gokou3 Posted May 15, 2021 Share Posted May 15, 2021 I am especially impressed by this tidbit from the 2021Q1 PR: Quote we realized approximately $6.4 billion of disposition gains in the quarter, split $1.8 billion for Brookfield and $4.6 billion for our clients. The amounts on behalf of clients enabled us to realize carried interest of $681 million Not only the (some recently made) investments were collectively sold for an almost 100% gain ($13B proceeds resulting in $6.4B gain, implying a $6.6B cost), but the carry means that BAM only had to put in 28% of the capital ($1.8B/$6.4) to get 39% of the gain [($1.8+0.681)/$6.4]. The carry boosts their ROC by a factor of 1.4x. Link to comment Share on other sites More sharing options...
petec Posted May 15, 2021 Share Posted May 15, 2021 (edited) 2 hours ago, gokou3 said: I am especially impressed by this tidbit from the 2021Q1 PR: Not only the (some recently made) investments were collectively sold for an almost 100% gain ($13B proceeds resulting in $6.4B gain, implying a $6.6B cost), but the carry means that BAM only had to put in 28% of the capital ($1.8B/$6.4) to get 39% of the gain [($1.8+0.681)/$6.4]. The carry boosts their ROC by a factor of 1.4x. Plus the management fees. It’s a glorious business when it works and BAM are pretty good at it. The carry likely to be realised over the next few years is significant. Edited May 15, 2021 by petec Link to comment Share on other sites More sharing options...
ValueMaven Posted June 1, 2021 Share Posted June 1, 2021 BAM wins again. BIP has a 19.9% stake in Inter Pipeline and went active recently. Inter Pipeline took a higher bid. https://www.bloomberg.com/news/articles/2021-06-01/pembina-to-buy-inter-pipeline-for-c-8-3-billion-share-deal Link to comment Share on other sites More sharing options...
ValueMaven Posted June 2, 2021 Share Posted June 2, 2021 spoke too soon! BIP counter offers! https://bip.brookfield.com/press-releases/2021/06-02-2021-121054396 Link to comment Share on other sites More sharing options...
gokou3 Posted June 8, 2021 Share Posted June 8, 2021 Brookfield Announces Record Date for Special Dividend and Creation of Brookfield Asset Management Reinsurance Partners Ltd. https://money.tmx.com/en/quote/BAM.A/news/5051716456180969/Brookfield_Announces_Record_Date_for_Special_Dividend_and_Creation_of_Brookfield_Asset_Management_Reinsurance_Partners_Ltd How are you going to play this? Will BAMR be a rocket like TSU, or a dud like BPY? Link to comment Share on other sites More sharing options...
tiddman Posted June 8, 2021 Share Posted June 8, 2021 BAM shareholders will only get a tiny amount, 1 share per 145 held so this is like a 0.7% dividend. So if you really want to own more you'd have to buy more after the spin. Initially it is economically equivalent to BAM so just like buying BAM. With luck the unit price will tank at some point to give us an opportunity to buy as happened with BIP and BBU. I took a real hard look at Trisura when it was spun and just couldn't figure out what was special about it or what is prospects were. Now it is up 6x from the spin price. I am sure that Brookfield had a strategy for it and a market segment they wanted to take and have apparently done so, but I just couldn't predict it by looking at the post-spin Trisura. Not saying the same thing will happen here but Brookfield surely has a multi-year strategy in store for BAMR. The structure of the spin is different with this tracking stock which initially is economically equivalent to BAM. I assume that will change over time as they get capital into the reinsurance sub and it will eventually sprout its own wings. Link to comment Share on other sites More sharing options...
John Hjorth Posted June 8, 2021 Share Posted June 8, 2021 Thank you for sharing, gokou3, I sincerely hate this wholeheartedly [,but it was already expected for my part]. -Hum-hoo ... Link to comment Share on other sites More sharing options...
petec Posted June 8, 2021 Share Posted June 8, 2021 I don’t understand how it’s economically equivalent to BAM unless it’s convertible into BAM. Link to comment Share on other sites More sharing options...
tiddman Posted June 8, 2021 Share Posted June 8, 2021 (edited) I am not sure I get all of the details but it will be a tracking stock that tracks assets that are on BAM's balance sheet so initially will be equivalent economically, but not convertible. Like you can have multiple stocks in multiple markets that all track the same company, yet they trade independently and are not convertible into one another. I assume over time this will diverge as the company is capitalized and created and further spun. Edited June 8, 2021 by tiddman Link to comment Share on other sites More sharing options...
