Brookfield : Investor Day Transcript

Published: 2024-10-04 16:40:10 ET BN

TRANSCRIPT: Brookfield Corporation 2024 Investor Day

September 10, 2024

BROOKFIELD CORPORATION SPEAKERS:

Opening Remarks

Introduction

Overview and Financial Outlook

Real Estate Update

Wealth Solutions Update

PRESENTATION

Angela Yulo, Vice President, Investor Relations

Good afternoon, everyone, and welcome to Brookfield Corporation's 2024 Investor Day. Thank you for joining us today both in person and online, as well as those who attended Brookfield Asset Management's presentation earlier. We appreciate your interest in Brookfield.

Today, we have a great lineup, starting with an introduction by our CEO, Bruce Flatt. Then, Nick Goodman, our president, will provide an overview and the financial outlook for the Corporation. Next, Ben Brown, head of the Americas region, and Kevin McCrain, head of Retail, will present the update on the real estate market, and Sachin Shah, CEO of Wealth Solutions, will provide the update on the business. Within that segment, we'll also share a case study on the partnership with American National, and you'll get to hear from a panel and the different perspectives from the Wealth Solutions team.

Finally, we'll take questions at the end of the day. For those of you in the room, we will have a mic roaming around, and we ask that you please wait until you receive the mic before asking a question to ensure everyone can hear. As for those joining virtually, you may fill in the text box on your screen.

As always, I'd like to remind you that during the Q&A and throughout today's discussions, we may make forward-looking statements. These statements reflect our current beliefs and estimates in relation to expected future events and trends, and are subject to known and unknown risks. Past performance is not a guarantee of future events, which may differ materially from such statements.

Brookfield Corporation 2024 Investor Day Transcript

For further information, please see our filings for the securities regulators in Canada and the US and the cautionary statements contained in our presentation, which are all available on our website. In addition, when we speak about Brookfield Wealth solutions, we are referring to Brookfield's investments in this business that supported the acquisitions of the underlying operating subsidiaries. And with that, I'll hand it over to Bruce.

Bruce Flatt, Brookfield, Chief Executive Officer

Okay. Good afternoon. If you didn't like me the first time, you're getting a second run, but I got a different topic. So, look. We're here to talk today about Brookfield Corporation. After the spinoff of Brookfield Asset Management, we've been reforming the business to take it to the future. And as you know, we're a global investment firm focused on building long-term wealth for everybody within the firm. And I'm going to take it back and give a little bit on the history first, and then take you forward.

But we did this gee-whiz figure the other day, which I think it tells the story. For the past 30 years, we've generated $225 billion for the constituents that we invest money for, public and private, and we're quite excited about that for all of our constituents. That is an 18% annualized compound return for the shareholders of BN over that 30-year period. So that is, in $225 billion, that's all of our constituents, but the parent company is compounded at 18%.

When you compare that to some of the other great companies in the world, and this is a 30-year comparison of those numbers, Amazon hasn't been around for 30 years, but it's got an excellent track record. LVMH, 14%, Berkshire Hathaway, 13%, Walmart, 12%, S&P 500, 11%.

The thing that struck me the most about this slide is that if you compound at 12%, you get 2,919% returns over a 30-year period, and if you compound at just 6% more, you get 13,873%. So it doesn't sound like a lot more 18% to 12%, it's 600 basis points, but the numbers are very dramatic as you compound over very, very long periods of time at just a little bit more, and that's the success of a great company.

Taking us to today. We have one of the largest pools of discretionary capital in the world, which really is three components. We have our own perpetual capital base, which is about $155 billion; we have a flexible insurance float, which is $110 billion today, and Sachin's going to tell you how that grows; and we have our investment manager, which you just heard about if you were here earlier, which continues to grow and is scaling. Those three things give us large flexibility to do many things that others can't.

Part of the success of that is we've methodically over 30 years, and will continue to do it, is to build out access to as many layers of capital as possible that allows us, again, to do things that others can't. We have access to institutional investors, private wealth, insurance, public markets, and our banking and credit relationships. Many have some of these, some have all of them. Not many as big as us. As we continue to scale the business, it should assist us to grow.

