Q1 2022 Brookfield Asset Management Inc Earnings Call

Yeah.

Hello, and welcome to the Brookfield asset management 2022, first quarter conference call and webcast. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assist.

Please press Star zero.

My pleasure to introduce managing partner Suzanne Fleming.

Thank you operator, and good morning, welcome to Brookfield first quarter 2022 conference call on the call today are Bruce Flatt, Our Chief Executive Officer, and Nick Goodman, Our Chief Financial Officer.

Bruce will start off by giving a business update followed by Matt who will discuss our financial and operating results as well as the distribution and partial lifting of the asset manager. After our formal remarks, we will turn the call over to the operator and take analyst questions in order to accommodate all those who wants to ask questions. We ask that you refrain from asking more than two questions at one time.

If you have additional questions. Please rejoin the queue and we will be happy to take any additional questions at the end as time permits.

I'd like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and our financial and operating performance. We may make forward looking statements, including forward looking statements within the meaning of the applicable Canadian and U S. Securities Law. These statements reflect predictions of future events and trends and do not relate to historic events their subs.

To known and unknown risks and future events and results may differ materially from such statements.

For further information on these risks and their potential impacts on our company. Please see our filings with the securities regulators in Canada, and the U S and the information available on our website and with that I'll turn the call over to Bruce.

Thank you Suzanne and welcome to everyone on the call.

We had a strong first quarter reporting net income of $3 billion.

And distributable earnings for common shareholders of $1 2 billion.

Earnings were supported by the continued strong performance of both our asset management business.

And our underlying operations.

Following our last earnings release.

Had discussions with a lot of shareholders.

Thank you all for that.

Post these discussions we decided to move forward with separating separately listing our asset management business by distributing at 25% interest to our shareholders.

Based on our estimate of values.

Shareholders will receive <unk>.

Distributions special distribution of $20 billion of shares.

Which is around somewhere around $12 per share at that time.

This will be done tax free for Canadian and U S shareholders and we are working on the other jurisdictions.

We will complete this by the end of 2022 and <unk>.

Nick will provide more details after discussing our financial results.

Turning first to markets.

With elevated inflation central banks are now raising interest rates and pulling back on the stimulus.

The 10 year U S Treasury recently hit 3%.

Which is over 1% higher than it was at the start of the year.

It is really important though to remember.

That for cash generative businesses in particular ones that we own.

2%, 3%, 4%, 5% interest rates are low by historical standards and can be absorbed in our margins.

What is more important for us is that we own one of the largest portfolios I've been inflation protected assets in the world.

Our assets generally have a high investment cost upfront.

Earn very high margin and have low expenses compared with the capital cost.

Therefore in periods of inflation, we capture most of the benefit from the revenue expansion in the overall value of our investments tend to increase over time.

The compounding effects are more profound as you go forward.

We're seeing this impact across most of our businesses and our infrastructure business. For example, we acquired many assets last year based on expectations and inflation would exceed market outlooks, and we would be able to capture the upside.

We are doing that now.

Within real estate based on our experience construction costs have increased at least 20% over the past three years.

Two main train returns on a new building.

Until rates will also need to be approximately 20% higher.

This is what we are seeing in New York right now for high quality office buildings, where rents have increased by even more than 30% from pre pandemic levels for great properties.

Great companies are wanting great space for their people, our leasing pipeline and are very high quality portfolio for space is very robust.

We're seeing similar impacts from inflation across our portfolio and it underscores the value of real return assets. They generate strong cash flows through economic cycles, while comps continue to compounding value.

Our clients recognize this.

This is ladd, our fundraising to be very strong.

We have a vast partner network and a very broad group of clients across the world.

In addition, our forms of capital are diverse and have always differentiated us.

This will be even more important.

Going forward.

We closed our latest credit opportunities fund at $16 billion and will soon be closing our global transition fund at $15 billion our latest.

Real estate flagship fund has raised over $12 billion and will be fully closed by year end.

We expect very strong first closes in the second quarter for our infrastructure and private equity funds.

And have been seeing strong inflows into our perpetual funds.

We now have our non traded REIT approved on numerous distribution platforms and expect to see increased inflows during the second half of this year.

Deployment has also been strong with.

With the public market volatility in the last number of months, we were successful in closing a number of public market bids in the first quarter, we invested or committed $33 billion to new acquisitions and our pipeline remains robust.

