Overview

We delivered strong results, and our business performed extremely well, demonstrating its resilience and diversification. Private assets continue to show their advantage for investors with stability during these volatile markets. This is contributing to increasing allocations to alternatives. By contrast, the volatility of equities, and publicly-traded fixed income—traditionally considered a safe haven—has left many investors searching for these alternative areas of investment.

Our Fee-Related Earnings (FRE) and Distributable Earnings (DE) were solid. Distributable earnings were $568 million in the period, and we continue to project significant growth in our earnings in 2024.

We were very active in the third quarter and beginning of the fourth, with the breadth and scale of our franchise enabling us to complete several large transactions. We are on track to have our largest fundraising year ever, with inflows of $24 billion since our last earnings report which takes capital raised to date this year to $61 billion, and still heading towards $150 billion.

Interest Rates Are Peaking, and This Is Good for Transaction Activity

Central banks have made significant progress in lowering headline inflation. Economic activity has been resilient and labor markets have remained tight, particularly in the United States. This has led to a market expectation that interest rates have created. However, it is worth noting that rates are still low on an absolute basis by historic standards.

With this backdrop, the market has increased confidence in pricing risk, which has led to liquidity starting to come back to the capital markets. And with record levels of dry powder currently on the sidelines, we expect a very busy period of transaction activity through to the end of 2024. Geopolitics, as is often the case, is an unknown that could lead to heightened volatility in the near term, but we expect that in the fullness of time this will not impact the long-term outlook for the global economy.

Financial Results and Fundraising Momentum Continue to Be Strong

Last quarter, we increased our fundraising target to close to $150 billion for the year. We are fortunate to have leading platforms in sectors within alternative assets that continue to see the greatest demand among investors. We held multiple closes in the third quarter and, with the anticipation of additional closes for our flagships, several complementary funds, and the pending completion of a contract to manage the insurance assets of AEL, we continue to remain confident in achieving our target before we release our results for the fourth quarter. A strong year of fundraising this year sets us up for a strong year of earnings growth next year.

The most significant fundraising updates and deal activity since the beginning of the third quarter are:

Renewable Power and Transition— We are currently fundraising for the second vintage of our global transition fund and have seen very positive reaction from clients. We expect to hold our first close in the fourth quarter. We are very encouraged with the early level of investor engagement and demand for this second vintage and expect it to be larger than our record setting first strategy, which was $15 billion. Our strategy remains the market leader in transition energy investing.

Subsequent to the end of the quarter, in October, we signed two investments for our new fund – Banks Renewables Limited, a leading independent renewable energy development business in the UK, for approximately $650 million and a second joint venture with Axis Energy, with whom we have partnered since 2019, to establish CleanTech, a renewable energy development platform targeting growth in India with a commitment of up to $850 million.

Infrastructure—For the fifth vintage of our flagship infrastructure fund, we closed on $3 billion of capital bringing the fund size to more than $27 billion. We anticipate holding the final close for this fund by the end of the year. Subsequent to quarter end, we held a final close for our third infrastructure debt fund of $1.3 billion of capital, making this vintage more than double the size of its predecessor fund with over $6.0 billion of capital commitments.

At the end of September, we closed our acquisition of Triton International, the world’s largest lessor of intermodal freight containers. The acquisition was primarily done through our fifth flagship infrastructure fund and a co-investment from BIP, who issued approximately 21 million shares of BIPC, valued at a little over $750 million, to Triton shareholders as partial consideration for the transaction. The latest vintage of our flagship infrastructure fund is approximately 40% committed.

Private Equity—In our private equity franchise, we held a final close for our sixth opportunistic private equity fund of $715 million, bringing the total strategy to $12 billion. This vintage represents the largest private equity strategy we have ever raised.

In October, we agreed to the partial sale of Everise, a technology services investment in the fifth vintage of our flagship private equity fund, at a valuation of $1 billion, representing a 3.5x multiple on total invested capital, with the fund continuing to hold a 46% interest in the business. The deal is expected to close in the first quarter of 2024.

Real Estate—We continue to see strong demand for the fifth vintage of our opportunistic real estate fund, closing on an additional $2 billion during the quarter, and we expect to finalize our first close during the fourth quarter.

During the quarter, we deployed $2 billion of capital across our real estate funds, including $400 million for North American logistics. Transaction activity is picking up and 2024 should be one of the best years we have seen in a while for investment.

Credit & Insurance Solutions—Oaktree raised a total of $11 billion across all strategies during the third quarter to date. For the twelfth vintage of our opportunistic credit fund, we held a close of $3.2 billion, bringing the size of the fund to over $6 billion. For Oaktree’s strategic lending partners fund, we closed on $2.3 billion of capital bringing the size of the fund to $3.6 billion.

Within our insurance solutions business, we raised $2.1 billion of net new capital during the quarter from Brookfield Corporation and its affiliates. We also announced a strategic partnership with Société Générale to originate and distribute high-quality private credit investments through a new private investment grade debt fund. The initial fund is targeting a total of €10 billion of deployment and will launch with €2.5 billion of seed funding at inception, provided by Société Générale and Brookfield Corporation.

