: We are a leading brand in Real Assets
●●●●● We are a leading brand in Real Assets 64 | Brookfield Asset Management Inc.
Slide 65: Our brand is becoming stronger
Our brand is becoming stronger We are increasingly known as a market leader in real asset investing We are actively working to leverage the strength of the Brookfield brand globally Already seeing increased awareness and success with top tier institutional investors 65 | Brookfield Asset Management
Slide 66: Q&A
Q&A 66 | Brookfield Asset Management Inc.
Slide 67: Private Equity
Private Equity CYRUS MADON 67 | Brookfield Asset Management Inc.
Slide 68: Our Private Equity Group leverages the strengths of the Brookfield platform
Our Private Equity Group leverages the strengths of the Brookfield platform Value buyer focused on opportunistic buyouts, underperforming businesses and platform opportunities Focused on opportunities that leverage Brookfield’s real asset and related operating platforms Acquire businesses and active
Slide 69: AUM from private equity funds continues to grow
AUM from private equity funds continues to grow Currently investing our fourth private equity fund Private equity business is attracting more capital from a broad array of investors Successor funds & co-investments2 Brookfield Capital Partners III1 Brookfield Capital $5B Partners II Brookfield Capit
Slide 70: We own and manage a diverse and growing portfolio of companies
We own and manage a diverse and growing portfolio of companies and investments BUSINESS SERVICES INDUSTRIAL DEVELOPMENT $4.6 billion1 in revenue $2.3 billion1 in revenue $2.8 billion1 in revenue Real Estate Services Building Products Land Development Construction Engineered Products Housing Developm
Slide 71: This is a business with significant scale
This is a business with significant scale $16 billion1 of assets under management Over $9 billion2 in revenue Over $500 million2 in funds from operations Global operations Notes/Assumptions: 1) As at June 30, 2015. 2) Last twelve months as of June 30, 2015. 71 | Brookfield Asset Management Inc.
Slide 72: Completed $2.3 billion of investments over the last twelve months
Completed $2.3 billion of investments over the last twelve months Key drivers of deal flow Investment Themes Transaction Types & Examples Underperforming Businesses • Opportunistic Buyouts Out of Favour Sectors • Corporate Carve-Outs Capital Markets Weakness • Distressed Investments & Recapitalizati
Slide 73: There has been significant growth in activist funds
There has been significant growth in activist funds… Activist funds have grown from $30 billion in 2008 to $130 billion in 2015 – Activist funds have been the fastest growing strategy amongst hedge funds and represented 15% of overall hedge fund net flows in the last 12 months ACTIVIST FUND ASSETS U
Slide 74: Increasing opportunities to be a White Knight
… which means there are increasing opportunities to be a White Knight COMPANY CATALYST OUTCOME FOR BROOKFIELD Pressured to sell assets Acquired exploration and production outside North America assets in Western Australia Looming proxy contest Acquired 100% of common shares Focus on core operations A
Slide 75: Business Services: Brookfield Global Integrated Solutions
Business Services Brookfield Global Integrated Solutions Business Overview • Global facilities management business • 250 million+ square feet of real estate under management • Significant scale, expertise, and self-perform capabilities Investment Highlights • Diverse customer base with high renewal
Slide 76: Industrial: Quadrant Energy
Industrial Quadrant Energy Business Overview • Large-scale oil and gas exploration and production assets in Western Australia • Dominant market position ~55,000 boe/d1 of current production and 248 MMboe2 of proved and probable reserves Investment Highlights • Significant cash flows backed by long-t
Slide 77: Industrial: GrafTech International
Industrial GrafTech International Business Overview • Cleveland-based global manufacturer of graphite electrodes (“GE”) used in electric arc furnaces for mini-mill steelmaking • Leading global market share • Production plants located in the U.S., Mexico, France and Spain Investment Highlights • Crit
Slide 78: Industrial: U.S. Steel Canada
Industrial U.S. Steel Canada (“USSC”) Business Overview • Wholly owned subsidiary of U.S. Steel • Manufacturing company with two integrated steel mills • Newest steel mill in North America • Filed for CCAA creditor protection in 2014 Investment Highlights • Provided a DIP loan to replace previous fi
Slide 79: Brookfield Business Partners
Brookfield Business Partners 79 | Brookfield Asset Management Inc.
