Brookfield Asset Management (BAM) vs Brookfield Corporation (BN)

ByDylan Callaghan Published On:

When it comes to investing in Brookfield, you might find yourself puzzled by the choice between the wide variety of different options.

Whether it be Brookfield Renewables, Property Partners, Asset Management, or Infrastructure, it’s all relatively confusing.

Brookfield Asset Management, in particular, is the most confusing, primarily because this is what the company was called prior to its spinoff.

This is why in this article, I’m going to focus primarily on BAM versus BN.

In my opinion, choosing between BN and BAM often comes down to your investment goals:

BN is better suited for long-term growth, while BAM is ideal for income investors seeking steady dividends.

The split of Brookfield Asset Management and the changing of tickers

In late 2022, you may have noticed significant changes in the Brookfield universe. The company formerly known as Brookfield Asset Management underwent a major restructuring.

The original entity, trading under the ticker BAM.A, spun off 25% of its asset management business into a new publicly traded company, which would be the new BAM. This spin-off retained the name Brookfield Asset Management and now trades under the ticker BAM.

The remaining 75% of the asset management business, along with the company’s directly held assets, became Brookfield Corporation, trading under the ticker BN.

Here’s a quick breakdown of the changes:

  • Old: BAM.A (Brookfield Asset Management)
  • New:
    • BAM (Brookfield Asset Management – pure-play asset manager)
    • BN (Brookfield Corporation – holding company)

As an investor, you now have two distinct investment options within the Brookfield family. 

BAM focuses solely on asset management, while BN operates as a holding company with a diversified portfolio of assets and a majority stake in BAM.

This split allows you to choose between direct exposure to Brookfield’s asset management expertise (BAM) or a broader investment in the company’s various holdings and operations (BN).

Overview of Brookfield Asset Management (BAM)

Brookfield Asset Management (BAM) operates as a pure-play asset management company focused on infrastructure, private equity, and credit. Their business model revolves around managing assets for institutional investors and high-net-worth individuals.

BAM’s focus is on generating strong returns through active management and value creation. The firm’s global reach and diverse portfolio allow for strategic investments across various sectors and regions.

Key points about BAM:

  • Pure-play asset management business
  • High-margin fee-based revenue model
  • Strong track record of growth and performance

BAM generates revenue through management fees, performance fees, and carried interest. These fees are based on the assets under management (AUM) and the performance of their investments.

The company’s strategy involves:

  1. Raising capital from investors
  2. Identifying and acquiring undervalued assets
  3. Improving asset performance through operational expertise
  4. Selling assets at a profit or generating steady cash flow

BAM’s expertise lies in real estate, renewable power, infrastructure, and private equity. They manage a diverse portfolio of assets across these sectors, providing investors with exposure to alternative investments.

You’ll find that BAM’s business model allows for scalability and recurring revenue. As they increase their AUM, their management fees grow proportionally, creating a stable income stream.

This is also why the company is the higher yielding option of the two.

Insight into Brookfield Corp. (BN)

Brookfield Corp. (BN) operates as a holding company and alternative asset manager with significant ownership stakes in various Brookfield entities, including a 75% ownership of BAM. The company holds direct investments in real assets and businesses across multiple sectors.

When you buy Brookfield stock, you’re buying a piece of businesses like Brookfield Renewables, Property Partners, Asset Management, Infrastructure, Reinsurance, and more.

BN owns significant stakes in several key subsidiaries:

BN’s structure allows investors to gain exposure to both Brookfield’s asset management capabilities and its invested capital. This dual approach provides a unique investment proposition.

Notable aspects of BN:

  • Diverse portfolio of direct investments
  • Ownership stakes in other Brookfield entities
  • Potential for capital appreciation and dividend income

By investing in BN, you’re essentially getting a piece of each of these specialized businesses. This diversification can help mitigate risk while providing exposure to various growth opportunities.

The rollup model impacts BN’s financial performance. Its revenue and profits are directly tied to the success of its subsidiaries. When these companies perform well, BN benefits.

It’s worth noting that BN’s debt-to-equity ratio is 1.43, which is relatively high. This leverage reflects the capital-intensive nature of the asset management business as a whole.

The key differences between BAM and BN

While both BAM and BN are part of the Brookfield family, they offer different investment characteristics.

BAM focuses on asset management fees and carried interest, while BN provides broader exposure to Brookfield’s investments and operations.

BAM stock typically trades at higher multiples due to its pure-play asset management model. BN, with its more diverse revenue streams, often trades at lower multiples but offers a different risk-reward profile.

Key differences:

  • BAM: Higher growth potential, fee-based revenue. Aims to pay back a large chunk of earnings towards a dividend
  • BN: More diversified exposure, potential for capital gains and smaller yields

Which One is The Better Buy Today?

Choosing between Brookfield Corporation (BN) and Brookfield Asset Management (BAM) depends on your investment goals and risk tolerance.

BN offers broader exposure to Brookfield’s diverse portfolio, including real estate, infrastructure, and renewable power. If you want a stake in the entire Brookfield ecosystem, BN is the better choice.

BAM, on the other hand, focuses solely on asset management. It’s a pure-play asset manager that may appeal if you’re interested in the financial services aspect of Brookfield’s operations.

Consider these factors:

  • Yield: BAM typically offers a higher dividend yield
  • Growth potential: BN may have more upside due to its diverse holdings
  • Risk: BAM is more concentrated, while BN spreads risk across sectors

If you’re seeking income and growth from alternative investments, BN’s exposure to cash flow-generative assets might be attractive. For those focused on the asset management business, BAM provides a more targeted approach.

Make no mistake about it, however. These are both two exceptional Canadian stocks, worthy of addition to most portfolios.