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Brookfield Partners Eugene Gologursky / Getty Images

Brookfield Considers Splitting Off Its Asset-Management Unit

Brookfield is wagering the move will give the unit a better valuation based on the performance of other pure-play investment firms.

(Bloomberg)—Brookfield Asset Management Inc. may soon spin off its division that invests on behalf of institutions, a dramatic move that would reshape one of Canada’s biggest companies.

Brookfield is wagering the move will give the unit a better valuation based on the performance of other pure-play investment firms. The Toronto-based company, which announced the possible separation Thursday, would be positioned to capitalize on investor hunger for exposure to sectors such as real estate and private credit.

Alternative-asset managers are seeing strong demand from pensions, endowments and insurers for funds that can produce returns that aren’t correlated to stock and bond markets. Private equity giant Blackstone Inc. hauled in a record pile of new cash in the fourth quarter, putting it years ahead of schedule in hitting its asset target by 2026. Carlyle Group Inc.’s fresh capital almost doubled last year.

Brookfield has seen similar demand. The company on Thursday pointed to high interest in its flagship real estate fund as well as its first transition fund. Its opportunistic fund closed at $16 billion in the fourth quarter, the largest fund ever for the strategy.

In total, Brookfield’s fee-bearing capital surged to $364 billion, and fee-related earnings jumped 33% over the prior year.

The equity value of a separate company could be as much as $100 billion, or about $45 to $60 per share, Chief Executive Officer Bruce Flatt said in a letter to shareholders that announced the plan.

Brookfield’s shares were up 7.2% in premarket trading in New York.

While the move would likely make financial sense, it would remodel Brookfield, which had a market value of $93 billion as of Wednesday’s close.

A spinoff would separate the company that manages assets across its portfolio of real estate, infrastructure, credit, private equity and renewables from Brookfield’s own investment capital of $50 billion. The separation make Brookfield “asset-light,” a model preferred by investors.

The company said it had funds from operations of $1.04 a share in the fourth quarter, exceeding analysts’ estimates of 82 cents. Adjusted earnings totaled 66 cents, compared with estimates of 73 cents.

Brookfield plans to raise $125 billion for the next round of its flagship funds after it brings in $100 billion in the current round, Flatt said in September.

© 2022 Bloomberg L.P.

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