We created 10 billion from our latest flagship real estate fund as a dislocation in markets led to a number of value opportunities for us where acquiring numerous companies across our other businesses, including a leading software company that is mission critical to car dealers.

<unk> billion dollars electricity transmission business in Australia, and numerous other things.

At the same time, the private markets are robust in terms of asset sales, particularly assets that generate strong cash flows and have some form of inflation protection.

We continue to actively sell down assets within our real estate portfolio, notably we have agreed to sell two office complex is in Australia for a total of $3 billion in.

We sold the 300 million pound, London office building for a sub four cap rate.

So progressing efforts to monetize mature assets across a number of our other businesses.

Given recent events around the world, we wanted to remind you about our global presence.

We operate in over 30 countries and do not have plans for this number to change too much over time.

We have no Brookfield business in Russia, we've been very disciplined about which countries. We invest in and have a few criteria that must be met before investing in a certain geography. Those are standard of governance needs to be at the level of advanced countries. The <unk>.

Country must be proven over time to have a respect for foreign capital, we should be able to scale the investments meaningful in the country and lastly, we should build invest across most of our sectors. So we get the benefits of economies of scale.

We will continue to refer to these criteria when assessing investment opportunities going forward and will remain choosy about where we put your capital to work.

Before I turn it over to Nick.

Wanted to end with three.

Final points about our overall business.

First we continue to see our fund raising accelerating while some sponsors are having indigestion, the breadth of our franchise and the diversification of capital makes our business very different in times of consolidation large brands win and as a result, we continue to widen our moat.

We expect to have our best fundraising year ever this year and that is on top of a record past few years. Our manager split is meant to continue to advance our strengths even further.

Second we own a vast and highly diversified group.

Cash generative inflation protected assets in.

In the times, we are heading into this portfolio is what is what you want to own.

We also use the past two years to widen our strengths. This is starting to pay off and should be true even more over the next 24 months.

And the last technology has and is changing the world. We always knew this our main issue has always been valuation, which often made no sense to us. The difference now versus 20 years ago is that many technology businesses have become real backbone cash.

General <unk> businesses.

With valuations now down and maybe going lower this presents great opportunity.

We believe we will be able to do many things such as the recent enterprise software acquisition.

That we added into our private equity business, we've been laying the seeds for years, but for the first time in 20 years, we're really exciting about buying great technology businesses at reasonable valuations.

Thank you for your continued support I'll now pass it over to Nick to go over the financial results in more details on our distribution of 25% of our asset management business.

Thank you Bruce and good morning, everyone.

Financial results for the quarter were strong distributable earnings or de <unk> or $1 $2 billion and day before realizations were $947 million up 28% from the prior year quarter and Thats supported by the growth in our asset management franchise and strong underlying performance across the business.

<unk> net income totaled $1 6 billion and $3 billion respectively.

Our asset management business continued to expand on its growth trajectory remains strong we ended the quarter with $379 billion of fee bearing capital and Thats up $59 billion compared to the prior year.

As Bruce mentioned, we expect 2022 to be our largest fundraising year ever with nearly 50 funds currently in marketing.

These funds include the latest series of flagships across our verticals as well as a suite of complementary fund products.

In infrastructure, we launched the fundraising over third infrastructure debt fund in February and have received strong investor engagement. We expect that this fund will be significantly larger than the previous vintage.

In private equity, we launched fundraising on the third vintage over technology fund with a very strong initial pipeline of seed investments.

And as Bruce mentioned, we continue to ramp up the number of distribution channels for our non traded REIT.

The growth in fee bearing capital directly resulted in higher fee related earnings, which grew by 21% in the quarter to $501 million and $2 billion over the last 12 months.

In addition to the current fee bearing capital, we have $33 billion of additional committed capital that when invested would translate to approximately $330 million of incremental annual fee revenues.

<unk> plus the additional capital that we expect to raise over the next few months is a significant tailwind for continued growth in our earnings.

Moving on to investment performance and monetization activity. Despite recent market volatility our capital recycling activities across our mature investments continued to remain strong.

And we are on track to realize up to $1 billion of realized carried interest during the year.

On the back of realization activity within our real estate infrastructure and credit funds during the first quarter, we realized $303 million of gross carried interest.

Our remaining investments continued to perform well result, resulting in strong valuation uplifts, we generated approximately $900 million of carried interest during the quarter, increasing the total accumulated unrealized carried interest to $8 4 billion net.

Net of what has been realized into income already.

