Brookfield Asset Management - INVESTOR DAY SEPTEMBER 26, 2019
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Brookfield Asset Management I N V E S T O R D AY SEPTEMBER 26, 2019
Agenda
Global Market Overview
Fireside Chat with Erik Schatzker, Bloomberg TV Editor at Large &
Howard Marks, Co-Chairman of Oaktree Capital Management
Strategic Review
Bruce Flatt, Managing Partner & CEO
Financial Review
Brian Lawson, Managing Partner & CFO
Q&A
2
Global Market Overview
FIRESIDE CHAT
Erik Schatzker
Bloomberg Television Editor at Large
Howard Marks
Co-Chairman, Oaktree Capital Management
3
Strategic Review
Bruce Flatt
Managing Partner & CEO
4
We have
four main takeaways
for you
5
1
-2% to 2%
We seem to be in the next phase
of global interest rate backdrop
6
2
If so, alternatives allocations
are increasing to
60%+
Alternatives are no longer Alternative
Notes/Assumptions:
1. Refer to slide 19 for details.
7
3
Including credit, our next series of
global flagships should be…..
$100 Billion
8
4
Oaktree assists us to prepare for the next downturn
9
Over the last year…
Raised over $50 billion
Deployed $33 billion
Realized $19 billion
Added a premier credit franchise
Notes/Assumptions:
1. For the period July 1, 2018 – June 30, 2019.
10Total assets are now over $500 billion
$509B 100,000+ 1,800+ 30+ $227B
ASSETS UNDER INSTITUTIONAL FEE BEARING
MANAGEMENT EMPLOYEES INVESTORS COUNTRIES CAPITAL
Notes/Assumptions:
1. As at June 30, 2019. See Notice to Recipients and endnotes, including endnotes 1, 2, and 3.
11But global risks are building
European rates are upside down
The technology nifty fifty is a large proportion of markets
Currency wars could be disruptive
Political extremes are everywhere
12Our growth strategy continues to focus
on three simple factors
1 2 3
Increasing Growing our Investing wisely
alternative product offerings
allocations
13Across all major capital markets
interest rates are low, or negative
U.S. EU Japan
14There are two consequences
of this rate environment
151
Asset values are going up
100 = $20
basis point BAM value
cap rate reduction per share
Notes/Assumptions:
1. Refer to slide 81 for details.
162
Allocations to alternatives are increasing
Since 2009, ~$6 trillion allocated
to private assets
Notes/Assumptions:
1. Source: 2019 Bain Global Private Equity Outlook.
17And targets are growing at an accelerating rate…
25%
15%
2016 2018
Notes/Assumptions:
1. Source: Willis Towers Watson Global Pension Assets Study, 2019.
18But if we are in the world as described,
our 40% target will likely go to 60%
20001 2018 20302
40% 60%+
75% 25%
95% 5%
Equity/Fixed Income Real Assets/Alternatives
Notes/Assumptions:
1. Source: Willis Towers Watson Global Pension Assets Study, 2019.
2. Brookfield estimate.
19Because investors have no alternative
20~$25 Trillion
will flow to alternatives
Note/Assumption:
1. Brookfield estimate of target allocation to real assets/alternatives by 2030.
21To sum up the opportunity
1 Alternatives are one of the few places returns exist
2 Institutions are continuing to increase allocations
3 Capital is increasing exponentially
22Investors are also consolidating
the number of managers
they invest with
23According to a recent survey
~25%
of all capital raised was
by the top 10 largest asset managers
Note/Assumption:
1. Source: Alternatives in 2019 – Preqin.
24Our private fund strategy is evolving
1 2 3
Flagship Perpetual Bespoke
Funds Core Strategies Opportunities
25Our flagship funds are growing
(billions) Previous Three Vintages Current
Real Estate $1.0 $4.4 $9.0 $15.0
1
Private Equity $0.8 $1.0 $4.0 $7.8+
1
Infrastructure $2.7 $7.0 $14.0 $15.2+
2
Credit $14.5 $7.2 $5.1 $12.5
Notes/Assumptions:
1. Still in fundraising period.
2. Represents Oaktree distressed debt strategy.
26Last year,
we highlighted our added focus
on growing our perpetual core
and credit strategies
Our clients need it to replace bonds
27In the past year, we more than doubled
our perpetual capital commitments
$60+
$6
$2
2018 2019 Long-Term Target
(billions)
28And Oaktree adds to our current franchise:
World class management team
Scaled credit expertise
Counter-cyclical fundraising strategy
The ability to deliver scaled credit products
29Today, the number of ways our clients can
allocate capital to us is increasing
Separately Special
Managed Opportunities
Accounts Program
Co-investments
30Leading to a growing institutional investor franchise
+157% 1,800+
700
700
+150%
280
1 1 1
2014 2019 With Oaktree
Notes/Assumptions:
1. As at June 30.
31But investing is always competitive
So we try to use our competitive advantages in everything we do
1 2 3
Size Global platform Operating
and flexible Expertise
mandates
32We invested over $33 billion in the last 12 months1
84%
9%
NORTH AMERICA
$33B
ASIA & OTHER
4%
SOUTH AMERICA 3%
EUROPE
Notes/Assumptions:
1. From July 1, 2018 – June 30, 2019.
33New investments are currently being
driven by four themes
341. Special situations in North America
Forest City Westinghouse
$6.8B $4.0B
LARGE-SCALE CAPITAL LARGE-SCALE CAPITAL
352. The interest rate inversion, particularly in Europe
363. Banking stress in India
374. The reorganization of balance sheets in China
38Irrespective of markets and politics,
we continue to focus on:
1 Maintaining
disciplined investing
standards 2 Deploying
capital
for value
3 Being patient,
waiting for
market breaks 4 Recycling proceeds
into higher yielding
opportunities
39Before getting into the numbers, we summarize:
Our franchise is broader and deeper than ever before
The backdrop for client capital is strong and increasing
Despite lots of capital in the world, few people have the
skills to transact in areas where we do
If we can execute, the next 10 years are set up to be better than the last 10!
40Financial Review
Brian Lawson
Managing Partner & CFO
41Agenda
Scorecard
Resiliency
Growth Profile
42Our business is…
Straightforward Transparent Resilient Growing
43Scorecard
1 44We achieved solid growth since this time last year...
AS AT JUNE 30
2018 20191
Fee bearing capital ($b) $ 129 $ 164 27%
24%
Annualized fee revenues2($m) 1,435 1,775
Target carried interest ($m) 1,115 1,660 49%
13%
Annualized CAFDAR3 ($m) 1,875 2,121
Notes/Assumptions:
1. Excludes Oaktree.
2. Annualized fee revenues as at June 30, 2019 exclude $60 million of annualized BPY fees that were subject to a fee waiver ended August 2019. The capital associated
with such fees is in fee bearing capital as at June 30, 2019. Including these fees, annualized fee revenues would be $1,835, or $1,100 net of costs – an increase of 28%.
3. Cash available for distribution and/or reinvestment – excludes carried interest.
45…and are tracking above our 2018 business plan
Fee Related Earnings (millions) Fee Bearing Capital (billions)
2500 300
$1,920 P
2000 250 $245 P
$1,065 A 200 $164 A
1500
150
1000
100 $147 P
500 $1,015 P
50
0 0
2018 2019 2020 2021 2022 2023P 2018 2019 2020 2021 2022 2023P
Carry Eligible Capital (billions) Net Invested Capital (billions)
120 60
$111 P $56 P
100 50
80 $72 A 40 $34 A
2
60 30
$35 P
40 $56 P 20
20 10
- 0
2018 2019 2020 2021 2022 2023P 2018 2019 2020 2021 2022 2023P
Notes/Assumptions:
1. As at and annualized for the period ended June 30, 2019 unless otherwise noted.
2. Incudes investment in listed investments, based on share prices as at September 20, 2019, excluding BPY which is valued based on IFRS values.
3. A = Actual annualized results as at June 30, 2019.
4. P = Plan per September 2018 Investor Day.
46Our funds are tracking to
meet or exceed their target returns1...
Total Carry Unrealized Target
Eligible Carried Gross Gross
AS AT JUNE 30, 2019
(millions) Vintage2 Capital Interest IRR IRR
Real estate 2005 – 2019 $ 31,609 $ 907 13% – 20% 12% – 20%
Infrastructure 2008 – 2018 29,842 992 15% 13% – 15%
Private equity 2007 – 2018 10,331 638 29% 20%
Total $ 71,782 $ 2,537
Which means these funds are well over their preferred return
and should earn carry on each dollar of profit
Notes/Assumptions:
1. See Q2 2019 Supplemental Information for further disaggregation by investment strategy. The funds above include opportunistic, value add, credit and core plus
strategies, and other strategies. Gross IRR excludes IRR for strategies categorized as “Other.” The table above excludes Oaktree funds. See Notice to Recipients and
endnotes, including endnotes 4, 5 and 6.
