BAM 10-K diff: FY 2024-12-31 → FY 2025-12-31
Paragraph-level diff of Risk Factors (Item 1A) and Management's Discussion & Analysis (Item 7).
Item 1A · Risk Factors
+91 paragraphs −82 paragraphs ~82 changed
FY 2024-12-31 (earlier)
ITEM 1A. RISK FACTORSYou should carefully consider the following factors in addition to other information set forth in this Annual Report. If any of the following risks were actually to occur, our business, financial condition and results of operations and the prospects and value of the Class A Shares would likely suffer.Risks Relating to Our Business
The trading price of the Class A Shares is subject to volatility due to market conditions and other factors and cannot be predicted.The market price of our Class A Shares may be volatile and could fluctuate significantly in response to factors both related and unrelated to our operating performance and/or future prospects, including, but not limited to: (i) variations in our operating results and financial condition; (ii) actual or prospective changes in government laws, rules or regulations affecting our business and our managed assets; (iii) material announcements by us, our affiliates or our competitors; (iv) the general state of the securities markets; (v) market conditions and events specific to the industries in which we and our managed assets operate; (vi) changes and developments in general economic, political, or social conditions, including as a result of pandemics/epidemics and related economic disruptions; (vii) changes in the values of our investments and distributions or changes in the amount of interest paid in respect of investments; (viii) differences between our actual financial results and those expected by investors and analysts; (ix) changes in analysts’ recommendations or earnings projections; (x) the depth and liquidity of the market for the Class A Shares; (xi) dilution from the issuance of additional equity; (xii) investor perception of our business, our managed assets and the sectors in which we deploy the funds from our strategies; (xiii) investment restrictions; (xiv) our dividend policy; (xv) the departure of key executives; (xvi) sales of Class A Shares by senior management or significant shareholders; and (xvii) the materialization of other risks.Deficiencies in our public company financial reporting and disclosures could adversely impact our reputation.
As we expand the size and scope of our business, there is a greater susceptibility that our financial reporting and other public disclosure documents may contain material misstatements and that the controls we maintain to attempt to ensure the complete accuracy of our public disclosures may fail to operate as intended. The occurrence of such events could adversely impact our reputation and financial condition. In addition, we disclose certain metrics that do not have standardized meaning, are based on our own methodologies and assumptions and may not properly convey the information they purport to reflect.Management is responsible for establishing and maintaining adequate internal controls over financial reporting to give our stakeholders assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in conformity with U.S. GAAP. However, the process for establishing and maintaining adequate internal controls over financial reporting has inherent limitations, including the possibility of human error. In addition, we may exclude recently acquired companies from our evaluation of internal controls.
Our internal controls over financial reporting may not prevent or detect misstatements in our financial disclosures on a timely basis, or at all. Some of these processes may be new for certain subsidiaries in our structure, and in the case of acquisitions, may take time to be fully implemented.Our disclosure controls and procedures are designed to provide assurance that information required to be disclosed by us in reports filed or submitted under U.S. and Canadian securities laws is recorded, processed, summarized and reported within the time periods specified. Our policies and procedures governing disclosures may not ensure that all material information regarding us is disclosed in a proper and timely fashion, or that we will be successful in preventing the disclosure of material information to a single person or a limited group of people before such information is generally disseminated.As at December 31, 2024, BAM used the equity method of accounting for its interest in our asset management business, and our asset management business’ results are not consolidated into BAM's financial statements, and therefore the recording of our asset management business’ transactions into its accounts is not part of BAM’s internal control structure. BAM has provided Asset Management Company stand-alone financial statements in this report. However, as of December 31, 2024, our asset management business was not independently required to meet Sarbanes-Oxley requirements and BAM did not have the same control and certification processes with respect to the information on our asset management business that it would have if it were a wholly-owned subsidiary of BAM.
If BAM or our auditors were to conclude that our internal controls over financial reporting were not effective in respect of any reporting period, investors could lose confidence in our reported financial information and the price of our Class A Shares could decline. Our failure to achieve and maintain effective internal controls could have a materially adverse effect on our business, our ability to access capital markets and our reputation. In addition, material weaknesses in our internal controls could require significant expense and management time to remediate.
27Investors may find it difficult or impossible to effect service of process and enforce judgments against us, our directors and our executive officers.BAM is headquartered in New York, NY, but some of its officers and directors are not residents of the United States, and a portion of the assets of BAM and said persons are located outside the United States. As a result, it may be difficult for U.S. investors to: (i) effect service of process within the United States upon BAM or those directors and officers who are not residents of the United States; or (ii) realize in the United States upon judgments of courts of the United States predicated upon the civil liability provisions of the United States federal securities laws. Investors outside of the U.S. will similarly find it difficult to enforce judgments obtained outside of the U.S.We are subject to numerous laws, rules and regulatory requirements which may impact our business, including resulting in financial penalties, loss of business and/or damage to our reputation in instances of non-compliance.
There are many laws, governmental rules and regulations and listing exchange rules that apply to our business and our managed assets. Changes in these laws, rules and regulations, or their interpretation by governmental agencies or the courts, could adversely affect our business, our managed assets, or our prospects, or those of our affiliates, customers, clients or partners. The failure of BAM, our asset management business or the entities that we manage to comply with these laws, rules and regulations, or with the rules and registration requirements of the respective stock exchanges on which we and they are listed, could adversely affect our reputation and financial condition.Our business, including our investment advisory and broker-dealer business, is subject to substantial and increasing regulatory compliance obligations and oversight, and this higher level of scrutiny may lead to more regulatory enforcement actions. There continues to be uncertainty regarding the appropriate level of regulation and oversight of asset management businesses in a number of jurisdictions in which we operate. The financial services industry has been the subject of heightened scrutiny and enforcement actions. Regulatory investigations and/or enforcement actions by our regulators could have a material adverse effect on our business and/or reputation. In addition, the introduction of new legislation and increased regulations may result in increased compliance costs and could materially affect the manner in which we conduct our business and adversely affect our profitability. Although there may be some areas where governments in certain jurisdictions propose deregulation, it is difficult to predict the timing and impact of any such deregulation, and we may not materially benefit from any such changes.
Our business is not only regulated in the U.S., but also in other jurisdictions where we conduct operations including, but not limited to, the E.U., the U.K., Canada, Brazil, Colombia, Australia, India and South Korea. Similar to the environment in the U.S., our business and how we market in jurisdictions outside the U.S. has become subject to further regulation. Governmental agencies around the world have proposed or implemented a number of initiatives and additional rules and regulations that could adversely affect our business and our managed assets, and governmental agencies may propose or implement further rules and regulations in the future. These rules and regulations may impact how we market in these jurisdictions and introduce compliance obligations with respect to disclosure and transparency, as well as restrictions on investor participation and distributions. Such regulations may also prescribe certain capital requirements on our managed assets, and conditions on the leverage our managed assets may employ and the liquidity these managed assets must have. Compliance with additional regulatory requirements will impose additional restrictions and expenses for us and could reduce our operating flexibility and fundraising opportunities.
The broker-dealer side of our managed assets is regulated by the SEC, the various Canadian provincial securities commissions, as well as self-regulatory organizations, including the Financial Industry Regulatory Authority in the U.S. These regulatory bodies may conduct administrative or enforcement proceedings that can result in censure, fine, suspension or expulsion of a broker-dealer, its directors, officers or employees. Such proceedings, whether or not resulting in adverse findings, can require substantial expenditures and can have an adverse impact on the reputation of a broker-dealer.The advisors of certain of our managed assets are registered as investment advisers with the SEC. Registered investment advisers are subject to the requirements and regulations of the Investment Advisers Act of 1940, which grants U.S. supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with laws or regulations. If such powers are exercised, the possible sanctions that may be imposed include the suspension of individual employees, limitations on the activities in which the investment adviser may engage, suspension or revocation of the investment adviser’s registration, censure and fines. Compliance with these requirements and regulations results in the expenditure of resources, and a failure to comply could result in investigations, financial or other sanctions, and reputational damage.The Investment Company Act and the rules promulgated thereunder provide certain protections to investors and impose certain restrictions on entities that are deemed “investment companies” under the Investment Company Act. We are not currently, nor do we intend to become, an investment company under the Investment Company Act. To ensure that we are not deemed to be an investment company, we may be required to materially restrict or limit the scope of our operations or plans and the types of acquisitions that we may make, and we may need to modify our organizational structure or dispose of assets that we would not otherwise dispose of. If we were required to register as an investment company, we would face severe limitations on the operation of our business. Among other things, we would be prohibited from engaging in certain business activities (or have conditions placed on our business activities), face
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restrictions on engaging in transactions with affiliated entities and issuing certain securities or engaging in certain types of financings, be restricted with respect to the amount and types of borrowings we are permitted to obtain, be required to limit the amount of investments that we make as principal, and face other limitations on our activities.We have and may become subject to additional regulatory and compliance requirements as we expand our product offerings and investment platform which likely will carry additional legal and compliance costs, as well as additional operating requirements that may also increase costs.
Our strategies primarily invest in renewable power and transition, infrastructure, business services, real estate and industrial assets. In doing so, our managed assets are required to comply with extensive and complex municipal, state or provincial, national and international laws and regulations. These laws and regulations can result in uncertainty and delays and impose additional costs, which may adversely affect our results of operations. Changes in these laws and regulations may negatively impact us and our managed assets or may benefit our competitors and their businesses.
Additionally, liability under such laws, rules and regulations may occur without our fault. In certain cases, parties can pursue legal actions against us to enforce compliance as well as seek damages for non-compliance or for personal injury or property damage. Our insurance may not provide sufficient coverage in the event that a successful claim is made against us.Most of our funds rely on Rule 506 of Regulation D under the U.S. Securities Act to raise capital from investors. Rule 506 is not available to issuers deemed to be “bad actors” under Rule 506 if a covered person of the issuer has been the subject to certain criminal, civil or regulatory disqualifying events. Covered persons include, among others, the issuer, executive officer or other officer participating in the offering of the issuer, any general partner or managing member of the foregoing entities, any promoter of the issuer and any beneficial owner of 20% or more of the issuer’s outstanding voting equity securities. If one or more of our funds were to lose the ability to rely on the Rule 506 exemption because a covered person has been the subject of a disqualifying event, our business, financial condition and results of operations could be materially and adversely affected.Federal, state and foreign anti-bribery and corruption and trade sanctions laws and restrictions on foreign direct investment applicable to us and our managed assets create the potential for significant liabilities and penalties, the inability to complete transactions, imposition of significant costs and burdens, and reputational harm and we may also be subject to various governmental investigations.
We are from time to time subject to various governmental investigations, audits and inquiries, both formal and informal. These investigations, regardless of their outcome, can be costly, divert management attention and damage our reputation. The unfavorable resolution of such investigations could result in criminal liability, fines, penalties or other monetary or non-monetary sanctions and could materially affect our business or results of operations.We are subject to a number of laws and regulations governing payments and contributions to public officials or other third parties both domestically and in respect of managed assets abroad, including the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), various federal and state corruption laws, and similar laws in non-U.S. jurisdictions, such as the U.K. Bribery Act 2010, the Canadian Corruption of Foreign Public Officials Act (the “CFPOA”) and Part IV of the Criminal Code (Canada), the Brazilian Clean Companies Act, the Australian Criminal Code Act 1995, the Indian Prevention of Corruption Act, and the Bermudian Bribery Act 2016. This global focus on anti-bribery and corruption enforcement may also lead to more investigations, both formal and informal, in this area, the results of which cannot be predicted.Instances of bribery, fraud, accounting irregularities and other improper, illegal or corrupt practices can be difficult to detect, in particular when conducting due diligence in connection with acquisitions, and fraud and other deceptive practices can be widespread in certain jurisdictions. We invest in emerging market countries that may not have established stringent anti-bribery and corruption laws and regulations, where existing laws and regulations may not be consistently enforced, or that are perceived to have materially higher levels of corruption according to international rating standards. Due diligence on investment opportunities in these jurisdictions is frequently more challenging because consistent and uniform commercial practices in such locations may not have developed or do not meet international standards. Bribery, fraud, accounting irregularities and corrupt practices can be especially difficult to detect in such locations. When acquiring assets in distress, the quality of financial information of the target may also make it difficult to identify irregularities.The FCPA prohibits bribery of non-U.S. officials, candidates for office and political parties, and requires U.S. companies to keep books and records that accurately and fairly reflect those companies’ transactions. Similar laws in non-U.S. jurisdictions, such as the U.K. Bribery Act 2010 and the CFPOA, as well as other applicable anti-bribery and corruption or related laws in the U.S. and abroad, may also impose stricter or more onerous requirements than the FCPA, and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. The policies and procedures we have implemented to comply with anti-bribery and corruption legislation may be inadequate. If we fail to comply with such laws and regulations, we could be exposed to claims for damages, financial penalties, incarceration of our employees, reputational harm, restrictions on our operations and other liabilities, which could negatively affect our operating results and financial condition. In addition, we may be subject to successor
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liability for violations under these laws and regulations or other acts of bribery committed by entities in which we or our managed assets invest.
We are also subject to laws and regulations governing trade and economic sanctions. The Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of Commerce and the U.S. Department of State administer and enforce various trade control laws and regulations, including economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals. These laws and regulations implicate a number of aspects of our business, including servicing existing fund investors, finding new fund investors, and sourcing new investments, as well as activities by our managed assets or other controlled investments. Some of these regulations provide that penalties can be imposed on us for the conduct of our managed assets, even if we have not ourselves violated any regulation. Similar laws in non-U.S. jurisdictions, such as the Special Economic Measures Act (Canada), the United Nations Act (Canada) and the Justice for Victims of Corrupt Foreign Officials Act (Canada), and E.U. sanctions, may also impose restrictions or requirements on us or our managed assets. Anti-corruption, anti-money laundering, economic sanctions, and trade control laws imposed by non-U.S. jurisdictions, such as EU and UK sanctions or blocking statutes and the UK Bribery Act, may also impose stricter or more onerous requirements than the FCPA, OFAC, the U.S. Department of Commerce, the U.S. Department of State or U.S. Department of Treasury, and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. Different laws may also contain conflicting provisions, making compliance with all laws more difficult.” In February 2022, the U.S. and other countries began imposing meaningful sanctions targeting Russia as a result of actions taken by Russia in Ukraine. We and our managed assets are required to comply with these and potentially additional sanctions imposed by the U.S. and by other countries, for which the full costs, burdens and limitations on our business and prospects are currently unknown and may become significant.
In addition, the U.S. and many non-U.S. countries that have laws designed to protect national security or to restrict foreign direct investment. For example, under the United States Foreign Investment Risk Review Modernization Act, the Committee on Foreign Investment in the United States has the authority to review, block or impose conditions on investments by non-U.S. persons in U.S. companies or real assets deemed critical or sensitive to the U.S. Many non-U.S. jurisdictions have similar laws. For example, the E.U. has adopted an E.U.-wide mechanism to screen foreign investment on national security grounds and most E.U. member states now have a foreign investment screening mechanism in place or has initiated a consultative or legislative process expected to result in the adoption of a new mechanism or amendments to an existing mechanism, adopted a regulation aimed at regulation of foreign subsidies that could distort the internal E.U. market.Under these laws, governments have the authority to impose a variety of actions, including requirements for the advance screening or notification of certain transactions, blocking or imposing conditions on certain transactions, limiting the size of foreign equity investments or control by foreign investors, and restricting the employment of foreigners as key personnel. These actions could limit our ability to find suitable investments, cause delays in consummating transactions, result in the abandonment of transactions, and impose burdensome operational requirements on us or our managed assets. These laws could also negatively impact our fundraising and syndication activities by causing us to exclude or limit certain investors in our funds or co-investors for our transactions. Moreover, these laws may make it difficult for us to identify suitable buyers for our investments that we want to exit and could constrain the universe of exit opportunities generally. Complying with these laws imposes potentially significant costs and complex additional burdens, and any failure by us or our managed assets to comply with them could expose us to significant penalties, sanctions, loss of future investment opportunities, additional regulatory scrutiny, and reputational harm.
Foreign exchange rate fluctuations could adversely impact our aggregate foreign currency exposure and hedging strategies may not be effective.
We have pursued and intend to continue to pursue growth opportunities in international markets, and often deploy capital in countries where the U.S. dollar is not the local currency. As a result, we are subject to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. A significant depreciation in the value of the currency utilized in one or more countries where we have a significant presence may have a material adverse effect on the results of our operations and financial position. In addition, we are active in certain markets where economic growth is dependent on the price of commodities and the currencies in these markets can be more volatile as a result.
Our business and our managed assets are impacted by changes in currency rates, interest rates, commodity prices and other financial exposures. We may selectively utilize financial instruments to manage these exposures, including credit default swaps and other derivatives to hedge certain of our financial positions. However, a significant portion of these risks may remain unhedged. We may also choose to establish unhedged positions in the ordinary course of business.
There is no assurance that hedging strategies, to the extent they are used, will fully mitigate the risks they are intended to offset. Additionally, derivatives that we may use are also subject to their own unique set of risks, including counterparty risk with respect to the financial well-being of the party on the other side of these transactions and a potential requirement to fund mark-to-market adjustments. Our financial risk management policies may not ultimately be effective at managing these risks.30
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and similar laws in other jurisdictions impose rules and regulations governing oversight of the over-the-counter derivatives market and its participants. These regulations may impose additional costs and regulatory scrutiny on us. If our derivative transactions are required to be executed through exchanges or regulated facilities, we will face incremental collateral requirements in the form of an initial margin and require variation margin to be cash settled on a daily basis. Such an increase in margin requirements (relative to bilateral agreements) or a more restricted list of securities that qualify as eligible collateral, would require us to hold larger positions in cash and treasuries, which could reduce income. We cannot predict the effect of changing derivatives legislation on our hedging costs, our hedging strategy or its implementation, or the risks that we hedge. Regulation of derivatives may increase the cost of derivative contracts, reduce the availability of derivatives to protect against operational risk and reduce the liquidity of the derivatives market, all of which may reduce our use of derivatives and result in the increased volatility and decreased predictability of our cash flows.Further increases in interest rates could increase our interest costs and adversely affect our financial performance.
Many long-life assets are interest rate sensitive. Further increases in interest rates will, other things being equal, decrease the value of an asset by reducing the present value of the cash flows expected to be produced by such asset. As the present value of an income-producing asset may decline as a result of interest rate increases, certain financial and other covenants under credit agreements governing such asset could be breached, even if we have satisfied and continue to satisfy our payment obligations thereunder. Such a breach could result in negative consequences on our financial performance and results of operations.
Additionally, any of our debt or preferred shares that are subject to variable interest rates, either as an obligation with a variable interest rate or as an obligation with a fixed interest rate that resets into a variable interest rate in the future, are subject to interest rate risk. Further, the value of any debt or preferred share that is subject to a fixed interest rate will be determined based on the prevailing interest rates and, accordingly, this type of debt or preferred share is also subject to interest rate risk.In many jurisdictions in which we operate, a period of sharply increasing interest rates may cause certain market dislocations that could negatively impact our financial performance, increase the cost and impact the availability of debt financing and thereby negatively impact the ability of our managed assets to obtain attractive financing or refinancing and could increase the cost of such financing if obtained. Many factors may impact us and our managed assets, including interest rate increases, which would impact the amount of revenue generated by our managed assets and may lead to an increase in the amount of cash required to service our obligations.Political instability, changes in government policy or unfamiliar cultural factors could adversely impact the value of our investments.We are subject to geopolitical uncertainties in all jurisdictions in which we operate. We make investments in businesses that are based outside of the United States and we may pursue investments in unfamiliar markets, which may expose us to additional risks not typically associated with investing in the United States. We may not properly adjust to the local culture and business practices in such markets, and there is the prospect that we may hire personnel or partner with local persons who might not comply with our culture and ethical business practices; either scenario could result in the failure of our initiatives in new or existing markets and lead to financial losses for us and our managed assets. There are risks of political instability and significant changes in laws and policies in several of our major markets and in other parts of the world in which we conduct business from factors such as political conflict, tariffs and other protectionist trade policies, including the encouragement of the onshoring of manufacturing in the U.S. and other countries, income inequality, refugee migration, terrorism, armed conflict, the potential break-up of countries or political-economic unions and political corruption; the materialization of one or more of these risks could negatively affect our financial performance.Further, conflict in Eastern Europe has contributed to global economic uncertainty, resulted in volatility in fuel prices, and heightened cybersecurity and cyber-terrorism disruptions and threats. Further economic and political instability and the commencement, escalation or expansion of armed conflict in Eastern Europe, the Middle East, or elsewhere in the world could significantly disrupt the free movement of goods, services and people, have a destabilizing effect on energy markets and result in potential higher costs of conducting business. Similarly, the inability of local and national governments to effectively manage ongoing political disputes could result in local, regional and/or global instability. The materialization of one or more of these risks could negatively affect our financial performance and adversely impact our business.