Lastly, our principal investments continued to provide strong and steady distributions supporting our distributable earnings.

Distributions from our investments were $622 million and a 27% higher than the prior year.

The increase was driven by distribution growth at <unk> and bet and the increased ownership of our real estate business.

Operating <unk> was $1 1 billion for the quarter, a 43% increase compared to the prior period.

The increase was largely driven by the continued growth in our asset management franchise strong organic growth across our operations as well as contributions from recent acquisitions.

Total <unk> was $1 $6 billion for the quarter.

And we're continuing to see trends supporting the recovery in the real estate market. In addition to in addition to executing a number of asset sales. We're also seeing strong interest in new leases with many negotiations underway with large scale global firms on a long term basis.

Our liquidity remains very strong and provides us with significant financial flexibility to deploy capital Opportunistically seek new products and return capital to shareholders through share buybacks.

Since the beginning of the year, we have deployed $170 million of capital towards share buybacks and if market conditions remain the same we expect continued to repurchase shares opportunistically.

We ended the quarter with $85 billion of deployable capital, which includes $70 billion of Uncalled fund commitments and approximately $15 billion of core liquidity.

During the quarter, we enhanced our liquidity by issuing $400 million of 30 year green bonds at 363%.

$400 million.

At $2 five 5% by reopening our existing 2028 notes.

Our liquidity is further bolstered by $4 1 billion of annualized day before realizations.

With Brookfield realize reinsurance shortly closing on its <unk>.

American National acquisition that will add $30 billion of insurance assets to its portfolio, including $8 billion of cash and short dated liquid assets.

Before turning to the details of the asset management distribution I am pleased to confirm that our board of directors has declared a quarterly dividend of <unk> 14 per share payable at the end of June .

As mentioned earlier, we are proceeding with our plan to publicly list and distribute to our shareholders a 25% interest in our asset management business.

The special distribution based on our estimate of value will be around $20 billion.

Our $12 for each share that you own to date.

We expect to complete the distribution by the end of the year on a tax free basis to at least Canadian and U S shareholders.

Over the last 20 years, we have successfully grown two businesses our capital investments on our alternative asset management franchise site by site. The combination of the two has been a significant competitive advantage to us and why are they are different in nature. They have worked very well together.

We have used our capital to create alignment with our clients and provide them with flexibility.

And leveraged our deep investing and operating expertise to deliver excellent returns over a long period of time.

Our business has been built around our core competencies of acquiring owning and operating real assets, which provide essential services and form the backbone of the global economy.

Each of our verticals across renewable power and transition infrastructure private equity real estate and credit operate on a decentralized basis with strong dedicated management investment and operating teams singularly focused on their respective business.

Access to capital.

This we feel has been a large contributor to our success and the performance of the listed affiliates share prices has also created further optionality for growth along the way.

Today, we have approximately $725 billion of assets under management and fee bearing capital of $380 billion.

And have delivered excellent returns to our clients and the capital that we have invested alongside our clients has benefited compounding at north of 15% returns and now stands at $75 billion gross around $60 billion net.

All in the public security is delivered to run to 20% return over the last 20 years and roughly 17% over the last 30 years.

And as we look forward, we are striving to set the business up for the next 20 years in order to achieve similar growth and returns.

And looking ahead, we see a tremendous growth opportunity.

For asset management business, our plan is to more than double our fee bearing capital over the next five years to over $800 billion, which will in turn more than double our fee revenues.

Our $75 billion of capital currently provides us with $3 billion of annual cash distributions and has generated an approximate 15% returns over time.

Going forward, we plan to continue recycling and investing our capital and compounding value north of 15% a year over the long term.

And applying the benefits of our learnings over the last 20 years, we have concluded that to optimize this growth. It is best that there'll be a degree of operational separation between the capital and the asset manager, while still preserving the benefit of their complementary nature and alignment.

Central to everything that we do is our people and our culture and one of our differentiating philosophies and as our business has been and will always be very strong alignment with our shareholders and our clients and this will not change we have always made sure to invest our own capital alongside our clients and we will continue to do so.

This includes us continuing to commit capital to our funds and invest alongside Lp's and we will continue to be anchor investors in our perpetual affiliates bit bet on btu.

We will also continue to ensure the strong alignment of our people with our shareholders and clients as well.

And our day to day business practices and investment philosophies will not change.

As mentioned, we plan to distribute 25% interest in our asset management business to shareholders, allowing our existing and prospective shareholders the ability to own a direct interest in our pure play asset manager that will look more comparable to asset light alternative asset managers and should expand our investor base.