2. Year of final close.
47…and our expectation of carried interest generated has
grown and shifted forward since last year
Existing Funds Only1
(billions)
$18
2019 IR Day
$16
$14
$12
2018 IR Day
$10
$8
$6
$4
$2
$0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Generated - 2018 IR Day Generated - 2019 IR Day
Notes/Assumptions:
1. Excludes Oaktree funds.
2. See Notice to Recipients and endnotes, including endnote 7.
48We increased plan values by over $10 billion…
Plan Value
AS AT JUNE 30
(billions) Multiple Ann.1 2019 2018
Asset manager
Annualized fee related earnings 20x $ 1.1 $ 21.3 $ 17.2
Net target carried interest 10x 1.2 11.6 8.1
Accumulated unrealized carried interest, net 1.8 1.7
34.7 27.0
Invested capital, net2 34.2 31.2
Total $ 68.9 $ 58.2
$10.7B
Notes/Assumptions:
1. Annualized as at June 30, 2019.
2. Investments in listed entities measured at closing prices on September 20, 2019, excluding BPY which is measured at its IFRS value. Gross invested capital,
before $11 billion of leverage, is $45 billion.
3. See Notice to Recipients and endnotes, including endnotes 8, 9 and 10.
49…resulting in a 20% total return since last year
$69
$58 20%
Total
Return1 $34
$31
$35
$27
2018 2019
Asset Manager Invested Capital
Notes/Assumptions:
1. Per share basis, including dividends paid to BAM shareholders.
2. See Notice to Recipients and endnotes, including endnotes 8, 9 and 10.
50Which implies you get a 22% margin of safety
2019
(millions, except per share) 2019 Total Per Share
Asset manager plus invested capital 1,2 $ 68,939 $ 68.72
Equity market capitalization 54,072 53.90
Discount to plan value $ 14,867 22%
Notes/Assumptions:
1. Per share amount calculated using total diluted shares as at June 30, 2019.
2. Based on September 20, 2019 public pricing.
3. See Notice to Recipients and endnotes, including endnotes 8, 9 and 10.
51Resiliency
2 52Our business is strong and resilient
Sustainable Business
High Quality Assets
Stable Capital Structure
Strong Liquidity
Reliable High Growth Cash Flows
Transparency
Which allows us to continue to grow through all parts of the cycle
53Sustainable business
54We are in one of the highest growth businesses…
1 2 3
High quality Protect Positive contribution
critical assets financial future to communities
and services for investors and employee base
…and our activities contribute value
in a number of ways
55Our assets are high quality and are an
essential part of our daily lives
Renewable Power Office Buildings Healthcare Toll Roads
56Our investors rely on us to protect their
financial future and the future of others
Pension Plans Insurers Education Research
57We always operate with a high priority on ESG principles
Built into our investment approval One of the world’s
process, board mandates, and largest pure-play
risk management activities renewable energy portfolios
90% of our core office portfolio Maintaining an inclusive and
is green building certified diverse work environment
It is engrained in everything we do
58Stable capital structure
59We have a solid balance sheet
1 Conservative capitalization 2 Strong corporate core liquidity
$4B financial assets
$7B long-term debt
$2.5B undrawn credit facility
$73B perpetual equity Investment-grade balance sheet
3 Leverage ratios are declining 4 CAFDAR2 exceeds any maturities
$3
$2.5
3.0x
2.5x
$2
$1.1 $1.2
$1 $0.6
$0.5 $0.5 $0.4
$0.3
$0
2015 2019 2021 2023 2024 2025 2026 2027 2028 2029+
Debt / CAFDAR before interest expense Maturities (billions)
Notes/Assumptions:
BAM is well positioned!
1. As at June 30, 2019. Comparative periods as at June 30.
2. Cash available for distribution and/or reinvestment.
60Listed issuers are self-sufficient
with strong access to capital
Available core liquidity of $8 billion:
Access to debt and/or equity capital markets
Undrawn credit facilities
Capital recycling programs
Strong free cash flow generation
Notes/Assumptions:
1. As at June 30, 2019.
61Strong financial discipline
at the portfolio and asset level
Non-recourse debt at the portfolio company / asset level is:
Sized appropriately for the asset being financed
Raised in local currencies, on long-term basis
Covenant friendly where possible
Has no recourse to the listed issuers or BAM
62Reliable high growth cash flows
63At BAM, we generate over $2 billion of cash
available for distribution / reinvestment on an
annualized basis, before carried interest…
ANNUALIZED AS AT JUNE 30
(millions) 2019
Fee related earnings $ 1,065
Recurring dividends from invested capital 1,706
2,771
Financing and operating costs (650)
$ 2,121
64We distribute ~ 30% to shareholders
ANNUALIZED AS AT JUNE 30
(millions) 2019
Cash available for distribution / reinvestment $ 2,121
Common share dividends (636)
Cash available for distribution / reinvestment, net 1,485
Percent distributed to shareholders 30%
The balance is available to reinvest for growth or return to shareholders
65The majority of our fee revenues are
contracted and predictable…
Fee Bearing Capital Annualized Fee Revenues
10% 7%
PUBLIC SECURITIES PUBLIC SECURITIES
3% 2%
LONG-LIFE PRIVATE FUNDS LONG-LIFE PRIVATE FUNDS
39% 48% 41% 50%
LISTED CLOSED-END CLOSED-END LISTED
PARTNERSHIPS PRIVATE FUNDS PRIVATE FUNDS PARTNERSHIPS
90% of fee bearing capital is perpetual or long-term
Fee revenues are contracted based on long-term contracts and pre-defined incentives
Notes/Assumptions:
1. As at June 30, 2019.
2. Performance income includes incentive distributions, performance fees and carried interest.
66…and our fee rates and margins are sustainable
as we grow
Annualized Fee Related Earnings Average Fee Rate2
(millions) (basis points)
2019
Base Management Fees 112 bps
Private $ 760
Listed 565
Public 116 102 bps
Incentive distributions 257
Performance & other fees 77
1,775
Direct costs (710) 2015 2016 2017 2018 2019
$ 1,065
Fee Related Earnings FRE Margin3
(millions) $1,065
$861
$774
$672 61%
$573
53%
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
Notes/Assumptions:
1. As at and annualized for the period ending June 30, unless otherwise stated.
2. Including fees associated with BPY capital issued relating to the privatization of GGP.
3. For the LTM period ended June 30, excluding BBU performance fees.
6710-year carry realizations are now
expected to total $15 billion
Existing Funds Only1
(billions)
$16
$14
$12
$10
$8
$6
$4
$2
$0
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Notes/Assumptions:
1. Excludes Oaktree funds.
2. See Notice to Recipients and endnotes, including endnote 7.
68Growth Profile
3 69Over the past 20 years, BAM has grown at an 18%
annual total return, or a 27.2x multiple of capital
$27.2
18%
Total
Return
$1.0
1
1999 2019
Notes/Assumptions:
1. Assumes $1 dollar of capital invested on June 30, 1999 and distributions are reinvested.
70But what is important is
our future growth
71Over five years, private fund and public securities
fee bearing capital should increase to nearly $300 billion
Private Funds & Public Securities – Fee Bearing Capital
($billions)
Credit &
Public Securities4 Outflows
$293B
------ Flagship Series ------ Core & Other3
Beginning 2024
2021-2023
Oaktree
$162B2
$99B1
2019 13% 2024
CAGR
Notes/Assumptions:
1. Opening private funds and public securities fee bearing capital as at June 30, 2019.
2. Includes our share of Oaktree’s fee-generating AUM as if the merger closed on June 30, 2019.
3. Core & Other includes the remainder of capital to be raised in our current vintage of flagship fundraising, to be completed by the first half 2020.
4. Credit & Public Securities includes fundraising in BAM’s credit strategies as well as net growth in public securities and Oaktree fee-generating AUM.
5. See Notice to Recipients and endnotes, including endnotes 2, 11 and 12.
72…and listed partnerships’ capitalization should
increase to over $100 billion
Listed Partnerships – Fee Bearing Capital
($billions)
Issuances $103B
Market Value Growth
(BPY, BBU)
Distribution Growth
(BEP, BIP, TERP, BPY)
$65B1
10%
CAGR
Notes/Assumptions:
1. Opening listed partnership fee bearing capital as at June 30, 2019.
2. See Notice to Recipients and endnotes, including endnote 11.
73In aggregate, we expect to increase our fee bearing
capital to nearly $400 billion in the next five years
AS AT JUNE 30
(billions) 20191 ~5 Years1
Listed partnerships $ 65 $ 103
Private funds & public securities
Flagship private funds 53 112
Core and other funds 26 60
Credit & public securities2 83 121
162 293
Fee bearing capital $ 227 $ 396 +12%
CAGR
Notes/Assumptions:
1. Includes Brookfield’s share of its ownership in Oaktree.
2. Credit & public securities includes fundraising in BAM’s credit strategies as well as net growth in public securities and Oaktree fee-generating AUM.
