Brookfield Asset Management Inc. (NYSE:BAM) Q1 2024 Earnings Call Transcript

Brookfield Asset Management Inc. (NYSE:BAM) Q1 2024 Earnings Call Transcript May 8, 2024

Brookfield Asset Management Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello, and welcome to Brookfield Asset Management’s First Quarter 2024 Conference Call and Webcast. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to our first speaker, Mr. Jason Fooks, Managing Director Investor Relations. Please go ahead.

Jason Fooks: Thank you for joining us today for Brookfield Asset Management’s earnings call. On the call today we have Bruce Flatt, our Chief Executive Officer; Connor Teskey, our President; and Bahir Manios, our Chief Financial Officer; and Hadley Peer Marshall, our Incoming Chief Financial Officer. Bruce will start the call today with opening remarks, followed by Connor who will talk about some of the important drivers of our future growth; Bahir, will discuss our financial and operating results for the business and finally Hadley will provide an update on our fundraising. After our formal comments, we’ll turn the call over to the operator and take any analyst questions. In order to accommodate all those who want to ask questions, we ask that you refrain from asking more than two questions at one time.

If you have additional questions, please rejoin the queue, and we’ll be happy to take additional questions at the end if time permits. Before we begin, I’d like to remind you that, in today’s comments, including in responding to questions and in discussing new initiatives and our financial and operating performance, we may make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and U.S. securities law. These statements reflect predictions of future events and trends and do not relate to historic events. They’re subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U.S. and the information available on our website.

And with that, I’ll turn the call over to Bruce.

Bruce Flatt: Thank you, Jason, and welcome to everyone on the call. Our business is performing extremely well and results were strong in first quarter, driven by execution across all aspects of our business and highlighted by robust fundraising, successful capital markets execution and several strategic transactions. This should lead to excellent growth in overall results in 2024. Improving market sentiment has been growing. Liquidity is returning to the capital markets and most major economies are performing better-than-expected. This in turn has revived risk appetite among many investors and is fostering an increasingly stable and more constructive market. We raised a total of $20 billion of capital during the first quarter, which included strong first closes for our two of our flagship funds.

Our flagship funds along with our private credit funds and insurance solutions channel have been among, where our largest fund flows have come from over the past year. More broadly, we see continued client demand for a more than 50 strategies that are in the market and expect our fundraising to continue to build throughout the year. This should lead to an excellent year for fundraising. Continued consolidation in the asset management sector is a tailwind with clients preferring to do more with fewer, larger and more diversified global managers. The market environment is also more conducive for transaction activity. We are seeing firsthand an improving market for sales of high-quality assets. This is particularly apparent in the private equity and real estate asset classes, where transaction volume has been lighter over the past few years, but is now picking up.

Most notably, we sold a 49% interest in ICD Brookfield Place, a premier office property in Dubai for approximately $1.5 billion, marking one of the largest real estate transactions globally since the pandemic at the highest valuation for an office property ever in the region. Over the past year, we also sold or under contract to sell approximately $35 billion of assets across all of our businesses, generating very good returns on capital. As we look forward to the rest of ’24, we see more monetizations to come. We are also continuing to take advantage of currently strong debt markets to refinance debt at attractive rates. Thanks to the high-quality nature of our businesses and continued progress on operational improvement plans across many of our portfolio companies within our private equity business, we have been able to successfully refinance over $18 billion of borrowings resulting in actually decrease in overall cost of debt compared to the debt that we were replaced.

At the same time, there are still many instances where the balance sheets of owners of high-quality businesses and assets cannot withstand the increase of the rates over the past two years or where business fundamentals have not lived up to the expectations of the capital structure that was put in place at the time, when they financed the business. This should therefore also be an excellent period to invest for both our equity and credit strategies. To support this, we enter this period with over $100 billion of dry powder, ready to invest and a strong balance sheet to support strategic initiatives. To that end, we announced three strategic transactions so far this year. First, we recently added management responsibility for the $50 billion of AEL capital that came to our parent.

