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Alternative Investment

Goldman Analyst Is Optimistic About Brookfield Asset Management Spin-off Despite Rough Start

Brookfield is already one of the world’s largest asset management firms, with more than $725 billion of assets. A recent spin-off from the Toronto-based multinational could make it even bigger but it’s off to a rough start. As a standalone public company, Brookfield Asset Management Ltd. has dropped about 13 percent since it began trading in New York on December 12th. But it may not be down for long, some Wall Street analysts say they expect Brookfield Asset to bounce back strongly in the weeks ahead.

Brookfield Asset was spun off from its parent company, now called Brookfield Corp., to create an “asset-light” investment management firm that intends to pay out most of its earnings in dividends. Investor reaction to how the new firm will perform is mixed, but some are very positive, including Goldman Sachs analyst Alex Blostein. Blostein said Brookfield Asset should trade at around 20 times earnings or more, based on the valuations of competitors like Blackstone Inc.

Brookfield is leaning on other services to drive much of its growth after acquiring Oaktree Capital Group three years ago and expanding its insurance business. A company presentation said real estate funds and private equity groups may become less critical to its overall business. Brookfield has high hopes for its asset management spin-off, but one hurdle moving forward could be higher interest rates. Rising interest rates could be a bigger problem for alternative asset managers like Brookfield than some investors are factoring in. This past year’s rate-driven equity selloff led all of Brookfield Corp.’s publicly traded divisions to underperform the S&P 500, not exactly what the company had hoped when it changed its structure.

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