Listed Perpetual Entities

Publicly traded utility, infrastructure and renewable power sectors have traded lower recently, in large part due to the perceived effect of interest rates on these securities, and some discrete issues impacting certain market participants. While the Brookfield listed entities were not directly impacted by these issues, they traded down in sympathy. In order to align our interests, we charge our listed entities a management fee based on their market capitalization, so our results this quarter were partially impacted by the share price performance of Brookfield Infrastructure Partners (BIP) and Brookfield Renewable Partners (BEP).

BIP and BEP both have very strong underlying business fundamentals and strong balance sheets, with attractive and achievable FFO and distribution growth targets. Both companies gave strong guidance at their Investor Days last month and announced robust earnings results last week. We believe the recent share prices are largely the result of negative public market sentiment and their share prices will ultimately rebound.

Investor Day

We hosted our first Investor Day as a stand-alone alternative asset manager in September in New York. For those who were unable to attend, the webcast and materials are posted on our website.

Our goal was to highlight the factors that have contributed to our success over the past 20+ years and what will fuel our continued growth over the next five years and beyond. We summarise the key takeaways from the day with four key points:

The Brookfield Ecosystem Provides Significant Competitive Advantages

The Brookfield Ecosystem is the collaborative interplay between our assets, businesses, counterparties, clients, and the capital flows we manage and oversee daily. These collectively play a critical role in the backbone of the global economy, and the interconnectedness across the over $850 billion of assets we have under management allows us to gain unique insights across global geographies, identify investment trends, and seize attractive opportunities. We leverage strategies, knowledge, and perspectives from various parts of our business to invest confidently throughout economic cycles and in diverse market conditions, enabling us to seek out the best deep-value opportunities. Our ecosystem proves particularly vital as global trends like deglobalization, decarbonization, and digitalization take center stage. This ecosystem has enabled our success to date and should continue to be a large and increasing differentiator for us going forward.

We Are Well Positioned to Capture Meaningful Opportunities in Private Credit

Along with our partners in credit at Oaktree, we have been preparing for a direct lending market like the one we are currently in. With banks reducing their private lending, and traditional capital sources becoming more scarce, alternative managers like us can fill the market demand for these products. Private credit is expected to be the fastest growing asset class within alternatives, driven by a shortage of liquidity and an increase in demand for capital as significant debt maturities need to be refinanced. Our ability to fund entire deals and facilitate better financing terms for prospective borrowers further aligns with our promise of being a best-in-class partner in business.

We Have a Strong Five-Year Organic Growth Plan

At each Investor Day, we set forth our five-year growth plan for fee-bearing capital, revenues, and earnings metrics. This year, we put forth the goal of surpassing $1 trillion in fee-bearing capital by 2028. This 18% compounded annual growth will come from all of our businesses, with particular emphasis on the accelerated growth within our private credit and insurance platforms, which are expected to grow to over $500 billion combined. Further growth is driven by fundraising efforts across our flagships and complementary strategies, which will propel our fee-related earnings to approximately $5 billion by 2028 – almost all of which will still be stable and resilient fee earnings.

We are also eligible to earn carried interest on new funds launched since the spin out, and this pool of carry-eligible capital will grow larger with each year. Over the next five years, our realized carry will be small, but it is expected to provide a significant catalyst for distributable earnings growth in the years thereafter. To give you a sense of the magnitude, in 2029 BAM is expected to realize approximately $2 billion of gross carried interest, which should grow to approximately $7 billion of annual gross carried interest realized by 2033. This gives us good line of sight on earnings growth for the next 10 years.

We Will Be Selective and Use Our Balance Sheet Strategically

Our balance sheet is debt free, and we currently hold close to $3 billion of net cash and equivalents. This fortress balance sheet is a source of strength for our business and by using it selectively and effectively, we will drive growth in our asset management activities over and beyond our stated goals. We may utilize our balance sheet to launch new fund strategies and business lines, or to make strategic acquisitions to bolster our existing capabilities.

Closing

We remain committed to being a world-class asset manager and strive to invest our capital in high-quality assets that earn solid returns, while emphasizing downside protection. The primary objective of the company continues to be to generate increasing cash flows on a per-share basis, and to distribute that cash to you by dividend or share repurchases.

Thank you for your interest in Brookfield, and please do not hesitate to contact any of us should you have suggestions, questions, comments, or ideas you wish to share.

Sincerely,

Cautionary Statement Regarding Forward-Looking Statements and Information

All references to “$” or “Dollars” are to U.S. Dollars. In addition to historical fact, this letter to shareholders contains “forward-looking information” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of the U.S. Securities Act of 1933, the U.S. Securities Exchange Act of 1934, and, “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements which reflect management’s expectations regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of Brookfield Asset Management Ltd., Brookfield Asset Management ULC and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” In particular, the forward-looking statements contained in this letter include statements referring to the impact of current market or economic conditions on our businesses, the future state of the economy or securities market, the expected future trading price of our shares or financial results, the results of future fundraising efforts, the expected growth, size or performance of future or existing strategies, future investment opportunities, or the results of future asset sales.

Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, including the ongoing COVID-19 pandemic and related global economic disruptions, which may cause the actual results, performance or achievements of Brookfield Asset Management Ltd. and Brookfield Asset Management ULC to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: our lack of independent means of generating revenue; our material assets consisting solely of our interest in Brookfield Asset Management ULC; challenges relating to maintaining our relationship with Brookfield Corporation and potential conflicts of interest; Brookfield Asset Management Ltd. being a newly formed company; our liability for our asset management business; our ability to maintain Brookfield Asset Management Ltd.’s excepted status as a “foreign private issuer” and an “emerging growth company” under U.S. federal securities laws; the difficulty for investors to effect service of process and enforce judgments in the United States, Canada and/or other applicable jurisdictions; the impact on growth in fee-bearing capital of poor product development or marketing efforts; our ability to maintain our global reputation; volatility in the trading price of our class A limited voting shares; being subjected to numerous laws, rules and regulatory requirements; the potential ineffectiveness of our policies to prevent violations of applicable law; meeting our financial obligations due to our cash flow from our asset management business; foreign currency risk and exchange rate fluctuations; requirement of temporary investments and backstop commitments to support our asset management business; rising interest rates; revenues impacted by a decline in the size or pace of investments made by our managed assets; our earnings growth can vary, which may affect our dividend and the trading price of our class A limited voting shares; exposed risk due to increased amount and type of investment products in our managed assets; difficulty in maintaining our culture or managing our human capital; political instability or changes in government; unfavorable economic conditions or changes in the industries in which we operate; catastrophic events, such as earthquakes, hurricanes, or pandemics/epidemics; deficiencies in public company financial reporting and disclosures; ineffective management of environmental, social and governance (ESG) considerations, and inadequate or ineffective health and safety programs; failure of our information and technology systems; us and our managed assets becoming involved in legal disputes; losses not covered by insurance; our inability to collect on amounts owing to us; information barriers that may give rise to conflicts and risks; risks related to our renewable power and transition, infrastructure, private equity, real estate, and other alternatives, including credit strategies; risks relating to Canadian and United States taxation laws; and other factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States.

We caution that the foregoing list of important factors that may affect future results is not exhaustive and other factors could also adversely affect its results. Investors and other readers are urged to consider the foregoing risks, as well as other uncertainties, factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such forward-looking information.

Expect where otherwise indicated, the information provided herein is based on matters as they exist as of the date hereof and not as of any future date. Unless required by law, we undertake no obligation to publicly update or otherwise revise any such information, whether written or oral, to reflect information that subsequently becomes available or circumstances existing or changes occurring after the date hereof.

Past performance is not indicative nor a guarantee of future results. There can be no assurance that comparable results will be achieved in the future, that future investments will be similar to the historic investments discussed herein (because of economic conditions, the availability of investment opportunities or otherwise), that targeted returns, diversification or asset allocations will be met or that an investment strategy or investment objectives will be achieved.

Certain of the information contained herein is based on or derived from information provided by independent third-party sources. While Brookfield Asset Management Ltd. believes that such information is accurate as of the date it was produced and that the sources from which such information has been obtained are reliable, Brookfield Asset Management Ltd. makes no representation or warranty, express or implied, with respect to the accuracy, reasonableness or completeness of any of the information or the assumptions on which such information is based, contained herein, including but not limited to, information obtained from third parties.

Expectations around future realizations of carried interest are illustrative. To calculate these figures, we assume that we achieve the gross target return rates for each of our funds for which we are eligible to earn carried interest. There can be no assurance that we will achieve these target returns or that we will realize these levels of carried interest. Carried interest is a contractual arrangement whereby we receive a fixed percentage of investment gains generated within a private fund provided that the investors receive a predetermined minimum return. Carried interest is typically paid towards the end of the life of a fund after the capital has been returned to investors and may be subject to “claw back” until all investments have been monetized and minimum investment returns are sufficiently assured. This is referred to as realized carried interest. Gross carried interest represents realizations after Brookfield Corporation receives its 33% share but before any direct costs that we would pay to employees.

Cautionary Statement Regarding the Use of Non-GAAP Measures

This letter to shareholders contains references to financial measures that are calculated and presented using methodologies other than in accordance with U.S. GAAP. These financial measures, which include Distributable Earnings, its components and its per share equivalent, should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, similar financial measures calculated in accordance with U.S. GAAP. We caution readers that these non-GAAP financial measures or other financial metrics are not standardized under U.S. GAAP and may differ from the financial measures or other financial metrics disclosed by other businesses and, as a result, may not be comparable to similar measures presented by other issuers and entities.