Second, we agreed to acquire the majority stake in Castlelake, a best-in-class manager focused on aviation and specialty finance. Third, we expanded our partnership with Oaktree by acquiring an additional close to 5% interest in the company. Connor will speak to each of these with a little more depth, but we’re excited about the opportunity to serve our clients in more ways, bolster the capabilities of our credit group and further drive fee related earnings. It’s been a very active start to the year and we look forward to keeping you updated on our progress. Before turning over the call, I wanted to note that, Bahir who is with Brookfield for 20 years, will be stepping away at the end of this month. Bahir has made a very significant contribution to many of our businesses over the years, helping to drive our infrastructure business, insurance and most recently assisted with the launch of our asset management business into the capital markets.

Thank you, Bahir. As all of you know, the Board appointed Hadley Peer Marshall, a 10 year Brookfield veteran, who has been driven significant success in our infrastructure group as our new Chief Financial Officer. We are all looking forward to introducing you to Hadley when we have the chance. With that, I will turn the call over to Connor. Thank you for being here.

Connor Teskey: Thank you, Bruce. As Bruce mentioned, we’ve had a very active start to the year both in terms of fundraising and executing on several strategic transactions and we expect to build on this momentum, as we progress through the year. However, my comments today will be focused on how we are positioning ourselves for long-term growth. With three flagships expecting final closes this year, a record number of complementary funds, more than 50 strategies either in or just now coming to market and the additional asset origination capabilities of the Brookfield Reinsurance platform from AEL, we expect fundraising will continue to scale throughout 2024. At the core of our fundraising success, is our longstanding track record of delivering attractive returns to our clients, reinforced by the deep relationships and partnership we have built over the last two decades.

However, our ability to raise significant levels of capital consistently each year and across different economic environments is due to several important characteristics of our business and we would like to highlight four of them with you here today. The first is that, we have a leadership position in infrastructure, renewable power, transition and credit, all of which are in high demand by institutional investors today. This demand is in large part because these asset classes sit at the center of three megatrends reshaping the global economy, decarbonization, deglobalization and digitalization. These sectors will require over $200 trillion of capital over the next 30 years creating significant growth opportunities, as we create products and solutions to address these market needs.

Second, we have deliberately focused on expanding our ability to raise capital across multiple channels with every global investor base. While we continue to see ample opportunity to raise capital from institutional investors, we’ve expanded our capabilities with our private wealth platform and our wealth solutions business. While today they represent a modest portion of our overall fee-bearing capital, we expect both to be new engines for this next phase of growth. Starting with our wealth solutions, last week, Brookfield Reinsurance successfully closed its acquisition of AEL. This transaction significantly enhances its wealth platform and is expected to accelerate its future growth. We now manage nearly $90 billion of insurance fee-bearing capital on behalf of Brookfield Reinsurance including approximately $50 billion of assets that came with the AEL acquisition.

These new assets will be subject to an investment management agreement and will provide us with an incremental $125 million of fee revenues each year. As Brookfield Reinsurance continues to grow its assets, we expect our fees will grow as well. We also expect that Brookfield’s wealth platform will soon write $15 billion to $20 billion of annuities annually, making it one of the largest annuity platforms within the United States. Because in recent years we have been investing in our insurance capabilities ahead of such growth, we are well prepared for this new $50 billion mandate of capital and we will be able to deploy it very efficiently. Our wealth solution strategy is focused on managing capital to meet the unique needs of insurance companies.

We earn fee related revenues for our services but we do not take on any of the assets, liabilities or generate spread related earnings from these investments. However, beyond a growing fee revenue stream, our wealth solutions business also gives us a pocket of capital that is seeking credit opportunities including investment grade at scale, which will allow us to deploy capital in new and innovative ways. We will continue to expand and enhance our capabilities to serve our insurance clients and expect that this will attract additional third-party insurance capital to our business. Now turning to Brookfield Oaktree Wealth Solutions. Three years ago, we combined our private wealth presence alongside Oaktree’s team to create Brookfield Oaktree Wealth Solutions, a business dedicated to delivering our premier alternative investment products to wealth managers worldwide.