Any existing or new operations may be subject to significant political, economic and financial risks, which vary by country, and may include: (i) changes in government policies and regulations, including tariffs and other protectionist policies, or personnel; (ii) changes in general economic or social conditions; (iii) restrictions on currency transfer or convertibility; (iv) changes in labor relations; (v) military conflict, political instability and civil unrest; (vi) less developed or efficient financial markets than in North America; (vii) the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements; (viii) less government supervision and regulation; (ix) a less developed legal or regulatory environment; (x) heightened exposure to corruption risk; (xi) political hostility to investments by foreign investors; (xii) less publicly available information in respect of companies in non-North American markets; (xiii) adversely higher or lower rates of inflation; (xiv) higher transaction costs; (xv) difficulty in enforcing contractual obligations and expropriation or confiscation of assets; and (xvi) fewer investor protections.31Unforeseen political events in markets where we have significant investors and/or where we have managed assets or may look to for further growth of our assets and businesses, such as the North American, South American, Australian, European, Middle Eastern and Asian markets, may create economic uncertainty that has a negative impact on our financial performance. Such uncertainty could cause disruptions to our businesses, including affecting our managed assets and/or our relationships with our investors, customers and suppliers, as well as altering the relationship among tariffs and currencies, including the value of foreign currencies relative to the U.S. dollar. Disruptions and uncertainties could adversely affect our financial condition, operating results and cash flows. In addition, political outcomes in the markets in which we operate may also result in legal uncertainty and potentially divergent national laws and regulations, which can contribute to general economic uncertainty. Economic uncertainty impacting us and our managed assets could be exacerbated by supply chain disruptions, trade policy and geopolitical tensions.
Unfavorable economic conditions or changes in the industries in which we operate could adversely impact our financial performance.
We are exposed to local, regional, national and international economic conditions and other events and occurrences beyond our control, including, but not limited to, the following: short-term and long-term interest rates; inflation; credit and capital market volatility; business investment levels; government spending levels; sovereign debt risks; consumer spending levels; changes in laws, rules or regulations; trade barriers; supply chain disruptions; commodity prices; currency exchange rates and controls; national and international political circumstances (including wars, terrorist acts or security operations); catastrophic events (including pandemics/epidemics, earthquakes, tornadoes or floods); the rate and direction of economic growth; and general economic uncertainty. On a global basis, certain industries and sectors have created capacity that anticipated higher growth, which has caused volatility across all markets, including commodity markets, which may have a negative impact on our financial performance. Unfavorable economic conditions could affect the jurisdictions in which our entities are formed and where we and our managed assets operate businesses, and may cause a reduction in: (i) securities prices; (ii) the liquidity of investments made by our managed assets; (iii) the value or performance of the investments made by our managed assets; and (iv) the ability of us and our managed assets to raise or deploy capital, each of which could adversely impact our financial condition.In general, a decline in economic conditions, either in the markets or industries in which our strategies invest, or both, will result in downward pressure on our operating margins and asset values as a result of lower demand and increased price competition for the services and products that we provide. In particular, given the importance of the U.S. to our operations, an economic downturn in this market could have a significant adverse effect on our operating margins and asset values.Many of our private funds have a finite life that may require us to exit an investment made in a fund at an inopportune time. Volatility in the exit markets for these investments, increasing levels of capital required to finance companies to exit and rising enterprise value thresholds to go public or complete a strategic sale can all contribute to the risk that we will not be able to exit a private fund investment successfully. We cannot always control the timing of our private fund investment exits or our realizations upon exit. See “—Actions or conduct that have a negative impact on our investors’ or stakeholders’ perception of us could adversely impact our ability to attract and/or retain investor capital and generate fee revenue”. If global economic conditions deteriorate, our investment performance could suffer, resulting in, for example, the payment of less or no carried interest to us. The payment of less or no carried interest to us could cause our cash flow from operations to decrease, which could materially adversely affect our liquidity position and the amount of cash we have on hand to conduct our operations. A reduction in our cash flow from our Fee-Bearing Capital strategies and products could, in turn, require us to rely on other sources of cash such as the capital markets, which may not be available to us on acceptable terms, or debt and other forms of leverage.
In addition, in an economic downturn, there is an increased risk of default by counterparties to our investments and other transactions. In these circumstances, it is more likely that such transactions will fail or perform poorly, which may in turn have a material adverse effect on our business, results of operation and financial condition.
Inflationary pressures could adversely impact our businesses.Our managed assets are impacted by inflationary pressures. While inflation has eased and central banks began reducing interest rates in the second half of 2024, past price increases continue to affect households and weigh on confidence and spending power. The potential for increased tariffs and trade barriers, as well as increased geopolitical risks, adds uncertainty to the long term outlook for inflation and interest rates and a reacceleration of inflation could trigger a reversal in recent interest rate decreases. Interest rate increases or other government actions taken to reduce inflation could also result in recessionary pressures in many parts of the world. Interest rate risk poses a significant market risk to us as a result of interest rate-sensitive assets and liabilities held by us and our managed assets. Higher interest rates or elevated interest rates for a sustained period could also result in an economic slowdown. Economic contraction or further deceleration in the rate of growth in certain industries, sectors or geographies may contribute to poor financial results at our managed assets. While regulated and contractual arrangements in our managed assets can provide significant protection against inflationary pressures, any sustained upward trajectory in the inflation rate may still have an impact on our managed assets and our investors, and could impact our ability to source suitable investment opportunities, match or exceed prior investment strategy performance and secure attractive debt financing, all of which could adversely impact our managed assets and our growth and capital recycling initiatives.
32Catastrophic events (or combination of events), such as earthquakes, tornadoes, floods, wildfires, pandemics/epidemics, climate change, military conflict/war or terrorism/sabotage, could adversely impact our financial performance.Our managed assets could be exposed to effects of catastrophic events, such as severe weather conditions, natural disasters, major accidents, pandemics/epidemics, acts of malicious destruction, climate change, war/military conflict or terrorism, which could materially adversely impact our operations.A local, regional, national or international outbreak of a contagious disease, such as COVID-19, which spreads across the globe at a rapid pace impacting global commercial activity and travel, or future public health crises, epidemics or pandemics, could materially and adversely affect our results of operations and financial condition due to disruptions to commerce, reduced economic activity and other unforeseen consequences that are beyond our control.Natural disasters and ongoing changes to the physical climate in which we and our managed assets operate may have an adverse impact on our business, financial position, results of operations or cash flows. Changes in weather patterns or extreme weather (such as floods, wildfires, droughts, hurricanes and other storms) may negatively affect our managed assets’ operations or damage assets that we may own or develop. Further, rising sea levels could, in the future, affect the value of any low-lying coastal real assets that we may manage. Climate change may increase the frequency and severity of severe weather conditions and may change existing weather patterns in ways that are difficult to anticipate. Responses to these changes could result in higher costs, such as the imposition of new property taxes and increases in insurance rates or additional capital expenditures.
Our managed assets forming part of our commercial office strategy are concentrated in large metropolitan areas, some of which have been or may be perceived to be threatened by terrorist attacks or acts of war. Furthermore, many of such properties consist of high rise buildings that may also be subject to this actual or perceived threat. The perceived threat of a terrorist attack or outbreak of war could negatively impact our ability to lease office space in our managed real estate portfolio. Renewable power and infrastructure assets that we manage, such as roads, railways, power generation facilities and ports, may also be targeted by terrorist organizations or in acts of war. Any damage or business interruption costs as a result of uninsured or underinsured acts of terrorism or war could result in a material cost to us and could adversely affect our business, financial condition or results of operation. Adequate terrorism insurance may not be available at rates we believe to be reasonable in the future. These risks could be heightened by foreign policy decisions of the U.S. (where we have significant operations) and other influential countries or general geopolitical conditions.Additionally, our managed assets rely on free movement of goods, services and capital from around the globe. Any slowdown in international investment, business or trade as a result of catastrophic events could also have a material adverse effect on our business, financial position, results of operations or cash flows.
Ineffective management of environmental and sustainability issues, including climate change, and inadequate or ineffective health and safety programs could damage our reputation, adversely impact our financial performance and lead to regulatory action.There is increasing stakeholder interest in sustainability considerations and how they are managed. Sustainability considerations include climate change, human capital and labor management, corporate governance, diversity and privacy and data security, among others. Increasingly, investors and lenders are incorporating sustainability considerations into their investment or lending process, respectively, alongside traditional financial considerations. Investors or potential investors may not invest in all our products given certain industries in which we operate. If we are unable to successfully integrate sustainability considerations into our practices, we may incur a higher cost of capital, lower interest in our debt securities and/or equity securities or otherwise face a negative impact on our business, operating results and cash flows and result in reputational damage.
Certain of our managed assets may be subject to compliance with laws, regulations, regulatory rules and/or guidance relating to sustainability, and any failure to comply with these laws, regulations, regulatory rules or guidance could expose us to material adverse consequences, including loss, limitations on our ability to undertake licensable business, legal liabilities, financial and non-financial sanctions and penalties, and/or reputational damage. Sustainability requirements imposed by jurisdictions in which we do business, such as the E.U. Sustainable Finance Disclosure Regulation (2019/2088), could (a) result in additional compliance costs, disclosure obligations or other implications or restrictions; and/or (b) impact our established business practices, cost base and, by extension, our profitability.
Sustainability-related requirements and market practices differ by region, industry and issue and are evolving dynamically, and the sustainability requirements applicable to us, our managed assets or our assessment of such requirements or practices may change over time. Under emerging sustainability requirements, we may be required to classify our businesses against, or determine the alignment of underlying investments under, Sustainability-related legislative and regulatory criteria and taxonomies, some of which can be open to subjective interpretation. Our view on the appropriate classifications may develop over time, including in response to statutory or regulatory guidance or changes in industry approach to classification. A change to the relevant classification may require further actions to be taken, for example it may require further disclosures, or it may require new processes to be set up to capture data, which may lead to additional cost, disclosure obligations or other implications or restrictions.
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The transition to a lower-carbon economy has the potential to be disruptive to traditional business models and investment strategies. Efforts to limit global warming may give rise to changes in regulations, reporting and consumer sentiment that could have a negative impact on our existing operations by increasing the costs of operating our business or reducing demand for our products and services. The adverse effects of climate change and related regulation at state, provincial, federal or international levels could have a material adverse effect on our business, financial position, results of operations or cash flows.The ownership and operation of some of our managed assets carry varying degrees of inherent risk or liability related to worker health and safety and the environment, including the risk of government-imposed orders to remedy unsafe conditions and contaminated lands and potential civil liability. Compliance with health, safety and environmental standards and the requirements set out in the relevant licenses, permits and other approvals obtained by the managed assets is crucial.
Our managed assets have incurred and will continue to incur significant capital and operating expenditures to comply with sustainability requirements, including health and safety standards, to obtain and comply with licenses, permits and other approvals, and to assess and manage potential liability exposure. Nevertheless, they may be unsuccessful in obtaining or maintaining an important license, permit or other approval or become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health, safety and environmental matters, any of which could have a material adverse effect on us.Health, safety and environmental laws and regulations can change rapidly and significantly, and we and/or our managed assets may become subject to more stringent laws and regulations in the future. The occurrence of any adverse health, safety or environmental event, or any changes, additions to, or more rigorous enforcement of, health, safety and environmental standards, licenses, permits or other approvals could have a significant impact on operations and/or result in material expenditures.Owners and operators of real assets may become liable for the costs of removal and remediation of certain hazardous substances released or deposited on or in their properties, or at other locations regardless of whether the owner and operator caused the release or deposit of such hazardous materials. These costs could be significant and could reduce cash available for our managed assets. The failure to remove or remediate such substances, if any, could adversely affect our ability to sell our assets or to borrow using these assets as collateral, and could potentially result in claims or other proceedings.Certain of our managed assets are involved in using, handling or transporting substances that are toxic, combustible or otherwise hazardous to the environment and may be in close proximity to environmentally sensitive areas or densely populated communities. If a leak, spill or other environmental incident occurred, it could result in substantial fines or penalties being imposed by regulatory authorities, revocation of licenses or permits required to operate the business, the imposition of more stringent conditions in those licenses or permits or legal claims for compensation (including punitive damages) by affected stakeholders.
Global sustainability challenges, such as greenhouse gas emissions, privacy and data security, demographic shifts and regulatory pressures are introducing new risk factors for us that we may not have dealt with previously. We are also engaged with various sustainability frameworks and organizations through which we have stated certain ambitions and commitments regarding sustainability best practices. If we are unable to successfully manage our sustainability compliance, this could have a negative impact on our reputation and our ability to raise capital and could be detrimental to our economic value and the value of our managed assets.
Failure to maintain the security of our information and technology systems could have a material adverse effect on us.We rely on the use of technology and information systems, many of which are controlled by third-party service providers, which may not be able to accommodate our growth or may increase in cost and may become subject to cyber-terrorism or other compromises and shut-downs, and any failures or interruptions of these systems could adversely affect our businesses and results of operations.We and our managed assets operate in businesses that are dependent on information systems and other technology, such as computer systems used for information storage, processing, administrative and commercial functions as well as the machinery and other equipment used in certain parts of our operations. In addition, our managed assets rely on telecommunication services to interface with their business networks and customers. The information and embedded systems of key business partners and regulatory agencies are also important to our operations. We rely on this technology functioning as intended. Our information systems and technology may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on us.We rely heavily on certain financial, accounting, communications and other data processing systems. We collect, store and use large amounts of sensitive information, including personally identifiable information, through our information technology systems. Our information technology systems face ongoing cybersecurity and cyber-terrorism threats and attacks, which could result in the failure of such infrastructure. We may in the future be subject to cyber-terrorism or other cybersecurity risks or other breaches of information technology security, noting the increasing frequency, sophistication and severity of these kinds of incidents. In particular, our information technology systems may be subject to cyber-terrorism intended to obtain unauthorized access to our proprietary information, personally identifiable information or to client or third-party data stored on our systems, destroy or disable our data, and/or that of our business partners, disclose confidential data in breach of data privacy legislation, destroy data or disable, degrade or
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sabotage our systems, through the introduction of computer viruses, cyber-attacks and other means. Such attacks could originate from a wide variety of sources, including internal actors or unknown third parties. Further, unauthorized parties may also gain physical access to our facilities and infiltrate our information systems or attempt to gain access to information and data. The sophistication of these threats continue to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes. We cannot predict what effects such cyber-attacks or compromises or shut-downs may have on our business and on the privacy of the individuals or entities affected, and the consequences could be material. Cyber incidents may remain undetected for an extended period, which could exacerbate these consequences. The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be material. A significant actual or potential theft, loss, corruption, exposure, fraudulent, unauthorized or accidental use or misuse of investor, policyholder, employee or other personally identifiable or proprietary business data, whether by third parties or as a result of employee malfeasance or otherwise, non-compliance with our contractual or other legal obligations regarding such data or intellectual property or a violation of our privacy and security policies with respect to such data could result in significant remediation and other costs, fines, litigation and regulatory actions against us by governments, various regulatory organizations or exchanges, or affected individuals, in addition to significant reputational harm and/or financial loss, and it may not be possible to recover losses suffered from such incidents under our insurance policies.In addition, our operating equipment may not continue to perform as it has in the past, and there is a risk of equipment failure due to wear and tear, latent defect, design or operator errors or early obsolescence, among other things.
A breach of our cybersecurity measures or the failure or malfunction of any of our computerized business systems, associated backup or data storage systems could cause us to suffer a disruption in one or more parts of our business and experience, among other things, financial loss, reputational damage, a loss of business opportunities, misappropriation or unauthorized release of confidential or personal information, damage to our systems and those with whom we do business, violation of privacy and other laws, litigation, regulatory penalties and remediation and restoration costs as well as increased costs to maintain our systems.We are reliant on third party service providers for certain aspects of our business, including for the administration of certain funds we manage, as well as for certain information systems and technology platforms, trustee services, legal services, technology, administration, tax, accounting and compliance matters. A disaster, disruption or compromise in technology or infrastructure that supports our managed assets, including a disruption involving electronic communications or other services used by us, our vendors or third parties with whom we conduct business, may have an adverse impact on our ability to continue to manage our assets without interruption which could have a material adverse effect on us. These risks could increase as vendors increasingly offer cloud-based software services rather than software services that can be operated within our own data centers. These risks also increase to the extent we engage with vendors and third-party services providers in jurisdictions with which we are not familiar. In addition to the fact that these third-party service providers could also face ongoing cybersecurity threats and compromises of their systems, we generally have less control over the delivery of such third-party services, and as a result, we may face disruptions to our ability to manage an asset as a result of interruptions of such services. A prolonged global failure of cloud services provided by a variety of cloud services providers that we engage could result in cascading systems failures for us. Although we are continuing to develop measures to ensure the integrity of our systems, we can provide no assurance that our efforts or those of third-party service providers will be successful in protecting our systems and preventing or ameliorating damage from a cyber incident.
Data protection and privacy rules have become a focus for regulators globally. For instance, the European General Data Protection Regulation (“GDPR”) sets out data protection rules for individuals that are residents of the E.U. The GDPR imposes stringent rules and penalties for non- compliance. Other countries where we operate are enacting or amending data protection, artificial intelligence and other technology laws to empower regulators to impose financial penalties and injunctions on certain data processing activities, which could have an adverse effect on our business.We and our managed assets may become involved in legal disputes in the U.S. and internationally that could adversely impact our financial performance and reputation.
In the normal course of our and our managed assets’ businesses, we become involved in various legal actions, including claims relating to personal injury, property damage, property taxes, land rights and contract and other commercial disputes. The investment decisions we make and the activities of our investment professionals on behalf of our managed assets may subject us and our managed assets to the risk of third-party litigation. Further, we have significant operations in the U.S. which may, as a result of the prevalence of litigation in the U.S., be more susceptible to legal action than certain of our other competitors.
The final outcome with respect to outstanding, pending or future litigation cannot be predicted with certainty, and the resolution of such actions may have an adverse effect on our financial position or results of our operations in a particular quarter or fiscal year. Any litigation may consume substantial amounts of our management’s time and attention, and that time and the devotion of these resources to litigation may, at times, be disproportionate to the amounts at stake in the litigation. Even if ultimately unsuccessful against us, any litigation has the potential to adversely affect our business, including by damaging our reputation.35
Losses not covered by insurance may be large, which could adversely impact the assets under management.
We and our managed assets carry various insurance policies in relation to our respective business activities. These policies contain policy specifications, limits and deductibles that may mean that such policies do not provide coverage or sufficient coverage against all potential material losses. We or those also part of the group policy may also self-insure a portion of certain of these risks, and therefore we may not be able to recover from a third-party insurer in the event that we, if we had separate insurance coverage from a third party, could make a claim for recovery. There are certain types of risk (generally of a catastrophic nature such as war or environmental contamination) that are either uninsurable or not economically insurable. Further, there are certain types of risk for which insurance coverage is not equal to the full replacement cost of the insured assets.
