Brookfield Asset Management: Record Year Ahead Despite Selloff

Brookfield Asset Management shares have fallen in sympathy with other asset managers this year. The decline comes despite a much lower exposure to software investments, a Seeking Alpha contributor wrote. The analyst, who disclosed a beneficial long position in BAM, said the firm also has substantial embedded earnings growth from funds already raised, setting up a potential record year.

Other asset managers with large software holdings have been hit harder by the tech rout. BAM's diversified portfolio and strong fundraising pipeline should support earnings, the analyst argued. The embedded earnings growth refers to management fees and carried interest from funds that have been raised but not yet fully deployed or realized. As those funds mature, the revenue will flow through.

The risk event is the broader asset manager selloff itself. If tech stocks remain under pressure, BAM could continue to trade lower, the analyst said. Over the medium term, the earnings catalysts provide a reason to hold or add to positions.

What would reduce the risk? Strong quarterly earnings or an acceleration in fundraising could reverse sentiment. The analyst pointed to BAM's track record of deploying capital and generating returns. The record year projection across all categories is based on funds already raised and the current deployment pipeline, the analyst wrote.

What would make the thesis worse? A prolonged downturn in software and tech stocks could drag BAM further despite the lower direct exposure. Any disappointment in fee-related earnings or a slowdown in new fund closes would weaken the bull case.

The analyst's note said the long position reflects confidence that the market is overlooking these catalysts. The stock's decline in sympathy with other asset managers has created an entry point, the analyst added.