Since then, we have methodically scaled the business. Today, the team includes 150 professionals in 10 countries spanning critical functions vital to fundraising, including supporting intermediaries and advisors. Our global efforts have resulted in relationships with nearly 50 wealth managers, where we have placed over 100 private and public market solutions, including rapidly growing strategies like our private wealth focused Brookfield Infrastructure Income Strategy and Oaktree Strategic Credit Fund. This success capitalizes on our long-term proven track record as a best-in-class alternative asset manager. As we embark on our next stage of growth, we are building from a position of strength, as we now offer individual investors a full suite of alternative investments across each of our strategies.

As the desire to increase allocation to alternatives for individual investors grows and should follow a similar course that alternatives have had for institutional investors over the last 20 years, we will continue to scale this business. Last year alone the business raised $7 billion in capital and we’re just getting started. With many tailwinds at our back, we are on pace to raise $12 billion to $15 billion annually through this channel over the medium-term. Thirdly, our organization is centered around building and operating businesses and assets that form the backbone of the global economy. However the global economy is always evolving. Of the more than $925 billion of assets that we manage nearly half are in sectors that didn’t exist in scale 20 years ago, from fiber, telecom, towers and data centers to wind, solar and digital payments.

Last quarter, we spoke about the importance of our focus on product innovation and development to meet the needs of our clients. We are seeing the benefits of that at work, as we expect to be raising capital for a record number of complementary strategies this year with funds launching across all of our verticals. Fourth and lastly, we have made investments in and built partnerships with best in class managers that has enabled us to expand our capabilities and serve our clients in more ways. We acquired an additional 5% interest in Oaktree in April, bringing our ownership stake to 73% today. We also announced an agreement to acquire a 51% interest in Castlelake, a leading asset based private credit manager focused on aviation and other forms of specialty finance with $22 billion of assets under management.

Our investment is projected to generate an additional $40 million of FRE within the next year with the option for us to increase our ownership over time. As we have done with other similar transactions, we plan to work in partnership with the Castlelake team to support the growth of their franchise while looking for opportunities for where our broader franchise can add value for our clients for years to come. Before I turn it over to Bahir to go through our financial and operating results for the quarter, I’ll wrap up by saying we have a number of tailwinds behind our business that continue to give us confidence to reach our targets of doubling distributable earnings and reaching over $1 trillion of fee bearing capital over the next four years.

Bahir?

Bahir Manios: Great. Thank you, Connor, and good morning, everybody. As Connor mentioned, I’ll focus my remarks on our financial performance over the quarter and hand it off to Hadley, who’ll take you through the update on fundraising activities. First on results. Fee related earnings or FRE, in the first quarter were $552 million and $2.2 billion over the last 12 months. Distributable earnings or DE, for the quarter were $547 million and $2.2 billion for the last 12 months. Our results for the period reflected the strong fundraising that both Bruce and Connor touched on earlier in their remarks. We generated over 15% growth in our fee-bearing capital within our flagship vehicles, private credit and insurance strategies over the last 12 months and that drove a 15% growth in our fee revenues from these areas in the LTM or last 12 months period.

These very positive results were, however, offset by lower fees associated with our permanent capital vehicles and transaction fees that were also lower compared to the prior year. Our permanent capital vehicle stock prices were lower as at period end compared to the prior periods despite releasing very strong earnings results and recent increases in the dividends paid by both our infrastructure and renewable companies, Brookfield Infrastructure Partners and Brookfield Renewable Partners. We believe each one of our companies are well-positioned in any environment and their trading prices will eventually rebound and be more reflective of the very strong underlying fundamentals and performance for those companies. During the quarter, we have raised $20 billion of capital, $10 billion of which we had previously announced on our February earnings call.

With that, our fee-bearing capital grew at period end to almost $460 billion, which is up $27 billion or 6% compared to the prior year. Our fee-bearing capital benefited from very strong inflows and capital deployed during the year. This was somewhat offset by capital we returned to clients and market valuations of our permanent capital vehicles. Our fee-bearing capital will increase by $50 billion with the recently closed asset management mandate from American Equity Life. Next on margins. For the last 12 months, they’ve remained stable and between 56% to 57%, but are poised to improve across each of our businesses, as revenue growth should outpace costs. As we’ve previously discussed, expense growth in our businesses is expected to slow, as much of the investment in expanding capabilities across our platform has been made over the past year or two.