Should any uninsured or underinsured loss occur, we could lose our anticipated profits and cash flows from one or more of our assets under management.We also carry directors’ and officers’ liability insurance (“D&O insurance”) for losses or advancement of defense costs in the event a legal action is brought against our directors, officers or employees for alleged wrongful acts in their capacity as directors, officers or employees. Our D&O insurance contains certain customary exclusions that may make it unavailable for us in the event it is needed; and in any case our D&O insurance may not be adequate to fully protect us against liability for the conduct of our directors, officers or employees. We may also self-insure a portion of our D&O insurance, and therefore we may not be able to recover from a third-party insurer in the event that we, if we had D&O insurance from a third-party insurer, could make a claim for recovery.For economic efficiency and other reasons, we may enter into insurance policies as a group (which may include BN) that are intended to provide coverage for the entire group. Where group policies are in place, any payments under such policy could have a negative impact on other entities covered under the policy as they may not be able to access adequate insurance in the event it is needed. While management attempts to design coverage limits under group policies to ensure that all entities covered under a policy have access to sufficient insurance coverage, there are no guarantees that these efforts will be effective in obtaining this result.Inability to collect amounts owing to us could adversely impact financial performance.
Third parties may not fulfill their payment obligations to us, which could include money, securities or other assets, thereby impacting our operations and financial results. These parties include deal and trading counterparties, governmental agencies, customers and financial intermediaries. Third parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure, general economic conditions or other reasons.
We manage assets that loan money to distressed companies, either privately or via an investment in publicly traded debt securities. As a result, we actively take heightened credit risk in other entities from time to time and whether we realize satisfactory investment returns on these loans is uncertain and may be beyond our control. If some of these debt investments fail, our financial performance could be negatively impacted.
Investors in our private funds, including BN and its affiliates, make capital commitments to these vehicles through the execution of subscription agreements. When a private fund makes an investment, these capital commitments are then satisfied by our investors via capital contributions. Investors in our private funds may default on their capital commitment obligations, which could have an adverse impact on our earnings or result in other negative implications to our business and our managed assets, such as the requirement to redeploy our own capital to cover such obligations. This impact would be magnified if the investor that does so is in multiple funds.
We are subject to operating and financial restrictions through covenants in our loan, debt and security agreements.
BAM and its subsidiaries are subject to operating and financial restrictions through covenants in our loan, debt and security agreements. These restrictions may prohibit or limit our ability to, among other things, incur additional debt, provide guarantees for indebtedness, grant liens, dispose of assets, liquidate, dissolve, amalgamate, consolidate or effect corporate or capital reorganizations, declare distributions, issue equity interests and create subsidiaries. A financial covenant in our corporate bank credit facilities may limit our overall indebtedness to a percentage of distributable earnings, a restriction which may limit our ability to obtain additional financing, withstand downturns in our business and take advantage of business and development opportunities. If we breach our covenants, our credit facilities may be terminated or come due and such an event may cause our credit rating to deteriorate and subject BAM to higher interest and financing costs. From time to time, we also acquire businesses and assets that have debt obligations that are in default. We may also be required to seek additional debt financing on terms that include more restrictive covenants and/or higher interest rates, change of control restrictions, require repayment on an accelerated schedule or impose other obligations that limit our ability to grow our business, acquire needed assets, exit investments in assets or portfolio companies, or take other actions that we might otherwise consider appropriate or desirable.The material assets of BAM consist solely of its interest in the common shares of the Asset Management Company.
The material assets of BAM consist solely of its interest in the common shares of the Asset Management Company. After giving effect to the 2025 Arrangement, BAM owns 100% of the Asset Management Company.
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BAM depends on distributions and other payments from our asset management business to provide it with the funds necessary to meet its financial obligations, as well as pay dividends to shareholders. BAM intends to pay dividends to shareholders on a quarterly basis equal to approximately 90% of its Distributable Earnings in the preceding quarter and our asset management business intends to pay dividends to BAM on a quarterly basis sufficient to ensure that BAM can pay its intended dividend. Dividends will be variable and will change in line with the growth of Distributable Earnings. The declaration and payment of any dividends will be at the discretion of the Board (and the board of the Asset Management Company), and may change at any time, including, without limitation, to reduce such quarterly dividends or to eliminate such dividends entirely.
Our asset management business and our managed assets are legally distinct from BAM and some of them are or may become restricted in their ability to pay dividends and distributions or otherwise make funds available to BAM pursuant to local law, regulatory requirements and their contractual agreements, including agreements governing their financing arrangements. Our asset management business and our managed assets will generally be required to service their debt and other obligations before making distributions to BAM.
BAM is solely liable for the debts and liabilities of the asset management business.
The Asset Management Company is an unlimited liability company and certain of its subsidiaries are also unlimited liability companies. As a result, after giving effect to the 2025 Arrangement whereby BAM acquired 100% of the Asset Management Company, it became liable for the payment of the debts and liabilities of the Asset Management Company on a liquidation or dissolution. If BAM has assets other than its interest in the asset management business, and if the assets of the asset management business are not sufficient to cover its debts and liabilities (including those arising as a result of its obligations towards its unlimited liability company subsidiaries), then BAM would be required to contribute its assets to the Asset Management Company, further reducing the assets of BAM available to its shareholders.Risks Relating to our Investment Activities
Actions or conduct that have a negative impact on our investors’ or stakeholders’ perception of us could adversely impact our ability to attract and/or retain investor capital and generate fee revenue.The growth of our business relies on continuous fundraising for various private and public investment products, and retention of capital raised from third-party investors. We depend on our business relationships and our global reputation for integrity and high-caliber asset management services to attract and retain investors and advisory clients, and to pursue investment opportunities for our clients. Our business relationships and reputation could be negatively impacted by a number of factors, including: poor performance; actual, potential or perceived conflicts of interest that are not adequately addressed; misconduct or alleged misconduct by employees; rumors or innuendos; or failed or ineffective implementation of new investments or strategies. If we are unable to continue to raise and retain capital from third-party investors, including from BN, either privately, publicly or both, or otherwise are unable to pursue our investment opportunities, this could materially reduce our revenue and cash flows and adversely affect our financial condition.Poor performance of any kind could damage our reputation with current and potential investors in our managed assets, making it more difficult for us to raise new capital. Investors may decline to invest in current and future managed assets and may withdraw their investments from our managed assets as a result of poor performance in the entity in which they are invested, and investors in our private funds may demand lower fees for new or existing funds, all of which would decrease our revenue.
As a global alternative asset manager with various lines of business and investment products, some of which have overlapping mandates, we may be subject to a number of actual, potential or perceived conflicts of interest.In addressing these conflicts, we have implemented a variety of policies and procedures; however, there can be no assurances that these will be effective at mitigating actual, potential or perceived conflicts of interest in all circumstances, or will not reduce the positive synergies that we seek to cultivate. It is also possible that actual, potential or perceived conflicts of interest, if not properly addressed, could give rise to investor dissatisfaction, litigation, regulatory enforcement actions or other detrimental outcomes. See “Risks Relating to BAM — Our organizational and ownership structure may create conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of our shareholders”.Appropriately dealing with conflicts of interest for an asset manager like us is a priority and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with actual, potential or perceived conflicts of interest. Asset manager conflicts are subject to enhanced regulatory scrutiny in the markets in which we operate and in the U.S. in particular. Such regulatory scrutiny can lead to fines, penalties and other negative consequences. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation, business, financial condition or results of operations in a number of ways, including an inability to adequately capitalize existing managed assets or raise new managed assets, including private funds, and a reluctance of counterparties to do business with us. For information regarding conflicts of interests between the businesses within our asset management operations that operate on opposite sides of an information barrier, see “—Information barriers may give rise to certain conflicts and risks and investment teams managing the activities of businesses that operate on opposite sides of an information barrier will not be aware of, and will not have the ability to manage, such conflicts and risks” herein.37Our reputation could also be negatively impacted if there is misconduct or alleged misconduct by our personnel or those of our managed assets, including historical misconduct prior to the investment in such managed asset. Risks associated with misconduct at our managed assets is heightened in cases where we do not have legal control or significant influence over a particular managed asset or are not otherwise involved in actively managing an investment. In such situations, given our management position and affiliation with the managed asset, we may still be negatively impacted from a reputational perspective through this association. In addition, even where we have management over an asset, if it is a newly acquired asset that we are in the process of integrating then we may face reputational risks related to historical or current misconduct or alleged misconduct at such managed asset for a period of time. We may also face an increased risk of misconduct to the extent investments in operating assets in emerging markets and distressed companies increases. If we face allegations of improper conduct by private litigants or regulators, whether the allegations are valid or invalid or whether the ultimate outcome is favorable or unfavorable to us, such allegations may result in negative publicity and press speculation about us, our investment activities or the asset management industry in general, which could harm our reputation and may be more damaging to our business than to other types of businesses.
We are subject to a number of obligations and standards arising from our business and our authority over the assets we manage. The violation of these obligations and standards by any of our employees may adversely affect our partners and our business and reputation. Our business often requires that we deal with confidential matters. If our employees were to improperly use or disclose confidential information, or a security breach results in an inadvertent disclosure of such information, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to detect or deter employee misconduct or security breaches, and the precautions we take in this regard may not be effective.
Implementation of new investment and growth strategies involves a number of risks that could result in losses and harm to our professional reputation, including the risk that the expected results are not achieved, that new strategies are not appropriately planned for or integrated, that new strategies may conflict with, detract from or compete against our managed assets, and that the investment process, controls and procedures that we have developed will prove insufficient or inadequate. Furthermore, our strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our complete control or under the control of another.In addition to impacting our ability to raise and retain third-party capital and pursue investment opportunities, certain of the risks identified herein that may have a negative impact on our reputation also could, in extreme cases, result in our removal as general partner or an acceleration of the liquidation date of the private funds that we manage. The governing agreements of our private funds provide that, subject to certain conditions (which may, particularly in the case of our removal as general partner, include final legal adjudications of the merits of the particular issue), third-party investors in these funds will have the right to remove us as general partner or to accelerate the liquidation date of the fund. Additionally, at any time, investors may seek to terminate a fund and accelerate the liquidation date upon the vote of a super-majority of investors in such fund. A significant negative impact to our reputation would be expected to increase the likelihood that investors could seek to terminate a private fund. This effect would be magnified if, as is often the case, an investor is invested in more than one fund. Such an event, were it to occur, would result in a reduction in the fees we would earn from such fund, particularly if we are unable to maximize the value of the fund’s investments during the liquidation process or in the event of the triggering of a “clawback” for fees already paid out to us as general partner.We face risks specific to our renewable power and transition strategies.
Our renewable power and transition strategies invest in assets that are subject to changes in the weather, hydrology and price, but also include risks related to equipment or dam failure, counterparty performance, water rental costs, land rental costs, changes in regulatory requirements and other material disruptions.
The revenues generated by the power facilities we manage are correlated to the amount of electricity generated, which in turn is dependent upon available water flows, wind, irradiance and other elements beyond our control. Hydrology, wind and irradiance levels vary naturally from year to year and may also change permanently because of climate change or other factors. It is therefore possible that low water, wind and irradiance levels at certain of our power generating operations could occur at any time and potentially continue for indefinite periods.
A portion of the renewable power and transition revenue is tied, either directly or indirectly, to the wholesale market price for electricity, which is impacted by a number of external factors beyond our control. Additionally, a portion of the power that is generated is sold under long-term power purchase agreements, shorter-term financial instruments and physical electricity contracts which are intended to mitigate the impact of fluctuations in wholesale electricity prices; however, they may not be effective in achieving this outcome. Certain of the power purchase agreements of our managed assets will be subject to re-contracting in the future. If the price of electricity in power markets is declining at the time of such re-contracting, it may impact our ability to re-negotiate or replace these contracts on terms that are acceptable to us. Conversely, what appears to be an attractive price at the time of re-contracting could, if power prices rise over the power purchase agreement’s term, result in us having committed to sell power in the future at below market rate. If we are unable to re-negotiate or replace these contracts, or unable to secure prices at least equal to the current prices we receive, our business, financial condition, results of operation and prospects could be adversely affected.38In our renewable power and transition portfolio, there is a risk of equipment failure due to severe weather conditions (including as a result of climate change), wear and tear, latent defect, design error or operator error, among other things. The occurrence of such failures could result in a loss of generating capacity and repairing such failures could require the expenditure of significant capital and other resources. Failures could also result in exposure to significant liability for damages due to harm to the environment, to the public generally or to specific third parties. Equipment that our renewable power and transition operations need, including spare parts and components required for project development, may become unavailable or difficult to procure, inhibiting our ability to maintain full availability of existing plants and also our ability to complete development projects on scope, schedule and budget.
In certain cases, some catastrophic events may not excuse us from performing our obligations pursuant to agreements with third parties and we may be liable for damages or suffer further losses as a result.
Our renewable power and transition portfolio is exposed to performance and operational risks in respect of certain nuclear technologies. The nuclear fuel and power industries are heavily regulated and could be significantly impacted by changes in government policies and priorities such as increased regulation and/or more onerous operating requirements that negatively impact our nuclear technology services. A future accident at a nuclear reactor could result in the shutdown of existing plants or impact the continued acceptance by the public and regulatory authorities of nuclear energy and the future prospects for nuclear generators. Accidents, terrorism, natural disasters or other incidents occurring at nuclear facilities or involving shipments of nuclear materials could reduce the demand for nuclear technology services.
The ability of the platforms we manage to develop greenfield renewable power projects in our development pipeline may be affected by a number of factors, including the state of capital markets, the ability to secure project financing (including from equity investors and through tax and other government incentives), the ability to secure approvals, licenses and permits and the ability to secure a long-term power purchase agreement or other sales contracts on reasonable terms. The development of our pipeline of greenfield renewable power projects is also subject to environmental, engineering and construction risks that could result in cost-overruns, delays and reduced performance.
New regulatory initiatives related to sustainability could adversely impact our managed assets. While we believe that regulatory initiatives and market trends towards an increased focus on sustainability are generally beneficial to our renewable power and transition group, any such regulatory initiatives also have the potential to adversely impact us. For example, regulatory initiatives seeking to reorient investment toward sustainability by regulating green financial products could have the effect of increasing burdensome disclosure requirements around sustainability and prescribing approaches to sustainability policies that are inconsistent with our current practices. If regulators disagree with the sustainability disclosures that we make, or with the categorization of our financial products, we may face regulatory enforcement action, and our business or reputation could be adversely affected.We face risks specific to our infrastructure strategies.
Our infrastructure managed assets include utilities, transport, midstream and data businesses.
Our infrastructure assets include toll roads, telecommunication towers, electricity transmission systems, terminal operations, electricity and gas distribution companies, residential infrastructure, rail networks, ports and data centers. The principal risks facing the regulated and unregulated businesses comprising our infrastructure assets relate to government regulation, general economic conditions and other material disruptions, counterparty performance and capital expenditure requirements.
Many of the infrastructure assets we manage are subject to government regulation, including with respect to revenues and environmental sustainability. If any of the respective regulators in the jurisdictions in which we operate decides to change the tolls or rates we are allowed to charge or the amounts of the provisions we are allowed to collect, we may not be able to earn the rate of return on our investments that we had planned, or we may not be able to recover our initial cost.
With environmental regulation becoming more stringent, our managed assets may become subject to increasing environmental responsibility and liability. These regulations may result in increased costs to our managed assets that may not be able to be passed onto their customers and may have an adverse impact on prospects for growth of some businesses.
General economic conditions (including those resulting from climate change and severe weather conditions) affect international demand for the commodities handled and services provided by operators in our infrastructure managed assets. A downturn in the economy generally or specific to any of our infrastructure managed assets, may lead to a reduction in volumes, disruption to business, bankruptcies or liquidations of one or more large customers, which could reduce our revenues, increase our bad debt expense, reduce our ability to make capital expenditures or have other adverse effects on us.
Some of our managed assets have customer contracts as well as concession agreements in place with public and private sector clients. Our managed assets with customer contracts could be adversely affected by any material change in the assets, financial condition or results of operations of such customers. Protecting the quality of our revenue streams through the inclusion of take-or-pay or guaranteed minimum volume provisions into our contracts is not always possible or fully effective.
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Some of our managed assets may require substantial capital expenditures to maintain their asset base. Any failure to make necessary expenditures to maintain their operations could impair their ability to serve existing customers or accommodate increased volumes. In addition, we may not be able to recover investments in capital expenditures based upon the rates our operations are able to charge.We face risks specific to our private equity strategies.
The principal risks for our private equity managed assets are potential loss of invested capital as well as insufficient investment or fee income to cover operating expenses and cost of capital. Our private equity platform is invested in industrial operations, business services operations and infrastructure services operations, many of which can be cyclical and/or illiquid and therefore may be difficult to monetize at our discretion, limiting our flexibility to react to changing economic or investment conditions. In addition, increasingly we have certain managed assets that provide goods and services directly to consumers across a variety of industries. These businesses are prone to greater liabilities, as well as reputational, litigation and other risks by virtue of being more public-facing and reliant on their ability to develop and preserve consumer relationships and achieve consumer satisfaction.
Unfavorable economic conditions could negatively impact the ability of our managed assets to repay debt. Adverse economic conditions facing our managed assets may adversely impact the value of our investments or deplete our financial or management resources. These investments are also subject to the risks inherent in the underlying businesses, some of which are facing difficult business conditions and may continue to do so for the foreseeable future. These risks are compounded by recent growth, as new acquisitions have increased the scale and scope of our operations, including in new geographic areas and industry sectors, and we may have difficulty managing these additional operations.
We may deploy our client’s capital in managed assets that are experiencing significant financial or business difficulties, including companies involved in work-outs, liquidations, spin-outs, reorganizations, bankruptcies and similar transactions. Such an investment entails the risk that the transaction will be unsuccessful, will take considerable time or will result in a distribution of cash or new securities, the value of which may be less than the purchase price of the securities in respect of which such distribution is received. In addition, if an anticipated transaction does not occur, we may be required to sell our investment at a loss. These managed assets may become subject to legal and/or regulatory proceedings and our investment may be adversely affected by external events beyond our control, leading to legal, indemnification or other expenses.We have several managed assets that operate in the highly competitive service industry. A wide variety of micro and macroeconomic factors affecting our clients and over which we have no control can impact how these companies operate. For example, our Canadian residential mortgage insurer is subject to significant regulation and may be adversely affected by changes in government policy. The majority of the revenue from our healthcare services operation is derived from private health insurance funds, which may be affected by a deterioration in the economic climate, a change in economic incentives, increases in private health insurance premiums and other factors. In addition, alternative technologies in the health care industry could impact the demand for, or use of, our services and could impair or eliminate the competitive advantage of our businesses in this industry.Our infrastructure services operations include companies in lottery services, marine transportation and work access services. Our lottery services operation is heavily dependent on long-term contracts and failure to win, maintain and renew these contracts could substantially impact revenue. Our lottery services operation also often requires entering into strategic relationships with third parties, including competitors, which we do not control, and which may have inconsistent business interests or goals from us. Marine transportation and oil production are inherently risky, particularly in the extreme conditions in which many of our vessels operate. An incident involving significant loss of product or environmental contamination by any of our vessels could harm our reputation and business. Our work access services business is subject to the risks inherent to construction operations, including risks relating to seasonal fluctuations in the demand for our services, a dependence on labor and performance being materially impacted by a lack of availability of labor force or increases in the cost of labor available, and operational hazards that could result in personal injury or death, work stoppage or serious property and equipment damage.
We face risks specific to our real estate strategies.
Our real estate strategies invest in commercial properties and are therefore exposed to certain risks inherent in the commercial real estate business. Commercial real estate investments are subject to varying degrees of risk depending on the nature of the property. These risks include changes in general economic conditions (such as the availability and cost of mortgage capital), local conditions (such as an oversupply of space or a reduction in demand for real estate in the markets in which we operate), the attractiveness of the properties to tenants, competition from other landlords and our ability to provide adequate maintenance at an economical cost.
Certain expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must be made whether or not a property is producing sufficient income to service these expenses. These commercial properties are typically subject to mortgages that require debt service payments. If we become unable or unwilling to meet mortgage payments on any property, losses could be sustained as a result of the mortgagee’s exercise of its rights of foreclosure or of sale.Continuation of rental income is dependent on favorable leasing markets to ensure expiring leases are renewed and new tenants are found promptly to fill vacancies. It is possible that we may face a disproportionate amount of space expiring in any one year.
