Brookfield Asset Management Ltd. (BAM) Earnings Call Transcript & Summary

Mr. Chair, we are ready to commence the meeting.

Good afternoon, ladies and gentlemen. It's now 2 p.m. Eastern, and it's time to begin the Annual and Special Meeting of Shareholders of Brookfield Asset Management Ltd. My name is Mark Carney, and as Chair of the Board, it's my pleasure to chair today's meeting. On behalf of the Board and management, I'd like to extend a warm welcome to everyone joining us through our live webcast, and voting during the meeting will take place on our webcast platform. I'll start by explaining this process. We will conduct the votes on the matters before us by a poll. On a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder. The poll will be opened for all resolutions at the same time and throughout the formal portion of the meeting. This will allow you to choose to vote on each resolution immediately or wait until the conclusion of discussion on each resolution prior to casting your vote. If you voted in advance of the meeting and do not wish to revoke your previously submitted proxies, then no action is needed. We will welcome questions from our shareholders. [Operator Instructions] Please indicate whether your question is of a general nature or whether it relates to a motion being considered as part of the meeting's formal business. Questions relating to a particular motion will be answered at the appropriate time in the meeting. Note that we recommend that you submit questions relating to motions being tabled as soon as possible as there is a 30-second delay in the webcast. Questions of a general nature will be answered during a question-and-answer period following the formal business of the meeting. Please click the submit button once you have finished typing your question. Our Corporate Secretary, who is serving as moderator of this meeting, will read out the question. And either a member of management or I will respond. If we receive similar questions, we will read one of them and note it to be one of a number of similar questions. We're unable to receive questions from participants joining the meeting only by telephone. Further, if you have connected to this meeting as a guest, you will not be able to submit a question. We'll endeavor to answer all questions submitted during the allotted time. Moving on, we wish to thank you for your participation in today's meeting. And I now call the meeting to order and would ask TSX Trust Company by its representatives, Helen Kim and Kay Harrison, to act as scrutineers. I will also ask our Managing Director, Legal & Regulatory, Kathy Sarpash to act as secretary of today's meeting. In the unlikely event of technology issues disconnecting my audio, I have designated Kathy to step in as Chair of the meeting. It's now my pleasure to introduce the members of management with us today: Bruce Flatt, our Chief Executive Officer; Connor Teskey, our President and CEO, Renewable Power and Transition; and Bahir Manios, our Chief Financial Officer. Following the conclusion of the formal part of the meeting, there will be a presentation from management. As outlined in our management information circular, there are 4 items of business to be considered today: first, to receive the consolidated financial statements of the corporation for the fiscal year ended December 31, 2022, including the external auditor's report; second, to elect directors who will serve until the next Annual Meeting of Shareholders; third, to appoint the external auditor and authorize the directors to set its remuneration; and fourth, to consider a resolution approving an amendment to the corporation's Escrowed Stock Plan. As mentioned, in connection with the business to be dealt with today, all voting will be conducted by online ballot through the live audio webcast platform. And voting is now open on all resolutions. In order to expedite the formal part of today's meeting, I've asked certain shareholders to move and second various resolutions. Although this procedure will assist in the handling of the formal matters, it's not intended to discourage anyone from submitting questions in reference to any resolution after it has been proposed and seconded. I'm advised that the notice calling this meeting and the management information circular were disseminated to voting shareholders in accordance with all applicable laws. And I've asked the Corporate Secretary to keep a copy of the notice and proof of mailing with the minutes of this meeting. Based upon the scrutineer's preliminary report on attendance, the secretary has confirmed that there is a quorum. I therefore declare the meeting properly constituted for the transaction of business for which it has been called. Turning to the first item of formal business, I will now table the corporation's 2022 annual report to shareholders, which includes the corporation's consolidated financial statements for the fiscal year ended December 31, 2022, together with the external auditor's report. Our annual report has been mailed to shareholders who requested it, and it is available in the meeting materials for this live webcast as well as on our website.

Mr. Chair, we have not received any questions or comments submitted in connection with the financial statements.