To that end, direct cost growth moderated quite significantly this quarter compared to the prior year comparables. At the same time, revenues will benefit from our significant capital-raising initiatives over the past year. The additional $50 billion of AEL capital, which will contribute at least $125 million of annualized base fee revenues and potentially a rebound in the prices of our publicly-listed affiliates. I’ll now briefly touch on our dry powder. Today, we sit on over $100 billion of dry powder available for deployment and have been actively putting this capital to work. We deployed an additional $11 billion in the first quarter with over half of that going into credit products, as we continue to see the current environment being very favorable for credit investing.

Our liquidity continues to be very strong with $2.6 billion of cash and equivalents on our balance sheet as at period end. And as a reminder, we operate with zero debt at the corporate level. Lastly, before turning the call over to Hadley, I’m pleased to confirm that the Board of Directors has declared a dividend of $0.38 per share for the first quarter of 2024, payable on June 28th to the shareholders of record as at the close of business on May 31st. With that, I’ll turn it over to Hadley. I’ve had the pleasure of working with Hadley since she joined our infrastructure group in 2015, and it’s a great honor for me to introduce her as my successor in this role. Hadley is extremely well-known in the financial community and brings tremendous experience and financial expertise to the role.

As for me, it’s been an incredible 20 year career at Brookfield. I’ve really enjoyed my time as CFO of the company and prior to that, the CFO of Brookfield Infrastructure Partners. It’s been a great experience and I feel so fortunate to have had the opportunity to work and interact with many of you on the line. I sincerely thank you for all your support along the way. I look forward to seeing many of you in the coming months, as I continue to transition Hadley into the CFO seat. With that, I’ll hand it over to Hadley.

Hadley Peer Marshall: Thank you, Bahir. I, too, would like to thank you for your service and support and I’m thrilled to be taking on this role at such an exciting time of growth for our business. Let me start things off by providing some more details on the capital we raised in the first quarter. In summary, it was a strong first quarter for capital raising and we’re optimistic about the year ahead since we have four flagships in the market. We have the largest number of complementary funds we’ve ever had in or coming to market, and a rapid scaling Insurance Solutions business. Within our Infrastructure business, we raised a little over $3 billion including around $2 billion of capital for our Supercore Infrastructure strategy as part of a follow on acquisition of FirstEnergy.

Our infrastructure wealth solutions product, Brookfield Infrastructure Income continues to see robust demand, raising an additional $600 million in the first quarter and bringing assets under management to over $2 billion. For our Renewable Power and Transition business, we held a first close for the second vintage of our flagship Global Transition Fund at $10 billion, including $1.2 billion of capital raised in the first quarter. On the back of good momentum, we expect to hold a final close later this year. In addition, we launched our Catalytic Transition Fund. This fund was previously announced at COP28 with a $1 billion anger commitment from our long-term partner, ALTÉRRA. And we anticipate first close to this fund later this year. Within private equity, we have raised $1.5 billion in the quarter and also recently launched several complementary strategies, including a Middle East Fund and a strategy for financial infrastructure investing.

In real estate, we held a first close for the fifth vintage of our flagship Opportunistic Real Estate Fund at over $8 billion and we also anticipate holding a final close later in 2024. Finally, in credit, we continue to see strong fundraising momentum, raising nearly $6 billion within Oaktree funds in the quarter, including $1 billion within our sponsor credit business and nearly $1 billion within the 12th vintage of our Opportunistic Credit Fund. Overall capital was raised across more than a dozen credit strategies this quarter and we anticipate launching our seventh Real Estate Debt Fund and our fourth Infrastructure Debt Fund later in the year. Within our Insurance Solutions business, we also raised $2 billion and are expecting this scaling further throughout the year.

I want to spend some time covering our credit group, in particular, as this is an area I have focused on personally for many years, and more importantly, is one of the parts of our franchise where we see significant growth ahead. One of the benefits of being large, global and diversified is that, we are in constant communication with and serve a wide array of clients, including the largest and most sophisticated institutional investors in the world, some of the biggest insurance companies globally, as well as individual and high net worth investors. Over the past year or so, what our clients have been telling us has been resoundingly clear. They want to meaningfully increase their allocations to credit, specifically private credit. Fortunately for us, our credit business can serve those clients’ needs, given its breadth of product offerings and brand as a market leader.