ValueMaven Posted June 9, 2021 Share Posted June 9, 2021 1) It's not a Unit (not an LP, but a C-Corp) 2) It is paired to BAM, thus economically the same for now. It's a special dividend basically for now... 3) At some point, BAMR will be unpaired from BAM, and will trade on its own fundamentals 4) BAMR is basically a reinsurance shell, until BAM puts all of their reinsurance business, or mergers with AEL or something of the sort Link to comment Share on other sites More sharing options...
ValueMaven Posted June 9, 2021 Share Posted June 9, 2021 wow I had NO idea Trisura is up 700% since its spinout 5 years ago!!! Link to comment Share on other sites More sharing options...
gokou3 Posted June 9, 2021 Share Posted June 9, 2021 My thinking is BAMR will trade at a premium to BAM, similar to the BEPC/BEP and BIPC/BIP pairs (but unlike BAMR/BAM, the premia for these c-corps are due to their tax advantages). Given BAM's promise of economic equivalency between BAMR and BAM (and assuming they keep their promise ), wouldn't BAMR be valued as BAM + a call option on the reinsurance business? i.e., if BAMR is less successful than BAM, then BAMR == BAM, and if BAMR performs better than BAM, then BAMR >> BAM? Link to comment Share on other sites More sharing options...
petec Posted June 9, 2021 Share Posted June 9, 2021 Aren’t BIPC and BEPC convertible? I thought that’s how they guaranteed economic equivalency without actually owning the same assets? (That and having the same dividend?) Link to comment Share on other sites More sharing options...
ValueMaven Posted June 9, 2021 Share Posted June 9, 2021 I dont see BAMR trading to a premium to BAM right now. It's a shell tracker. The reason BIPC and BEPC trade at sizable premiums is 1) The C-Corps allow retail investors to own these businesses, or economic stakes without the K1 filing requirement that the LPs have here in the states and 2) C-Corps can be bought by Index/passive funds. Since BAMR and BAM are both C-Corps, all you are doing is acquiring optionality on the reinsurance business (I wont be selling and plan on owning BAMR for a long time). Given the valuation spreads between BIP/BIPC and BEP/BEPC - I could see in the future that BAM converts all LP's into C-Corps to simplify the structure + get higher market valuations. Kinder Morgan did this back in 2014, and so have the large Private Equity firms. Link to comment Share on other sites More sharing options...
tiddman Posted June 9, 2021 Share Posted June 9, 2021 11 hours ago, ValueMaven said: wow I had NO idea Trisura is up 700% since its spinout 5 years ago!!! Yep I have been watching helplessly as the stock took off like a rocket ship with me left behind. I feel pretty certain that Brookfield only creates or spins a company if they have a pretty firm 3-5 year plan for it, and some particular market segment or something that they are going after. When Trisura was spun I read everything about it and that segment of the insurance industry and what I could determine as their peers and just never really got a bead on anything in particular. And here we are 6x higher than when we started. I am not big on "faith based investing" but I suppose I should have just taken a position based on faith... I am not saying the same thing is going to happen with BAMR but they obviously have a plan in store. Oaktree brought credit capabilities that Brookfield did not previously have which lend themselves to insurance float. And we see how this can take shape with AEL. I think that BAM using their own balance sheet to start a reinsurance business is highly unusual and will surely only be a temporary arrangement until they can capitalize the company separately. They must see an opportunity here. I doubt that they want to engage in the actual reinsurance business and am guessing they will lay the risks off to reinsurers somehow, and instead focus on investing the float. I really doubt that BAM wants to put their balance sheet in the way of natural disasters for example. Will be interesting to see how it plays out. Link to comment Share on other sites More sharing options...
rkbabang Posted June 9, 2021 Share Posted June 9, 2021 9 minutes ago, tiddman said: Yep I have been watching helplessly as the stock took off like a rocket ship with me left behind. I feel pretty certain that Brookfield only creates or spins a company if they have a pretty firm 3-5 year plan for it, and some particular market segment or something that they are going after. When Trisura was spun I read everything about it and that segment of the insurance industry and what I could determine as their peers and just never really got a bead on anything in particular. And here we are 6x higher than when we started. I am not big on "faith based investing" but I suppose I should have just taken a position based on faith... I am not saying the same thing is going to happen with BAMR but they obviously have a plan in store. Oaktree brought credit capabilities that Brookfield did not previously have which lend themselves to insurance float. And we see how this can take shape with AEL. I think that BAM using their own balance sheet to start a reinsurance business is highly unusual and will surely only be a temporary arrangement until they can capitalize the company separately. They must see an opportunity here. I doubt that they want to engage in the actual reinsurance business and am guessing they will lay the risks off to reinsurers somehow, and instead focus on investing the float. I really doubt that BAM wants to put their balance sheet in the way of natural disasters for example. Will be interesting to see how it plays out. I held on to it based on the fact that even though BAM spun it off, Partners Value Investments was holding on to it. My thoughts was that they most likely understood it a lot better than I. I've been adding to it significantly along the way and am up over 300% on my total cost basis now. Link to comment Share on other sites More sharing options...