The 30 years has been good. Having been here for all those 30 years, I actually think that the business is better today than it's ever been before. I think actually, the team that was up here earlier, the people who were at Brookfield Asset Management when I was here 30 years ago, I was not that good. Maybe I'm not that good today, but I think we're positioned to be able to compound at 15% returns today and into the future.

Our approach is very simple on how you create long-term wealth, and it's really just five things. One, invest in good businesses; two, run them well; three, allocate the excess cash that's generated wisely,

Brookfield Corporation 2024 Investor Day Transcript

because that's the future of the business. Align everyone with the long-term objectives and evolve with the world that's around us. I wouldn't have put that one in 20 years ago, but I think it's really important, and maybe I'll just take those five in order.

The secret to wealth is buying good businesses that can deploy cash at high rates of return. So it's often the business you buy, but more importantly, it's if they can consume capital and earn returns at high rates, they're really great businesses. So we try to identify high-quality businesses, focus on them, and grow them in a continuously and productive way, and build resilient earnings in those.

That has led us to buy essentially the backbone of the global economy, renewable and power and transition infrastructure, private equity, real estate, and many of the businesses you know we own. All of those have stable, largely contracted and growing revenues, and that's been the secret of our success. There's many ways to make money. On a scalable basis, in 30 countries in the world, buying these type of backbone infrastructure in that way has allowed us to stay out of trouble and earn good returns.

Second, running the businesses well. We focus on operational improvements, try to run in a very disciplined cost fashion, and leverage the expertise we have in the businesses, and move people around to optimize what we have. Said very specifically, operating businesses well is often or most often the difference between good businesses and great ones, and we're always trying to buy and build great businesses.

Third, the wise allocation of the cash generated by businesses is what is really the difference of wealth creation over the longer term and not, and it's because what you buy today is only a fraction 30 years from now what you will have. What you invest, the excess cash flow that's generated during the next 25 years is extremely important to the overall return out of that investment.

So our goal is to build new businesses and create ones that can consume cash and earn high rates of return, reinvest it back into those businesses to be able to earn that, and opportunistically return capital to shareholders when it makes sense. So either share buybacks, distributions, as we've done many times, and to keep doing that throughout the business.

Today, currently, we retain 75% of the cash flow. The easiest thing we could do if one wanted it was to take the dividend up by that 75%, pay it back to you. Firstly, it's tax-inefficient. Secondly, it creates less freedom in the business. The success of our business is having freedom when the markets were not as opportune to be able to do things that other people can't.

That's allowed us to scale Brookfield Asset Management in 25 years into one of the preeminent investment alternative franchises in the world. Today, at a trillion dollars, I'm sure it'll get to $2 trillion and more. It's allowed us to build four market-leading businesses in renewables, infrastructure, private equity, real estate, and those are among the best in the world. All of them.

It's allowed us to from a start four years ago, it says $2 billion. I don't even know how the $2 billion got there, I guess that was one small business we had. But from nothing four years ago, to $110 billion today and growing, and we think we can scale this business significantly. It's coming upon $2 billion of profits a year, and it should keep growing. While doing all of that, we've returned $20 billion back to shareholders over the last five years in the form of distributions, buybacks, and special distributions.

One of the things we focus on very significantly within the business and within everything we do is to make sure that we align everybody with the long-term objectives. When we buy a business, make sure

Brookfield Corporation 2024 Investor Day Transcript

the people that run it for us own a stake in the business. When we are partnered with people, we're aligned, and we all have clear mandates with our people that we're bringing through the organization and promoting from within, and we align all their compensation very similar.

Alignment is the most important operating objective one can implement in any single business or any business in its entirety, and so we focus a lot on that, none more than the senior management of this organization. 90% of the wealth of all the senior people within the organization is invested in Brookfield. We own 20% approximately between us of the company. Our team continues to buy more shares when we can, and we're heavily aligned with the objectives of the organization to build wealth over the long term.