Okay. We table the annual report. The second item of business at our meeting today is to elect directors who will serve until our next Annual Meeting of Shareholders. To assist you in identifying our directors, their photos will be shown on the slides of the webcast platform as I read their names. The 6 proposed nominees for election by holders of the corporation's Class A limited voting shares are Marcel Coutu, Liv Garfield and Nili Gilbert, Allison Kirkby, Diana Noble and Satish Rai. The six nominees for election by the holders of the corporation's Class B limited voting shares are Bruce Flatt, Brian Kingston, Keith Johnson, Cyrus Madon, Samuel Pollock and myself, Mark Carney. Information on all 12 director nominees is set out in our management information circular, which was posted on our website for shareholder review and is available from the company upon request.

Mr. Chair, we have not received any questions or comments with respect to the nomination of directors.

The meeting is now open to receive nominations for the election of the proposed directors. We invite shareholders and proxyholders to submit their vote online if they have not already done so. As a reminder, if you have already voted or sent in your proxy, there's no need to do anything unless you wish to change your vote. [Voting]

Mr. Chair, I nominate for election as directors the 6 nominees for the Class A limited voting shareholders and the 6 nominees for the Class B limited voting shareholders named in the management information circular dated April 28, 2023.

Thank you, Jasmine.

Mr. Chair, I second the motion.

Thank you, Thomas. Are there any further nominations? If not, I declare the nominations closed. As there are 12 directors to be elected and the same number of nominees, I now declare that those nominated have been duly elected as directors of the corporation. The third item of business today is the appointment of the corporation's external auditor and authorizing the directors to set their remuneration. As stated in the management information circular, the Audit Committee of our Board of Directors has recommended to shareholders that Deloitte LLP be reappointed as the corporation's external auditor.

Mr. Chair, I move that Deloitte LLP be appointed as the external auditor of the corporation until the next annual meeting and that the directors be authorized to set their remuneration.

Thank you, Thomas.

Mr. Chair, I second the motion.

Thank you, Jasmine. The resolution has been moved and seconded, and the motion is now before the meeting for discussion.

Mr. Chair, we have not received any questions or comments submitted in connection with the appointment of the auditors.

Adoption of this motion requires the favorable vote of a majority of the votes cast at the meeting by the holders of each of the Class A limited voting shares and the Class B limited voting shares voting as separate classes. Management has received proxies representing approximately 68% of the corporation's Class A limited voting shares and 100% of the Class B limited voting shares. These proxies direct me to vote over 99% of the Class A limited voting shares and all of the Class B limited voting shares in favor of the resolution. I will now call for shareholders and proxyholders to submit their vote if they have not already done so. [Voting]

The fourth item of business today is the approval of the resolution authorizing an amendment to the corporation's Escrowed Stock Plan. As described in the corporation's management information circular, the proposed amendment will allow for participants in the Escrowed Stock Plan to contribute a portion of their existing escrowed shares received in previous grants as consideration for the receipt of a grant of new escrowed shares. The non-dilutive nature of the Escrowed Stock Plan will not be impacted by the amendment. The corporation will continue to be required to cancel a number of Class A shares equivalent to the number of Class A shares that are issued to holders of escrowed shares.

Mr. Chair, I move that the resolution authorizing an amendment to the corporation's Escrowed Stock Plan as described in the management information circular dated April 28, 2023, be approved.

Thank you, Jasmine.

Mr. Chair, I second the motion.

Thank you, Thomas. The resolution has been moved and seconded, and the motion is now before the meeting for discussion.

Mr. Chair, we have not received any questions or comments submitted in the connection with the amendment to the Escrowed Stock Plan.

Adoption of this motion requires the favorable vote of a majority of the votes cast at the meeting by the holders of each of the Class A limited voting shares and the Class B limited voting shares voting as separate classes. Management has received proxies representing approximately 68% of the corporation's Class A limited voting shares and 100% of the Class B limited voting shares. These proxies direct me to vote over 98% of the Class A limited voting shares and all of the Class B limited voting shares in favor of the resolution. I will now call for shareholders and proxyholders to submit their vote if they have not already done so and now call for the vote on the motion by submitting their votes. [Voting]

Voting is now closed on all resolutions. I'm advised that our Corporate Secretary has the results of the vote based on the final tabulations of proxy votes received.

Thank you, Mr. Chair. I'm pleased to report as there are 12 directors to be elected and the same number of nominees, I now declare that those nominated have been duly elected as directors of the corporation. On the appointment of the corporation's external auditor and authorization of directors to set their remuneration, I declare the motion carried. On the approval of the resolution to amend the corporation's Escrowed Stock Plan, I declare the motion carried. The final voting results will be available after the meeting and posted to SEDAR at www.sedar.com.

