Brookfield Corporation (BN) has been one of the largest, most successful financial holding companies in the Canadian market for decades. The company has gradually nurtured and built multiple successful businesses over the years. This is unlike other large conglomerates such as Berkshire Hathaway (BRK.B), which has tended to keep every business under one umbrella.

BN chose to spin out many high-quality businesses to target investors with different needs, while also maintaining control of those businesses. The purpose of it is to allow investors to allocate to Brookfield’s family based on personal needs. For instance, some investors may be more interested in income-producing securities rather than capital gains, and as a result, they can choose to position themselves differently by owning more of one name than the other. This blog will address the key securities BN currently offers and a short investment thesis of each entity.

What investment options does Brookfield offer?

1. Brookfield Asset Management (BAM): BAM operates as an asset management business that raises long-duration capital from institutional investors. BAM offers investors a combination of strong earnings growth and stability with a highly recurring, fee-based earnings stream, as the company targets an earnings growth of 15%-20% over the years while managing to pay out 90% of earnings as dividends. BAM is an attractive candidate for investors who seek total returns, as the company’s investment case balances both earnings growth and dividend yield.
2. Brookfield Wealth Solutions (BNT): BNT is an investment-led insurance operation targeting individuals and institutions through a range of retirement services, wealth protection products such as annuities, personal and commercial property and casualty insurance, and life insurance. BNT is a growth-oriented organization, as the company retains and reinvests the majority of earnings to compound capital internally.
3. Brookfield Infrastructure Partners (BIP.UN/BIPC): These are 'paired' companies, and essentially, economically the same. BIPC was set up largely to allow for some funds and indices to buy shares. Investors can look at the details of this structure in our previous blog here. BIP.UN provides investors with an investment vehicle in one of the largest global infrastructure companies that deliver essential services to support modern economies, ranging from utilities, transport, midstream and data sectors. These are widely considered as “monopoly assets” with predictable and growing earnings streams to support dividend growth over time.
4. Brookfield Renewable Partners (BEP.UN/BEPC): Similarly, these two entities are economically equivalent. BEPC and BEP.UN may get a certain premium/discount in the market because of the dividend/index premium/discount difference. That being said, these entities will benefit equally from the growth of the underlying business. Investors can visit our previous blog regarding this topic here. BEP.UN is one of the largest operators in renewable power in the world. The company’s diversified portfolio includes hydroelectric, wind, solar, and other sustainable energy solutions. These are highly durable, critical assets with decades of runway in terms of growth potential and reinvestment. BEP.UN has been widely recognized as a decent candidate for income-seeking investors.
5. Brookfield Business Partners (BBU.UN/BBUC): BBU.UN is a global business services and industrial company that targets to own high-quality operators of essential products/services across the industrial, infrastructure and business services. BBU.UN creates value by acquiring high-quality businesses and applying operational expertise to enhance profitability and cash flow. BBU.UN targets to generate long-term returns in the range of 15%-20% compounded annual growth rate.

These are well-established enterprises with a decent track record and long-term growth strategies. There are still other vehicles, such as Brookfield Property Partners (BPY) and Brookfield Office Properties (BPO), that only offer investors preferred units as publicly traded securities; therefore, we will not discuss them in this blog.

There is a certain overlap that investors need to be aware of in case an investor owns more than one security. For instance, investors may see themselves slightly overexposed to the asset management business if they own a significant BAM position in addition to a meaningful position in BN. It is largely because BN owns 73% of BAM, and basically, 2/3 of the BN market capitalization already comes from the value of BAM.

However, if one wants direct exposure to the renewables theme along with the diversified private equity exposure offered by BN, then it makes sense to own both despite certain overlap. This is because BEP.UN is more of an income stock, while BN is more growth-oriented. Lastly, investors should think about owning all of these names as a single position within the portfolio and manage exposure and risks accordingly.

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Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.