And last, we continuously evolve with the world that's around us. Years ago, we created our listed affiliates to give us access to retail markets, as was mentioned earlier. Our retirement wealth business has been created over the last four years. I think it's going to be one of the best decisions we ever made in the fullness of time. And we've adapted our asset classes over time because what was the backbone of the economy 25 years ago is not the backbone of the economy today. It's still part of the economy. It's not the future of the world.

As the world evolves, we have to evolve with it, and we try to. And one of the reasons why we promote as young executives as fast as we can in the organization, because they know what the future is going to be better than I do or somebody older than me, and that's really important for a growing organization.

As the backbone expands, we have to adapt to it. And I said this earlier, and I'm going to say it again in this slide because it's really important. We used to invest and we still invest in railways, ports, hydro, pipelines, and all the things which were the critical backbone before, and we still invest in them.

But where the big, big money is going today is telecom towers, data centers, solar, batteries, nuclear, logistics, housing, hospitality, and all these businesses which are the future. And every one of those that we're investing in today, many of them didn't exist 20 years ago. The ones that existed before are accentuated today because of trends that are going on in the world of baby boomers getting older and spending more money and discretionary spending happening, so we continue to evolve with that.

Maybe most importantly, all this is underpinned by a very, very conservative balance sheet, and it will always be that way, because strong access to capital is the lifeblood of any company. Our $155 billion capital base, $60 billion of securities which are liquid in the markets and could be sold. And just to show you the access to capital, we financed $115 billion last year in a tough year for financings, so we have one of the largest arrays of access to capital in the world.

These core principles have been key to our success, and I think they've been key in past. I think they're probably, as you get larger, and you're in more countries, and you have more things, you have to have more principles. And they're probably more important in the future, because before, when you could sit in a room with 10 people, that's different than when you have thousands. And you need to have principles that everyone operates off of, and I think they're more important in the future.

But what that leads us to is I think we're in an excellent position to continue to grow earnings, continue to create value in the business. As I said earlier, we have one of the largest pools of capital. We truly are a partner of choice for global corporations today, and our businesses are centered around many of the tailwinds on deglobalization, decarbonization, digitalization, and that gives us significant secular trends behind us.

Brookfield Corporation 2024 Investor Day Transcript

In addition to that, I haven't been able to say this for two years, the tailwinds are turning in our favor. At that time, I probably didn't say it, but the definitely headwinds were turning against us, but the tailwinds are turning in our favor because interest rates are coming down, liquidity is coming back into markets, transaction activity is starting again, which means that we're going to return capital to our limited partners, and they're going to have much, much more money to invest into new funds, for us and for everybody that does what we do.

Our business though has been tremendously resilient over that period. And again, what shows a great business is if during tough times, you can have resilience, and during really good times, you grow probably not as fast as some, but you grow at a very good pace. We continue to grow at a 17% return over that period.

And despite all the chaos in the markets of the last five years, and there was a lot of chaos in the markets over the last five years, if you didn't notice, our plan value reflecting back in 2019 was $45. The plan value today is $84, but we spun out $10 a share, so it's actually $94. I think that's the best NAV growth in any five-year period that we've measured these numbers.

The tailwinds from here are significant. As I mentioned, lower borrowing costs, lower cap rates, increased transaction activity leads to higher asset values, returning capital to investors, increased carry generation in this business. And Nick, will talk about that in a minute.

Our expectation is that our annual cash flow will grow by 20% annually on a per-share basis over the next five years. That generates $47 billion of cash. Remember what I said earlier. The future of a great business is about how you invest your cash that's generated in the company. The future of this company and of the compounding returns will be how do we invest that $47 billion?

Yes, it's about how we run the businesses that we have today, but this is a very meaningful component to it. That's $30 a share today. If meaningfully put to work, it will be much, much more in the future.