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Additionally, rental rates could decline, tenant bankruptcies could increase, and tenant renewals may not be achieved, particularly in the event of an economic slowdown.Our real estate strategies invest in businesses that operate in industries or geographies that may be impacted by a local, regional, national or international outbreak of a contagious disease. Adverse impacts on our managed assets may also include:
• a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or tenant action and climate change events including hurricanes, earthquakes, tsunamis and other natural and man-made disasters;
• a slowdown in business activity may severely impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to fund their business operations, meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;
• an increase in re-leasing timelines, potential delays in lease-up of vacant space and the market rates at which such lease will be executed;
• reduced economic activity could result in a prolonged recession, which could negatively impact consumer discretionary spending; and
• expected completion dates for our development and redevelopment projects may be subject to delay as a result of the disruption of local economic conditions.
The retail real estate assets in our managed assets are susceptible to any economic factors that have a negative impact on consumer spending. Lower consumer spending would have an unfavorable effect on the sales of our retail tenants, which could result in their inability or unwillingness to make all payments owing to us, and on our ability to keep existing tenants and attract new tenants. Significant expenditures associated with each equity investment in real estate assets, such as mortgage payments, property taxes and maintenance costs, are generally not reduced when there is a reduction in income from the investment, so our income and cash flow would be adversely affected by a decline in income from our retail properties. In addition, low occupancy or sales at our retail properties, as a result of competition or otherwise, could result in termination of or reduced rent payable under certain of our retail leases, which could adversely affect our retail property revenues.The hospitality and multifamily assets in our managed assets are subject to a range of operating risks common to these industries, many of which are outside our control, and the profitability of our investments in these industries may be adversely affected by these factors. For example, our hospitality business faces risks relating to climate change; hurricanes, earthquakes, tsunamis and other natural and man-made disasters; the potential spread of contagious diseases; and insect infestations more common to rental accommodations. Such factors could limit or reduce the demand for or the prices our hospitality properties are able to obtain for their accommodations or could increase our costs and therefore reduce the profitability of our hospitality businesses. There are numerous housing alternatives that compete with our multifamily properties, including other multifamily properties as well as condominiums and single-family homes. This competitive environment could have a material adverse effect on our ability to lease apartment homes at our present properties or any newly developed or acquired real estate, as well as on the rents realized.We face risks specific to our credit strategies.
Our credit strategies offer a broad range of strategies to our investors. Similar to our other private funds managed across different strategies, we earn base management fees on our credit strategies and, in certain cases, carried interest on fund capital and separate accounts in our credit strategies. Cyclicality is important to credit strategies and weak economic environments have tended to afford some of the best investment opportunities and relative investment performance to such strategies. Any prolonged economic expansion or recession could have an adverse impact on certain credit strategies and materially affect the ability to deliver attractive investment returns for clients or generate incentive or other income in respect of those strategies.
Growth in Fee-Bearing Capital could be adversely impacted by poor product development or marketing efforts. In addition, investment returns could be lower than target returns due to inappropriate allocation of capital or ineffective investment management.
Our business depends on our ability to fundraise third-party capital, deploy that capital effectively and produce targeted investment returns.Our ability to raise third-party capital depends on a number of factors, including many that are outside our control such as the general economic environment and market conditions (including the performance of the stock market), investment rules or policies to which third party investors are subject, and the number of other investment funds being raised at the same time by our competitors. Investors may reduce (or even eliminate) their investment allocations to alternative investments, including closed-ended private funds. Investors that are required to maintain specific asset class allocations within their portfolio may be required to reduce their investment allocations to alternative investments, particularly during periods when other asset classes, such as public securities, are decreasing in
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value. In addition, investors may prefer to insource and make direct investments; therefore, becoming competitors and ceasing to be clients and/or making new capital commitments.Our initiatives to expand our retail investor base, including outside of the U.S., require the investment of significant time, effort and resources, including the potential hiring of additional personnel, the implementation of new operational, compliance and other systems and processes and the development or implementation of new technology. There is no assurance that our efforts to grow our retail assets under management will be successful.
Competition from other asset managers for raising public and private capital is intense, with competition based on a variety of factors, including investment performance, the quality of service provided to investors, the quality and availability of investment products, marketing efforts, investor liquidity and willingness to invest, and reputation. Poor investment performance could hamper our ability to compete for these sources of capital or force us to reduce our management fees. Our investors and potential investors continually assess investment performance and our ability to raise capital for existing and future funds depends on our funds’ relative and absolute performance. If poor investment returns or changes in investment mandates prevent us from raising further capital from our existing partners, we may need to identify and attract new investors in order to maintain or increase the size of our private funds, and there are no assurances that we will be able to find new investors. Further, as competition and disintermediation in the asset management industry increase, we may face pressure to reduce or modify our asset management fees, including base management fees and/or carried interest, or modify other terms governing our current asset management fee structure, in order to attract and retain investors.
The successful execution of our investing strategy is uncertain as it requires suitable opportunities, careful timing and business judgment, as well as the resources to complete asset purchases and restructure them, if required, notwithstanding difficulties experienced in a particular industry.There is no certainty that we will be able to identify suitable or sufficient opportunities that meet our investment criteria and be able to acquire additional high-quality assets at attractive prices to supplement our growth in a timely manner, or at all. In pursuing investment opportunities and returns, we and our managed assets face competition from other investment managers and investors worldwide. Each of our strategies is subject to competition in varying degrees and our competitors may have certain competitive advantages over us when pursuing investment opportunities. Some of our competitors may have higher risk tolerances, different risk assessments, lower return thresholds, a lower cost of capital, or a lower effective tax rate (or no tax rate at all), all of which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments. We may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by our competitors, some of whom may have synergistic businesses which allow them to consider bidding a higher price than we can reasonably offer. While we will continue to attempt to deal with competitive pressures by leveraging our asset management strengths and the operating capabilities of BN and compete on more than just price, there is no guarantee these measures will be successful, and we may have difficulty competing for investment opportunities, particularly those offered through auction or other competitive processes. If we are unable to successfully raise, retain and deploy third-party capital into investments, or make acquisitions which yield attractive returns, we may be unable to collect management fees, carried interest or transaction fees, which would materially reduce our revenue and cash flows and adversely affect our financial condition.Our approach to investing may entail adding assets to our existing managed assets through tuck-in acquisitions when the competition for assets is weakest; typically, when depressed economic conditions exist in the market relating to a particular entity or industry. Such an investing style carries with it inherent risks when investments are made in either markets or industries that are undergoing some form of dislocation. We may fail to value opportunities accurately or to consider all relevant factors that may be necessary or helpful in evaluating an opportunity, may underestimate the costs necessary to bring an acquisition up to standards established for its intended market position, may be exposed to unexpected risks and costs associated with these investments, including risks arising from alternative technologies that could impair or eliminate the competitive advantage of our managed assets in a particular industry, and/or may be unable to quickly and effectively integrate new acquisitions into existing operations or exit from the investment on favorable terms. In addition, liabilities may exist that we or our managed assets do not discover in due diligence prior to the consummation of an acquisition, or circumstances may exist with respect to the entities or assets acquired that could lead to future liabilities and, in each case, we or our managed assets may not be entitled to sufficient, or any, recourse against the contractual counterparties to an acquisition.
We generally pursue investment opportunities that involve business, regulatory, legal and other complexities. Our tolerance for complexity presents risks, as completing complex transactions on behalf of our managed assets can be more difficult, expensive and time-consuming to finance and execute, and have a higher risk of execution failure. It can also be more difficult to manage or realize value from the assets acquired in such transactions and such transactions sometimes entail a higher level of regulatory scrutiny or a greater risk of contingent liabilities.
At times, we make investments (for one or more of our funds or managed assets) in companies that we do not control. These investments are subject to the risk that the company in which the investment is made may make business, financial or management decisions with which we do not agree or that the majority stakeholders or the management of the company may take risks or otherwise act in a manner that does not serve our interests.42Certain strategies may be concentrated in particular asset types or geographic regions, which could exacerbate any negative performance of one or more of our managed assets to the extent those concentrated investments are in assets or regions that experience market dislocation. In addition, certain of our funds hold publicly traded securities, the price of which will be volatile and are likely to fluctuate due to a number of factors beyond our control, including actual or anticipated changes in the profitability of the issuers of such securities; general economic, social, or political developments; changes in industry conditions; changes in governance regulation; inflation; the general state of the securities markets; pandemics/epidemics; and other material events.
The failure of a newly acquired business to perform according to expectations could have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash flows. Alternatively, we may be required to sell a business before it has realized our expected level of returns for such business.
If any of our managed investments perform poorly or experience prolonged periods of volatility, or we are unable to deploy capital effectively, our fee-based revenue, cash available for distribution and/or carried interest would decline. Accordingly, our expected returns on these investments may be less than we have assumed in forecasting the value of our business.
Our cash flow must be available to meet our financial obligations when due and enable us to capitalize on investment opportunities when they arise.
We employ debt and other forms of leverage in the ordinary course of business to enhance returns. We are therefore subject to the risks associated with debt financing (directly and indirectly through our managed assets) and refinancing, including but not limited to the following: (i) our cash flow may be insufficient to meet required payments of principal and interest; (ii) payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses and dividends; (iii) if we are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at high interest rates or on other unfavorable terms, we may have difficulty completing acquisitions or may generate profits that are lower than would otherwise be the case; (iv) we may not be able to refinance indebtedness at maturity due to company and market factors such as the estimated cash flow produced by our assets, the value of our assets, liquidity in the debt markets and/or financial, competitive, business and other factors; and (v) if we are able to refinance our indebtedness, the terms of a refinancing may not be as favorable as the original terms for such indebtedness. If we are unable to refinance our indebtedness on acceptable terms, or at all, we may need to utilize available liquidity, which would reduce our ability to pursue new investment opportunities, or we may need to dispose of one or more of our or our managed assets on disadvantageous terms, or raise equity, thereby causing dilution to existing shareholders. Regulatory changes or changes in economic or market conditions may also result in higher borrowing costs and reduced access to credit.The terms of our various credit agreements and other financing documents may require us to comply with a number of customary financial and other covenants, such as maintaining debt service coverage and leverage ratios, adequate insurance coverage and certain credit ratings. These covenants may limit our flexibility in conducting our business and our cash flows, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness, even if we have satisfied and continue to satisfy our payment obligations.A large proportion of our managed assets include physical assets and securities that can be hard to sell, especially if market conditions are poor. Further, because our investment strategy can entail our having representation on public company boards, we may be restricted in our ability to affect sales during certain time periods. A lack of liquidity could limit our ability to vary our managed assets promptly in response to changing economic or investment conditions. Additionally, if financial or operating difficulties of other owners result in distress sales, such sales could depress asset values in the markets in which we manage assets. The restrictions inherent in managing physical assets could reduce our ability to respond to changes in market conditions and could adversely affect the performance of investments across our fund strategies, our financial condition and our results of operations.
Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid or non-public investments, the fair values of such investments do not necessarily reflect the prices that would actually be obtained when such investments are realized. Realizations at values significantly lower than the values at which investments have been recorded would result in losses, a decline in asset management fees and the potential loss of carried interest and incentive fees.
Additionally, from time to time, we may guarantee the obligations of other entities that we manage. If we are required to fund these commitments and are unable to do so, this could result in damages being pursued against us or a loss of opportunity through default under contracts that are otherwise to our benefit.
We may be exposed to risks associated with acquisitions.Part of BAM’s growth strategy involves seeking acquisition opportunities. We will face competition for acquisitions, including from our competitors, many of whom will have greater financial resources than us. There can be no assurance that we will identify and successfully complete acquisitions that will advance our growth strategy, or at all. Though we are not currently pursuing any strategic acquisitions, future acquisitions will likely involve some or all of the following risks, which could materially and adversely affect our business, financial condition or results of operations: the difficulty of integrating the acquired operations and personnel into our current operations; potential disruption of our current operations; diversion of resources, including our management’s time and
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attention; the difficulty of managing the growth of a larger organization; the risk of entering markets in which we have little experience; the risk of becoming involved in labor, commercial or regulatory disputes or litigation related to the new enterprise; the risk of environmental or other liabilities associated with the acquired business; and the risk of a change of control resulting from an acquisition triggering rights of third parties or government agencies under contracts with, or authorizations held by, the managed assets being acquired. It is possible that due diligence investigations into businesses being acquired may fail to uncover all material risks, or to identify a change of control trigger in a material contract or authorization, or that a contractual counterparty or government agency may take a different view on the interpretation of such a provision to that taken by us, thereby resulting in a dispute.We may be required to make temporary investments and backstop commitments with respect to our business and managed assets and may be unable to syndicate, assign or transfer such investments and commitments.
We periodically may be asked to enter into agreements that commit us to acquire or stand in place of another entity to acquire assets or securities in order to support our managed assets with the expectation that our commitment is temporary. For example, we may acquire an asset suitable for a particular managed business that is fundraising and warehouse that asset through the fundraising period before transferring the asset to the managed business for which it was intended. As another example, our asset management business may commit capital for a particular acquisition transaction as part of a consortium alongside certain of our managed assets with the expectation that we will syndicate or assign all or a portion of our own commitment to investors prior to, at the same time as, or subsequent to, the anticipated closing of the transaction. In all of these cases, our support is intended to be of a temporary nature, and we engage in this activity in order to further the growth and development of our asset management business.Even if our asset management business’ direct participation is intended to be of a temporary nature, our asset management business may be unable to syndicate, assign or transfer its interest or commitment as our asset management business intended and therefore may be required to take or keep ownership of assets or securities for an extended period. This would increase the amount of our asset management business’ own capital deployed to certain assets and could have an adverse impact on our asset management business’ liquidity, which may negatively impact its ability to meet other financial commitments.Our revenues may be adversely affected by a decline in the size or pace of investments made by our managed assets.Our revenue is driven in part by the pace at which our funds make investments and the size of those investments, and a decline in the pace or the size of such investments may reduce our revenues. In particular, in recent years we have meaningfully increased the number of perpetual strategies we offer and the assets under management in such strategies. The fees we earn from our perpetual capital strategies represent a significant and growing portion of our overall revenues. If our funds, including our perpetual capital strategies, are unable to deploy capital at a sufficient pace, our revenues would be adversely impacted. Many factors could cause a decline in the pace of investment, including a market environment characterized by relative high prices, the inability of our investment professionals to identify attractive investment opportunities, competition for such opportunities among other potential acquirers, decreased availability of capital on attractive terms. Further, we may fail to consummate identified investment opportunities because of business, regulatory or legal complexities or uncertainty and adverse developments in the markets in which we operate, financial markets or geopolitical conditions, and our ability to deploy capital in certain countries may be adversely impacted by government policy changes and regulations.Our revenue, earnings, net income and cash flow can materially vary from quarter to quarter, which may affect our earnings growth and dividend on a quarterly basis and can affect the trading price of the Class A Shares.Our revenue, net income and cash flow, substantially all of which is derived from our asset management business, can vary materially due to our reliance on incentive distributions and performance-based returns, such as carried interest. We may experience fluctuations in our results, including our revenue and net income, from quarter to quarter due to a number of other factors, including timing of realizations, changes in the valuations of our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degree to which we encounter competition and general economic and market conditions. Achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn cause our dividend and our ability to pay dividends to fluctuate and lead to large adverse movements or general increased volatility in the price of the Class A Shares. We also do not provide any guidance regarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in the Class A Shares.Our cash flow may fluctuate significantly due to the fact that we receive carried interest from certain of our funds only when investments are realized and achieve a certain preferred return. The payment of performance-based returns, including carried interest, depends on the applicable funds’ performance and opportunities for realizing gains, which may be limited. It takes a substantial period of time to identify attractive investment opportunities, to raise all the funds needed to make an investment and then to realize the cash value (or other proceeds) of an investment through a sale, public offering, recapitalization or other exit. Even if an investment proves to be profitable, it may be a number of years before any profits can be realized in cash (or other proceeds). We cannot predict when, or if, any realization of investments will occur.
The mark-to-market valuations of investments made by our funds are subject to volatility driven by economic and market conditions. Economic and market conditions may also negatively impact our realization opportunities.44The valuations of and realization opportunities for investments made by our funds could also be subject to high volatility as a result of uncertainty regarding governmental policy with respect to, among other things, tax, financial services regulation, international trade, immigration, healthcare, labor, infrastructure and energy.
In addition, upon the realization of a profitable investment by any of our funds featuring performance-based returns and prior to our receiving any carried interest in respect of that investment, 100% of the proceeds of that investment must generally be paid to the investors in such fund until they have recovered certain fees and expenses and achieved a certain return on all realized investments by that fund as well as a recovery of any unrealized losses. A particular realization event may have a significant impact on our results for that particular quarter that may not be replicated in subsequent quarters. We recognize revenue on investments in our funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds, and a decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue and possibly cash flow, which could further increase the volatility of our quarterly results. Because our funds have preferred return thresholds to investors that need to be met prior to our receiving any carried interest or other performance-based returns, substantial declines in the carrying value of the investment portfolios of such funds can significantly delay or eliminate any performance-based returns paid to us in respect of that fund since the value of the assets in the fund would need to recover to their aggregate cost basis plus the preferred return over time before we would be entitled to receive any performance-based returns, including carried interest, from that fund.
The timing and receipt of performance-based returns also varies with the life cycle of our funds. During periods in which a relatively large portion of our assets under management is attributable to funds and investments in their “harvesting” period, our funds would make larger distributions than in the fundraising or investment periods that precede harvesting. During periods in which a significant portion of our assets under management is attributable to funds that are not in their harvesting periods, we may receive substantially lower performance-based returns, including carried interest.The varying frequency of payments of our different funds and strategies will contribute to the volatility of our cash flow. Furthermore, we earn this incentive income only if the net asset value of a vehicle has increased or, in the case of certain vehicles, increased beyond a particular return threshold, or if the vehicle has earned a net profit. Certain of these vehicles also have “high water marks” whereby we do not earn incentive income during a particular period even though the vehicle had positive returns in such period as a result of losses in prior periods. If one of these vehicles experiences losses, we will not earn incentive income from it until it surpasses the previous high water mark. The incentive income we earn is therefore dependent on the net asset value or the net profit of the vehicle, which could lead to significant volatility in our results.Our access to retail investors and selling retail directed products in numerous jurisdictions opens us up to potential litigation and regulatory enforcement risks.In 2021, we created a business group in partnership with Oaktree to serve the global wealth management channel, delivering access to Brookfield and Oaktree’s private and public funds. Our goal is to increase the number and type of investment products we offer to high-net-worth individuals and mass affluent investors in the U.S. and other jurisdictions around the world. In some cases, our unregistered funds are distributed to retail investors indirectly through third-party managed vehicles sponsored by brokerage firms, private banks or third-party feeder providers, and in other cases directly to the qualified clients of private banks, independent investment advisors and brokers. In other cases, we create investment products specifically designed for direct investment by retail investors in the U.S., some of whom are not accredited investors, or similar investors in non-U.S. jurisdictions, including in Europe. Such investment products are regulated by the SEC in the U.S. and by other similar regulatory bodies in other jurisdictions.Accessing retail investors and selling retail directed products exposes us to new and greater levels of risk, including heightened litigation and regulatory enforcement risks. To the extent distribution of retail products is through new channels, including through an increasing number of distributors with whom we engage, we may not be able to effectively monitor or control the manner of their distribution, which could result in litigation or regulatory action against us, including with respect to, among other things, claims that products distributed through such channels are distributed to customers for whom they are unsuitable or that they are distributed in an otherwise inappropriate manner. Although we seek to ensure through due diligence and onboarding procedures that the third-party channels through which retail investors access our investment products conduct themselves responsibly, we are exposed to the risks of reputational damage and legal liability to the extent such third parties improperly sell our products to investors. This risk is heightened by the continuing increase in the number of third parties through whom we distribute our investment products around the world and who we do not control. For example, in certain cases, we may be viewed by a regulator as responsible for the content of materials prepared by third-party distributors.