Thank you, Kathy. Ladies and gentlemen, that completes the formal business of today's meeting. There being no other business, I declare the meeting terminated. Now that the meeting has concluded, Bahir Manios will be leading a presentation on behalf of our management team. And at the end of the presentation, we'll be available to respond to any questions or comments you may have submitted. Please note that in responding to questions and in talking about our new initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, you're encouraged to review the business environment and risk section of management's discussion and analysis in our annual report. Finally, we would like to ensure that all shareholders who are interested in asking a question have the opportunity to do so. We'll make every effort on our part to address questions during the allotted question-and-answer period. And with that, I invite Bahir Manios to commence management's presentation.

Thank you, Mr. Chair, and good afternoon. I'm pleased to be with you today to provide a report on our activities over the past 7 months since we completed the special distribution and separate listing of the company on the New York Stock Exchange and the Toronto Stock Exchange. In terms of an agenda for this afternoon's call, we thought we'd cover off 4 topics. First, I'll start off with a discussion of the spin-off. Second, I'll cover off the story of the new Brookfield Asset Management or Brookfield. Then I'll highlight the key metrics that make Brookfield a top-tier asset manager in the industry. And finally, we will detail how Brookfield is well positioned for future success. This past December, we completed the spin-off of Brookfield Asset Management as its own standalone public listing, creating one of the world's largest and most diversified pure-play asset management businesses. Spinning out the asset manager creates a simpler security that we believe will be much better understood and appreciated by the capital markets. In terms of the structure, it's quite straightforward. Our asset management business, which is depicted on this slide, has 1.6 billion shares outstanding and has a value of almost $52 billion. And it is owned 25% by this newly created public company being Brookfield Asset Management Ltd., which trades on the New York Stock Exchange and TSX with the ticker symbol BAM or B-A-M. The other 75% is owned by Brookfield Corporation, ticker symbol BN on the New York and Toronto Stock Exchanges. All discussions in this presentation this afternoon and in our disclosure materials refer to our asset management business, which we believe is the most meaningful way for our shareholders to analyze our financial and operational results. It has been more than 7 months after creating the new Brookfield Asset Management as a pure-play publicly traded alternative asset manager following our spin-off from Brookfield Corporation. And we're very encouraged by the positive feedback we have received to date. Our business is centered around extremely resilient and growing cash flows and industry-leading businesses, both of which are well positioned to benefit from secular global trends over the coming decades. This is bolstered by our access to large-scale capital, global reach and deep operating expertise. Brookfield's asset management business has been 25 years in the making, and we've been investing our own capital for over a century. While new in the form of a standalone public company, our long track record and growth as an asset manager provides continuity for this next phase of growth. We are one of the largest and fastest-growing alternative asset managers globally with operations spanning 30 countries on 5 continents. We have over 1,000 investment in asset management professionals who employ a disciplined investment approach to creating value and delivering strong risk-adjusted returns to clients across a diverse set of public and private fund offerings. The business has grown from its infancy 25 years ago to almost $835 billion of assets under management today and has deep relationships with more than 2,000 clients, which includes most of the largest global institutions -- institutional investors. In terms of our strategy, we believe it's quite differentiated due largely to the following components. First, we invest in the backbone of the global economy and have industry-leading businesses that are extremely well positioned around the leading secular global drivers of capital across renewable power and transition, infrastructure, real estate and credit. Second, we leverage our deep operational expertise to create value. Third, our scale and track record over a very long period of time means that we are a beneficiary of the capital that is increasingly gravitating to the largest multi-asset class managers in a period of industry consolidation. And finally, we're highly diversified, which enables the business to grow and to deploy capital through economic cycles. Our credit, private equity and real estate businesses each specialized in finding investment opportunities in markets like we're seeing today. We designed the new BAM security to provide investors with direct access to our leading global asset management business. BAM has industry-leading metrics. I wanted to touch on a few of them on this slide. First, a cash flow stream that's extremely resilient. Almost 85% of our fee-bearing capital is invested in long-term private funds that -- or have permanent and perpetual with over 10-year lives. Second, distributable earnings that are almost entirely made up of our highly stable fee-related earnings, making our cash flow generation profile simple to understand, stable and easy to predict. Third, an asset-light balance sheet that is exceptionally strong with no debt and cash and financial assets of over $3 billion. And finally, an expectation to return the vast majority of the cash that we generate in this business to our shareholders