Analyzing Brookfield Asset Management Inc. among Hedge Fund Favorites
Recently, we curated a selection of the 10 Best Asset Management Stocks to Buy According to Hedge Funds. In this piece, we will examine where Brookfield Asset Management Inc. (NYSE:BAM) ranks among other top asset management stocks favored by hedge funds.
A Exceptional Year for Asset Management
The year is shaping up to be one of the finest for asset management firms, with stocks witnessing substantial double-digit gains driven by a favorable investment landscape. Central banks are actively pursuing lower interest rates, boosting investor confidence and fueling market momentum.
Capital Inflows and Investor Rewards
As a result, asset management firms are reaping the benefits of a surge in capital inflows and heightened fee generation. Investors are being rewarded with stock buybacks and generous dividends, further enhancing their returns.
Record Growth in Assets Under Management
Due to robust market performance and increased net flows, assets under management (AUM) reached an impressive $132 trillion by June 2024. A global report by PricewaterhouseCoopers highlights that firms delivering both financial and social returns are set to emerge as frontrunners.
The Importance of Social Responsibility
“While financial returns will always hold significance, investors are increasingly recognizing the value of social returns,” noted industry experts. Firms excelling in both areas are likely to attract investment and sustain strong shareholder returns.
Projected Growth in the Asset Management Sector
The asset management industry is poised for continued growth, with projections indicating an annual increase of up to 5.6%, reaching $147.4 trillion by 2025. This growth is expected as firms adapt to evolving investment management strategies driven by technology, changing investor preferences, and a growing emphasis on sustainability.
Customization of Investment Products
Responding to shifting investor demands, asset managers are increasingly offering tailored investment products that align with individual financial objectives, risk tolerance, and ethical values.
The Shift Towards Client-Centric Approaches
According to Matt Ford, Co-founder and CEO at Sidekick, “We anticipate a sustained shift towards a more client-focused approach in asset management as high-net-worth and mass affluent individuals ask for more than conventional offerings.”
Technological Advancements Fueling Customization
Technology is playing a crucial role in this trend, with asset managers utilizing artificial intelligence and machine learning to gather extensive data. This enables proactive investments in promising companies while sidestepping those that face hurdles.
Popularity of Passive Investment Products
Passive investment products, which track market indices like the S&P 500, have gained traction compared to their active counterparts. Their success is attributed to robust market performance, with the S&P 500 climbing 26% in 2024 following a 24% rise in 2023.
ESG Integration in Asset Management
Environmental, social, and governance (ESG) factors are becoming essential in asset management. Managers are under increasing pressure to incorporate these considerations into their investment processes.
Importance of ESG in Due Diligence
“ESG is poised to play a significant role in the due diligence process, allowing active managers like us to not only deliver alpha but also identify companies committed to a sustainable future,” stated Mr. Ford.
The Role of Asset Management Stocks
Asset management stocks are pivotal in the financial sector, generating revenue through advisory and management fees. Despite operating in a heavily regulated space, they provide stability and diversification for investors.
Brookfield Asset Management Inc.: A Leading Player
To compile our list of the best asset management stocks to buy from a hedge fund perspective, we evaluated the largest U.S. asset managers by market capitalization, focusing on those with strong fundamentals and significant upside potential. Stocks were ranked based on the number of hedge funds holding stakes.
Brookfield’s Performance and Future Outlook
Brookfield Asset Management Inc. (NYSE:BAM) focuses on diverse sectors, including real estate, renewable energy, infrastructure, and private equity, delivering an impressive average annual return of 18% over the last three decades.
In Q3 2024, the company released outstanding results, showcasing a 19% increase in distributable earnings, amounting to $1.3 billion or $0.80 per share. This growth was bolstered by a 14% rise in fee-related earnings and successful acquisitions, including American Equity Life.
Strong Growth Projections
Brookfield anticipates its earnings per share will grow over 20% annually for the next five years, fueled by expansion in its wealth solutions and asset management sectors. Furthermore, the company expects to generate $47 billion in free cash flow over this period, approximately $30 per share, enabling significant investments aimed at enhancing shareholder value.
Hedge Fund Insights on Brookfield
Madison Investors Fund commented, “Though we sold our stake in Brookfield Asset Management Ltd. (NYSE:BAM) this quarter to explore other opportunities, we remain optimistic about its outlook and maintain indirect exposure through our holdings in Brookfield Corporation, its largest shareholder.”
Conclusion: BAM’s Position in the Market
Brookfield Asset Management Inc. ranks 6th on our list of best asset management stocks to consider based on hedge fund activity. While we recognize its growth potential, we are inclined to believe that AI stocks may offer greater returns in a shorter time frame. For those seeking promising AI investments trading below five times their earnings, we encourage further exploration.
Disclosure: None. This article is originally published at Insider Monkey.