Similarly, there is a risk that employees involved in the direct distribution of our products, or employees who oversee independent advisors, brokerage firms and other third parties around the world involved in distributing our products, do not follow our compliance and supervisory procedures. In addition, the distribution of retail products, including through new channels whether directly or through market intermediaries, could expose us to allegations of improper conduct and/or actions by state and federal regulators in the U.S. and regulators in jurisdictions outside of the U.S. with respect to, among other things, product suitability, investor classification, compliance with securities laws, conflicts of interest and the adequacy of disclosure to customers to whom our products are distributed through those channels.45As we expand the distribution of products to retail investors outside of the U.S., we are increasingly exposed to risks in non-U.S. jurisdictions. While these risks are similar to those that we face in the distribution of products to retail investors in the U.S., securities laws and other applicable regulatory regimes in many jurisdictions, including the U.K. and the European Economic Area, are extensive, complex, and vary by local jurisdiction. As a result, this expansion subjects us to additional litigation and regulatory risk.
Information barriers may give rise to certain conflicts and risks and investment teams managing the activities of businesses that operate on opposite sides of an information barrier will not be aware of, and will not have the ability to manage, such conflicts and risks.
Certain of our investment professionals operate largely independently of one another pursuant to an information barrier. The information barrier restricts businesses on opposite sides from coordinating or consulting with one another with respect to investment activities and/or decisions. Accordingly, these businesses manage their investment operations independently of each other. The investment activities and decisions made by a business on one side of an information barrier are not expected to be subject to any internal approvals by any person who would have knowledge and/or decision-making control of the investment activities and decisions made by a business on the other side of the information barrier. This absence of coordination and consultation will give rise to certain conflicts and risks in connection with the activities of the businesses within our asset management strategies and make it more difficult to mitigate, ameliorate or avoid such situations. These conflicts (and potential conflicts) of interests may include: (i) competing from time to time for the same investment opportunities, (ii) the pursuit by a business on one side of the information barrier of investment opportunities suitable for a business on the other side of the information barrier, without making such opportunities available to such business, and (iii) the formation or establishment of new strategies or products that could compete or otherwise conduct their affairs without regard as to whether or not they adversely impact the strategies or products of businesses operating on the other side of the information barrier. Investment teams managing the activities of businesses that operate on opposite sides of an information barrier are not expected to be aware of, and will not have the need or ability to manage, such conflicts which may impact the investment strategy, performance and investment returns of certain businesses within our asset management strategies.The investment professionals that operate on opposite sides of an information barrier are likely to be deemed affiliates for purposes of certain laws and regulations notwithstanding that they may be operationally independent from one another. The information barrier does not eliminate the requirement to aggregate certain investment holdings for certain securities laws and other regulatory purposes. This may result in, among other things, earlier public disclosure of investments; restrictions on transactions (including the ability to make or dispose of certain investments at certain times); potential short-swing profit disgorgement; penalties and/or regulatory remedies; or adverse effects on the prices of investments for our investment professionals’ businesses that operate on the other side of such information barrier.
Although these information barriers are intended to address the potential conflicts of interests and regulatory, legal and contractual requirements applicable to us, we may decide, at any time and without notice to our shareholders, to remove or modify the information barriers. In addition, there may be breaches (including inadvertent breaches) of the information barriers and related internal controls. In the event that the information barrier is removed or modified, it would be expected that we will adopt certain protocols designed to address potential conflicts and other considerations relating to the management of the investment activities of those businesses that previously operated on opposite sides of an information barrier. See “Risks Relating to our Organizational and Ownership Structure — Our organizational and ownership structure may create conflicts of interest that may be resolved in a manner that is not in the best interests of our company or the best interests of our shareholders”.
The breach or failure of our information barriers could result in the sharing of material non-public information between investment professionals that operate on opposite sides of an information barrier, which may restrict the acquisition or disposition activities of one of our strategies and ultimately impact the returns generated for our investors. In addition, any such breach or failure could also result in potential regulatory investigations and claims for securities laws violations in connection with our direct and/or indirect investment activities. Any inadvertent trading on material non-public information, or perception of trading on material non-public information by our personnel, could have a significant adverse effect on our reputation, result in the imposition of regulatory or financial sanctions and negatively impact our ability to raise third-party capital and provide investment management services to our clients, all of which could result in negative financial impact to our investment activities.
Risks Relating to our Organizational and Ownership StructureBN will exercise substantial influence over BAM.
After giving effect to the 2025 Arrangement, BN owns approximately 73% of the Class A Shares. As a result, for so long as BN maintains a significant voting interest in BAM, it will have the ability to exert substantial influence over many matters affecting BAM’s business, including: (i) the composition of the Board and, through the Board, any determinations with respect to the business plans and policies of BAM, including the appointment and removal of its officers; (ii) determinations with respect to acquisitions of businesses, mergers or other business combinations; and (iii) BAM’s capital structure, including financing activities.
In addition, BN has the right (but not the obligation) to participate up to 25% (net of any participation of our asset management business) in each new sponsored fund of our asset management business. This participation includes any participation by BN’s
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perpetual affiliates and BWS, but they are also not obligated to invest capital in our funds. Any fees to be paid to our asset management business on BN’s managed capital must be agreed to by BN, in its sole discretion. It is expected that most of BN’s capital will continue to be provided by the perpetual affiliates, for whom existing fee arrangements will continue to apply. For greater certainty, for any new capital, BN has a right to determine that no fees will apply. If BN does not commit all the capital it is entitled to provide, or does not agree for its capital to be fee-bearing, we may have difficulty growing our managed capital or our revenues.Moreover, a significant portion of our Fee-Bearing Capital is represented by the capital of the perpetual affiliates, which are controlled by BN. BN will therefore exercise significant influence over their operation, including (among other things) distribution policies that enable us to earn incentive distributions.
BN has no obligation to provide backstops or other guarantees relating to new investments or acquisitions, or to commit capital on a transitional basis while other investors are being sourced, but any arrangements or understandings existing at the time of completion of the 2022 Arrangement will be continued. Moreover, if BN does make transitory investments it will generally be entitled to receive the same cost of carry for such investment as the relevant fund of our asset management business is entitled to under its fund documents (typically 8%) as well as stand-by / commitment fees at market rates and such other compensation as otherwise may be mutually agreed. It is possible that our ability to deploy capital may be adversely affected by not having BN’s backstops or other guarantees, or we may be required to deploy our own capital, or to pay for other sources of capital.
We depend on our global reputation for integrity and investment acumen. Our business could be negatively impacted by changes in BN’s global reputation. In addition, other than as described in this Annual Report, BN is not committed to an exclusive relationship with us, and we may compete with BN (except for capital represented by the perpetual affiliates, which is exclusive) or compete with other asset managers for BN’s capital.The ownership of BN may change and the control of BAM may be transferred to a third party without shareholder approval.BN is not required to maintain any ownership level in BAM and may sell the Class A Shares to a third party without the consent of BAM shareholders. Similarly, if a third party were to acquire ownership of BN’s Class A Shares and appoint new directors or officers of its own choosing, it would be able to exercise substantial influence over BAM’s policies and procedures and exercise substantial influence over BAM’s management. Such changes could result in BAM’s capital being used to make acquisitions in which BN has no involvement or to make acquisitions that are substantially different from those targeted by BAM’s current growth strategy. Additionally, BAM cannot predict with any certainty the effect that changes in the ownership of BN would have on the trading price of the Class A Shares or its ability to raise capital or make investments in the future, because such matters would depend to a large extent on the identity of the new owner and the new owner’s intentions with regard to BAM. As a result, BAM’s business, financial condition and results of operations may suffer.Our organizational and ownership structure may create conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of our shareholders.
Our organizational and ownership structure involves a number of relationships that may give rise to conflicts of interest between us and our shareholders, on the one hand, and BN, on the other hand. For example, except to a limited extent, BN is not committed to an exclusive relationship with us, and we may compete with BN (except for capital represented by the perpetual affiliates, which is exclusive) or may compete with other asset managers for BN’s capital.
Many of our executives and employees have a material portion of their equity compensation awards that are tied to the performance of the shares of BN. If the market value of BAM’s shares and BN’s shares are not fully aligned, the existence of these awards may result in our executives and employees being less focused on BAM’s financial success.
Ineffective maintenance of our culture or ineffective management of human capital could adversely impact our business and financial performance.
Our ability to compete effectively in our business will depend upon our ability to attract new employees and retain and motivate our existing employees. Our senior management team has a significant role in our success and oversees the execution of our investment strategies. If we are unable to attract and retain qualified employees, our ability to compete successfully and achieve our business objectives could be limited, and our business, financial condition and results of operations could be negatively impacted.
Our ability to retain and motivate our management team, attract suitable replacements should any members of our management team leave, or attract new investment professionals as our business grows, is dependent on, among other things, the competitive nature of the employment market and the career opportunities and compensation that we can offer. In all of our markets, we face intense competition in connection with the attraction and retention of qualified employees.We may experience departures of key professionals in the future. We cannot predict the impact that any such departures will have on our ability to achieve our objectives. Our senior management team possesses substantial experience and expertise and has strong business relationships with investors in our managed assets and other members of the business communities and industries in which we operate. As a result, the loss of these personnel could jeopardize our relationships with investors in our managed assets and other
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members of the business communities and industries in which we operate and result in the reduction of our assets under management or fewer investment opportunities. Accordingly, the loss of services from key professionals or a limitation in their availability could adversely impact our financial condition and cash flow. Furthermore, such a loss could be negatively perceived in the capital markets.Additionally, the departure of certain individuals could trigger certain “key person” provisions in the documentation governing certain of our private funds, which would permit the limited partners of those funds to suspend or terminate the funds’ investment periods or withdraw their capital prior to the expiration of the applicable lock-up date. Our key person provisions vary by both strategy and fund and, with respect to each strategy and fund, are typically tied to multiple individuals, meaning that it would require the departure of more than one individual to trigger the key person provisions. Our human capital risks may be exacerbated by the fact that we do not maintain any key person insurance.
The conduct of our business and the execution of our strategy rely heavily on teamwork. Our continued ability to respond promptly to opportunities and challenges as they arise depends on co-operation and co-ordination across our organization and our team-oriented management structure, which may not materialize in the way we expect.
A portion of the workforce in some of our managed assets is unionized. If we are unable to negotiate acceptable collective bargaining agreements with any of our unions as existing agreements expire, we could experience a work stoppage, which could result in a significant disruption to the affected operations, higher ongoing labor costs and restrictions on our ability to maximize the efficiency of our operations, all of which could have an adverse effect on our financial results.Risks Relating to Taxation
If BAM is classified as a passive foreign investment company, U.S. persons who own Class A Shares could be subject to adverse U.S. federal income tax consequences.If BAM is classified as a PFIC for U.S. federal income tax purposes, a U.S. Holder that owns Class A Shares could be subject to adverse tax consequences, including a greater tax liability than might otherwise apply, an interest charge on certain taxes deemed deferred as a result of BAM’s non-U.S. status and additional U.S. tax reporting obligations. In general, a non-U.S. corporation will be a PFIC during a taxable year if, taking into account the income and assets of certain of its affiliates, (i) 75% or more of its gross income constitutes passive income or (ii) 50% or more of its assets produce, or are held for the production of, passive income. Passive income generally includes interest, dividends and other investment income.
Based on its current and expected income, assets and activities, BAM does not expect to be classified as a PFIC for the current taxable year or in the foreseeable future. However, the determination of whether BAM is a PFIC depends upon the composition of its income and assets and the nature of its activities from time to time and must be made annually as of the close of each taxable year. The PFIC determination also depends on the application of complex U.S. federal income tax rules that are subject to differing interpretations. Thus, there can be no assurance that BAM will not be classified as a PFIC for any taxable year, or that the IRS or a court will agree with BAM’s determination as to its PFIC status. U.S. Holders are urged to consult their tax advisers regarding the application of the PFIC rules, including the related reporting requirements and the advisability of making any available election under the PFIC rules, with respect to their ownership and disposition of Class A Shares.Changes in Canadian federal income tax law might adversely affect BAM and/or holders of Class A Shares.There can be no assurance that Canadian federal income tax laws, the judicial interpretation thereof, or the administrative policies and assessing practices of the CRA will not be changed in a manner that adversely affects BAM and/or holders of Class A Shares. Any such developments could have a material adverse effect on the holders of Class A Shares or our business, financial condition and results of operations.Reassessments by tax authorities or changes in tax laws could create additional tax costs for us.We operate in countries with differing tax laws and tax rates. Our tax reporting is supported by tax laws in the countries in which we operate and the application of tax treaties between the various countries in which we operate. Our income tax reporting is subject to audit by tax authorities in the countries in which we operate. Our effective tax rate may change from year to year, based on changes in the mix of activities and income earned among the different jurisdictions in which we operate, changes in tax laws in these jurisdictions, changes in the tax treaties between the countries in which we operate, changes in our eligibility for benefits under those tax treaties, and changes in the estimated values of deferred tax assets and liabilities. Tax laws, regulations and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. Such changes could result in a substantial increase in the effective tax rate on all or a portion of our income.
Governments around the world increasingly seek to regulate multinational companies and the application of differential tax rates between jurisdictions. This effort includes a greater emphasis by various nations on coordinating and sharing information regarding companies and the taxes they pay. A number of countries across the globe have also agreed to implement a “two pillar” plan for global tax reform, developed by the OECD/G20 Inclusive Framework on BEPS, to address perceived base erosion and profit shifting
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(“BEPS”) by some multinational groups. Governmental taxation reforms, policies and practices could adversely affect us and, depending on the nature of such reforms, policies and practices, including the implementation of the BEPS proposals in the jurisdictions in which we operate, could have an impact on us. As a result of this increased focus on the use of tax planning by multinational companies, our company could be subject to negative media coverage, which may adversely impact our reputation.
FY 2025-12-31 (later)
ITEM 1A. RISK FACTORSYou should carefully consider the following risk factors, in addition to other information set forth in this Annual Report. If any of the following risks were actually to occur, our business, financial condition and results of operations and the prospects and value of the Class A Shares would likely be materially impacted.Risks Relating to Our Business
The trading price of the Class A Shares is subject to volatility due to market conditions and other factors and cannot be predicted.The market price of our Class A Shares may be volatile and could fluctuate significantly in response to factors both related and unrelated to our operating performance and/or future prospects, including, but not limited to: (i) variations in our operating results and financial condition; (ii) actual or prospective changes in government laws, rules or regulations affecting our business and our managed assets; (iii) material announcements by us, our affiliates or our competitors; (iv) the general state of the securities markets; (v) market conditions and events specific to the industries in which we and our managed assets operate; (vi) changes and developments in general economic, political, or social conditions, including as a result of pandemics/epidemics and related economic disruptions; (vii) changes in the values of our investments and distributions or changes in the amount of interest paid in respect of investments; (viii) differences between our actual financial results and those expected by investors and analysts; (ix) changes in analysts’ recommendations or earnings projections; (x) the depth and liquidity of the market for the Class A Shares; (xi) dilution from the issuance of additional
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equity; (xii) investor perception of our business, our managed assets and the sectors in which we deploy the funds from our strategies; (xiii) investment restrictions; (xiv) our dividend policy; (xv) the departure of key executives; (xvi) sales of Class A Shares by senior management or significant shareholders; and (xvii) the materialization of other risks.Deficiencies in our public company financial reporting and disclosures could adversely impact our reputation.
As we expand the size and scope of our business, there is a greater susceptibility that our financial reporting and other public disclosure documents may contain material misstatements and that the controls we maintain to attempt to ensure the complete accuracy of our public disclosures may fail to operate as intended. The occurrence of such events could adversely impact our reputation and financial condition. In addition, we disclose certain metrics that do not have standardized meaning, are based on our own methodologies and assumptions and may not properly convey the information they purport to reflect.Management is responsible for establishing and maintaining adequate internal control over financial reporting to give our stakeholders assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in conformity with U.S. GAAP. However, the process for establishing and maintaining adequate internal control over financial reporting has inherent limitations, including the possibility of human error. In addition, we may exclude recently acquired companies from our evaluation of internal controls.
Our internal control over financial reporting may not prevent or detect misstatements in our financial disclosures on a timely basis, or at all. Some of these processes may be new for certain subsidiaries in our structure, and in the case of acquisitions, may take time to be fully implemented.Our disclosure controls and procedures are designed to provide assurance that information required to be disclosed by us in reports filed or submitted under U.S. and Canadian securities laws is recorded, processed, summarized and reported within the time periods specified. Our policies and procedures governing disclosures may not ensure that all material information regarding us is disclosed in a proper and timely fashion, or that we will be successful in preventing the disclosure of material information to a single person or a limited group of people before such information is generally disseminated.As at December 31, 2025, the results of our asset management business are consolidated into BAM's financial statements. However, as a result of the 2025 Arrangement, management has excluded from its evaluation the internal control over financial reporting of our asset management business. The total assets, net assets, total revenues and net income subject to our asset management business’ internal control over financial reporting of the consolidated financial statement amounts as of and for the year ended December 31, 2025 are disclosed in “Part II—Item 9A. Controls and Procedures” in this report.
If BAM or our auditors were to conclude that our internal control over financial reporting were not effective in respect of any reporting period, investors could lose confidence in our reported financial information and the price of our Class A Shares could decline. Our failure to achieve and maintain effective internal controls could have a materially adverse effect on our business, our ability to access capital markets and our reputation. In addition, material weaknesses in our internal controls could require significant expense and management time to remediate.Investors may find it difficult or impossible to effect service of process and enforce judgments against us, our directors and our executive officers.BAM is headquartered in New York, NY, but some of its officers and directors are not residents of the U.S., and a portion of the assets of BAM and said persons are located outside the U.S.. As a result, it may be difficult for U.S. investors to: (i) effect service of process within the U.S. upon BAM or those directors and officers who are not residents of the U.S.; or (ii) realize in the U.S. upon judgments of courts of the U.S. predicated upon the civil liability provisions of the U.S. federal securities laws. Investors outside of the U.S. will similarly find it difficult to enforce judgments obtained outside of the U.S.We are subject to numerous laws, rules and regulatory requirements which may impact our business, including resulting in financial penalties, loss of business and/or damage to our reputation in instances of non-compliance.
There are many laws, governmental rules and regulations and listing exchange rules that apply to our business and our managed assets. Changes in these laws, rules and regulations, or their interpretation by governmental agencies or the courts, could adversely affect our business, our managed assets, or our prospects, or those of our affiliates, customers, clients or partners. The failure of BAM, our asset management business or the entities that we manage to comply with these laws, rules and regulations, or with the rules and registration requirements of the respective stock exchanges on which we and they are listed, could adversely affect our reputation and financial condition.Our business, including our investment advisory and broker-dealer business, is subject to substantial and increasing regulatory compliance obligations and oversight, and this higher level of scrutiny may lead to more regulatory enforcement actions. There continues to be uncertainty regarding the appropriate level of regulation and oversight of asset management businesses in a number of jurisdictions in which we operate. The financial services industry has been the subject of heightened scrutiny and enforcement actions. Regulatory investigations and/or enforcement actions by our regulators could have a material adverse effect on our business and/or
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reputation. In addition, the introduction of new legislation and increased regulations may result in increased compliance costs and could materially affect the manner in which we conduct our business and adversely affect our profitability. Although there may be some areas where governments in certain jurisdictions propose deregulation, it is difficult to predict the timing and impact of any such deregulation, and we may not materially benefit from any such changes.
Our business is not only regulated in the U.S., but also in other jurisdictions where we conduct operations including, but not limited to, the E.U., the U.K., Canada, Brazil, Colombia, Australia, India and South Korea. Similar to the environment in the U.S., our business and how we market in jurisdictions outside the U.S. have become subject to further regulation. Governmental agencies around the world have proposed or implemented a number of initiatives and additional rules and regulations that could adversely affect our business and our managed assets, and governmental agencies may propose or implement further rules and regulations in the future. These rules and regulations may impact how we market in these jurisdictions and introduce compliance obligations with respect to disclosure and transparency, as well as restrictions on investor participation and distributions. Such regulations may also prescribe certain capital requirements on our managed assets, and conditions on the leverage our managed assets may employ and the liquidity these managed assets must have. Compliance with additional regulatory requirements will impose additional restrictions and expenses for us and could reduce our operating flexibility and fundraising opportunities.