Manager will have a high payout ratio, 90% or higher as it does not require much capital going forward and it will have minimal day one leverage.

It will in our view have an approximate equity value of $80 billion based on a midpoint of current market valuation multiples and subject to the allocation of carried interest and therefore, our free float of around $20 billion.

The Corporation will initially owned 75% of the asset management business, which we value at around $60 billion.

This is in addition to the $75 billion of capital investments we have to date. So in total the corporation will hold around $135 billion of investments.

The Corporation will have a lower payout ratio as it will focus on reinvesting in compounding its capital and continuing to build new businesses by leveraging its deep investing and operating expertise.

And before I wrap up I just want to go over a few points worth noting on the transaction.

We do not expect any impact to our debtholders are preferred shareholders, our borrowings and preferred shares will be heritage held at the corporation, but we do not anticipate any impact to our ratings.

The split in distribution over shares will be structured so that it distributes a tax free to U S and Canadian shareholders and we are currently working through the tax impact for other jurisdictions.

The structure of the manager will be same as our structure note there will be a Canadian C Corp that will be dual listed on the New York and Toronto stock exchanges.

We will ensure that Brookfield reinsurance shareholders are treated equally to Brookfield class a shareholders from an economic perspective as a result of the conversion feature in their shares.

In terms of timing, we're expecting that this will be completed before the end of the year through a plan of arrangement between now and then we will have a number of customary regulatory filings that will be completed including issuing a prospectus shareholder and court approval.

There are a number of details that are being worked through but we will be sure to provide updates as they become available on our quarterly earnings call and at our annual Investor Day in September .

Thank you for your time and I'll now turn the call back to the operator for questions.

Thank you.

And as a reminder, ladies and gentlemen, if you have a question. Please press star one on your telephone.

If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

And our first question comes from the line of Geoff Kwan with RBC capital markets.

Hi, good morning.

First question was when we've seen the markets kind of down or turbulent in the past Brookfield is sometimes use those opportunities to buy security thinking companies.

Have you been doing that given what we've seen over the past month or so we obtained and if so.

Were there.

Particular, part sort of sectors or parts of them that were more active than others in other words, whether it's whether it was top of the house or maybe on the infrastructure side or private equity side.

As Bruce So the answer is yes in some of our funds we.

To buy securities from time to time when markets are going down and we have been buying some I would say the.

Broadly though.

As you know.

The dow's off <unk>.

14% S&P is up 18%.

Nasdaq's off 25, or 30% in half of nasdaq's off 50% so the the real.

Declines have occurred in securities.

Haven't really been of interest to us but.

But we continue obviously to monitor monitor it in and I would say, maybe even more importantly than that the.

Public market transactions.

We have been working on over the past three four months many of those.

Been able to crystallize them and take them private or in the process of taking them private so thats been highly additive.

Okay and that actually lead into the other question I had is.

And on the on the M&A side of the.

<unk>.

Given again, what we've seen in the markets has there been adjustments that you've seen in terms of business that youre looking at in the asking prices have they've been adjusted given what's been happening in the market and then also from the funding side has that generally been okay for you or have you seen signs of turbulence, whether or not it certain types of deals or geographies.

I'm going to.

Maybe just answer the one on financing quickly.

And then Nick and.

Go onto it and I'd, just say that generally financing is freely available in the market for good businesses and.

Everything that we.

Buyer I would put in the category of good businesses.

But maybe Nick just wants to cover specifically on capital on capital markets.

Yes, sure happy to.

Jeff Yes.

I agree with Bruce's sentiment that.

Financing and liquidity is still available for good businesses assets and strong sponsors with acute reputation definitely markets broadly are tighter, but everything that we've been looking to do in new financings or refinancings, we have still fund capital readily available.

And the second question or that was your first question is just on <unk>.

Have values changed in the market and our boards companies decided to lower their prices in it.

What I would say is.

In transactions in the marketplace generally sometimes.

People selling assets.

Keep running an auction longer want to ask for more and generally when you're in markets like this they take the bid.

I would say it's much more.

Youre strike ratio is a much more significant at these periods in time than it is when markets are strong.

Okay, great. Thank you.

Thank you.

Our next question comes from the line of Cherilyn Radbourne TD Securities.

Thanks, very much and good morning.

The first question is on real estate.

Your letter references several property dispositions get very strong values and I assume that those are destinations.