That should enable us to deliver 16% annual returns. Nick will take you through this after. That means that our net asset value in the company grows from $84 to $176, which is a 16% compound return as we do the math, but it can actually be better for an investor. If we can close the gap of where NAV to stock price is, from $50 circa today to that $176, or thereabouts, that's a 29% compound return to a stock investor. That means we didn't earn you 29%, because we already have $84, but to a stock investor, if we close that gap, it's a 29% return.

Nick will come up and explain some of that. I think we're really well-positioned to continue to compound the returns in the business. We're as excited today as we have been for years, both with the businesses we have, but with the market environment turning in the favor of the businesses that we possess today. So with that, Nick will take you through the rest of the story.

Nick Goodman, Brookfield, President

Thank you. Thanks, Bruce, and good afternoon, everyone. It's really great to see so many of you here in person.

Brookfield Corporation 2024 Investor Day Transcript

So, consistent with prior years, I'll start my presentation by taking a look back at our financial performance over the last 12 months, focusing on some of our key accomplishments. I'll then look back over the last five years and compare how we've performed against some of the metrics that we've laid out for you in our Plan at Investor Day five years ago.

After that, I'll provide an update an review on our business, focusing on our private holdings, but noting in the subsequent discussions from real estate and the Brookfield Wealth Solutions team, they'll be taking a much deeper look at their businesses and providing a more fulsome update. And then I will finish it off by bringing it all together and giving you an update on our five-year plan.

Now, there is a few key messages or takeaways that we have for you in today's presentation. The first of those, and Bruce touched on this, that in a volatile market backdrop and really an environment of muted transaction activity, we've continued to focus on operational excellence in driving the earnings growth per share in our business by using the organic levers we have available to us. And over the last five years, we've delivered 18% annualized growth in earnings, but we firmly believe the best is yet to come.

With the foundations that we have in place today, and we'll talk through these in the presentation, we are set up to grow our earnings per share at 20%-plus. That's 20%-plus over the next five years, taking DE or earnings at the end of the plan period to $9.77 cents per share.

Now, the main contributors to that growth, you heard from Brookfield Asset Management this morning, that's the 17%, but in addition to that, the contribution from carried interest, the growth in Brookfield Wealth Solutions, and the added benefit in earnings growth per share and value creation for the wise allocation of our free cash flow generation. If we're successful in achieving our plans, over the next five years, we expect to generate free cash flow of $47 billion, which Bruce touched on, which is the equivalent to $30 per share.

Now, if you think back over recent years, the allocation of that capital has been very important to achieving some of the strategic objectives in recent times. Think of the Oaktree acquisition, think of the scaling of our wealth solutions business, and how we allocate that capital will be just as important to determining the future success of Brookfield. And all of this will continue to be underpinned by our strong balance sheet, high levels of liquidity, and strong access to capital.

The plan value, as we just discussed, will grow to $176 per share at the end of the plan period if we execute, and we are well-positioned, arguably better positioned than we have ever been, to continue to deliver 15%-plus total returns per share over the long term.

Let's start with a review of the past. And looking over the last 12 months, there are four key areas I'll just touch on briefly. First, financial performance. In the last 12 months, we met our plan in terms of growing DE per share. Within Brookfield Asset management, annualized DE grew by 12%. In Brookfield Wealth Solutions, earnings grew by 58%, and when you put it all together, we increased total DE by 17%, to $5.8 billion, or $3.67 cents a share. Across asset classes and geographies, we maintained excellent access to capital, executing on $115 billion of highly efficient financings across the organization.

And again, we have seen a more muted transaction activity market in the last period. But the nature of the assets that we own, the high-quality cash flows that they generate, and the sectors that they are placed in, they're still very attractive to private buyers. And even in a more benign transaction activity market, we still executed on $30 billion of monetizations, realizing carry of almost half a billion dollars.