The broker-dealer side of our managed assets is regulated by the SEC, the various Canadian provincial and territorial securities commissions and administrators, as well as self-regulatory organizations, including the Financial Industry Regulatory Authority in the U.S. These regulatory bodies may conduct administrative or enforcement proceedings that can result in censure, fine, suspension or expulsion of a broker-dealer, its directors, officers or employees. Such proceedings, whether or not resulting in adverse findings, can require substantial expenditures and can have an adverse impact on the reputation of a broker-dealer.The advisors of certain of our managed assets are registered as investment advisers with the SEC. Registered investment advisers are subject to the requirements and regulations of the Investment Advisers Act of 1940, which grants U.S. supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with laws or regulations. If such powers are exercised, the possible sanctions that may be imposed include the suspension of individual employees, limitations on the activities in which the investment adviser may engage, suspension or revocation of the investment adviser’s registration, censure and fines. Compliance with these requirements and regulations results in the expenditure of resources, and a failure to comply could result in investigations, financial or other sanctions, and reputational damage.The Investment Company Act and the rules promulgated thereunder provide certain protections to investors and impose certain restrictions on entities that are deemed “investment companies” under the Investment Company Act. We are not currently, nor do we intend to become, an investment company under the Investment Company Act. To ensure that we are not deemed to be an investment company, we may be required to materially restrict or limit the scope of our operations or plans and the types of acquisitions that we may make, and we may need to modify our organizational structure or dispose of assets that we would not otherwise dispose of. If we were required to register as an investment company, we would face severe limitations on the operation of our business. Among other things, we would be prohibited from engaging in certain business activities (or have conditions placed on our business activities), face restrictions on engaging in transactions with affiliated entities and issuing certain securities or engaging in certain types of financings, be restricted with respect to the amount and types of borrowings we are permitted to obtain, be required to limit the amount of investments that we make as principal, and face other limitations on our activities.We have and may become subject to additional regulatory and compliance requirements as we expand our product offerings and investment platform which likely will carry additional legal and compliance costs, as well as additional operating requirements that may also increase costs.
Our strategies primarily invest in renewable power and transition, infrastructure, business services, real estate and industrial assets. In doing so, our managed assets are required to comply with extensive and complex municipal, state or provincial, national and international laws and regulations. These laws and regulations can result in uncertainty and delays and impose additional costs, which may adversely affect our results of operations. Changes in these laws and regulations may negatively impact us and our managed assets or may benefit our competitors and their businesses.
Additionally, liability under such laws, rules and regulations may occur without our fault. In certain cases, parties can pursue legal actions against us to enforce compliance as well as seek damages for non-compliance or for personal injury or property damage. Our insurance may not provide sufficient coverage in the event that a successful claim is made against us.Most of our funds rely on Rule 506 of Regulation D under the Securities Act to raise capital from investors. Rule 506 is not available to issuers deemed to be “bad actors” under Rule 506 if a covered person of the issuer has been the subject to certain criminal, civil or regulatory disqualifying events. Covered persons include, among others, the issuer, executive officer or other officer participating in the offering of the issuer, any general partner or managing member of the foregoing entities, any promoter of the issuer and any beneficial owner of 20% or more of the issuer’s outstanding voting equity securities. If one or more of our funds were to lose the ability to rely on the Rule 506 exemption because a covered person has been the subject of a disqualifying event, our business, financial condition and results of operations could be materially and adversely affected.
24Federal, state and foreign anti-bribery and corruption and trade sanctions laws and restrictions on foreign direct investment applicable to us and our managed assets create the potential for significant liabilities and penalties, the inability to complete transactions, imposition of significant costs and burdens, and reputational harm and we may also be subject to various governmental investigations.
We are from time to time subject to various governmental investigations, audits and inquiries, both formal and informal. These investigations, regardless of their outcome, can be costly, divert management attention and damage our reputation. The unfavorable resolution of such investigations could result in criminal liability, fines, penalties or other monetary or non-monetary sanctions and could materially affect our business or results of operations.We are subject to a number of laws and regulations governing payments and contributions to public officials or other third parties both domestically and in respect of managed assets abroad, including the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), various federal and state corruption laws, and similar laws in non-U.S. jurisdictions, such as the U.K. Bribery Act 2010, the Canadian Corruption of Foreign Public Officials Act (the “CFPOA”) and Part IV of the Criminal Code (Canada), the Brazilian Clean Companies Act, the Australian Criminal Code Act 1995, the Indian Prevention of Corruption Act 1988, and the Bermudian Bribery Act 2016. This global focus on anti-bribery and corruption enforcement may also lead to more investigations, both formal and informal, in this area, the results of which cannot be predicted.Instances of bribery, fraud, accounting irregularities and other improper, illegal or corrupt practices can be difficult to detect, in particular when conducting due diligence in connection with acquisitions, and fraud and other deceptive practices can be widespread in certain jurisdictions. We invest in emerging market countries that may not have established stringent anti-bribery and corruption laws and regulations, where existing laws and regulations may not be consistently enforced, or that are perceived to have materially higher levels of corruption according to international rating standards. Due diligence on investment opportunities in these jurisdictions is frequently more challenging because consistent and uniform commercial practices in such locations may not have developed or do not meet international standards. Bribery, fraud, accounting irregularities and corrupt practices can be especially difficult to detect in such locations. When acquiring assets in distress, the quality of financial information of the target may also make it difficult to identify irregularities.The FCPA prohibits bribery of non-U.S. officials, candidates for office and political parties, and requires U.S. companies to keep books and records that accurately and fairly reflect those companies’ transactions. Similar laws in non-U.S. jurisdictions, such as the U.K. Bribery Act 2010 and the CFPOA, as well as other applicable anti-bribery and corruption or related laws in the U.S. and abroad, may also impose stricter or more onerous requirements than the FCPA, and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. The policies and procedures we have implemented to comply with anti-bribery and corruption legislation may be inadequate. If we fail to comply with such laws and regulations, we could be exposed to claims for damages, financial penalties, incarceration of our employees, reputational harm, restrictions on our operations and other liabilities, which could negatively affect our operating results and financial condition. In addition, we may be subject to successor liability for violations under these laws and regulations or other acts of bribery committed by entities in which we or our managed assets invest.
We are also subject to laws and regulations governing trade and economic sanctions. The Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), the U.S. Department of Commerce and the U.S. Department of State administer and enforce various trade control laws and regulations, including economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals. These laws and regulations implicate a number of aspects of our business, including servicing existing fund investors, finding new fund investors, and sourcing new investments, as well as activities by our managed assets or other controlled investments. Some of these regulations provide that penalties can be imposed on us for the conduct of our managed assets, even if we have not ourselves violated any regulation. Similar laws in non-U.S. jurisdictions, such as the Special Economic Measures Act (Canada), the United Nations Act (Canada) and the Justice for Victims of Corrupt Foreign Officials Act (Canada), and E.U. sanctions, may also impose restrictions or requirements on us or our managed assets. Anti-corruption, anti-money laundering, economic sanctions, and trade control laws imposed by non-U.S. jurisdictions, such as E.U. and U.K. sanctions or blocking statutes and the U.K. Bribery Act, may also impose stricter or more onerous requirements than the FCPA, OFAC, the U.S. Department of Commerce, the U.S. Department of State or U.S. Department of Treasury, and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. Different laws may also contain conflicting provisions, making compliance with all laws more difficult. In February 2022, the U.S. and other countries began imposing meaningful sanctions targeting Russia as a result of actions taken by Russia in Ukraine. We and our managed assets are required to comply with these and potentially additional sanctions imposed by the U.S. and by other countries, for which the full costs, burdens and limitations on our business and prospects are currently unknown and may become significant.
In addition, the U.S. and many non-U.S. countries that have laws designed to protect national security or to restrict foreign direct investment. For example, under the United States Foreign Investment Risk Review Modernization Act of 2018, the Committee on Foreign Investment in the United States has the authority to review, block or impose conditions on investments by non-U.S. persons in U.S. companies or real assets deemed critical or sensitive to the U.S. Many non-U.S. jurisdictions have similar laws. For example, the E.U. has adopted an E.U.-wide mechanism to screen foreign investment on national security grounds and most E.U. member states
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now have a foreign investment screening mechanism in place or has initiated a consultative or legislative process expected to result in the adoption of a new mechanism or amendments to an existing mechanism, adopted a regulation aimed at regulation of foreign subsidies that could distort the internal E.U. market.Under these laws, governments have the authority to impose a variety of actions, including requirements for the advance screening or notification of certain transactions, blocking or imposing conditions on certain transactions, limiting the size of foreign equity investments or control by foreign investors, and restricting the employment of foreigners as key personnel. These actions could limit our ability to find suitable investments, cause delays in consummating transactions, result in the abandonment of transactions, and impose burdensome operational requirements on us or our managed assets. These laws could also negatively impact our fundraising and syndication activities by causing us to exclude or limit certain investors in our funds or co-investors for our transactions. Moreover, these laws may make it difficult for us to identify suitable buyers for our investments that we want to exit and could constrain the universe of exit opportunities generally. Complying with these laws imposes potentially significant costs and complex additional burdens, and any failure by us or our managed assets to comply with them could expose us to significant penalties, sanctions, loss of future investment opportunities, additional regulatory scrutiny, and reputational harm.
Foreign exchange rate fluctuations could adversely impact our aggregate foreign currency exposure and hedging strategies may not be effective.
We have pursued and intend to continue to pursue growth opportunities in international markets, and often deploy capital in countries where the U.S. dollar is not the local currency. As a result, we are subject to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. A significant depreciation in the value of the currency utilized in one or more countries where we have a significant presence may have a material adverse effect on the results of our operations and financial position. In addition, we are active in certain markets where economic growth is dependent on the price of commodities and the currencies in these markets can be more volatile as a result.
Our business and our managed assets are impacted by changes in currency rates, interest rates, commodity prices and other financial exposures. We may selectively utilize financial instruments to manage these exposures, including credit default swaps and other derivatives to hedge certain of our financial positions. However, a significant portion of these risks may remain unhedged. We may also choose to establish unhedged positions in the ordinary course of business.
There is no assurance that hedging strategies, to the extent they are used, will fully mitigate the risks they are intended to offset. Additionally, derivatives that we may use are also subject to their own unique set of risks, including counterparty risk with respect to the financial well-being of the party on the other side of these transactions and a potential requirement to fund mark-to-market adjustments. Our financial risk management policies may not ultimately be effective at managing these risks.The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and similar laws in other jurisdictions impose rules and regulations governing oversight of the over-the-counter derivatives market and its participants. These regulations may impose additional costs and regulatory scrutiny on us. If our derivative transactions are required to be executed through exchanges or regulated facilities, we will face incremental collateral requirements in the form of an initial margin and require variation margin to be cash settled on a daily basis. Such an increase in margin requirements (relative to bilateral agreements) or a more restricted list of securities that qualify as eligible collateral, would require us to hold larger positions in cash and treasuries, which could reduce income. We cannot predict the effect of changing derivatives legislation on our hedging costs, our hedging strategy or its implementation, or the risks that we hedge. Regulation of derivatives may increase the cost of derivative contracts, reduce the availability of derivatives to protect against operational risk and reduce the liquidity of the over-the-counter derivatives market, all of which may reduce our use of derivatives and result in the increased volatility and decreased predictability of our cash flows.Further increases in interest rates could increase our interest costs and adversely affect our financial performance.
Many long-life assets are interest rate sensitive. Further increases in interest rates will, other things being equal, decrease the value of an asset by reducing the present value of the cash flows expected to be produced by such asset. As the present value of an income-producing asset may decline as a result of interest rate increases, certain financial and other covenants under credit agreements governing such asset could be breached, even if we have satisfied and continue to satisfy our payment obligations thereunder. Such a breach could result in negative consequences on our financial performance and results of operations.
Additionally, any of our debt or preferred shares that are subject to variable interest rates, either as an obligation with a variable interest rate or as an obligation with a fixed interest rate that resets into a variable interest rate in the future, are subject to interest rate risk. Further, the value of any debt or preferred share that is subject to a fixed interest rate will be determined based on the prevailing interest rates and, accordingly, this type of debt or preferred share is also subject to interest rate risk.In many jurisdictions in which we operate, a period of sharply increasing interest rates may cause certain market dislocations that could negatively impact our financial performance, increase the cost and impact the availability of debt financing and thereby negatively impact the ability of our managed assets to obtain attractive financing or refinancing and could increase the cost of such financing if obtained. Many factors may impact us and our managed assets, including interest rate increases, which would impact the
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amount of revenue generated by our managed assets and may lead to an increase in the amount of cash required to service our obligations.Political instability, changes in government policy or unfamiliar cultural factors could adversely impact the value of our investments.We are subject to geopolitical uncertainties in all jurisdictions in which we operate. We make investments in businesses that are based outside of the U.S. and we may pursue investments in unfamiliar markets, which may expose us to additional risks not typically associated with investing in the U.S.. We may not properly adjust to the local culture and business practices in such markets, and there is the prospect that we may hire personnel or partner with local persons who might not comply with our culture and ethical business practices; either scenario could result in the failure of our initiatives in new or existing markets and lead to financial losses for us and our managed assets. There are risks of political instability and significant changes in laws and policies in several of our major markets and in other parts of the world in which we conduct business from factors such as political conflict, tariffs and other protectionist trade policies, including the encouragement of the onshoring of manufacturing in the U.S. and other countries, income inequality, refugee migration, terrorism, armed conflict, the potential break-up of countries or political-economic unions and political corruption; the materialization of one or more of these risks could negatively affect our financial performance.Further, conflict in Eastern Europe has contributed to global economic uncertainty, resulted in volatility in fuel prices, and heightened cybersecurity and cyber-terrorism disruptions and threats. Further economic and political instability and the commencement, escalation or expansion of armed conflict in Eastern Europe, the Middle East, or elsewhere in the world could significantly disrupt the free movement of goods, services and people, have a destabilizing effect on energy markets and result in potential higher costs of conducting business. Similarly, the inability of local and national governments to effectively manage ongoing political disputes could result in local, regional and/or global instability. The materialization of one or more of these risks could negatively affect our financial performance and adversely impact our business.
Any existing or new operations may be subject to significant political, economic and financial risks, which vary by country, and may include: (i) changes in government policies and regulations, including tariffs and other protectionist policies, or personnel; (ii) changes in general economic or social conditions; (iii) restrictions on currency transfer or convertibility; (iv) changes in labor relations; (v) military conflict, political instability and civil unrest; (vi) less developed or efficient financial markets than in North America; (vii) the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements; (viii) less government supervision and regulation; (ix) a less developed legal or regulatory environment; (x) heightened exposure to corruption risk; (xi) political hostility to investments by foreign investors; (xii) less publicly available information in respect of companies in non-North American markets; (xiii) adversely higher or lower rates of inflation; (xiv) higher transaction costs; (xv) difficulty in enforcing contractual obligations and expropriation or confiscation of assets; and (xvi) fewer investor protections.Unforeseen political events in markets where we have significant investors and/or where we have managed assets or may look to for further growth of our assets and businesses, such as the North American, South American, Australian, European, Middle Eastern and Asian markets, may create economic uncertainty that has a negative impact on our financial performance. Such uncertainty could cause disruptions to our businesses, including affecting our managed assets and/or our relationships with our investors, customers and suppliers, as well as altering the relationship among tariffs and currencies, including the value of foreign currencies relative to the U.S. dollar. Disruptions and uncertainties could adversely affect our financial condition, operating results and cash flows. In addition, political outcomes in the markets in which we operate may also result in legal uncertainty and potentially divergent national laws and regulations, which can contribute to general economic uncertainty. Economic uncertainty impacting us and our managed assets could be exacerbated by supply chain disruptions, trade policy and geopolitical tensions.
Unfavorable economic conditions or changes in the industries in which we operate could adversely impact our financial performance.
We are exposed to local, regional, national and international economic conditions and other events and occurrences beyond our control, including, but not limited to, the following: short-term and long-term interest rates; inflation; credit and capital market volatility; business investment levels; government spending levels; sovereign debt risks; consumer spending levels; changes in laws, rules or regulations; trade barriers; supply chain disruptions; commodity prices; currency exchange rates and controls; national and international political circumstances (including wars, terrorist acts or security operations); catastrophic events (including pandemics/epidemics, earthquakes, tornadoes or floods); the rate and direction of economic growth; and general economic uncertainty. On a global basis, certain industries and sectors have created capacity that anticipated higher growth, which has caused volatility across all markets, including commodity markets, which may have a negative impact on our financial performance. Unfavorable economic conditions could affect the jurisdictions in which our entities are formed and where we and our managed assets operate businesses, and may cause a reduction in: (i) securities prices; (ii) the liquidity of investments made by our managed assets; (iii) the value or performance of the investments made by our managed assets; and (iv) the ability of us and our managed assets to raise or deploy capital, each of which could adversely impact our financial condition.In general, a decline in economic conditions, either in the markets or industries in which our strategies invest, or both, will result in downward pressure on our operating margins and asset values as a result of lower demand and increased price competition for the
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services and products that we provide. In particular, given the importance of the U.S. to our operations, an economic downturn in this market could have a significant adverse effect on our operating margins and asset values.Many of our private funds have a finite life that may require us to exit an investment made in a fund at an inopportune time. Volatility in the exit markets for these investments, increasing levels of capital required to finance companies to exit and rising enterprise value thresholds to go public or complete a strategic sale can all contribute to the risk that we will not be able to exit a private fund investment successfully. We cannot always control the timing of our private fund investment exits or our realizations upon exit. See “—Actions or conduct that have a negative impact on our investors’ or stakeholders’ perception of us could adversely impact our ability to attract and/or retain investor capital and generate fee revenue”. If global economic conditions deteriorate, our investment performance could suffer, resulting in, for example, the payment of less or no carried interest to us. The payment of less or no carried interest to us could cause our cash flow from operations to decrease, which could materially adversely affect our liquidity position and the amount of cash we have on hand to conduct our operations. A reduction in our cash flow from our Fee-Bearing Capital strategies and products could, in turn, require us to rely on other sources of cash such as the capital markets, which may not be available to us on acceptable terms, or debt and other forms of leverage.
In addition, in an economic downturn, there is an increased risk of default by counterparties to our investments and other transactions. In these circumstances, it is more likely that such transactions will fail or perform poorly, which may in turn have a material adverse effect on our business, results of operation and financial condition.
Inflationary pressures could adversely impact our businesses.Our managed assets are impacted by inflationary pressures. While inflationary pressures eased in 2025 across many jurisdictions, past price increases continue to affect households and weigh on confidence and spending power. Increased tariffs, retaliatory actions and trade barriers, as well as increased geopolitical risks, add uncertainty to the long-term outlook for inflation and interest rates and a reacceleration of inflation could trigger a reversal in recent interest rate decreases. Interest rate increases or other government actions taken to reduce inflation could also result in recessionary pressures in many parts of the world. Interest rate risk poses a significant market risk to us as a result of interest rate-sensitive assets and liabilities held by us and our managed assets. Higher interest rates or elevated interest rates for a sustained period could also result in an economic slowdown. Economic contraction or further deceleration in the rate of growth in certain industries, sectors or geographies may contribute to poor financial results at our managed assets. While regulated and contractual arrangements in our managed assets can provide significant protection against inflationary pressures, any sustained upward trajectory in the inflation rate may still have an impact on our managed assets and our investors, and could impact our ability to source suitable investment opportunities, match or exceed prior investment strategy performance and secure attractive debt financing, all of which could adversely impact our managed assets and our growth and capital recycling initiatives.Catastrophic events (or combination of events), such as earthquakes, tornadoes, floods, wildfires, pandemics/epidemics, climate change, military conflict/war or terrorism/sabotage, could adversely impact our financial performance.Our managed assets could be exposed to the effects of catastrophic events, such as severe weather conditions, natural disasters, major accidents, pandemics/epidemics, acts of malicious destruction, climate change, war/military conflict or terrorism, which could materially adversely impact our operations.A local, regional, national or international outbreak of a contagious disease, such as COVID-19, which spreads across the globe at a rapid pace impacting global commercial activity and travel, or future public health crises, epidemics or pandemics, could materially and adversely affect our results of operations and financial condition due to disruptions to commerce, reduced economic activity and other unforeseen consequences that are beyond our control.Natural disasters and ongoing changes to the physical climate in which we and our managed assets operate may have an adverse impact on our business, financial position, results of operations or cash flows. Changes in weather patterns or extreme weather (such as floods, wildfires, droughts, hurricanes and other storms) may negatively affect our managed assets’ operations or damage assets that we may own or develop. Further, rising sea levels and/or other types of flooding could, in the future, affect the value of any coastal or other real assets and businesses that we may manage. Climate change may increase the frequency and severity of severe weather conditions and may change existing weather patterns in ways that are difficult to anticipate. Responses to and impacts from these changes could result in lower revenues and/or higher costs, such as the imposition of new property taxes, limited availability of insurance, increases in insurance rates or additional capital or operating expenditures.