3. See Notice to Recipients and endnotes, including endnotes 11 and 12.
74The increase in fee bearing capital should generate
strong growth in fee related earnings
AS AT JUNE 30
(millions) 20191 ~5 Years
Base fees $ 1,441 $ 2,875
IDRs 257 625
Other fees 77 180
Fee revenues 1,775 3,680
Direct costs (710) (1,470)
Brookfield FRE 1,065 2,210
Oaktree FRE2 125 325
+16%
Fee related earnings $ 1,190 $ 2,535 CAGR
Notes/Assumptions:
1. Annualized as at June 30.
2. Oaktree fee related earnings at BAM’s share.
3. See Notice to Recipients and endnotes, including endnotes 8, 11 and 12.
75And increase our potential to earn carried interest
Carry Eligible Capital Annualized Carried Interest, Gross
(billions) (billions)
$200 $4.2
16% 18%
CAGR CAGR
$94 $1.8
2019 2024 2019 2024
Brookfield Oaktree 1 Brookfield Oaktree 1
Notes/Assumptions:
1. At BAM’s share.
2. As at June 30.
3. See Notice to Recipients and endnotes, including endnotes 8, 11 and 12.
76Growing cash flows significantly increase
our invested capital
Invested Capital
($billions)
Cash Retained –
Distributions from Capitalization
Invested Capital and Dividends
$75B
-7
12
Cash Retained –
Asset Manager
14
5
Value Appreciation
(BBU, Other)2
Distribution Increase
(BEP, BIP, BPY)2 4
$45B1 7
2019 11% ~5 Years
CAGR
14
Notes/Assumptions:
1. Opening “Blended” invested capital value as at June 30, 2019, except investment in listed investments which are based on share prices as at September 20, 2019, excluding
BPY which is valued based on June 30, 2019 IFRS values.
2. See Notice to Recipients and endnotes, including endnotes 9 and 13.
77Putting it all together
78Plan value results in $141 per share
over the next five years…
~5 Years Multiple ~5 Years
(millions) (billions, except
per share amounts)
Asset manager
Fee related earnings $ 2,535 20x $ 51
Generated carried interest, net 2,740 10x 27
Accumulated carried interest, net 7
85
Asset owner
Invested capital 75
Leverage (11)
64
Total plan value $ 149 22%
Total
Plan value per share1 $ 141 Return2
Notes/Assumptions:
1. Per share amount calculated using total diluted shares as at June 30, 2019, plus the BAM shares issued in relation to the Oaktree transaction.
2. Total return includes dividends and is calculated using public pricing ($53.90 per share as at September 20, 2019).
3. See Notice to Recipients and endnotes, including endnotes 10, 11, 12 and 13.
79…driven by fundraising and investing
Cash
Retained $141
Value Creation –
Invested Capital 18
Value Creation –
Carry 11
Value Creation –
Fee Related Earnings 18
Discount to 25
Plan Value2
$54 15
22%
2019 Total ~5 Years
Market Price Return
Notes/Assumptions:
1. All figures on a per share basis. 2019 per share basis calculated using total diluted shares as at June 30, 2019. 2024 per share calculated including the BAM shares
issued in relation to the Oaktree transaction.
2. Current discount to plan value per slide 51, based on September 20, 2019 share price of $53.90.
3. See Notice to Recipients and endnotes, including endnotes 10, 11, 12 and 13.
80There is additional value creation potential
beyond our plan
32
Fee Related Earnings $167
Invested Capital 6
20
4 1
$141
22% -100bps 26%
Total Return Total Return
DECREASE IN
INTEREST RATES
Notes/Assumptions:
1. Plan value per share. See Notice to Recipients and endnotes, including endnotes 10 and 15.
81The cash available for distribution, before carried interest,
should be over $5 billion annually…
(millions) ~5 Years
Fee related earnings1 $ 2,535
Distributions from investments 3,285
Financing and corporate costs (680)
Cash available for distribution / reinvestment $ 5,140
Notes/Assumptions:
1. Including our share of Oaktree’s fee related earnings.
2. See Notice to Recipients and endnotes, including endnotes 13 and 14.
82… and over $6 billion with carried interest
$6.3
$5.5
$4.3
$3.6
$3.3
$2.5
$5.1
$4.4
$3.8
$2.7 $3.2
$2.1
2019 2020 2021 2022 2023 2024
(billions)
Cash available for distribution and/or reinvestment, before carried interest
Realized carried interest, net
Notes/Assumptions:
1. See Notice to Recipients and endnotes, including endnotes 7, 13 and 14.
83Over the next five years, cumulative cash flow
generated should surpass $20 billion
Cash flow will be allocated to:
1 Participate in the growth of our listed partnerships
2 Seed new investment strategies
3 Repurchase shares for value
4 Serve as additional liquidity at any stage of a market cycle
Notes/Assumptions:
1. See Notice to Recipients and endnotes, including endnotes 7 and 14.
84And looking out 10 years… we can
return more meaningful capital to shareholders
(millions)
Cumulative
~10 Years1
Net cash from:
Fee related earnings $ 25,000
Net invested capital 30,000
Realized carried interest, net 15,000
65,000
Cash investment into Listed Partnerships (10,000)
Return of capital through dividends (10,000)
Available for share repurchases $ 45,000
Notes/Assumptions:
1. Per Brookfield plan, consistent with 5-year plan assumptions.
2. See Notice to Recipients and endnotes, including endnotes 7 and 14.
85We want to leave you with four important points
1 Our business is resilient and growing rapidly
2 We are generating over $2.5 billion, which is capable of
reaching $6 billion of annual cash flows over the next five years
3 Carry is continuing to grow and is very meaningful
4 Excess cash flow will be returned to owners unless better
alternatives are found
Notes/Assumptions:
1. Refer to slide 83.
86Q&A
87Endnotes
1. AUM is calculated as follows: (i) for investments that Brookfield consolidates for accounting purposes or actively manages, including investments of which Brookfield or a
controlled investment vehicle is the largest shareholder or the primary operator or manager, at 100% of the investment’s total assets on a fair value basis and (ii) for all other
investments, at Brookfield’s or its controlled investment vehicles’, as applicable, proportionate share of the investment’s total assets on a fair value basis. References to AUM of
$509 billion as at June 30, 2019 is illustrative to include 100% of Oaktree AUM as at June 30, 2019, as if the merger had closed on such date.
2. Fee bearing capital of $227 billion is illustrative to include our proportionate share of Oaktree fee-generating AUM as at June 30, 2019.
3. Institutional investors include total institutional investors across Brookfield and Oaktree private fund strategies.
4. Gross IRR on current Brookfield private funds, as presented on slide 47, is on existing carry eligible funds, excluding open-ended funds and funds categorized as “Other” in
Brookfield’s Q2 2019 Supplemental Information available at brookfield.com.
5. The actual realized returns on current unrealized investments may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to
Recipients.
6. Gross IRR, as presented on slide 47, reflects performance before fund expenses, management fees (or equivalent fees) and carried interest.
7. Current and future gross generated carried interest on existing funds, as presented on slide 48, and gross realized carried interest expectations, as presented on slide 68, is
illustrative only. Actual results may vary materially and are subject to market conditions and other factors and risks, as well as certain assumptions, that are set out in our Notice
to Recipients.
8. The value of the asset manager within our Plan Value assumes a 60% margin on annualized fee revenues and a 70% margin on gross target carried interest. The multiple reflects
Brookfield's estimates of appropriate multiples applied to fee related earnings and carried interest in the alternative asset management industry based on, among other things,
industry reports. These factors are used to translate earnings metrics into value in order to measure performance and value creation for business planning purposes.
9. The value of our invested capital within our Plan Value represents blended value, which is the quoted value of listed investments and IFRS value of unlisted investments, subject
to two adjustments. First, we reflect BPY at its IFRS value as we believe that this best reflects the fair value of the underlying properties. Second, we reflect Brookfield Residential
at its privatization value.
10. Illustrative stock price analysis is not intended to forecast or predict future events, but rather to provide information utilized by Brookfield in measuring performance for business
planning purposes, based on the specific assumptions and other factors described herein and in our Notice to Recipient.
11. Fee bearing capital, carry eligible capital and invested capital growth is illustrative only. Actual results may vary materially and are subject to market conditions and other factors
and risks, as well as certain assumptions, that are set out in our Notice to Recipients.
12. Growth assumptions relating to Oaktree are disclosed in the Form F-4 registration statement as filed with the Securities and Exchange Commission, effective June 20, 2019.
Results may vary materially and are subject to market conditions and other factors and risks that are set out in our Notice to Recipients.
13. Growth in invested capital relating to cash retained incudes cashflow from fee related earnings, realized carried interest, invested capital cash flow and dispositions of directly held
assets. Accumulated balances are reinvested at 8%. Capitalization and dividends paid out during the period assume a constant capitalization level and 7% annual growth in BAM
dividends.
14. Growth in free cashflow includes growth in distributions from listed investments, assuming dividend growth at mid-point of target distribution growth rates, and 5% growth in
corporate costs, and assumes current capitalization. Actual results may vary materially and are subject to market conditions and other factors and risks that are set out in our
Notice to Recipients.
15. Interest rate sensitivity for listed partnerships includes decrease in 100 bps to the current yield or capitalization rate of the listed and unlisted investments and reduces the
expected yield on cash and financial assets by 100 bps.
88Notice to Recipients
Investor Day 2019 – Notice to Readers
Brookfield is not making any offer or invitation of any kind by communication of this document to the recipient and under no circumstances is it to be construed as a prospectus or an
advertisement.
Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of June 30, 2019 and not as of any future date, is subject to change, and,
unless required by law, will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing or changes occurring after the date
hereof.
Unless otherwise noted, all references to “$” or “Dollars” are to U.S. Dollars.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
This presentation contains “forward-looking information” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of the U.S.