Slide 80: Brookfield Business Partners Overview
Brookfield Business Partners Overview Creating a permanent capital issuer for our Business Services and Industrial operations – Brookfield Business Partners (“BBP”) Similar structure to BIP, BREP and BPY Focus on long-term capital appreciation BBP will be Brookfield’s primary listed investment vehic
Slide 81: It is consistent with other Brookfield Listed Partnerships
It is consistent with other Brookfield Listed Partnerships Brookfield Asset Management (BAM) 62%1 29% 63% 65%2 Listed Brookfield Brookfield Brookfield Renewable Brookfield Property Partners Infrastructure Partners Energy Partners Business Partners Partnerships (BPY) (BIP) (BREP) (BBP) Private Infra-
Slide 82: Why Launch a Listed Partnership?
Why Launch a Listed Partnership? Broaden the horizon of potential investment opportunities Enhance access to capital Surface value of existing Business Services and Industrial operations Provides shareholders the ability to participate directly in those operations and in their growth 82 | Brookfield
Slide 83: Structure and Capitalization
Structure and Capitalization STRUCTURE INDICATIVE CAPITALIZATION1 Equity value of businesses $2 billion Brookfield Asset Public Management Preferred shares ($0.5 billion) BBP net asset value $1.5 billion Brookfield Public ownership at spin-off1 35% Business Partners L.P. BAM ownership at spin-off1 6
Slide 84: Brookfield Business Partners Peer Group
Brookfield Business Partners Peer Group Diversified holding and permanent capital companies that are managed by high profile managers with strong reputations as capital allocators BBP will have a very broad mandate like others in its peer group BBP will differ from some of the holding companies belo
Slide 85: Brookfield Business Partners Business Strategy
Brookfield Business Partners Business Strategy Opportunistic acquisitions of high quality businesses Enhancing cash flow and value of our businesses Opportunistically recycle capital from mature businesses Mid-market acquisitions and large scale transactions from time to time Pursue businesses where
Slide 86: Business Segments
Business Segments Over 20 operating businesses FFO ~$200 million1 | Equity ~$2 billion BUSINESS SERVICES INDUSTRIAL Provide construction Businesses providing Businesses in the Businesses in a and related services services to global energy supply variety of industrial globally: clients: chain: manufa
Slide 87: Q&A
Q&A 87 | Brookfield Asset Management Inc.
Slide 88: Financial Results
Financial Results BRIAN LAWSON 88 | Brookfield Asset Management Inc.
Slide 89: We significantly expanded our business over the past year
●●●●● We significantly expanded our business over the past year 89 | Brookfield Asset Management Inc.
Slide 90: We achieved growth across all fund categories
We achieved growth across all fund categories FEE BEARING CAPITAL ($ billions) 2014 2015 Listed Partnerships $ 39 +15% $ 44 Private Funds 29 +25% 36 Public Markets 16 +11% 19 $ 84 $ 99 +18% Notes/Assumptions: 1) As at June 30. 90 | Brookfield Asset Management Inc.
Slide 91: 29% increase in fee related earnings on an LTM basis
… resulting in a 29% increase in fee related earnings on an LTM basis ($ millions) 900 $836 800 $702 700 600 $528 500 400 $368 $440 $302 300 $341 200 $240 100 $137 $132 0 2011 2012 2013 2014 2015 Fee Related Earnings Fee Revenues +29% Notes/Assumptions: 1) For the LTM as at June 30. 91 | Brookfield
Slide 92: Annualized fee base and target carry increased to ~$1.4 billion
Our annualized fee base and target carry has increased to ~$1.4 billion ANNUALIZED FEES AND TARGET CARRY ($ millions) 2014 2015 Fee revenue $ 744 $ 955 Target carried interest 375 475 Total $ 1,119 $ 1,430 +28% Notes/Assumptions: 1) As at June 30. 92 | Brookfield Asset Management Inc.
Slide 93: Increased asset management franchise value since last year
… all of which has significantly increased our our asset management franchise value since last year ($ millions) 2014 2015 20 x Fee related earnings1 $ 6,820 $ 8,800 10 x Target carried interest, net2 2,440 3,090 $ 9,260 $ 11,890 28% Notes/Assumptions: 1) Multiple of 20x LTM fee related earnings, as
Slide 94: We are well positioned for continued growth
●●●●● We are well positioned for continued growth 94 | Brookfield Asset Management Inc.