To that end, we have recently announced the consolidation of all of our credit businesses and strategies under a newly formed credit group, which today totals nearly $300 billion of assets under management, inclusive of the $50 billion AEL mandate. As of March 31, we managed $180 billion of fee-bearing capital, which generates annualized fee revenues of $1.2 billion and growing. 45% of this capital is raised to private and opportunistic credit strategies, which accounts for over 70% of our fee revenues. We have a broad and growing product offering from various private, opportunistic, structured and liquid credit strategies for institutional insurance and individual clients to choose from, based on their financial goals. We believe that, the best is yet to come.

We continue to broaden our product offerings and enhance our deployment capabilities for our clients. In fact, the three strategic transactions we discussed, AEL, Oaktree and Castlelake, each marked an exciting next step in significantly scaling our global credit franchise. We also enhanced our insurance solution disclosure, given the growth of this fundraising channel. As a reminder, our insurance solution channel is focused on large mandate that can deliver to insurance companies their financial objectives. The capital we have raised so far has been predominantly from Brookfield Reinsurance. However, we expect to bring in additional third party insurance companies as well. Our relationship with these clients is strong and in turn, they are attracted to Brookfield’s product offerings and partnership capabilities.

With the $50 billion of additional capital we are now managing from the AEL mandate, our total assets managed through our Insurance Solutions channel is $86 billion and our expectation is, this will grow by $15 billion to $20 billion per year. As of March 31, 51% of this capital was invested in high-grade liquid credit strategies, 41% in investment grade credit and 8% in private funds. As a reminder, we earn a 25 basis point fee for the total amount of capital we manage under our long-term investment management agreement and then additional standard fees for any capital allocated to our private funds. I’ll just wrap up by saying, as you’ve heard from the team today, we are embarking on a year filled with significant initiatives and opportunities.

I’m eager to contribute to our continued success and look forward to meeting many of you in the quarters to come. With that, operator, we can open it up to questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Cherilyn Radbourne with TD Cowen.

Cherilyn Radbourne: Firstly, we’ve been getting some questions from clients on the fund performance track records this morning and those seem to be flat to down slightly quarter-over-quarter. I was hoping you could give us some color on your marks and whether you would see that as a transitory issue with the market backdrop improving?

Connor Teskey: This is in our minds absolutely as you say temporary in nature. We are always very conservative with our marks and with some of the market volatility in Q1. We obviously reflect that in our financial positions, but it will come as a surprise to no one, just the increasing strength and momentum in the financial markets. We’re seeing the strategic bid come back from corporate. We’re seeing banks’ lending an increasing amount. We’re seeing incredible liquidity in the system and we’re seeing the bid-ask between buyers and sellers increasingly shrink. We always position ourselves in a strong liquidity position. We are never a forced seller during those temporary moments of volatility, but we would expect those marks to very quickly revert to inline or above our targets and similar with our long-term track record.

Cherilyn Radbourne: And then, shifting gears, could you give us some background on how the recent Castlelake deal came together? And particularly how that deal structured between them and Brookfield Reinsurance?

Connor Teskey: Absolutely. We are thrilled with the announcement to being partnered with Castlelake going forward. We’ve spent a great deal of time getting to know the company and the management team. We think, they will be very complementary to broader Brookfield and our existing credit franchise. Similar to how we have partnered with other affiliate managers in the past, we believe that, within the Brookfield ecosystem, we can support and accelerate the growth of that franchise, while at the same time expanding the product offering we can provide to our clients and LP partners. To answer your specific question around the breakdown between Brookfield Asset Management and Brookfield Reinsurance, Brookfield Asset Management will spend about $500 million upon closing of that transaction.

That $500 million is broken down into about $350 million to acquire 51% of the FRE and the remaining $150 million will be to support the business in acquiring a small portion of the businesses carry and funding our proportionate share of the manager’s GP stakes going forward. It’s important to recognize that the bulk of the $1.5 billion that was announced will come as an investment from Brookfield reinsurance to support the growth of Castlelake going forward, but the investment from Brookfield Asset Management is about $500 million upfront.

Operator: Our next question comes from the line of Alexander Blostein with Goldman Sachs.