Our managed assets forming part of our commercial office strategy are concentrated in large metropolitan areas, some of which have been or may be perceived to be threatened by terrorist attacks or acts of war. Furthermore, many of such properties consist of high rise buildings that may also be subject to this actual or perceived threat. The perceived threat of a terrorist attack or outbreak of war could negatively impact our ability to lease office space in our managed real estate portfolio. Renewable power and infrastructure assets that we manage, such as roads, railways, power generation facilities and ports, may also be targeted by terrorist organizations or in acts of war. Any damage or business interruption costs as a result of uninsured or underinsured acts of terrorism or war could result in a material cost to us and could adversely affect our business, financial condition or results of operation. Adequate terrorism insurance may not be available at rates we believe to be reasonable in the future. These risks could be heightened by foreign policy decisions of
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the U.S. (where we have significant operations) and other influential countries or general geopolitical conditions.Additionally, our managed assets rely on free movement of goods, services and capital from around the globe. Any slowdown in international investment, business or trade as a result of catastrophic events could also have a material adverse effect on our business, financial position, results of operations or cash flows.
Ineffective management of environmental and sustainability issues, including climate change, and inadequate or ineffective health and safety programs could damage our reputation, adversely impact our financial performance and lead to regulatory action.There is increasing stakeholder interest in sustainability considerations and how they are managed. Sustainability considerations include climate change, human capital and labor management, corporate governance, diversity and privacy and data security, among others. Certain investors and lenders are incorporating sustainability considerations into their investment or lending process, respectively, alongside traditional financial considerations. Investors or potential investors may not invest in all our products given certain industries in which we operate. If we are unable to successfully integrate sustainability considerations into our practices, we may incur a higher cost of capital, lower interest in our debt securities and/or equity securities or otherwise face a negative impact on our business, operating results and cash flows and result in reputational damage.
Certain of our managed assets may be subject to compliance with laws, regulations, regulatory rules and/or guidance relating to sustainability, and any failure to comply with these laws, regulations, regulatory rules and/or guidance could expose us to material adverse consequences, including loss, limitations on our ability to undertake licensable business, legal liabilities, financial and non-financial sanctions and penalties, and/or reputational damage. Sustainability requirements imposed by jurisdictions in which we do business, such as the E.U. Sustainable Finance Disclosure Regulation (2019/2088), could (a) result in additional compliance costs, disclosure obligations or other implications or restrictions; and/or (b) impact our established business practices, cost base and, by extension, our profitability.
Sustainability-related requirements and market practices differ by region, industry and issue and are evolving dynamically, and the sustainability requirements applicable to us, our managed assets or our assessment of such requirements or practices may change over time. Under emerging sustainability requirements, we may be required to classify our businesses against, or determine the alignment of underlying investments under, sustainability-related legislative and regulatory criteria and taxonomies, some of which can be open to subjective interpretation. Our view on the appropriate classifications may develop over time, including in response to statutory or regulatory guidance or changes in industry approach to classification. A change to the relevant classification may require further actions to be taken, for example, it may require further disclosures, or it may require new processes to be set up to capture data, which may lead to additional cost, disclosure obligations or other implications or restrictions.
The transition to a lower-carbon economy has the potential to be disruptive to traditional business models and investment strategies. Efforts to limit climate change may give rise to changes in regulations, reporting and consumer sentiment that could have a negative impact on our existing operations by increasing the costs of operating our business or reducing demand for our products and services. The adverse effects of climate change and related regulation at state, provincial, federal or international levels could have a material adverse effect on our business, financial position, results of operations or cash flows.The ownership and operation of some of our managed assets carry varying degrees of inherent risk or liability related to worker health and safety and the environment, including the risk of government-imposed orders to remedy unsafe conditions and contaminated lands and potential civil liability. Compliance with health, safety and environmental standards and the requirements set out in the relevant licenses, permits and other approvals obtained by the managed assets is crucial.
Our managed assets have incurred and will continue to incur significant capital and operating expenditures to comply with sustainability requirements, including health and safety standards, to obtain and comply with licenses, permits and other approvals, and to assess and manage potential liability exposure. Nevertheless, they may be unsuccessful in obtaining or maintaining an important license, permit or other approval or become subject to government orders, investigations, inquiries or other proceedings (including civil claims) relating to health, safety and environmental matters, any of which could have a material adverse effect on us.Health, safety and environmental laws and regulations can change rapidly and significantly, and we and/or our managed assets may become subject to more stringent laws and regulations in the future. The occurrence of any adverse health, safety or environmental event, or any changes or additions to, or more rigorous enforcement of, health, safety and environmental standards, licenses, permits or other approvals could have a significant impact on operations and/or result in material expenditures.Owners and operators of real assets may become liable for the costs of removal and remediation of certain hazardous substances released or deposited on or in their properties, or at other locations regardless of whether the owner and operator caused the release or deposit of such hazardous materials. These costs could be significant and could reduce cash available for our managed assets. The failure to remove or remediate such substances, if any, could adversely affect our ability to sell our assets or to borrow using these assets as collateral, and could potentially result in claims or other proceedings.29Certain of our managed assets are involved in using, handling or transporting substances that are toxic, combustible or otherwise hazardous to the environment and may be in close proximity to environmentally sensitive areas or densely populated communities. If a leak, spill or other environmental incident occurred, it could result in substantial fines or penalties being imposed by regulatory authorities, revocation of licenses or permits required to operate the business, the imposition of more stringent conditions in those licenses or permits or legal claims for compensation (including punitive damages) by affected stakeholders.
Global sustainability challenges, such as greenhouse gas emissions, privacy and data security, demographic shifts and regulatory pressures are introducing new risk factors for us that we may not have dealt with previously. We are also engaged with various sustainability frameworks and organizations through which we have stated certain ambitions and commitments regarding sustainability best practices. If we are unable to successfully manage our sustainability compliance, this could have a negative impact on our reputation and our ability to raise capital and could be detrimental to our economic value and the value of our managed assets.
Failure to maintain the security of our information and technology systems could have a material adverse effect on us.We rely on the use of technology and information systems, many of which are controlled by third-party service providers, which may not be able to accommodate our growth or may increase in cost and may become subject to cyber-terrorism or other compromises and shutdowns, and any failures or interruptions of these systems could adversely affect our businesses and results of operations.We and our managed assets operate in businesses that are dependent on information systems and other technology, such as computer systems used for information storage, processing, administrative and commercial functions as well as the machinery and other equipment used in certain parts of our operations. In addition, our managed assets rely on telecommunication services to interface with their business networks and customers. The information and embedded systems of key business partners and regulatory agencies are also important to our operations. We rely on this technology functioning as intended. Our information systems and technology may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on us.We rely heavily on certain financial, accounting, communications and other data processing systems. We collect, store and use large amounts of sensitive information, including personally identifiable information, through our information technology systems. Our information technology systems face ongoing cybersecurity and cyber-terrorism threats and attacks, which could result in the failure of such infrastructure. We may in the future be subject to cyber-terrorism or other cybersecurity risks or other breaches of information technology security, noting the increasing frequency, sophistication and severity of these kinds of incidents. In particular, our information technology systems may be subject to cyber-terrorism intended to obtain unauthorized access to our proprietary information, personally identifiable information or to client or third-party data stored on our systems, destroy or disable our data, and/or that of our business partners, disclose confidential data in breach of data privacy legislation, disable, degrade or sabotage our systems, through the introduction of computer viruses, cyber-attacks and other means. Such attacks could originate from a wide variety of sources, including internal actors or unknown third parties. Further, unauthorized parties may also gain physical access to our facilities and infiltrate our information systems or attempt to gain access to information and data. The sophistication of these threats continue to evolve and grow, including the risk associated with the use of emerging technologies, such as AI and quantum computing, for nefarious purposes. We cannot predict what effects such cyber-attacks or compromises or shutdowns may have on our business and on the privacy of the individuals or entities affected, and the consequences could be material. Cyber incidents may remain undetected for an extended period, which could exacerbate these consequences. The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be material. A significant actual or potential theft, loss, corruption, exposure, fraudulent, unauthorized or accidental use or misuse of investor, policyholder, employee or other personally identifiable or proprietary business data, whether by third parties or as a result of employee malfeasance or otherwise, non-compliance with our contractual or other legal obligations regarding such data or intellectual property or a violation of our privacy and security policies with respect to such data could result in significant remediation and other costs, fines, litigation and regulatory actions against us by governments, various regulatory organizations or exchanges, or affected individuals, in addition to significant reputational harm and/or financial loss, and it may not be possible to recover losses suffered from such incidents under our insurance policies.In addition, our operating equipment may not continue to perform as it has in the past, and there is a risk of equipment failure due to wear and tear, latent defect, design or operator errors or early obsolescence, among other things.
A breach of our cybersecurity measures or the failure or malfunction of any of our computerized business systems, associated backup or data storage systems could cause us to suffer a disruption in one or more parts of our business and experience, among other things, financial loss, reputational damage, a loss of business opportunities, misappropriation or unauthorized release of confidential or personal information, damage to our systems and those with whom we do business, violation of privacy and other laws, litigation, regulatory penalties and remediation and restoration costs as well as increased costs to maintain our systems.We are reliant on third party service providers for certain aspects of our business, including for the administration of certain funds we manage, as well as for certain information systems and technology platforms, trustee services, legal services, technology, administration, tax, accounting and compliance matters. A disaster, disruption or compromise in technology or infrastructure that
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supports our managed assets, including a disruption involving electronic communications or other services used by us, our vendors or third parties with whom we conduct business, may have an adverse impact on our ability to continue to manage our assets without interruption which could have a material adverse effect on us. These risks could increase as vendors increasingly offer cloud-based software services rather than software services that can be operated within our own data centers. These risks also increase to the extent we engage with vendors and third-party services providers in jurisdictions with which we are not familiar. In addition to the fact that these third-party service providers could also face ongoing cybersecurity threats and compromises of their systems, we generally have less control over the delivery of such third-party services, and as a result, we may face disruptions to our ability to manage an asset as a result of interruptions of such services. A prolonged global failure of cloud services provided by a variety of cloud services providers that we engage could result in cascading systems failures for us. Although we are continuing to develop measures to ensure the integrity of our systems, we can provide no assurance that our efforts or those of third-party service providers will be successful in protecting our systems and preventing or ameliorating damage from a cyber incident.
Data protection and privacy rules have become a focus for regulators globally. For instance, the European General Data Protection Regulation (“GDPR”) sets out data protection rules for individuals that are residents of the E.U. The GDPR imposes stringent rules and penalties for non-compliance. Other countries where we operate are enacting or amending data protection, AI and other technology laws to empower regulators to impose financial penalties and injunctions on certain data processing activities, which could have an adverse effect on our business.
AI may be used more effectively by our competitors and our employees or third parties may inappropriately use the technology.
Developments in AI, including machine learning technology and generative AI, and their impact on the private investment and financial services sectors are rapidly evolving. The full extent of the risks associated with AI, as well as the legal and regulatory frameworks within which they will operate across jurisdictions, is impossible to predict. Given the substantial uncertainty about the extent to which AI will create dramatic changes throughout the world, we may not be able to anticipate or mitigate all of the potential risks.
Our competitors may be more successful than us in the development and implementation of AI and, if we are unable to adequately advance our capabilities in these areas or do so at a slower pace than our competitors, we may be at a competitive disadvantage.
As the use of AI increases, there is a risk that it may be used or relied upon inappropriately by our employees or third parties that we engage in carrying out their responsibilities.
Furthermore, AI technologies may produce inaccurate, incomplete, biased, or non-explainable outputs, or rely on data that is flawed, improperly sourced, restricted, or subject to privacy or confidentiality obligations. This could adversely impact us and our operations to the extent that we rely on the work product of such AI in such operations.
The misuse or misappropriation of our data through the use of AI could also have an adverse impact on our reputation and could subject us to legal and regulatory investigations and/or actions.
Additionally, increased reliance on third-party AI technologies may also expose us to security vulnerabilities, limitations in our ability to monitor or control model behavior, and uncertainty regarding the ownership or licensing of intellectual property associated with AI-generated outputs.
Finally, any failure to appropriately govern the development, deployment, or use of AI could result in regulatory scrutiny, legal liability, financial loss, or reputational harm.We and our managed assets may become involved in legal disputes in the U.S. and internationally that could adversely impact our financial performance and reputation.
In the normal course of our and our managed assets’ businesses, we become involved in various legal actions, including claims relating to personal injury, property damage, property taxes, land rights and contract and other commercial disputes. The investment decisions we make and the activities of our investment professionals on behalf of our managed assets may subject us and our managed assets to the risk of third-party litigation. Further, we have significant operations in the U.S. which may, as a result of the prevalence of litigation in the U.S., be more susceptible to legal action than certain of our other competitors.
The final outcome with respect to outstanding, pending or future litigation cannot be predicted with certainty, and the resolution of such actions may have an adverse effect on our financial position or results of our operations in a particular quarter or fiscal year. Any litigation may consume substantial amounts of our management’s time and attention, and that time and the devotion of these resources to litigation may, at times, be disproportionate to the amounts at stake in the litigation. Even if ultimately unsuccessful against us, any litigation has the potential to adversely affect our business, including by damaging our reputation.Losses not covered by insurance may be large, which could adversely impact the Assets Under Management.
We and our managed assets carry various insurance policies in relation to our respective business activities. These policies contain policy specifications, limits and deductibles that may mean that such policies do not provide coverage or sufficient coverage against
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all potential material losses. We or those also part of the group policy may also self-insure a portion of certain of these risks, and therefore we may not be able to recover from a third-party insurer in the event that we, if we had separate insurance coverage from a third party, could make a claim for recovery. There are certain types of risk (generally of a catastrophic nature such as war or environmental contamination) that are either uninsurable or not economically insurable. Further, there are certain types of risk for which insurance coverage is not equal to the full replacement cost of the insured assets.
Should any uninsured or underinsured loss occur, we could lose our anticipated profits and cash flows from one or more of our Assets Under Management.We also carry directors’ and officers’ liability insurance (“D&O insurance”) for losses or advancement of defense costs in the event a legal action is brought against our directors, officers or employees for alleged wrongful acts in their capacity as directors, officers or employees. Our D&O insurance contains certain customary exclusions that may make it unavailable for us in the event it is needed; and in any case our D&O insurance may not be adequate to fully protect us against liability for the conduct of our directors, officers or employees. We may also self-insure a portion of our D&O insurance, and therefore we may not be able to recover from a third-party insurer in the event that we, if we had D&O insurance from a third-party insurer, could make a claim for recovery.For economic efficiency and other reasons, Brookfield may enter into insurance policies as a group that are intended to provide coverage for the entire group. Where group policies are in place, any payments under such policy could have a negative impact on other entities covered under the policy as they may not be able to access adequate insurance in the event it is needed. While management attempts to design coverage limits under group policies to ensure that all entities covered under a policy have access to sufficient insurance coverage, there are no guarantees that these efforts will be effective in obtaining this result.Inability to collect amounts owing to us could adversely impact financial performance.
Third parties may not fulfill their payment obligations to us, which could include money, securities or other assets, thereby impacting our operations and financial results. These parties include deal and trading counterparties, governmental agencies, customers and financial intermediaries. Third parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure, general economic conditions or other reasons.
We manage assets that loan money to distressed companies, either privately or via an investment in publicly traded debt securities. As a result, we actively take heightened credit risk in other entities from time to time and whether we realize satisfactory investment returns on these loans is uncertain and may be beyond our control. If some of these debt investments fail, our financial performance could be negatively impacted.
Investors in our private funds, including BN and its affiliates, make capital commitments to these vehicles through the execution of subscription agreements. When a private fund makes an investment, these capital commitments are then satisfied by our investors via capital contributions. Investors in our private funds may default on their capital commitment obligations, which could have an adverse impact on our earnings or result in other negative implications to our business and our managed assets, such as the requirement to redeploy our own capital to cover such obligations. This impact would be magnified if the investor that does so is in multiple funds.
We are subject to operating and financial restrictions through covenants in our loan, debt and security agreements.
BAM and its subsidiaries are subject to operating and financial restrictions through covenants in our loan, debt and security agreements. These restrictions may prohibit or limit our ability to, among other things, incur additional debt, provide guarantees for indebtedness, grant liens, dispose of assets, liquidate, dissolve, amalgamate, consolidate or effect corporate or capital reorganizations, declare distributions, issue equity interests and create subsidiaries. A financial covenant in our corporate bank credit facilities may limit our overall indebtedness to a percentage of distributable earnings, a restriction which may limit our ability to obtain additional financing, withstand downturns in our business and take advantage of business and development opportunities. If we breach our covenants, our credit facilities may be terminated or come due and such an event may cause our credit rating to deteriorate and subject BAM to higher interest and financing costs. From time to time, we also acquire businesses and assets that have debt obligations that are in default. We may also be required to seek additional debt financing on terms that include more restrictive covenants and/or higher interest rates, change of control restrictions, require repayment on an accelerated schedule or impose other obligations that limit our ability to grow our business, acquire needed assets, exit investments in assets or portfolio companies, or take other actions that we might otherwise consider appropriate or desirable.Risks Relating to our Investment Activities
Actions or conduct that have a negative impact on our investors’ or stakeholders’ perception of us could adversely impact our ability to attract and/or retain investor capital and generate fee revenue.The growth of our business relies on continuous fundraising for various private and public investment products, and retention of capital raised from third-party investors. We depend on our business relationships and our global reputation for integrity and high-caliber asset management services to attract and retain investors and advisory clients, and to pursue investment opportunities for our clients. Our business relationships and reputation could be negatively impacted by a number of factors, including: poor performance;
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actual, potential or perceived conflicts of interest that are not adequately addressed; misconduct or alleged misconduct by employees; rumors or innuendos; or failed or ineffective implementation of new investments or strategies. If we are unable to continue to raise and retain capital from third-party investors, including from BN, either privately, publicly or both, or otherwise are unable to pursue our investment opportunities, this could materially reduce our revenue and cash flows and adversely affect our financial condition.Poor performance of any kind could damage our reputation with current and potential investors in our managed assets, making it more difficult for us to raise new capital. Investors may decline to invest in current and future managed assets and may withdraw their investments from our managed assets as a result of poor performance in the entity in which they are invested, and investors in our private funds may demand lower fees for new or existing funds, all of which would decrease our revenue.
