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Is Brookfield Asset Management (BAM) a Smart Long-Term Buy?

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Baron Funds, an asset management firm, published its “Baron Durable Advantage Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. Baron Durable Advantage Fund (the "Fund") declined 10.3% (Institutional Shares) during the first quarter, compared to the 4.6% decline for the S&P 500 Index (the "Index"), the Fund's benchmark. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Baron Durable Advantage Fund mentioned Brookfield Asset Management Inc. (NYSE:BAM) and explained its insights for the company. Founded in 1997, Brookfield Asset Management Inc. (NYSE:BAM) is a Toronto, Canada-based investment management company with a $80.2 billion market capitalization. Brookfield Asset Management Inc. (NYSE:BAM) delivered a -18.98% return since the beginning of the year, while its 12-month returns are up by 0.57%. The stock closed at $48.92 per share on May 17, 2022.

Here is what Baron Durable Advantage Fund has to say about Brookfield Asset Management Inc. (NYSE:BAM) in its Q1 2022 investor letter:

"During the first quarter, we initiated one new investment: the alternative asset manager, Brookfield Asset Management (NYSE:BAM). We also utilized the market correction to add to 4 existing positions in which our conviction level has increased: Alphabet, Accenture, Ecolab and Nice. Lastly, we reduced 22 positions and liquidated 3 others as we further consolidated the portfolio in our higher conviction ideas.

We acquired a new position in Brookfield Asset Management Inc. during the first quarter. Brookfield is one of the largest alternative asset managers in the world focused on infrastructure, real estate, credit, and private equity investments and has approximately $700 billion of assets under management. We have admired what CEO Bruce Flatt and his managing partners, all of whom have significant equity ownership in the business, have accomplished over the last 20-plus years with the shares compounding at a 20% annualized rate driven by the growing allocation to real assets and alternatives (which have grown from about 5% of portfolios in 2000 to 30% in 2021) while maintaining a conservative balance sheet with downside protection.

We believe Brookfield remains well-positioned for continued solid growth due to: i) secular growth opportunity in the alternative asset management space as a "fixed income alternative" with the top 10 asset managers capturing a bigger portion of the pie; and ii) Brookfield's ability to take share due to its superior investment track record, global reach and operating platform, and scale and diverse product offering. Lastly, we believe management is intent about maximizing the value of its asset management arm or pure "fee business" with a plan to spin-out this business in the near future. We have long believed that Brookfield's asset management business

has been under-appreciated in the public market due to the complex structure of the company with its on-balance sheet investments. Brookfield's closest peers that have pure "asset-light" business models are trading at material premiums in the public markets and we believe there is a minimum of 30% value upside on in-place earnings solely through this value crystallization event (not taking into consideration any future growth). In addition, management has laid out a credible plan at its most recent investor day to more than double AUM over the next five years, which we believe will result in material equity value creation."


Our calculations show that Brookfield Asset Management Inc. (NYSE:BAM) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Brookfield Asset Management Inc. (NYSE:BAM) was in 29 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 32 funds in the previous quarter. Brookfield Asset Management Inc. (NYSE:BAM) delivered a -13.42% return in the past 3 months.

In August 2021, we also shared another hedge fund’s views on Brookfield Asset Management Inc. (NYSE:BAM) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.