Securities Act of 1933, the U.S. Securities Exchange Act of 1934, and, “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any
applicable Canadian securities regulations. .
Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include, but are not limited to, statements which reflect
management’s expectations regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing
objectives, strategies and outlook of the Company and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent
periods. Often, but not always, forward-looking information can be identified by the use of forward-looking terminology such as “expects,” “likely,” “anticipates,” “plans,” “believes,”
“estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts,” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,”
“would” and “could.”
Below are certain of the forward-looking statements that are contained in this presentation and a number of assumptions underlying them.
Where this presentation refers to “gross carried interest” or “carried interest,” carried interest for existing funds is based on June 30, 2019 carry eligible capital and carried interest for
future funds is based on Brookfield’s estimates of future fundraising as at June 30, 2019, as described below. In addition, this presentation assumes that existing and future funds meet
their target gross return. Target gross returns are typically 20+% for opportunistic funds; 13% to 15% for value-add funds; 12% to 15% for credit and core plus funds. Fee terms vary by
investment strategy (carried interest is approximately 15% to 20% subject to a preferred return and catch-up) and may change over time. This presentation assumes that capital is
deployed evenly over a four-year investment period and realized evenly over three years of sales. The year in which such sales commence varies by investment strategy and ranges
from year 6 to year 10.
Where this presentation refers to “future fundraising,” or “growth in fee bearing capital” we assume that flagship funds are raised every two to three years based on historical fund
series and non-flagship funds are raised annually within certain strategies, and in other strategies every two years. Fund series’ sizes remain constant and consistent with target funds
from period-to-period. This presentation also assumes that distributions are based on fund realizations evenly over three years of sales. The year in which such sales commence varies
by investment strategy and ranges from year 6 to year 10.
References to “distribution, growth, market valuation, and issuances relating to listed partnerships,” include the following assumptions: (i) BIP, BEP, and TERP grow at a rate
equal to the mid-point of their target distribution growth rate, assuming current yield; (ii) the market price to IFRS discount on BPY is eliminated; (iii) BBU share price grows at a 10%
annual rate; and (iv) total listed partnership capitalization includes issuances related to debt and preferred equity for BPY, BIP and BEP, based on a debt to total capitalization ratio of
20-30%.
89Notice to Recipients cont’d
Where this presentation refers to “fee related earnings,” fee related earnings from listed partnerships and private funds are based on fee bearing capital increasing in accordance with
slide 74. The listed partnership management fees for BPY, BEP and TERP are fixed fees on initial capitalization and an additional fee of 1.25% on the amount in excess of initial
capitalization. Management fees for BIP and BBU are 1.25% of total capitalization. Fee terms for private funds vary by investment strategy (generally, within a range of approximately
1-2%). The incentive distribution rights of the listed partnerships are based on a mid-point of the applicable listed partnership’s distribution growth rate as described above. Other fees
include the BBU performance fee assuming a 10% BBU annual share price growth. Fee related earnings assumes a margin of 60%.
Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon
reasonable assumptions and expectations, the reader should not place undue reliance on forward- looking statements and information because they involve known and unknown risks,
uncertainties and other factors, many of which are beyond our control, which may cause our and our subsidiaries’ actual results, performance or achievements to differ materially from
anticipated future results, performance or achievements expressed or implied by such forward-looking statements and information.
Some of the factors, many of which are beyond Brookfield’s control and the effects of which can be difficult to predict, but may cause actual results to differ materially from those
contemplated or implied by forward-looking statements include, but are not limited to: (i) investment returns that are lower than target; (ii) the impact or unanticipated impact of general
economic, political and market factors in the countries in which we do business; (iii) the behavior of financial markets, including fluctuations in interest and foreign exchange rates;
(iv) global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; (v) strategic actions including dispositions; the ability to
complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits; (vi) changes in accounting policies and methods used to report
financial condition (including uncertainties associated with critical accounting assumptions and estimates); (vii) the ability to appropriately manage human capital; (viii) the effect of
applying future accounting changes; (ix) business competition; (x) operational and reputational risks; (xi) technological change; (xii) changes in government regulation and legislation
within the countries in which we operate; (xiii) governmental investigations; (xiv) litigation; (xv) changes in tax laws; (xvi) ability to collect amounts owed; (xvii) catastrophic events, such
as earthquakes and hurricanes; (xviii) the possible impact of international conflicts and other developments including terrorist acts and cyberterrorism; (xix) the introduction, withdrawal,
success and timing of business initiatives and strategies; (xx) the failure of effective disclosure controls and procedures and internal controls over financial reporting and other risks;
(xxi) health, safety and environmental risks; (xxii) the maintenance of adequate insurance coverage; (xxiii) risks specific to our business segments including our real estate, renewable
power, infrastructure, private equity, and residential development activities; (xxiv) and factors detailed from time to time in our documents filed with the securities regulators in Canada
and the United States.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements, investors and others should
carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, we undertake no obligation to publicly update or revise any forward-
looking statements or information in this presentation, whether as a result of new information, future events or otherwise.