Alexander Blostein: Congrats here to your next endeavor, and welcome Hadley to the call. Good to hear from you. My question is around fundraising. So you guys raised $20 billion in the quarter, and you suggested a number of times over the course of the call that, that’s likely to build as you progress I know you sort of backed away from being too specific with respect to, I guess, $100 billion you talked in the past and as things could slip, et cetera. But can you just help us frame, I guess, one, what is the kind of quarterly pace you expect to be at? Are your comments implying you expect to be north of 20% kind of on a quarterly run rate basis from here? And number 2, with respect to the 4 flagships that are currently in the market, can you just give us the mark-to-market on kind of the expected sizing for these flagships and the client reception you’re having on the demand side of things.

Connor Teskey: Great. Thanks, Alex. I appreciate the question. The overarching comment we would make on fundraising is our sentiment around confidence in terms of fundraising hasn’t changed at all. Obviously, it was a tremendous quarter. In fact, this was the best Q1 fundraising quarter we’ve ever had. And in terms of the dynamics that we see driving our fundraising activity for the remainder of the year, they all stay very much intact. Three flagships that we expect to close a record number of complementary funds and significantly larger ability to generate inflows from our insurance platform going forward. The one point I would just make on specific figures and timing is given what we’ve seen to date, yes, things could change, but they could equally change to the upside in terms of them slipping.

The momentum is very, very strong. To answer your 2 specific questions, maybe the one piece of guidance we would give on quarterly pace is we do recognize that 2023 in terms of fundraising was quite back-end loaded. We don’t see as much of that dynamic this year. We do expect fundraising to be more balanced across the 4 quarters. Obviously, it will accelerate a little bit towards the back end of the year. But we don’t expect such a concentration in Q4 as we saw in 2023. And then just in terms of the flagship within our business, this is where we’re seeing incredible momentum. Our confidence in the reception of our transition strategy continues to be immense best-in-class. We feel very confident in terms of closing up that fund at or above our targets this year and particularly in our real estate flagship, this is where we’re really seeing the market opening up.

And investors are seeing the upside and the rebound in that asset class and looking to get an increasing amount of exposure. And then maybe just to finish on credit. It was very well highlighted in our quarterly results that credit is the biggest driver of our fundraising in Q1, and that is indicative of the support we are seeing across our credit franchise, including the flagships, and that’s something we expect to see in the coming quarters as well.

Alexander Blostein: Great. That’s perfect. And then my second question is around the insurance business and appreciate the extra disclosure in the slide deck. But I guess if you look at AEL now that it’s closed, how are you thinking about both the magnitude and timing of rotating some of AEL assets to BAM and Oaktree kind of credit strategies that will enable you to earn a higher fee on top of the — and I guess when you kind of think about the platform broadly, now you mentioned $90 billion as a whole. Kind of what is the ultimate sub-advisory capacity do you see for the firm, again, in addition to IMA when it comes to that $90 billion?

Connor Teskey: Sure. And well, obviously, this will evolve over time. We want to be helpful and constructive here. I would say, over the long term, we expect to deploy about 1/3 of that capital into long-term private funds, maybe about another 1/3 into investment-grade credit and maybe about another 1/3 into liquid credit. That’s probably a good rule of thumb based on what we’re seeing today. And then in terms of pace and ability to make those allocations, there’s 2 things we would highlight here. It does take a little bit of time, but it’s not that much. And we’ve spoken over the last several quarters about investments we’ve been making in the business. One of the key areas of investment has been into the insurance franchise, such that we are very well positioned to deploy this capital starting last week when AEL closed.

And it’s great that those investments and costs that weren’t previously being offset by revenue now have fees to be paired against. So as a general rule, I would say it will probably take somewhere in the 2- to 3-year time frame in order to frame out those allocations.

Operator: Our next question comes from the line of Geoffrey Kwan with RBC Capital Markets.

Geoffrey Kwan: I also wanted to just talk on credit. I know Hadley talked about it a little bit, just — but given the growth in the credit platform and a more diverse credit product offering. Can you talk maybe a bit about the competitive environment around putting that capital to work and how you see your competitive advantage in deploying that capital within credit?

