BAM: More evidence of superior capital allocation by top PE firms

I have long admired Brookfield Asset Management’s ability to generate strong returns for its shareholders and to understand the long-term trends and invest aggressively in them when they get the opportunity. That’s what makes these top PE firms so important in difficult markets. They have the cash, interest, and time to think long-term and to think big when the opportunities arise.

From todays earnings call, here’s yet another example of their superior investment acumen. Westinghouse, a former darling, filed for BK, BAM came in, added significant investments, turned the business around, get it growing again and it’s now in-line to win big from massive global infrastructure spend on renewables and nuclear. Great read here. They invested $4 billion initially in 2018, added another $1B plus $3B of debt financing and just transferred the asset to another one of their funds paying $8B and offering a 6x return to their PE business and 60% CAGR IRR for investors. That’s how the best investors do it!

How rising rates affect PE deal multiples

I looked back at deal multiples for PE industry, lets assume falling rates & easy fed=tailwinds for multiples -rising=headwinds. I would expect multiples to fall given rapid rise in rates in 2022 but history shows the multiples didn’t change that much. $BX $KKR. Rising periods green-boxed

The many benefits of Private Equity's Wisdom

If you have ever read anything I’ve written, you’ll know I am a huge believer in the mega trend of migrating assets to alternative asset managers like Blackstone, KKR, BAM etc. These are the smartest, most connected investors in the world and they have access to ungodly amounts of capital that gets deployed in thoughtful ways and at perilous times. I thought I would take a look back at some annual reports from Blackstone in the GFC 2007-2009 to see what these smart investors were up to during that difficult period. Yes, they owned assets that were being marked down but there’s a difference between unrealized and realized losses and when you put lots of capital to work into distressed prices and in smart secular opportunities, you come out of the shoot stronger and more profitable. That’s what I want with my allocations to these great companies. BX and KKR are my chosen two thus far but if the carnage gets much worse, I’ll broaden my exposure to some of the other great PE firms. They all have massive dry powder to deploy and the Fed, a former PE guy himself, is delivering wicked good opportunities to his former colleagues. You can read into that comment any way you like!

Remember story of Cheniere Energy and its dominance today? BX was early investor to help $LNG build LNG terminals. Invested $1.5B in 2012, sold its 42% stake in LNG to $BAM in 2020 for $7B. For these kinds of investments, NOT available to most of us, Ill accept stock VOL.