via dividends and when it makes sense, stock buybacks. We believe the combination of these characteristics generates an excellent long-term investment for our shareholders. Our performance in 2022 was very strong. Over the past 12 months, we've had a record year for fundraising, bringing in approximately $100 billion of capital across our business. We were able to strategically put this capital to work, deploying over $72 billion. And we also monetized a number of investments, raising a total of $31 billion of total gross proceeds at attractive valuations. This has all led to our distributable earnings growing to $2.2 billion over the last 12 months, representing a growth rate of 20% excluding performance fees. Our fee-bearing capital has also experienced very strong growth, primarily the result of the strong fundraising results that we posted in 2022. Geopolitical and macroeconomic trends have created significant uncertainty in the market. However, these conditions also create meaningful opportunities for investors like us, who have experienced investing through cycles and significant capital to put to work. And we're well positioned to execute in the future, given the numerous meaningful competitive advantages our franchise benefits from. First, we have a favorable business mix. We have positioned our business around the massive global secular trends of deglobalization, decarbonization, digitization in addition to a significant opportunity that exists in private credit. Having recognized these trends early and taken steps to build a leadership position in these businesses that will -- we will be the beneficiary of these themes has left us with an asset mix that is very much in favor. Second, our scale provides us a critical advantage over many others as it allows us to raise capital from the largest institutions and deploy that capital in investment opportunities outside the more competitive and commoditized parts of the market. Simply put, we can pursue transactions that require an equity check that few others can write. Third, on the fundraising side, we have great diversity. Today, we invest and operate businesses in 30 countries and have boots on the ground in each one of these markets. Equally important is the fact that most of our offices around the world includes asset management professionals focused on building long-term relationships with a broad range of local investors. This ensures that we're well diversified across our client base and can efficiently and consistently raise capital in different economic environments. We are currently seeing an increased proportion of our fundraising coming from non-U.S. clients. Last but certainly not least, we keep in mind ESG principles when it comes to investing. Every business around the world needs to decarbonize. And we look to be a capital provider or operating partner to help those businesses achieve that goal and the net-zero emissions goal we've set for ourselves. We believe sound environmental, social and governance practices are key to building resilient businesses and for creating long-term value for our investors. Our track record really speaks for itself. Our infrastructure returns have been excellent, especially for the stable risk profile for that asset class. Renewables at 13% is very strong, considering the lower risk profile. And as you can see, private equity, real estate and credit have posted exceptional returns for a period of between 15 and 35 years. Despite the macroeconomic headwinds making -- that make fundraising more challenging, we expect 2023 to be another strong year from a capital-raising perspective with all our flagship funds and a number of our other complementary fund strategies in some stage of fundraising. Given the recent launch of several of our largest products, which are well suited to the current market backdrop, we see the potential for our fundraising to accelerate throughout the year. Our confidence regarding our ability to raise and deploy capital on a large scale is due primarily to the global reach that we have taken in building our business. Our balance sheet is strong. We currently have no debt and over $3 billion of cash to put to work. Alongside our own capital, we have nearly $80 billion of uncalled commitments from limited partners, giving us a meaningful pool of dry powder to deploy as we continue to see valuations become increasingly attractive. The spin out of Brookfield Asset Management has allowed us to create a pure-play alternative asset manager with industry-leading fundamentals and metrics. Our business is very well positioned around the leading secular global drivers of capital across renewables, transition, infrastructure, real estate and credit. Our proven track record of successfully delivering above-market risk-adjusted returns throughout multiple economic cycles for clients should enable us to continue raising significant amounts of capital for many years to come. All of this lays out the groundwork for what should be meaningful organic growth over the next 5 years. We also expect that the alternatives industry will inevitably go through a period of consolidation in the coming years. And BAM as a standalone security gives us a better currency to potentially accelerate our already impressive organic growth targets with some strategic M&A. To sum up, we believe the best is yet to come for the new Brookfield Asset Management. That wraps up my formal remarks. On behalf of the Brookfield team, we thank you for your support, and we look forward to providing you another update on our affairs in August on our second quarter conference call.

Mr. Chair, there are no questions to be addressed.

Okay. Ladies and gentlemen, if there are no further questions or comments, I'd like to thank you again on behalf of the whole management team for taking the time to join us today. I hope you found the meeting and the management presentation informative. We appreciate your participation.