<unk>.

So I was hoping you could give us one.

Color on the fundraising environment, where real estate specifically.

It also gave us a high level update on the progress Thats been made repositioning the <unk> portfolio and ultimately reducing the balance sheet capital invested in real estate.

Charlotte.

So maybe I'll start with the I think starting the end of your question. So the assets that we've been selling have not exclusively being in funds. Some of the office that we referenced that were selling would be directly off of the <unk> balance sheet, but it. So it's a mixture of the two but what we are seeing and it comes back to some of the comments you made earlier.

Is that for the highest quality real estate, which as you know in our office portfolio is largely what we owned in the highest quality assets in our private funds. We are still stream very strong fits for them in the private market. So it's a combination of the two.

In our fundraising again this comes back to the.

Sure.

Attractiveness of owning inflation protected real assets in this environment, we continue to see a constructive fundraising environment, we had strong quarters last year for our latest flagship real estate fund.

We're still we're engaged with many investors and building up to the next closes for that fund and then our Super core.

Perpetual real estate fund, we've actually seen fundraising for that pick up in the first quarter compared to last year as people get more comfortable with owning high quality real estate on the attractiveness of the inflation linkage.

Great that's helpful color.

And then the next one I think you as.

Well Nick.

Are you seeing in the public markets become volatile investors naturally get worried about the carried interest. So I was hoping you could speak to the visibility that the company has to realizing.

Million gross carried interest during 2022 and also through the compensation of the unrealized carried interest balance by strategy and how much of that you think would be dependent on an exit strategy involving the public market.

Yes on your question right at the end of our guests to the issued share with very little of what we are doing as we look at the potential dispositions, we have very little would be relying on the public markets and we've talked about this in the past the benefit of owning a diversified global portfolio, which is predominantly in real assets the majority of them.

Them would transact in the private markets to buyers that still have very strong levels of capital and strong desire to own these inflation protected assets. So.

As we look through the 1 billion, we're still reiterating that number obviously its subject to change in timing, but based on the pipeline.

The attractiveness and interest in our assets, we still believe thats achievable and the broader composition again little reliance on public markets and still very attractive in private markets.

Thank you. Thank you.

Thank you.

And our next question comes from the line of Kenneth Worthington with JP Morgan.

Hi, good morning.

You highlighted an $80 billion valuation for the asset management business.

Maybe if we look at <unk> 22, as an example, what was the earnings be attributed to the asset management business that you're spinning off and can you share with us the rough math youre using to get to that $80 billion valuation for both I think we know conceptually what you're doing but if you put some hard numbers around it we'll make sure we're not.

Missing anything.

Yeah sure Ken So I think we disclosed some of the details in the latter, but we're using our annualized and fee related earnings and our target carried interest is the real inputs to it. So the one nine annualized fee related earnings we've used a market based range, what we've used for notice $25.

235 times and taking the midpoint of that range and we've taken just over $2 billion of annualized carried interest earned $2. Two at 10 times multiple and then the five of accumulated unrealized and that gets us to the gross value and we use the midpoint of the range for round numbers 80 billion <unk>.

25%, that's the 20 and Thats, obviously based on our view kind of our planned value of the intrinsic value of the business and what we think it could be worth.

At the time.

Excellent that's perfect.

And then on the spin off of the asset management business.

Does the spin off position the asset management business to grow better in the future than it did prior to the spinoff. So I understand that the leading motivation is to unlock value and if you can do with you.

Our highlighting you think it can do but there's definitely.

Unlock value there, but is there also value creation as part of the spinoff so assuming that the spin off yields are more highly valued public currency.

For the Newco are there opportunities in his management ready to use the public a new public currency to maybe better or faster grow the business better.

Better so than would have otherwise been the case.

Yes, it's Bruce and I would say.

The answer is yes and.

To expand on that.

And an extra benefit of this is we may unlock value.

For shareholders and they may realize it quicker than they otherwise have realized it but the real reason we're doing this is the industrial logic of mixing all of our capital with an asset asset manager.

It doesn't allow us to have a security that might trade in the marketplace as an asset manager and if it does then we can utilize that security.

From time to time, if we so choose.

So it should allow us just like it has in our other businesses too.

Do transactions, we otherwise would not.

Be able to do or not want to do because of undue dilution to shareholders.

It's a we think it's going to be very helpful for the growth of the business over the next 20 years.

Great. Thank you very much.

Thank you.

