Brookfield Asset Management Ltd. Form 20-F Summary
Business context and reporting period
This is the annual Form 20-F for the fiscal year ended December 31, 2022, filed March 31, 2023. The filing is not a standalone 2022 fourth-quarter report; it presents the Manager’s results from July 4, 2022, its incorporation date, through December 31, 2022, and the Asset Management Company’s full-year 2022 results.
Brookfield Asset Management Ltd. was created in connection with the December 9, 2022 Arrangement and owns 25% of Brookfield Asset Management ULC, while Brookfield Corporation owns the remaining 75%. The Manager is a holding company whose principal asset is this equity-method investment. Class A shares trade on the NYSE and TSX under “BAM.”
Key financial and operating metrics
| Metric | 2022 | Comparable period |
|---|---|---|
| Manager net income | $19 million for July 4–December 31 | No comparable standalone period |
| Manager total assets | $3.2 billion | No comparable standalone period |
| Manager cash flow from operations | $1 million | No comparable standalone period |
| Asset Management Company revenue | $3.6 billion | $3.1 billion in 2021; up 17% |
| Asset Management Company net income | $2.9 billion | $2.8 billion in 2021 |
| Net income attributable to common stockholders | $1.9 billion | $1.9 billion in 2021 |
| Fee Revenues | $4.0 billion | $3.5 billion in 2021; up 15% |
| Fee-Related Earnings | $2.1 billion | $1.8 billion in 2021; up 15% |
| Distributable Earnings | $2.1 billion | $1.9 billion in 2021; up 11% |
| Fee-Bearing Capital | $417.9 billion | $364.1 billion at December 31, 2021; up 15% |
| Assets under management | Approximately $800 billion | Comparable filing value not provided here |
The Asset Management Company’s 2022 revenue included $2.8 billion of management fee revenue, $490 million of carried-interest allocations, $258 million of interest and dividend revenue, and $44 million of other revenue. Reported expenses were $1.4 billion, including $1.0 billion of compensation, operating and general and administrative expenses, $200 million of carried-interest compensation, and $154 million of interest expense.
Fee-Bearing Capital was approximately 83% long-dated or perpetual. Capital consisted of approximately $218.9 billion in long-term private funds, $127.2 billion in perpetual strategies, and $71.9 billion in liquid strategies. Inflows of $107.7 billion were partly offset by $22.0 billion of outflows, $12.2 billion of distributions, and $20.2 billion of negative market valuation adjustments.
The Asset Management Company ended 2022 with $3.5 billion of cash and cash equivalents, including approximately $3.3 billion deposited with Brookfield Corporation, total liabilities of $2.7 billion, and no corporate borrowings. Core liquidity was $3.5 billion, plus an undrawn $300 million revolving credit facility with Brookfield Corporation. The Manager had $1 million of cash, $784 million of liabilities, and access to a five-year $500 million revolving credit facility from the Asset Management Company; no amount was drawn at year-end.
Material changes versus the prior comparable period
- Fee-Bearing Capital increased by $53.7 billion, driven primarily by $107.7 billion of fundraising and deployments, despite lower market valuations and liquid-strategy outflows.
- Base management and advisory fees increased 22% on a pro forma basis, reflecting fundraising for flagship funds and growth in complementary strategies.
- Realized carried interest increased to $241 million from $49 million, while unrealized carried interest declined to $249 million from $299 million.
- No BBU performance fee was recognized in 2022; 2021 included a $157 million performance fee after BBU exceeded its prior high-water mark.
- Other income declined to $1.1 billion from $1.5 billion, primarily because valuation gains on BSREP III were lower than in 2021.
- Operating cash flow for the Asset Management Company was negative $374 million, compared with positive $1.4 billion in 2021. The change principally reflected working-capital movements and transaction-related balance settlements rather than a decline in underlying pre-working-capital operating inflows.
- The Arrangement resulted in the deconsolidation of BSREP III, settlement of legacy related-party balances, transfer of certain investments to Brookfield Corporation, and issuance of $1.8 billion of preferred tracking-share redeemable non-controlling interests.
- Oaktree’s 2022 revenue declined to $1.3 billion from $1.4 billion, and net income attributable to the Oaktree Asset Management Operating Group declined to $356 million from $412 million, primarily reflecting lower incentive fees and carried-interest allocations.
Guidance, outlook, risks and unusual items
Management did not provide quarterly or annual operating guidance. The Manager intends to distribute approximately 90% of its Distributable Earnings to shareholders quarterly and reinvest the balance, but dividends are discretionary and may vary or be eliminated.
Management identified continued long-term opportunities in fundraising, private wealth distribution, secondaries, technology, insurance, transition investing, renewable power, infrastructure, credit and real estate. The filing also describes a substantial pipeline for renewable power and transition investments, including the $15 billion Brookfield Global Transition Fund.
- The Manager has no independent operating revenue source and depends on distributions and other payments from the Asset Management Company.
- The Manager’s principal asset is its 25% interest in the Asset Management Company. Brookfield Corporation owns 75% and has significant influence over the business, creating potential conflicts of interest and dependence on related-party arrangements.
- Revenue and cash flow can be volatile because of carried interest, performance fees, investment realizations, market valuations, fundraising timing and the life cycle of private funds.
- Rising interest rates, weaker capital markets, inflation, geopolitical events, foreign exchange movements, illiquid investments and refinancing conditions could reduce asset values, fundraising, deployments and incentive income.
- Regulatory, litigation, cybersecurity, ESG, tax and reputational risks are material. The business is subject to extensive regulation across multiple jurisdictions.
- The filing states that the Manager’s disclosure controls were effective as of December 31, 2022, but it did not include management’s assessment or an auditor attestation of internal control over financial reporting because of the newly public company transition period.
- The Asset Management Company had a $2.8 billion commitment to BSREP III, of which $1.8 billion had been funded at December 31, 2022. Total uncalled fund commitments were $87.4 billion, approximately $46 billion of which was fee-bearing.
- After year-end, Oaktree exercised a put option requiring the Company to acquire an additional 6.1 million Oaktree units for $444 million, increasing ownership from approximately 64.4% to 68.2%.
- A quarterly dividend of $0.32 per share was declared on February 7, 2023. The Manager also announced a normal-course issuer bid in January 2023; no share repurchases occurred during 2022.
Investor verification checklist
- Reconcile the Manager’s $19 million period income with the Asset Management Company’s full-year and pro forma results, recognizing that the periods are not directly comparable.
- Review the calculation and reconciliation of Fee Revenues, Fee-Related Earnings and Distributable Earnings, which are non-GAAP measures and include Oaktree on an equity-accounted basis.
- Assess the quality and stability of the $417.9 billion of Fee-Bearing Capital, including the percentage that is long-dated or perpetual and the exposure to liquid-market valuations.
- Examine the impact of the Corporation’s 75% ownership, carried-interest entitlements, tracking shares, related-party deposits, cost-recovery agreements and potential conflicts of interest.
- Evaluate cash conversion, particularly the difference between $2.0 billion of operating inflows before working-capital and non-cash items and reported operating cash outflow of $374 million.
- Review the $87.4 billion of uncalled commitments, the $2.8 billion BSREP III commitment, and any clawback, backstop, guarantee or temporary-investment obligations.
- Consider valuation sensitivity for carried interest, real estate, private investments and other Level III or otherwise illiquid assets.
- Confirm post-year-end dividend payments, share repurchases, Oaktree ownership changes and any subsequent changes in credit facilities or related-party balances.