Brookfield Corporation 2024 Investor Day Transcript

And then coming to capital allocation. Using our free cash flow to drive that incremental earnings growth and value appreciation, we invested $2.6 billion of our free cash flow in the last 12 months into BAM strategies, into strategies that are poised to deliver very attractive returns over the medium term. We invested $2 billion into our wealth solutions business, into Brookfield Wealth Solutions, driving in a meaningful way that 58% growth in their earnings over the last 12 months.

Capital recycling. We sold $1 billion dollars of BAM shares as part of the consideration for the AEL transaction, and we repurchased over $1 billion dollars of BAM shares in the last 12 months. Again, as we see that disconnect between price and value, we continue to opportunistically allocate capital, weighing it up against the other alternatives, but allocating capital to repurchasing shares, and growing that value per share for those remaining shareholders.

In this table, you can see the 17% earnings growth that we've delivered in the last 12 months, a meaningful contributor coming from that DE before realizations. The stabilized part of our business then being topped up by the gain from the monetizations and recycling of the BAM shares, driving that 17% growth over the last 12 months.

When you add in the contribution of our dividends, we have returned over $1.5 billion of capital to shareholders. Now, again, we weigh this up against reinvesting back into the business, because the reinvestment back into the business allows you to compound over the long term. But we weigh that up, and we do have a fair share of allocation to repurchasing shares when we see that disconnect in value and price, and we continue to buy back shares today, and we plan to do so in the future.

So rolling forward, our plan value today is $133 billion or $84 per share. You can see the three pillars of the valuation. We have our asset management business. Our asset management business is comprised of our ownership of Brookfield Asset Management. It's our direct investments. Our investments into the funds managed by Brookfield Asset Management, into their strategies, and it's our share of the profits generated for clients in the asset management business by way of carried interest.

All three of those inextricably link to each other. If you think about the core competency at Brookfield and the key to our success is delivering attractive returns over a long period of time. And if we're successful in doing that, Brookfield Asset Management continues to scale direct investments, deliver attractive returns, and we realize significant carry in the future.

Our Wealth Solutions platform, and you'll hear more about this today, but we've been very deliberate and methodical in how we have grown this business. In a low business operating environment with low-risk culture, we've created a vehicle that now has a great growth platform for organic growth levers, focused on leveraging the investment capabilities across Brookfield to drive attractive spreads with a singular focus on driving an ROE in the 15 to 20% range, valued today at $21 billion. And our operating businesses for global champions across renewable power and transition, private equity, infrastructure, and real estate at $42 billion.

But if we put this plan value in context to earnings today, it's a 23x multiple on our DE. But if we deliver that plan value growth in earnings, the plan growth in earnings of 20%-plus, it's a 15x multiple in the average projected DE over the next five years.

Brookfield Corporation 2024 Investor Day Transcript

After delivering 22% growth in our plan value in 2022, we've consistently grown that value by 14% over the last two years, growing it to $84 from $74 last year. And again, it's underpinned by a conservative balance sheet and high levels of liquidity.

This is really important, because as you know, we look to drive returns through our operational capability and expertise, and the priority there is to give our operating teams and our investment teams the breathing space to execute their plans, and not allowing us or anyone to be distracted by short-term volatility in the markets. And having this large-scale capital significant liquidity has allowed us to focus on doing absolutely that over the last few years, and will continue to be so in the future.

Now, if we take a look back, five years ago, in the blue bars is the plan that we set out for you on Investor Day, the green dots representing our actual performance, and in every year subsequent to that, we've met, largely met, or exceeded those plans, delivering an 18% CAGR in DE before realizations. The stabilized part of our business growing at 18% compound annual growth over the last five years with cumulative DE before realizations of $17 billion over that period.

The plan value has grown at 16% CAGR, again, above our target returns of 15%-plus over the long term. And when you factor in the average dividend yield along the way, it's a 17% total compound annual return over the last five years, which is ahead of our target. Bruce presented this in a slightly different way, but you look at the share price returns over the last 30 years as an 18% total return to our shareholders. And stating the obvious, that obviously increases as we close that gap between price and value.