Hadley Peer Marshall: Thanks, Geoff. I can take that answer. So if you — I guess the short answer is it’s very strong. If you think about 2023 and especially the first half, there was a lot of market disruption, which was the upside to our credit business. Today, there is more liquidity in the market, but we continue to find attractive opportunities. If you take a step back, we have a long record and have proven that we can deploy through various market cycles, earning attractive returns for our credit businesses. And we can do this for a few reasons. One, we have a strong asset knowledge across all the sectors we invest in. We can provide more than just capital, making us a partner of choice, and we can provide all parts of the capital structure from debt to equity and in between, leading to more proprietary deal flow.

And finally, I would say we can provide certainty of capital with quick execution on large ticket sizes, limiting the competition. It’s also important to note that there continues to be areas of scarcity of capital in today’s environment. Banks have pulled back, regional banks are not as active, which has been very helpful for our asset-based sectors, the real estate and infrastructure markets in particular. And then when you add on maturity walls and unsustainable capital structures, that’s an advantageous point for Oaktree and the growth of their business. So in essence, it’s a good time to have dry powder for us.

Geoffrey Kwan: Okay. That’s helpful. And my second question was back on Investor Day, the 5-year FBC target implied, I think it was roughly about an 18% CAGR. And I recall also assumed no acquisitions, so maybe something like the AEL. But essentially, when you look at Q1, it was up 6% year-over-year. Obviously, it was hit in part by the decline in share price of the affiliates. Fund raising should be a tailwind. But if monetization markets improve, that would also temper some of that FBC growth. So my question is, looking at your crystal ball, when you take a look at 2024, and if we exclude the $50 billion from AEL, do you see FBC growth this year being, say, above that 18% in line or perhaps a bit below that?

Connor Teskey: Thanks, Geoff. Maybe the way we would frame it is, obviously, that 18% CAGR may fluctuate a little bit year-to-year. But there’s nothing about this year that is going to be out of line with that broader trend. The way that we would really characterize this quarter across, let’s say, all the key drivers of the business, whether it be deployment, whether it be fundraising, whether it be monetization is there are — there is tremendous momentum. And a number of the growth initiatives that we’ve locked in, in Q1 are going to drive significant amounts of growth in the latter part of this year. Our expanding credit franchise is going to allow us to raise more organic capital our expanding wealth solutions franchise is going to allow us to bring more inflows into that business.

So one year to another might be slightly above or below that long-term trend, but there’s certainly nothing about what we’re seeing in the market that disrupts our perspective of that very high teens type CAGR going forward.

Bahir Manios: And Geoff, it’s Bahir. And I’ll just add on to that from what Connor said. As I noted in my remarks, if you just looked at our private fund strategies, the activity that’s going on in credit and insurance year-over-year. Our fee-bearing capital was actually up 15%. So there was a bit of noise that you correctly highlighted in your question for sure. But definitely, as Connor said, there’s nothing sort of strange here in what happened in the first quarter with respect to sort of the fundamentals of the business and most importantly, our outlook with respect to growth in the future.

Operator: Our next question comes from the line of Brian Bedell with Deutsche Bank.

Brian Bedell: Maybe just on the — I think you referenced that you were able to refinance some portfolio company debt at attractive spreads. Maybe if I can tie that in with also the deployment in the credit business and what’s increasingly on sustainable capital structures across many businesses. Can you talk about how are you reviewing that refinancing wall both from your portfolio company perspective and also the opportunity within credit to deploy that capital and whether that’s sort of a rising potential on a sequential basis as we move throughout the year and deploying that capital?

Connor Teskey: Brian, thanks for the question. Perhaps let us come at this a slightly different way and just tell you what we’re seeing in the market. We often get asked the question, do you expect to be a bigger buyer or a bigger seller in the current market environment? And what is unique about the market right now, and this won’t last forever, but it’s incredibly constructive is we expect to absolutely be both in scale given what we’re seeing in terms of the economic cycle right now. At the same time, due to things you mentioned, unsustainable capital structures, some ambitious growth that didn’t play out in certain businesses. We are seeing incredible opportunities to deploy capital at scale, while at the same time, the big trends that we’ve been investing in digitalization, decarbonization, deglobalization, those continue to only accelerate.