Brookfield Asset Management Ltd. BAM-T is considering moving its head office to New York to set it up to join a wider roster of stock indexes, as it seeks to expand the pool of potential investors in its stock.
The Toronto-based asset manager floated a series of changes, which are still under consideration, to investors at a presentation in New York on Tuesday. They would be the company’s next steps to broaden its access to capital markets, following a 2022 spinoff that listed 25 per cent of its shares in public markets.
If Brookfield moves ahead with the plan, it could choose to reregister its asset manager’s head office in New York, which is already its largest outpost around the world – but keep its Canadian incorporation.
The company would also undertake a share exchange that would make all of the asset manager’s shares publicly traded. Parent entity Brookfield Corp. currently owns nearly three-quarters of the asset manager’s stock through an unlisted holding company, while the other quarter is publicly traded. Brookfield would swap that stake for public shares in Brookfield Asset Management, keeping its underlying ownership unchanged.
That would mean that the market capitalization of Brookfield Asset Management would reflect the full value of the business – about US$70-billion – instead of roughly one-quarter of that amount currently.
Brookfield Asset Management would still be taxed in Canada, and its parent entity, Brookfield Corp., would remain Toronto-based, owning 73 per cent of the asset manager. The company would also keep its Toronto Stock Exchange listing and its place in Canadian stock indexes. In that sense, the proposed changes would be largely technical in nature, and Brookfield said in its presentation that there would be no changes to business operations.
Chief financial officer Hadley Peer Marshall said Tuesday that Brookfield had received feedback from shareholders that urged the company to focus on further increasing the liquidity of its asset manager’s stock, and gaining inclusion in prominent U.S.-based and global stock indexes.
The proposed plan would give Brookfield new status with some indexes, such as the Russell 2000 Index of smaller-capitalization companies. But the company would need to make further changes that are not currently being contemplated to be eligible to join the S&P 500 Index of larger-capitalization companies, which is tracked by funds worth trillions of dollars.
“We will continue to broaden that base into the deepest pools of capital,” Ms. Peer Marshall said.
Moving the company’s registered head office to New York “makes sense just because we have the largest percentage of our employees, our revenues and of asset management located in the U.S.,” she said. With all of the asset manager’s stock publicly owned, “it will reflect the appropriate, true value of our market cap at almost $70-billion.”
With Brookfield’s ownership, incorporation and dividend treatment remaining unchanged, “this is a non-event for our shareholders,” she said.
Part of the rationale for Brookfield’s decision in 2022 to spin off its asset manager, and list one-quarter of its shares publicly, was to create a simpler, asset-light company that would be more appealing to investors looking for pure exposure to investments in alternative assets.
By gaining eligibility to join more stock indexes, Brookfield could entice a new swath of investors to compare its valuation and performance directly against other large, publicly listed asset managers in the United States.
Some Canadian companies have gone much farther, such as Ovintiv Inc. – formerly Encana Corp. – which moved its incorporation to Delaware when it moved its headquarters from Calgary to Denver.
Brookfield’s proposed changes are far less dramatic. But as the asset manager grows rapidly – it manages about US$1-trillion in assets, and plans to double that figure to US$2-trillion within five years – its proposed changes demonstrate the powerful allure of the vast pools of capital increasingly flowing to the U.S. and other premier stock indexes around the world.