CAUTIONARY STATEMENT REGARDING OAKTREE
This presentation includes information regarding Oaktree Capital Group, LLC. On March 13, 2019, Brookfield and Oaktree announced an agreement whereby Brookfield will acquire
approximately 62% of the Oaktree business. As of the date hereof, the transaction has not closed and remains subject to the satisfaction or waiver of any remaining conditions,
including regulatory approvals, necessary to complete the transaction. Information contained in this presentation regarding Oaktree may be subject to the closing of the transaction and
is forward-looking, included for illustrative purposes only.
90Notice to Recipients cont’d
CAUTIONARY STATEMENT REGARDING PAST AND FUTURE PERFORMANCE AND TARGET RETURNS
Past performance is not indicative nor a guarantee of future results. There can be no assurance that comparable results will be achieved in the future, or that future investments or
fundraising efforts will be similar to the historic results presented herein (because of economic conditions, the availability of investment opportunities or otherwise). Any information
regarding prior investment activities and returns contained herein has not been calculated using generally accepted accounting principles and may not have been audited or verified by
an auditor or any independent party. Unless otherwise indicated, internal rates of return (including targeted rates of return) are presented on a “gross” basis (i.e., they do not reflect
management fees (or equivalent fees), carried interest (or incentive allocation), taxes, transaction costs and other expenses to be borne by investors, which in the aggregate are
expected to be substantial).
The target returns set forth herein are for illustrative and informational purposes only and have been presented based on various assumptions made by Brookfield in relation to the
investment strategies being pursued by the funds, any of which may prove to be incorrect. There can be no assurance that targeted returns, diversification, or asset allocations will be
met or that an investment strategy or investment objectives will be achieved. Due to various risks, uncertainties and changes (including changes in economic, operational, political or
other circumstances) beyond Brookfield’s control, the actual performance of the funds could differ materially from the target returns set forth herein. In addition, industry experts may
disagree with the assumptions used in presenting the target returns.
Any changes to assumptions could have a material impact on projections and actual returns. Actual returns on unrealized investments will depend on, among other factors, future
operating results, the value of the assets and market conditions at the time of disposition, legal and contractual restrictions on transfer that may limit liquidity, any related transaction
costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the valuations used in the prior performance data contained herein
are based. Accordingly, the actual realized returns on unrealized investments may differ materially from the returns indicated herein.
No assurance, representation or warranty is made by any person that the target returns will be achieved, and undue reliance should not be put on them. Prior performance is not
indicative of future results and there can be no guarantee that the funds will achieve the target returns or be able to avoid losses.
CAUTIONARY STATEMENT REGARDING USE OF NON-IFRS MEASURES
This presentation contains references to financial metrics that are not calculated in accordance with, and do not have any standardized meaning prescribed by, International Financial
Reporting Standards (“IFRS”). We believe such non-IFRS measures including, but not limited to, funds from operations (“FFO”) and invested capital, are useful supplemental measures
that may assist investors and others in assessing our financial performance and the financial performance of our subsidiaries. As these non-IFRS measures are not generally accepted
accounting measures under IFRS, references to FFO and invested capital, as examples, are therefore unlikely to be comparable to similar measures presented by other issuers and
entities. These non-IFRS measures have limitations as analytical tools. They should not be considered as the sole measure of our performance and should not be considered in
isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. For a more fulsome discussion regarding our use of non-IFRS measures
and their reconciliation to the most directly comparable IFRS measures refer to our documents filed with the securities regulators in Canada and the United States.
OTHER CAUTIONARY STATEMENTS
Certain of the information contained herein is based on or derived from information provided by independent third-party sources. While Brookfield believes that such information is
accurate as of the date it was produced and that the sources from which such information has been obtained are reliable, Brookfield does not guarantee the accuracy or completeness
of such information and has not independently verified such information or the assumptions on which such information is based. This document is subject to the assumptions (if any)
and notes contained herein.
The information in this document does not take into account your investment objectives, financial situation or particular needs and nothing contained herein should be construed as
legal, business or tax advice. Each prospective investor should consult its own attorney, business adviser and tax advisor as to legal, business, tax and related matters concerning the
information contained herein.
91Brookfield Asset Management I N V E S T O R D AY SEPTEMBER 26, 2019
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