Brookfield Asset Management INVESTOR DAY 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. 10
Total assets are now over $500 billion $509B 100,000+ 1,800+ 30+ $227B ASSETS UNDER INSTITUTIONAL FEE BEARING INVESTORS COUNTRIES CAPITAL MANAGEMENT EMPLOYEES Notes/Assumptions: 1. As at June 30, 2019. See Notice to Recipients and endnotes, including endnotes 1, 2, and 3. 11
But 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 12
Our growth strategy continues to focus on three simple factors 1 2 3 Increasing Growing our Investing wisely alternative product offerings allocations 13
Across all major capital markets interest rates are low, or negative EU Japan U.S. 14
There are two consequences of this rate environment 15
1 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. 16
2 Allocations to alternatives are increasing Since 2009, ~ $6 trillion allocated to private assets Notes/Assumptions: 1. Source: 2019 Bain Global Private Equity Outlook. 17
And targets are growing at an accelerating rate… 25% 15% 2016 2018 Notes/Assumptions: 1. Source: Willis Towers Watson Global Pension Assets Study, 2019. 18
But if we are in the world as described, our 40% target will likely go to 60% 2000 2030 1 2018 2 60%+ 40% 25% 75% 5% 95% Real Assets/Alternatives Equity/Fixed Income Notes/Assumptions: 1. Source: Willis Towers Watson Global Pension Assets Study, 2019. 2. Brookfield estimate. 19
Because 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. 21
To sum up the opportunity Alternatives are one of the few places returns exist 1 Institutions are continuing to increase allocations 2 Capital is increasing exponentially 3 22
Investors are also consolidating the number of managers they invest with 23
According 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. 24
Our private fund strategy is evolving 2 1 3 Flagship Perpetual Bespoke Funds Core Strategies Opportunities 25
Our flagship funds are growing Previous Three Vintages Current (billions) 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. 26
Last year, we highlighted our added focus on growing our perpetual core and credit strategies Our clients need it to replace bonds 27
In the past year, we more than doubled our perpetual capital commitments $60+ $6 $2 2018 2019 Long-Term Target (billions) 28 28
And Oaktree adds to our current franchise: World class management team Scaled credit expertise Counter-cyclical fundraising strategy The ability to deliver scaled credit products 29 29
Today, the number of ways our clients can allocate capital to us is increasing Special Separately Opportunities Managed Program Accounts Co-investments 30
Leading 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. 31
But 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 32
We invested over $33 billion in the last 12 months 1 84% NORTH AMERICA 9% ASIA & OTHER $33B 4% 3% SOUTH AMERICA EUROPE Notes/Assumptions: 1. From July 1, 2018 – June 30, 2019. 33
New investments are currently being driven by four themes 34
1. Special situations in North America Forest City Westinghouse $6.8B $4.0B LARGE-SCALE CAPITAL LARGE-SCALE CAPITAL 35
2. The interest rate inversion, particularly in Europe 36
3. Banking stress in India 37
4. The reorganization of balance sheets in China 38
Irrespective of markets and politics, we continue to focus on : 1 2 Maintaining Deploying capital disciplined investing standards for value 3 4 Recycling proceeds Being patient, into higher yielding waiting for opportunities market breaks 39
Before getting into the numbers, we summarize : Our franchise is broader and deeper than ever before The backdrop for client capital is strong and increasing Despite lots of capital in the world, few people have the skills to transact in areas where we do If we can execute, the next 10 years are set up to be better than the last 10! 40
Financial Review Brian Lawson Managing Partner & CFO 41
Agenda Scorecard Resiliency Growth Profile 42
Our business is… Straightforward Transparent Resilient Growing 43
Scorecard 1 44
We achieved solid growth since this time last year... 2018 2019 1 AS AT JUNE 30 Fee bearing capital ($b) $ 129 $ 164 27% 24% Annualized fee revenues 2 ($m) 1,435 1,775 Target carried interest ($m) 1,115 1,660 49% 13% Annualized CAFDAR 3 ($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 250 $245 P 2000 $164 A $1,065 A 200 1500 150 1000 $147 P 100 $1,015 P 500 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 $72 A 2 $34 A 80 40 60 30 $35 P $56 P 40 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. 46
Our funds are tracking to meet or exceed their target returns 1 ... Total Carry Unrealized Target Eligible Carried Gross Gross AS AT JUNE 30, 2019 Vintage 2 Capital Interest IRR IRR (millions) 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 Only 1 (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. 48
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