So just finishing off with this section, if you think about the plan value today of $84, our share price today of roughly $50, that was the end of August, obviously, things have moved around, but roughly $50, it's about a 40% discount to plan value. If you think about that in terms of our earnings today, it's 14x. If you think about it in terms of the earnings that we're projecting over the next five years, that's a 9x multiple on the average projected earnings over the next five years. If you say that in a different way, it's offering investors a very large margin of safety or significant upside for investors at the current share price.

Let's take a closer look at our business. Our perpetual capital base today has grown to $155 billion, generating over $5 billion of cashflow annually across our three pillars: asset management, wealth solutions, and our operating businesses. Our base business, as I touched on, has demonstrated its resilience over the last five years, driving earnings growth of 18% per share, with each of our businesses focusing on executing their plans. Operational excellence.

Within asset management, we continue to be positioned as one of the leading global alternative asset managers, perfectly positioned for global flows of capital, having grown earnings at 17%. Within Brookfield Wealth Solutions, we've established a top-tier annuity writer in the US now with a clear path of growth from organic growth potential, and producing a very, very high-quality, predictable earnings stream with a high-growth profile, delivering ROEs today of 20%, and poised to increase annualized earnings to $2 billion in the short term.

And our operating businesses within your renewable power and transition perfectly positioned around decarbonization, infrastructure around digitalization and de-globalization, each growing their earnings and cash flows by 10%. Our real estate business, again, owning some of the highest-quality real estate in the world, continuing to drive revenue growth, and as Ben will touch on, with supply-demand dynamics and tailwinds turning in our favor, poised to be a key contributor.

Brookfield Corporation 2024 Investor Day Transcript

And our private equity business, uniquely focused on owning essential service, high cash-flowing businesses, has delivered 19% EBITDA growth. So the business is very well-positioned from those organic leavers to drive value, but as the economic headwinds turn into tailwinds, we believe that will be a catalyst for additional earnings growth as we look forward.

So let's turn to our private holdings. We can separate these out into two distinct buckets. There's our public securities of $62 billion. They're each separately listed. There's a share price you can lift, but there's a ton of information out there to be able to value those companies, each holding their own investor days and well-followed in the markets.

Our private holdings at $90 billion represent 59% of our plan value, so $90 billion out of $133 billion coming from our private holdings. And that is where we will, or I will focus my time today, and the subsequent presentations will be focused as well.

Subsequent presentations will be focused as well. There are five parts to the earnings profile and the intrinsic value of our private holdings, and we'll go through each of these in turn, but asset management, BAM is listed, not included in this. We have our direct investments and our carried interest making up the balance of our asset management pillar. We have Brookfield Wealth Solutions and we have our real estate business across core and transitional and development, a globally diversified portfolio of high quality real estate. We've laid out for you the earnings profile of these individual pillars and the valuation method that we use to get to our plan value.

So starting with our direct investments, this is the capital that we have invested into strategies managed by BAM. Today, that totals $11 billion. On the table, you can see how that's broken down. It's diversified across strategies, but if you look at the target returns, it's 15 to 20% target gross returns. It's an excellent place for us to be allocating capital to compound value over the medium and long-term and all of these strategies tracking ahead or in line with their target returns. If you look at just the first two real estate strategies, we've had all of our capital return to date and we still have capital working for us in these funds generating returns. Similarly, across the other real estate funds, Oaktree and private equity, we firmly believe this is an excellent use of our capital.

We often get asked, "What is the stabilized amount of capital that you expect to have work here over the medium to long term? And the short answer is $8 billion, but if you think about what's happened in the last couple of years, you've heard it in the earlier presentations, we have seen value investment opportunities. We've still been deploying capital over the last few years, drawing down commitments in the funds, but yet the monetization activity has slowed down. We've executed our plans, we're creating the value, but we are waiting for the right market environment to monetize. So we've probably become slightly over indexed here, but as the transaction market levels out and normalizes over the next few years, we should be receiving back more capital that we're investing back into these strategies. So over the medium term, we would expect this number to level out around $8 billion. That doesn't mean we're allocating any less capital to BAM strategies, it just means that returns will exceed the deployment.