And our next question comes from the line of Robert Lee with K B W.

Okay.

Great. Good morning, and thank you for taking my questions.

Couple of questions. So first maybe.

Dig a little deeper maybe into the wealth management initiative.

I believe you pointed two 5 billion of flows to perpetual products and.

Have a range of new platforms, you're going to be getting retail loan, but that 5 billion no or maybe beyond that how much of that is are you currently driving.

From wealth management and.

Can you maybe kind of dig a little deeper in terms of what your expectations are for that over the coming quarters are you seeing given this environment any any pull back.

In the wealth management channel.

And then I'll have a follow up.

Look just to I would say in general the wealth management.

Business is.

As small relatively speaking for for our overall organization today, but it's going to be growing fast over the next 10 years.

And.

The products that we have are just getting.

Formed in distributed within private wealth.

But it's going to be significant in times like we're going through right now.

Are only going to prove to wealth investors that these are the types of things they should be invested in.

As to the exact specifics most of the.

Money that we.

Raised in perpetual.

Private.

<unk> is from institutional flows today, but the.

But it will continue to increase over time.

Great and then maybe as a follow up many years.

Your peers.

Most notably KKR, but the others are kind of falling created capital markets businesses.

Basically look to tap into the natural.

Deal flow, if you will of their portfolio of companies and businesses, including origination platforms.

Is that a.

A business that youre thinking about entering that maybe you're investing in you know how should we think about that opportunity for the asset management.

So post spin or currently.

The only.

The only thing I'd say is that our business is a little different than most of those other organizations, we have a vast <unk>.

Racing organization and a very significant banking.

<unk> chips.

We received capital from two derived.

New transactions, just the type of assets that we.

Acquire and sell so to date, we have not.

Set up one of those groups and.

But it's not that we couldn't do it in the future. We just haven't done it to date.

Great. Thank you.

Thank you and our next question comes from the line of Sohrab <unk> with BMO capital markets.

Yes. Thank you.

Bruce I just wanted to go back to the answer you gave to one of the questions.

Having the asset manager.

Hi, there its own cost of capital, we will open up some opportunities for us over the long term.

Can you can you put it a little bit more meat on the bone on that isn't it capabilities is it geographies is it scaling up.

Some of the stuff you already have I'm, just trying to kind of get a better feel for.

What are some of those.

Opportunities are.

You put it on a faster trajectory.

Look I think it's all it's all the above it's our.

Our people.

Well in the future have a security which ties.

Exactly to what they do.

And that's great.

For business.

It will allow us to have a security, which we could offer apples for apples to somebody to expand.

Geographically within another sector that is not within our business or add into things and often.

People don't want to do.

Taxable cash transactions.

And when you have a security you can offer it allows you to do things that you can't otherwise do.

And that's if we don't have any intention of diluting Brookfield parent shares. So this will allow us to do things that we wouldn't otherwise do.

And was there any maybe it's for you and Nick and was there any.

I'll call it science behind the 25% as opposed to a different number that's getting spun out.

No I'd startup I think there was a few inputs to that but I think we wanted to be material enough that would have a large free float and attractive to investors and scale.

On the balancing side, we have as I think we talked about.

Debt and preferred share to wrap things up with the corporation and we want to maintain existing ratings. So there was a few variables, but we felt that this was a good starting point on a 25% with the corporation still owning 75% maybe most important that preserves alignment increase that alignment going forward, which we think is really important to the success of the business.

Okay. Thank you I'll re queue.

Thank you.

Our next question comes from the line of Alexander <unk> with Goldman Sachs.

Hey, good morning, Thanks for taking the question.

So back to the 80 billion evaluation in nature.

<unk> card your framework of how you guys came up with us, but clearly the public markets have been pretty punitive old space in the last in the last several months.

The $80 billion valuation plan.

<unk> likely to be adjusted as you guys get kind of closer to the spin to kind of reflect the mark to market on what's happening with the public comps or is that more kind of a set number.

So the only thing I'd say is we were and are always trying to be helpful to our shareholders.

Understand where we're going and what we're trying to accomplish so as opposed to just saying we're spinning out 25% of the business. We were just trying to put a.

The parameters of value around it.

So we've now told you what the parameters are everyone can decide from now on what it's going to be what it will be worth and when it gets spun off the market will decide so theres no real it's not worth X or Y it'll be whatever it trade for it is just we all we were trying to do is make sure people understood. The <unk>.