Slide 95: Most of our fee bearing capital is perpetual or long-term
Most of our fee bearing capital is perpetual or long-term in nature >80% Private Listed Funds Partnerships (10-12 years+) (Perpetual) 36% 45% 19% Public Markets (Shorter Term) Which provides stability in base fees and provides upside through compounding of capital 95 | Brookfield Asset Management In
Slide 96: We are growing and investing our private funds at accelerated rates
We are growing and investing our private funds at accelerated rates… Fund IV – $14 Billion Fund III – $12 Billion Fund II – $7 Billion Fund I – $3 Billion We are here 96 | Brookfield Asset Management Inc.
Slide 97: Listed partnership capital has multiple opportunities for expansion
Listed partnership capital has multiple opportunities for expansion Distribution increases as a result of cash flow growth Accretive issuance to fund investment activity Currency for large scale M&A 97 | Brookfield Asset Management Inc.
Slide 98: At least 10% annualized growth in fee bearing capital
As a result… we continue to expect at least 10% annualized growth in fee bearing capital FEE BEARING CAPITAL ($ billions) $160 +10% $99 Actual Interpolated Potential – see notes 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Notes/Assumptions: 1) Listed partnerships midpoint of target distri
Slide 99: New capital will earn higher base management fees
New capital will earn higher base management fees Greater emphasis on value add and opportunistic funds, which yield higher fees Increases in listed partnership equity capitalization yield 125 bps, compared to lower flat fee on initial capitalization Public securities moving to higher fee equity str
Slide 100: Incentive distributions increase along with distributions to unitholders
… and incentive distributions increase along with distributions to unitholders ($ millions) 450 High ($415 mm) 400 350 Base Case ($340 mm) 300 250 Low ($260 mm) 200 150 100 50 0 2015 2016 2017 2018 2019 2020 High end of target distribution growth range Average of target distribution growth range Low
Slide 101: Enhanced growth rate for fee related earnings
…leading to an enhanced growth rate for fee related earnings FEE RELATED EARNINGS ($ millions) $1,130 +21% $440 Actual Interpolated Potential – see notes 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Notes/Assumptions: 1) 2016–2020 based on projected annualized results. 2) Listed partnershi
Slide 102: We have outperformed our previous projections
We have outperformed our previous projections FEE RELATED EARNINGS1,2 ($ millions) 1,000 800 600 $440 $341 400 $240 200 $132 - 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 Investor Day 2014 Investor Day 2013 Investor Day 2015 Investor Day Notes/Assumptions: 1) Excludes net carried interest
Slide 103: Private funds positioned to generate substantial carried interest
●●●●● Our private funds are well positioned to generate substantial inflows of carried interest 103 | Brookfield Asset Management Inc.
Slide 104: How we describe carried interest
First…. how we describe carried interest… Target The carry we would generate on third party capital Carried assuming the fund achieves the target return, Interest annualized on a straight line basis Unrealized Carried Carry generated and based on performance to date Interest Realized Carry earned, e
Slide 105: Generated $1.2 billion of carried interest over five years
●●●●● Over the past five years, we generated $1.2 billion of carried interest and realized nearly $600 million 105 | Brookfield Asset Management Inc.
Slide 106: Growth in private fund capital leads to increases in target carried interests
Growth in private fund capital leads to increases in target carried interests TARGET CARRIED INTERESTS ($ millions) $875 +13% $570 $475 Net of fees2 Interpolated 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Notes/Assumptions: 1) Target carried interest is a non-IFRS measure intended to be
Slide 107: We expect to realize significant carried interest as funds mature
We expect to realize significant carried interest as funds mature and we harvest investments REALIZED CARRIED INTEREST 37% ($ millions) CAGR 1,600 1,400 1,200 1,000 800 600 400 200 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Existing Funds Target Funds Notes/Assumptions: 1) 2016 – 2020 inter
Slide 108: Pulling it together
Pulling it together… Asset Invested Base Case Manager Capital Value 108 | Brookfield Asset Management Inc.
