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Brookfield Asset Management (NYSE: BAM) invests in physical assets, including real estate, energy, and infrastructure investments. The firm has over $100 billion in assets under management.[1] Essentially a publicly-traded private equity firm, Brookfield earns over 50% of its revenue by owning, renting, and operating office and residential properties. The firm also invests in global hydroelectric power generation plants, timberlands, and electricity transmission infrastructure in Brazil and Canada. Brookfield invests capital on behalf of its institutional investors and itself. In most cases, institutions provide funds for BAM to manage.

Rising Interest rates as well as fluctuating foreign exchange rates affect BAM operations. When interest rates rise, Brookfield (and the firms whose money Brookfield manages) is less inclined to borrow and make leveraged investments. Brookfield is headquartered in Canada and owns and operates properties, power plants, and timberlands across the globe, making the firm subject to worldwide foreign exchange rates. Also, adverse weather conditions around the globe hurt BAM's timberland and hydroelectric power segments.

Business Overview

Business and Financial Metrics[2]

In 2009, BAM had $100 billion in total assets under management.[3] The company generated $454 million in net income on $12.1 billion in total revenues. This represents a 30.0% decline in net income and a 6.4% dip in total revenue from 2008.

IMAGE:BAM-Income2009.jpg[2]

Business Segments [2]

BAM divides its business into the following segments.

  • Development (16.2% of total revenue): This segment includes investments in residential and other properties in or waiting to be in development.
  • Renewable Power Generation (10.0% of total revenue): BAM also invests in power plants around the globe. Brookfield mainly channels funds into hydroelectric plants in the US, Canada, and Brazil.
  • Infrastructure (3.5% of total revenue): Brookfield's Infrastructure investments include money placed in the timber and electricity transmission segments. BAM manages 2.5 million acres of timberland, which is valued at $3 billion.[5] Also, the firm is the largest operator of electrical transmission lines in Chile.
  • Special Situations (27.7% of total revenue): This segment bridges lending and real estate finance, which are operated for BAM and institutional partners.[6]
  • Public Securities (4.0% of total revenue): This segment manages $24 billion of fixed income and equity securities for institutional investors.

IMAGE:BAM-Segments2009.jpg[2]

Key Trends & Forces

Rising interest rates and foreign exchange rate fluctuations hurt BAM

BAM owns and operates real estate, power plants, and timberlands around the world, and are affected foreign exchange rates. With major holdings outside of Canada (especially in the US), Brookfield stands to lose from a falling dollar.

Adverse weather conditions hurt Brookfield timberland and hydroelectric operations

Brookfield's Power Generation and Development segments are both at the mercy of global weather conditions. Not only is Brookfield's Development segment affected by bad weather conditions, but its Power Generation operations are vulnerable as well. In general, Brookfield, more than most asset managers, is subject to adverse weather conditions around the globe.

Competition

Though no asset managers totally match the distribution of assets of Brookfield, a few do overlap BAM operations. Competitors are primarily companies that also invest in physical capital, which include the Vornado Realty Trust (VNO), SL Green Realty (SLG), and Boston Properties (BXP).

References

  1. BAM 2009 40-F pg. 1  
  2. 2.0 2.1 2.2 2.3 BAM 2009 40-F pg. 54  
  3. BAM 2009 40-F pg. 42  
  4. Hoovers: Brookfield Asset Management
  5. BAM 2007 Annual Report pg. 114  
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