Scope and scale of what this is and from now on people can decide make their own decisions as to what value is.

Got it it makes oxo.

My second follow up also around the structure and it's really around just the 75% ownership as a corporation that it's likely to happen in the new new spinoff as management.

Is that percentage go down over time, or what will ultimately determine that ownership.

<unk> asset management company kind of Standalone entity, because the asset manager will still be dependent on sort of the legacy banks balance sheet for capital needs what it sounds like so co investment in seed capital GP commitments things like that.

Based on your comments that the balance sheet on the asset manager is likely to be pretty light. So how are you thinking about that relationship over time and will the public all of this is actually will be minority shareholder in the asset management.

Look our current intention is to keep a very meaningful interest.

In the in the Corporation and the parent Corporation.

In the asset manager so I don't know what that number is just say 50%.

And.

It may be 75 forever.

It could be diluted down because we issued shares in the asset manager to do a transaction to grow the business and therefore, it got diluted down or it's possible over time that it.

It could raise capital by selling shares but our intention is to have a very significant interest in the asset.

Managed to make sure of the businesses are aligned.

And I'm not there's no there's no.

Nick said earlier, there's no science.

So the number we were just trying to make sure alignment float.

All sort of.

Was together and I guess I'd say, we always like to make sure that we.

Walk before we run so 25% seemed like a good number.

Especially when $20 billion float is.

Bigger than probably.

Almost every other alternative manager.

In themselves.

Then in two or three.

Our 25% is bigger than most other alt.

Alternative managers in the marketplace.

And Alex I would just add that all of these options are obviously available over time, but we have no intention to be reducing the ownership in the short term.

Got it great. Thanks, I'll re queue.

Thank you.

And our next question comes from the line of <unk> with Scotiabank.

Alright, Thank you and good morning.

I think.

Just coming back to the spin off two questions.

What are kind of highlight to be defensive just concentrated in special management team I. Thank Bruce.

You've highlighted.

Incremental benefits.

Having shares.

One.

Have you have you decided on kind of the C suite composition of the asset manager.

Nick.

Enough already.

You think about that transition.

As I mentioned.

We are of course, we have a little bit we have some time to make.

Final decisions, but were I guess, what I'd say is that.

Brookfield people today are running all of US both of these businesses and.

In the fullness of time, we should separate them, but for the time being that probably just stayed exactly the same as they are.

And then we will figure it out over time.

Okay and then my second question just in terms of yield.

The asset manager cash flow.

Can you talk about.

Their whole tax efficient that may be.

Going forward with all the cash flow being attached to the invested capital that's going to remain within the corporation.

Hi, Mario its Nick I think we currently assume that there'll be no significant change to the current tax profile of the manager.

Great. Okay. Thank you.

Thank you.

Your next question comes from the line of Dean Wilkinson with CIBC.

Thanks, Good morning, guys.

Just one question for you on the 90% payout on the asset manager post the transaction.

Does that include the carry and what I am trying to get to is that yield looking something closer to two or 4%.

It would be on the total distributable.

Earnings of the manager so with include everything.

Include everything so a 3% to 4% yield is probably where this would be looking at an $80 billion enterprise value.

Yes in that range using those multiples.

That's it thanks.

Thank you.

Your next question comes from the line of Brian Bedell with Deutsche Bank.

Great. Thanks, good morning for taking.

Thanks for taking my question just a.

A couple.

You talk about.

Doubling the fee bearing capital over a five year period, I guess would imply like a 15% compounded growth rate.

Are you seeing the are you thinking FRE grows at a similar rate or is there leverage in the model that it would grow faster or there'd be other factors that would that would change that.

Brian I would say like consistent with what we put out in Investor day, and nothing has changed from last year, and maybe FRE growth marginally higher than that but it's in and around that range.

Okay, Great and then just to just one clarification so on the spin out.

P&L structure is similar.

Post spin.

It's carving out the.

The fee related earnings for example, the $501 million in the first quarter and the carry not not the perpetual affiliates.

Got it.

That's correct, although the fish in a perpetual affiliates will be there so as the total FRE in the total carry or not the distributions from perpetual investments.

Got it.

Got it great. Thank you.

Yes.

Thank you and our next question comes from the line of Robert Lee with <unk>.

Great. Thanks for taking my follow ups.

Just kind of curious maybe going back to real estate fund raising just want to make sure I was looking at these numbers correctly. So it looks like.

No you've already.

