Brookfield Already Reaping the Benefit of Its Asset Management Spin-off

By Franco Faraudo

The Canadian investment firm the Brookfield Corporation announced its earnings last week, its first since it spun off its “fee generating” asset management arm (with the new ticker symbol BAM) last year. As expected, the parent company saw a drop in net income from around $3.5 billion last year to $44 million in the same period this year. As bad as that might sound, the main reason for the drop was the $5.2 billion in earnings that the company paid out to shareholders. The new asset management spin-off has done particularly well, earnings for that segment of the company grew by 26 percent.

Stock prices for both Brookfield Corporation and Brookfield Asset Management are down significantly compared to last year, but with plenty of capital reserves management sees that as more of an opportunity than a threat. Last year the company bought back nearly $700 million in stock and this year, if the stock price stays low, it will buy back even more. The softening real estate market has affected analysts’ outlooks for the company but the company seems undaunted. Its aggressive expansion plans show how well-capitalized companies can not only survive a drop in real estate valuations, but can benefit from them as well.

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