Slide 109: Substantial increase in our asset management franchise value
We anticipate a substantial increase in our asset management franchise value ($ millions) 2015 2020 20 x Fee related earnings1 $ 8,800 $ 21,600 10 x Carried interest, net2 3,090 5,700 $ 11,890 $ 27,300 18% Notes/Assumptions: 1) Multiple of 20x LTM fee related earnings for 2015 and 20x hypothetical f
Slide 110: $28 billion of balance sheet investments
●●●●● In addition, we have $28 billion of balance sheet investments that contribute to growth 110 | Brookfield Asset Management Inc.
Slide 111: Balance sheet strength provides considerable liquidity
The strength of our balance sheet provides us with considerable liquidity Core group liquidity of $6 billion Undrawn fund commitments of $9 billion Proceeds from monetization of balance sheet assets Broad access to debt and equity capital markets to support our asset management activities and invest
Slide 112: Flexibility of our balance sheet and increasing free cash flow
In addition…the flexibility of our balance sheet and increasing free cash flow provides opportunities to enhance returns Expand our business…to accelerate growth of asset management activities…and fees Stock buybacks…if our shares trade at a meaningful discount And… our track record of executing str
Slide 113: Target a 12-15% annualized return on invested capital
We continue to target a 12-15% annualized return on invested capital INVESTED CAPITAL $52 Billion $28 Billion 2015 2020E Notes/Assumptions: 1) Determined by applying 13.5% growth rate to 2015 base case LP value on a compound basis. 113 | Brookfield Asset Management Inc.
Slide 114: 2020 base case represents a substantial increase in value per share
Our 2020 base case represents a substantial increase in our value per share ($ millions, except per share amount) 2020 Estimated Asset Manager Value Fee related earnings $ 21,600 Target carried interest, net 5,700 27,300 Invested Capital Invested capital 52,450 Carried interest receivable 2,700 Leve
Slide 115: Considerable value and growth potential not reflected in base case
●●●●● And, we believe there is considerable value and growth potential that is not reflected in our base case 115 | Brookfield Asset Management Inc.
Slide 116: Asset manager value increases with modest assumption changes
Our asset manager value significantly increases with modest assumption changes Projected 2020 Values Growth rate in FBCUM 10% 10% 15% FRE margin 53% 60% 55% 60% Fee bearing capital ($ billions) $ 160 $ 160 $ 195 $ 195 Projected fee base Fee related earnings 1,130 1,285 1,515 1,650 Target carry, net1
Slide 117: We hope to exceed our target 12-15% annualized return
And…we hope to exceed our target of a 12-15% annualized return on invested capital Projected 2020 Values1 Growth Rate 13.5% 15% 18% 20% Invested Capital (billions) $52 $55 $63 $69 Base Case Potential Upside Outcomes Notes/Assumptions: 1) Determined by applying stated growth rates to 2015 base case L
Slide 118: Potential to offer very attractive returns to shareholders
We have the potential to offer very attractive returns to shareholders Base Case BAM Potential Equity Value – 2020 ($ billions, except per share amount) Assumptions: FBC growth rate 10% 10% 15% 15% FRE gross margin 53% 60% 55% 60% LP return 13.5% 15% 18% 20% Equity value GP value1 $ 27 $ 30 $ 36 $ 3
Slide 119: In summary
In summary… Asset management activity produces reliable cash flows with attractive growth potential – Diversified long-duration fund categories – Accelerated growth potential – Increasing fee rates – Future carry potential Balance sheet flexibility with significant liquidity provides confidence to t
Slide 120: Q&A
October 7, 2015 ui Brookfield
Slide 121: Notes, Definitions and Assumptions
NOTES, DEFINITIONS AND ASSUMPTIONS • Fee bearing capital represents the capital committed, pledged or invested in our listed partnerships, private funds, and public markets that we manage which entitle us to earn fee revenues and/or carried interests. Fee bearing capital includes both called (“inves
Slide 122: Notes, Definitions and Assumptions (cont'd)
NOTES, DEFINITIONS AND ASSUMPTIONS (CONT’D) • Base Case Value or Invested Capital refers to the value ascribed to our company’s investments and its asset management activities on a deconsolidated basis utilizing the following valuation methodologies, which primarily utilize public pricing or reading
Brookfield Asset Management — Investor Day (October 2015) on 6ix