Boyd or committed $10 billion of the $12 billion and praise for thank you.

One four.

Could you maybe update us I mean.

Is that making you think that you could upsize that fund even further just given your pace of deployment and maybe what youre seeing in demand out there.

And then maybe Nick as a quick follow up on American National I get that closes.

Mid year can you remind us what the impact would be on.

Fee bearing capital and how should we should think of the incremental contribution of those assets.

Management fee perspective.

Why don't I take the first one just on real estate fundraising.

And as a.

Okay.

I don't think I can tell you the size of the fund that's on the cover so it's a larger fund. The 12. So 12 is what's been raised to date.

It will close at a larger figure than that when it's fully closed out this year.

So we just continue invest that fund and when it's when we're fully invested in.

In the fund will go out and raise another fund for opportunistic investing.

In real estate like we do our other.

Our other strategies.

Hey, Rob just on the on the second part yes.

Yes, we expect the transaction to close soon.

And I think as it relates to fee bearing capital it probably would be around 20 billion of fee bearing capital and once fully deployed into all the strategies that would be around $45 million of annualized fees, but it will take a little bit of time to ramp up to that as we get the capital deployed into the various.

Strategies across the business.

Okay.

Maybe as a quick follow up I mean are you like many of your peers in their insurance strategies or insurance business. They own. They also earn a.

More modest advisory fee so to speak.

Yes, two weeks, you'll be earning that two I assume.

Yes, sorry, I think the $45 million I referenced is the IME, which is around 25 basis points and then there'll be more on top as we deploy into our various strategies.

Great. Thanks for helping I appreciate it thank.

Thank you.

Thank you and our next question comes from the line of Alexander <unk> with Goldman Sachs.

Okay.

Okay. Thanks for taking a follow up just away from the spin off of maybe a couple of business related question. So I wanted to zone in poultry and the opportunities that Gpus right now in credit markets given.

Volatility in credit markets, obviously and rising probability off.

Some of the credit default so could you sort of think about the opportunity for both deployment and fundraising across the Oaktree franchise. What are you guys seeing over the next kind of 12 to 18 months.

Look I would say that the.

The credit franchise that Oaktree has is.

Is good in all markets because it has a broad credit franchise, but really good when there is more stress in the markets.

So.

Franchise came into its own and it will put a lot of money out in March.

March April May June of 2020, and this period of time is going to be really good for deploying capital in their funds. So.

Which will get us probably back out raising another large.

<unk> fund.

Within a relatively short period of time.

Great. Thanks.

Thank you.

And our next question comes from the line of <unk> <unk> with Scotiabank.

Alright, Thank you sorry, one more.

Just coming back to the non traded REIT.

But what's appropriate fee bearing capital.

And the REIT today.

Have you been able to bend in any format BP y assets into the REIT or how has your kind of thought process.

Changed at all on that and how should we think about the fee bearing capital group.

The next two years, given the increasing number of platforms.

Hi, Mario its net.

Gross asset value of what we have in the non traded REIT today is around $2 billion and we did seed some of assets into the seed portfolio. When we launched the strategy.

There may be assets in the portfolio that could be suitable going forward as you know we own.

Excellent portfolio with with attributes that are attractive to these kind of.

Platforms, but then also we have a strong sort of M&A pipeline for new acquisitions that will be perfect for this kind of.

This kind of security. So I think the pipeline of acquisitions is definitely not locking in on fundraising.

You have to remember that.

It's a huge effort to get on the platforms of the banks, they're very exclusive there are not many.

Platforms that get onto the bank channel and so we're on them now.

And that kind of gets us to the start line and now we have to do the education and we expect the fundraising to ramp up as we said in the coming months and years. So the fundraising that was really just a very very early stages and the pools will increase.

We move forward.

Great and then just based on past experience or in the market.

How long you expect it will take for.

There are some roofing mature like what's around the platform.

Sure Rockies to gross profit.

The mature it takes time, but I expect in the next six months, we're hopeful and we'll see what happens in the next six months the number should pick up materially mature could take time, because there is an enormous amount of capital and wealth system broadly that's massively under allocated to also I think what the maturity looks like is unknown and Thats why theres so much focus on.

But for US the next six months, we should start to see the ramp up come.

Okay great.

Thank you.

I am showing no further questions at this time.

So with that I'll hand, the call back over to Suzanne Fleming for any closing remarks.

Thank you operator, and with that we'll conclude the call. Thank you everyone for joining us.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

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