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Brookfield considers splitting off its asset-management unit

(Bloomberg)-Brookfield Asset Management Inc. It could soon separate its division that invests on behalf of institutions, a dramatic move that will reshape one of Canada’s largest companies.

Brookfield is betting that the move will give the unit a better valuation based on the performance of other pure-play investment firms. The Toronto-based company, which announced a possible separation on Thursday, will be positioned to capitalize on investors’ appetite for investments in sectors such as real estate and private loans.

Alternative-asset managers are seeing strong demand from pension, endowment and insurers for funds that can produce returns unrelated to the stock and bond markets. Private equity giant Blackstone Inc. posted a record pile of new cash in the fourth quarter, putting it ahead of schedule to meet its asset target by 2026. Carlyle Group Inc.’s fresh capital nearly doubled last year.

Brookfield has seen similar demand. The company on Thursday pointed to higher interest in its flagship real estate fund as well as its first transition fund. Its opportunistic fund closed at $16 billion in the fourth quarter, the largest fund to date for the strategy.

Overall, Brookfield’s fee-bearing capital increased to $364 billion, and fee-related income jumped 33% compared to the prior year.

A separate company could have an equity value of $100 billion, or about $45 to $60 per share, Chief Executive Officer Bruce Flatt said in a letter to shareholders announcing the plan.

Shares of Brookfield were up 7.2% in premarket trading in New York.

While the move is likely to make financial sense, it would redeploy Brookfield, which had a market value of around $93 billion as of Wednesday.

A spinoff would separate the company that manages Brookfield’s assets across its portfolio of real estate, infrastructure, credit, private equity and renewables from $50 billion of its investment capital. The separation makes Brookfield “asset-light,” the model preferred by investors.

The company said it had funds from operations operating at $1.04 per share in the fourth quarter, which exceeded analysts’ estimates of 82 cents. Adjusted earnings totaled 66 cents, compared to estimates for 73 cents.

Flatt said in September that after bringing in $100 billion in the current round, Brookfield plans to raise $125 billion for the next round of its flagship fund.

© 2022 Bloomberg LP

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