Now, focusing on carried interest. Maybe taking a step back, and many of you'll be familiar, but when we spun out Brookfield Asset Management, we put in place an agreement for carried interest. All carried interest from funds raised before the spin-out accrues to Brookfield Corporation at 100% and Brookfield Corporation bears the associated costs of that carried interest. All carried interest on funds raised after the date of the spin-out, 33% of the gross carry comes to the corporation, the goes to Brookfield Asset Management and Brookfield Asset Management deals with the associated costs. If you look at our carry

Brookfield Corporation 2024 Investor Day Transcript

eligible capital, it has grown commensurate with the growth in Brookfield Asset Management. This is the capital against which we are entitled to earn carried interest and it's scaled to $232 billion to date. That's the capital at work against which we earn a share of the profits.

Now if you look back at what we set out for you five years ago and you think about what carry is, it's the capital at work. Carry accrues daily for you it's just the value creation in the business that we're executing every day. The realization of that carry is less predictable. We talked about last year with carried interest, it's a question of when, not if. And you can see that in 2021 and 22 in aggregate, we were largely meeting or exceeding the plan. The slowdown in transaction activity has slowed down that realization in the last two years. But if you think about it's the when, not the if and all of our funds are tracking to meet or exceed their target returns. And as monetization activity picks up again in the next few years, we expect to catch that up and realize significant carried interest.

Over the next 10 years, we expect to realize $25 billion of net carried interest direct to BN. That's $25 billion of cash free and clear for Brookfield Corporation to invest back into the business or return to shareholders. And $21 billion of that $25 billion is from funds are already raised. We do not have to raise a single dollar more for that capital to be returned to us. We have to execute our plans, we have to monetize at the right time and that carried interest will be returned to Brookfield Corporation. If we bring that into a shorter timeline over the next one to three years, it's $5 billion and the funds to watch out for in that period, there are four main contributors in the plan. There's the second real estate fund, the second infrastructure fund, our fifth private equity fund and two vintages of Oaktree that we expect to be material contributors to carried interest over the next few years.

And what's unique, we think about our carried interest is the nature of the underlying investments that contribute to that realization. It's diversified across asset class risk profile and strategy. And we believe that over time this reduces volatility and will lead to a more stable amount over a long period of time. So the numbers I laid out for you today are really based on the carry that we already have working for us in the ground, but if we roll forward the plan five years, we see significant more potential for carried interest over the medium to long term. If you roll forward to the end of the five years and the end of the plan period, carry eligible capital scales to $531 billion. Our annual generated carry scales to $3 billion net or $7 billion gross and realization how much we think we'll be realizing on an annual basis at that point in time goes to $3 billion net to the corporation at the end of the plan period.

Now we value our carried interest at $33 billion today. It's broken up into two line items here on the table. It's our target number. The target is what's the capital at work times the target returns gives you that target carried interest. The share of profits are being generated on an annual basis at $2.6 billion, 10x multiple, a $26 billion valuation. And then you add in the accumulated unrealized carried interest, that value that's in there today that would be realized if we were to monetize everything another $7 billion taking the value to $33 billion. But the key message we have as it relates to carried interest is this is a significant sum of cash that is going to be returned to Brookfield Corporation over the plan period. And as we monetize investments, it starts to come in. The allocation of this capital back into the business is going to be a significant contributor to additional earnings growth and value creation through capital allocation and the excess cash can be returned to shareholders, which I'll touch on in a second.

So when we put all the component parts together for our asset management business. You can see the distributable earnings from BAM that's reflective of the plan that they laid out for you this morning. Our direct investments, the growth there, you see the growth, less the dispositions and the contribution from realized carried interest. When you put that asset management segment together, it's a 21% CAGR over

Brookfield Corporation 2024 Investor Day Transcript

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Brookfield Corporation published this content on October 04, 2024 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on October 04, 2024 at 20:39:46 UTC.