MBS: Best-In-Class Total Return, Soon To Be Brookfield-Controlled

Brookfield Asset Management will acquire a majority stake in Angel Oak Companies, providing Brookfield clients access to Angel Oak's MBS ETF, which focuses on IG non-agency RMBS. The acquisition is expected to enhance the fund's performance, as it already leads its peer group in total return. Analysts recommend a 'Buy' rating on MBS based on anticipated performance under Brookfield's management.

Analysis

Brookfield Asset Management (BAM) announced its acquisition of a majority stake in Angel Oak Companies LP on April 1, 2025, a strategic move poised to grant Brookfield's clientele synergistic access to Angel Oak's specialized Mortgage-Backed Securities ETF (MBS). This ETF is distinguished by its focus on investment-grade (IG) non-agency Residential Mortgage-Backed Securities (RMBS), a sector recognized for offering higher yields. The Angel Oak MBS ETF already exhibits strong performance, reportedly leading its peer group on a total return basis, and this transaction is anticipated to serve as a major catalyst for the fund. The acquisition provides BAM with a unique entry point into this higher-yielding asset class, aligning with themes of M&A and expansion in credit and bond markets. Analyst sentiment, reflected in a 'Buy' rating for MBS and strongly positive sentiment scores (BAM: 0.7, MBS: 0.9), underscores the expected beneficial impact of Brookfield's control and resources on the fund's future performance.

Key Decisions for Investors

• Investors may consider initiating or increasing exposure to the Angel Oak MBS ETF, given its existing top-tier performance and the anticipated positive catalyst from the Brookfield acquisition.
• For investors in Brookfield Asset Management (BAM), this acquisition signals a strategic expansion into the higher-yielding non-agency RMBS market, potentially enhancing its alternative asset management capabilities and revenue streams.
• Monitor the post-acquisition integration and subsequent performance of the MBS ETF under Brookfield's management to assess the realization of expected synergies and validate the 'Buy' thesis.