Xerxes Posted June 9, 2021 Share Posted June 9, 2021 8 hours ago, gokou3 said: My thinking is BAMR will trade at a premium to BAM, similar to the BEPC/BEP and BIPC/BIP pairs (but unlike BAMR/BAM, the premia for these c-corps are due to their tax advantages). Given BAM's promise of economic equivalency between BAMR and BAM (and assuming they keep their promise ), wouldn't BAMR be valued as BAM + a call option on the reinsurance business? i.e., if BAMR is less successful than BAM, then BAMR == BAM, and if BAMR performs better than BAM, then BAMR >> BAM? I think this the first time, it was explained so clearly for me. Thanks. On BIPC/BIP and BEPC/BEP, it would just add that the smaller size of the float for the C-corp is also helping with their premia, so there is a supply-constraints as well. In fact that has been allowing BAM to sell its C-corp shares into the market at a premium, (i.e. getting paid to enlarge the float and help narrow the spread). So, it is not just the tax-advantage and it being indexer-friendly that is contributing to its premia. Lastly, if i recall, you cannot convert BIP and BEP into BIPC and BEPC, the conversion is only the other way around from C-corps to LPs. The 1-145 share split for BAMR will also ensure limited supply of the "embedded call option", while keeping the total BAM economic interest unchanged. Link to comment Share on other sites More sharing options...
Xerxes Posted June 9, 2021 Share Posted June 9, 2021 (edited) 31 minutes ago, rkbabang said: I held on to it based on the fact that even though BAM spun it off, Partners Value Investments was holding on to it. My thoughts was that they most likely understood it a lot better than I. I've been adding to it significantly along the way and am up over 300% on my total cost basis now. And more importantly, Trisura's spin off also meant, Bruce Flett and his gang also received their distribution of Trisura shares and hugely benefitted from it (assuming they kept it; why would they not keep it). I think where most people got hung up was that it was seen as a BAM doesn't want it therefore ... In fact it was a gift to shareholders (including BAM top-tier owners) for them to decide its final outcome. Edited June 9, 2021 by Xerxes Link to comment Share on other sites More sharing options...
ValueMaven Posted June 9, 2021 Share Posted June 9, 2021 31 minutes ago, Xerxes said: And more importantly, Trisura's spin off also meant, Bruce Flett and his gang also received their distribution of Trisura shares and hugely benefitted from it (assuming they kept it; why would they not keep it). I think where most people got hung up was that it was seen as a BAM doesn't want it therefore ... In fact it was a gift to shareholders (including BAM top-tier owners) for them to decide its final outcome. +1 Helps when management owns 10%+ of the company Link to comment Share on other sites More sharing options...
tiddman Posted June 9, 2021 Share Posted June 9, 2021 1 hour ago, Xerxes said: And more importantly, Trisura's spin off also meant, Bruce Flett and his gang also received their distribution of Trisura shares and hugely benefitted from it (assuming they kept it; why would they not keep it) Imagine if Berkshire listed a tracking stock for certain subsidiaries such as GEICO and BHE. Rather than just own Berkshire and the consolidated results you could own a larger portion of certain subsidiaries in whatever proportions you wanted. And you can then invest directly in the fastest growing subsidiaries while the parent company still also gets benefit from them. This is essentially what Brookfield has done. This is a much better outcome for shareholders. Trisura's market cap is still only $1.3 billion after the run-up, Brookfield's is about $75 billion. If they owned 100% of Trisura, those gains would not have "moved the needle". But by spinning it off shareholders get the benefit directly. Link to comment Share on other sites More sharing options...
villainx Posted June 9, 2021 Share Posted June 9, 2021 This discussion regarding Trisura is just reminding me how poor my decision making abilities are. Either add to make a full position or exit small amount of spin shares, and I chose latter. Link to comment Share on other sites More sharing options...
ValueMaven Posted June 11, 2021 Share Posted June 11, 2021 very interesting Oaktree deal https://www.bloomberg.com/news/articles/2021-06-11/bob-marley-music-owner-attracts-375-million-investment-from-oaktree?srnd=premium Link to comment Share on other sites More sharing options...
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