As a global alternative asset manager with various lines of business and investment products, some of which have overlapping mandates, we may be subject to a number of actual, potential or perceived conflicts of interest.In addressing these conflicts, we have implemented a variety of policies and procedures; however, there can be no assurance that these will be effective at mitigating actual, potential or perceived conflicts of interest in all circumstances, or will not reduce the positive synergies that we seek to cultivate. It is also possible that actual, potential or perceived conflicts of interest, if not properly addressed, could give rise to investor dissatisfaction, litigation, regulatory enforcement actions or other detrimental outcomes. See “Risks Relating to BAM — Our organizational and ownership structure may create conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of our shareholders”.Appropriately dealing with conflicts of interest for an asset manager like us is a priority and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with actual, potential or perceived conflicts of interest. Asset manager conflicts are subject to enhanced regulatory scrutiny in the markets in which we operate and in the U.S. in particular. Such regulatory scrutiny can lead to fines, penalties and other negative consequences. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation, business, financial condition or results of operations in a number of ways, including an inability to adequately capitalize existing managed assets or raise new managed assets, including private funds, and a reluctance of counterparties to do business with us. For information regarding conflicts of interests between the businesses within our asset management operations that operate on opposite sides of an information barrier, see “—Information barriers may give rise to certain conflicts and risks and investment teams managing the activities of businesses that operate on opposite sides of an information barrier will not be aware of, and will not have the ability to manage, such conflicts and risks” herein.Our reputation could also be negatively impacted if there is misconduct or alleged misconduct by our personnel or those of our managed assets, including historical misconduct prior to the investment in such managed asset. Risks associated with misconduct at our managed assets is heightened in cases where we do not have legal control or significant influence over a particular managed asset or are not otherwise involved in actively managing an investment. In such situations, given our management position and affiliation with the managed asset, we may still be negatively impacted from a reputational perspective through this association. In addition, even where we have management over an asset, if it is a newly acquired asset that we are in the process of integrating then we may face reputational risks related to historical or current misconduct or alleged misconduct at such managed asset for a period of time. We may also face an increased risk of misconduct to the extent investments in operating assets in emerging markets and distressed companies increases. If we face allegations of improper conduct by private litigants or regulators, whether the allegations are valid or invalid or whether the ultimate outcome is favorable or unfavorable to us, such allegations may result in negative publicity and press speculation about us, our investment activities or the asset management industry in general, which could harm our reputation and may be more damaging to our business than to other types of businesses.
We are subject to a number of obligations and standards arising from our business and our authority over the assets we manage. The violation of these obligations and standards by any of our employees may adversely affect our partners and our business and reputation. Our business often requires that we deal with confidential matters. If our employees were to improperly use or disclose confidential information, or a security breach results in an inadvertent disclosure of such information, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to detect or deter employee misconduct or security breaches, and the precautions we take in this regard may not be effective.
Implementation of new investment and growth strategies involves a number of risks that could result in losses and harm to our professional reputation, including the risk that the expected results are not achieved, that new strategies are not appropriately planned for or integrated, that new strategies may conflict with, detract from or compete against our managed assets, and that the investment process, controls and procedures that we have developed will prove insufficient or inadequate. Furthermore, our strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our complete control or under the control of another.In addition to impacting our ability to raise and retain third-party capital and pursue investment opportunities, certain of the risks identified herein that may have a negative impact on our reputation also could, in extreme cases, result in our removal as general partner or an acceleration of the liquidation date of the private funds that we manage. The governing agreements of our private funds
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provide that, subject to certain conditions (which may, particularly in the case of our removal as general partner, include final legal adjudications of the merits of the particular issue), third-party investors in these funds will have the right to remove us as general partner or to accelerate the liquidation date of the fund. Additionally, at any time, investors may seek to terminate a fund and accelerate the liquidation date upon the vote of a super-majority of investors in such fund. A significant negative impact to our reputation would be expected to increase the likelihood that investors could seek to terminate a private fund. This effect would be magnified if, as is often the case, an investor is invested in more than one fund. Such an event, were it to occur, would result in a reduction in the fees we would earn from such fund, particularly if we are unable to maximize the value of the fund’s investments during the liquidation process or in the event of the triggering of a “clawback” for fees already paid out to us as general partner.
We face risks specific to our infrastructure strategies.
Our infrastructure managed assets include utilities, transport, midstream and data businesses.
Our infrastructure assets include toll roads, telecommunication towers, electricity transmission systems, terminal operations, electricity and gas distribution companies, residential infrastructure, rail networks, ports and data centers. The principal risks facing the regulated and unregulated businesses comprising our infrastructure assets relate to government regulation, general economic conditions and other material disruptions, counterparty performance and capital expenditure requirements.
Many of the infrastructure assets we manage are subject to government regulation, including with respect to revenues and environmental sustainability. If any of the respective regulators in the jurisdictions in which we operate decides to change the tolls or rates we are allowed to charge or the amounts of the provisions we are allowed to collect, we may not be able to earn the rate of return on our investments that we had planned, or we may not be able to recover our initial cost.
With environmental regulation becoming more stringent, our managed assets may become subject to increasing environmental responsibility and liability. These regulations may result in increased costs to our managed assets that may not be able to be passed onto their customers and may have an adverse impact on prospects for growth of some businesses.
General economic conditions (including those resulting from climate change and severe weather conditions) affect international demand for the commodities handled and services provided by operators in our infrastructure managed assets. A downturn in the economy generally or specific to any of our infrastructure managed assets, may lead to a reduction in volumes, disruption to business, bankruptcies or liquidations of one or more large customers, which could reduce our revenues, increase our bad debt expense, reduce our ability to make capital expenditures or have other adverse effects on us.
Some of our managed assets have customer contracts as well as concession agreements in place with public and private sector clients. Our managed assets with customer contracts could be adversely affected by any material change in the assets, financial condition or results of operations of such customers. Protecting the quality of our revenue streams through the inclusion of take-or-pay or guaranteed minimum volume provisions into our contracts is not always possible or fully effective.
Some of our managed assets may require substantial capital expenditures to maintain their asset base. Any failure to make necessary expenditures to maintain their operations could impair their ability to serve existing customers or accommodate increased volumes. In addition, we may not be able to recover investments in capital expenditures based upon the rates our operations are able to charge.We face risks specific to our renewable power and transition strategies.
Our renewable power and transition strategies invest in assets that are subject to changes in the weather, hydrology and price, but also include risks related to equipment or dam failure, counterparty performance, water rental costs, land rental costs, changes in regulatory requirements and other material disruptions.
The revenues generated by the power facilities we manage are correlated to the amount of electricity generated, which in turn is dependent upon available water flows, wind, irradiance and other elements beyond our control. Hydrology, wind and irradiance levels vary naturally from year to year and may also change permanently because of climate change or other factors. It is therefore possible that low water, wind and irradiance levels at certain of our power generating operations could occur at any time and potentially continue for indefinite periods.
A portion of the renewable power and transition revenue is tied, either directly or indirectly, to the wholesale market price for electricity, which is impacted by a number of external factors beyond our control. Additionally, a portion of the power that is generated is sold under long-term power purchase agreements, shorter-term financial instruments and physical electricity contracts which are intended to mitigate the impact of fluctuations in wholesale electricity prices; however, they may not be effective in achieving this outcome. Certain of the power purchase agreements of our managed assets will be subject to re-contracting in the future. If the price of electricity in power markets is declining at the time of such re-contracting, it may impact our ability to re-negotiate or replace these contracts on terms that are acceptable to us. Conversely, what appears to be an attractive price at the time of re-contracting could, if power prices rise over the power purchase agreement’s term, result in us having committed to sell power in the future at below market rate. If we are unable to re-negotiate or replace these contracts, or unable to secure prices at least equal to the current prices we receive, our business, financial condition, results of operation and prospects could be adversely affected.34In our renewable power and transition portfolio, there is a risk of equipment failure due to severe weather conditions (including as a result of climate change), wear and tear, latent defect, design error or operator error, among other things. The occurrence of such failures could result in a loss of generating capacity and repairing such failures could require the expenditure of significant capital and other resources. Failures could also result in exposure to significant liability for damages due to harm to the environment, to the public generally or to specific third parties. Equipment that our renewable power and transition operations need, including spare parts and components required for project development, may become unavailable or difficult to procure, inhibiting our ability to maintain full availability of existing plants and also our ability to complete development projects on scope, schedule and budget.
In certain cases, some catastrophic events may not excuse us from performing our obligations pursuant to agreements with third parties and we may be liable for damages or suffer further losses as a result.
Our renewable power and transition portfolio is exposed to performance and operational risks in respect of certain nuclear technologies. The nuclear fuel and power industries are heavily regulated and could be significantly impacted by changes in government policies and priorities such as increased regulation and/or more onerous operating requirements that negatively impact our nuclear technology services. A future accident at a nuclear reactor could result in the shutdown of existing plants or impact the continued acceptance by the public and regulatory authorities of nuclear energy and the future prospects for nuclear generators. Accidents, terrorism, natural disasters or other incidents occurring at nuclear facilities or involving shipments of nuclear materials could reduce the demand for nuclear technology services.
The ability of the platforms we manage to develop greenfield renewable power projects in our development pipeline may be affected by a number of factors, including the state of capital markets, the ability to secure project financing (including from equity investors and through tax and other government incentives), the ability to secure approvals, licenses and permits and the ability to secure a long-term power purchase agreement or other sales contracts on reasonable terms. The development of our pipeline of greenfield renewable power projects is also subject to environmental, engineering and construction risks that could result in cost-overruns, delays and reduced performance.
New regulatory initiatives related to sustainability could adversely impact our managed assets. While we believe that regulatory initiatives and market trends towards an increased focus on sustainability are generally beneficial to our renewable power and transition group, any such regulatory initiatives also have the potential to adversely impact us. For example, regulatory initiatives seeking to reorient investment toward sustainability by regulating green financial products could have the effect of increasing burdensome disclosure requirements around sustainability and prescribing approaches to sustainability policies that are inconsistent with our current practices. If regulators disagree with the sustainability disclosures that we make, or with the categorization of our financial products, we may face regulatory enforcement action, and our business or reputation could be adversely affected.We face risks specific to our private equity strategies.
The principal risks for our private equity managed assets are potential loss of invested capital as well as insufficient investment or fee income to cover operating expenses and cost of capital. Our private equity platform is invested in industrial operations, business services operations and infrastructure services operations, many of which can be cyclical and/or illiquid and therefore may be difficult to monetize at our discretion, limiting our flexibility to react to changing economic or investment conditions. In addition, increasingly we have certain managed assets that provide goods and services directly to consumers across a variety of industries. These businesses are prone to greater liabilities, as well as reputational, litigation and other risks by virtue of being more public-facing and reliant on their ability to develop and preserve consumer relationships and achieve consumer satisfaction.
Unfavorable economic conditions could negatively impact the ability of our managed assets to repay debt. Adverse economic conditions facing our managed assets may adversely impact the value of our investments or deplete our financial or management resources. These investments are also subject to the risks inherent in the underlying businesses, some of which are facing difficult business conditions and may continue to do so for the foreseeable future. These risks are compounded by recent growth, as new acquisitions have increased the scale and scope of our operations, including in new geographic areas and industry sectors, and we may have difficulty managing these additional operations.
We may deploy our client’s capital in managed assets that are experiencing significant financial or business difficulties, including companies involved in work-outs, liquidations, spin-outs, reorganizations, bankruptcies and similar transactions. Such an investment entails the risk that the transaction will be unsuccessful, will take considerable time or will result in a distribution of cash or new securities, the value of which may be less than the purchase price of the securities in respect of which such distribution is received. In addition, if an anticipated transaction does not occur, we may be required to sell our investment at a loss. These managed assets may become subject to legal and/or regulatory proceedings and our investment may be adversely affected by external events beyond our control, leading to legal, indemnification or other expenses.We have several managed assets that operate in the highly competitive service industry. A wide variety of micro and macroeconomic factors affecting our clients and over which we have no control can impact how these companies operate. For example, our Canadian residential mortgage insurer is subject to significant regulation and may be adversely affected by changes in government policy. The majority of the revenue from our healthcare services operation is derived from private health insurance funds, which may be affected
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by a deterioration in the economic climate, a change in economic incentives, increases in private health insurance premiums and other factors. In addition, alternative technologies in the health care industry could impact the demand for, or use of, our services and could impair or eliminate the competitive advantage of our businesses in this industry.Our infrastructure services operations include companies in lottery services, marine transportation and work access services. Our lottery services operation is heavily dependent on long-term contracts and failure to win, maintain and renew these contracts could substantially impact revenue. Our lottery services operation also often requires entering into strategic relationships with third parties, including competitors, which we do not control, and which may have inconsistent business interests or goals from us. Marine transportation and oil production are inherently risky, particularly in the extreme conditions in which many of our vessels operate. An incident involving significant loss of product or environmental contamination by any of our vessels could harm our reputation and business. Our work access services business is subject to the risks inherent to construction operations, including risks relating to seasonal fluctuations in the demand for our services, a dependence on labor and performance being materially impacted by a lack of availability of labor force or increases in the cost of labor available, and operational hazards that could result in personal injury or death, work stoppage or serious property and equipment damage.
We face risks specific to our real estate strategies.
Our real estate strategies invest in commercial properties and are therefore exposed to certain risks inherent in the commercial real estate business. Commercial real estate investments are subject to varying degrees of risk depending on the nature of the property. These risks include changes in general economic conditions (such as the availability and cost of mortgage capital), local conditions (such as an oversupply of space or a reduction in demand for real estate in the markets in which we operate), the attractiveness of the properties to tenants, competition from other landlords and our ability to provide adequate maintenance at an economical cost.
Certain expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must be made whether or not a property is producing sufficient income to service these expenses. These commercial properties are typically subject to mortgages that require debt service payments. If we become unable or unwilling to meet mortgage payments on any property, losses could be sustained as a result of the mortgagee’s exercise of its rights of foreclosure or of sale.Continuation of rental income is dependent on favorable leasing markets to ensure expiring leases are renewed and new tenants are found promptly to fill vacancies. It is possible that we may face a disproportionate amount of space expiring in any one year. Additionally, rental rates could decline, tenant bankruptcies could increase, and tenant renewals may not be achieved, particularly in the event of an economic slowdown.Our real estate strategies invest in businesses that operate in industries or geographies that may be impacted by a local, regional, national or international outbreak of a contagious disease. Adverse impacts on our managed assets may also include:
• a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or tenant action and climate change events including hurricanes, earthquakes, tsunamis and other natural and man-made disasters;
• a slowdown in business activity may severely impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to fund their business operations, meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;
• an increase in re-leasing timelines, potential delays in lease-up of vacant space and the market rates at which such lease will be executed;
• reduced economic activity could result in a prolonged recession, which could negatively impact consumer discretionary spending; and
• expected completion dates for our development and redevelopment projects may be subject to delay as a result of the disruption of local economic conditions.
The retail real estate assets in our managed assets are susceptible to any economic factors that have a negative impact on consumer spending. Lower consumer spending would have an unfavorable effect on the sales of our retail tenants, which could result in their inability or unwillingness to make all payments owing to us, and on our ability to keep existing tenants and attract new tenants. Significant expenditures associated with each equity investment in real estate assets, such as mortgage payments, property taxes and maintenance costs, are generally not reduced when there is a reduction in income from the investment, so our income and cash flow would be adversely affected by a decline in income from our retail properties. In addition, low occupancy or sales at our retail properties, as a result of competition or otherwise, could result in termination of or reduced rent payable under certain of our retail leases, which could adversely affect our retail property revenues.The hospitality and multifamily assets in our managed assets are subject to a range of operating risks common to these industries, many of which are outside our control, and the profitability of our investments in these industries may be adversely affected by these
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factors. For example, our hospitality business faces risks relating to climate change; hurricanes, earthquakes, tsunamis and other natural and man-made disasters; the potential spread of contagious diseases; and insect infestations more common to rental accommodations. Such factors could limit or reduce the demand for or the prices our hospitality properties are able to obtain for their accommodations or could increase our costs and therefore reduce the profitability of our hospitality businesses. There are numerous housing alternatives that compete with our multifamily properties, including other multifamily properties as well as condominiums and single-family homes. This competitive environment could have a material adverse effect on our ability to lease apartment homes at our present properties or any newly developed or acquired real estate, as well as on the rents realized.We face risks specific to our credit strategies.
Our credit strategies offer a broad range of strategies to our investors. Similar to our other private funds managed across different strategies, we earn base management fees on our credit strategies and, in certain cases, carried interest on fund capital and separate accounts in our credit strategies. Cyclicality is important to credit strategies and weak economic environments have tended to afford some of the best investment opportunities and relative investment performance to such strategies. Any prolonged economic expansion or recession could have an adverse impact on certain credit strategies and materially affect the ability to deliver attractive investment returns for clients or generate incentive or other income in respect of those strategies.
Growth in Fee-Bearing Capital could be adversely impacted by poor product development or marketing efforts. In addition, investment returns could be lower than target returns due to inappropriate allocation of capital or ineffective investment management.
Our business depends on our ability to fundraise third-party capital, deploy that capital effectively and produce targeted investment returns.Our ability to raise third-party capital depends on a number of factors, including many that are outside our control such as the general economic environment and market conditions (including the performance of the stock market), investment rules or policies to which third party investors are subject, and the number of other investment funds being raised at the same time by our competitors. Investors may reduce (or even eliminate) their investment allocations to alternative investments, including closed-ended private funds. Investors that are required to maintain specific asset class allocations within their portfolio may be required to reduce their investment allocations to alternative investments, particularly during periods when other asset classes, such as public securities, are decreasing in value. In addition, investors may prefer to insource and make direct investments; therefore, becoming competitors and ceasing to be clients and/or making new capital commitments.Our initiatives to expand our retail investor base, including outside of the U.S., require the investment of significant time, effort and resources, including the potential hiring of additional personnel, the implementation of new operational, compliance and other systems and processes and the development or implementation of new technology. There is no assurance that our efforts to grow our retail assets under management will be successful.
Competition from other asset managers for raising public and private capital is intense, with competition based on a variety of factors, including investment performance, the quality of service provided to investors, the quality and availability of investment products, marketing efforts, investor liquidity and willingness to invest, and reputation. Poor investment performance could hamper our ability to compete for these sources of capital or force us to reduce our management fees. Our investors and potential investors continually assess investment performance and our ability to raise capital for existing and future funds depends on our funds’ relative and absolute performance. If poor investment returns or changes in investment mandates prevent us from raising further capital from our existing partners, we may need to identify and attract new investors in order to maintain or increase the size of our private funds, and there are no assurances that we will be able to find new investors. Further, as competition and disintermediation in the asset management industry increase, we may face pressure to reduce or modify our asset management fees, including base management fees and/or carried interest, or modify other terms governing our current asset management fee structure, in order to attract and retain investors.
The successful execution of our investing strategy is uncertain as it requires suitable opportunities, careful timing and business judgment, as well as the resources to complete asset purchases and restructure them, if required, notwithstanding difficulties experienced in a particular industry.There is no certainty that we will be able to identify suitable or sufficient opportunities that meet our investment criteria and be able to acquire additional high-quality assets at attractive prices to supplement our growth in a timely manner, or at all. In pursuing investment opportunities and returns, we and our managed assets face competition from other investment managers and investors worldwide. Each of our strategies is subject to competition in varying degrees and our competitors may have certain competitive advantages over us when pursuing investment opportunities. Some of our competitors may have higher risk tolerances, different risk assessments, lower return thresholds, a lower cost of capital, or a lower effective tax rate (or no tax rate at all), all of which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments. We may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by our competitors, some of whom may have synergistic businesses which allow them to consider bidding a higher price than we can reasonably offer. While we will continue to attempt to deal with competitive pressures by leveraging our asset management strengths and the operating capabilities of BN and
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compete on more than just price, there is no guarantee these measures will be successful, and we may have difficulty competing for investment opportunities, particularly those offered through auction or other competitive processes. If we are unable to successfully raise, retain and deploy third-party capital into investments, or make acquisitions which yield attractive returns, we may be unable to collect management fees, carried interest or transaction fees, which would materially reduce our revenue and cash flows and adversely affect our financial condition.Our approach to investing may entail adding assets to our existing managed assets through tuck-in acquisitions when the competition for assets is weakest; typically, when depressed economic conditions exist in the market relating to a particular entity or industry. Such an investing style carries with it inherent risks when investments are made in either markets or industries that are undergoing some form of dislocation. We may fail to value opportunities accurately or to consider all relevant factors that may be necessary or helpful in evaluating an opportunity, may underestimate the costs necessary to bring an acquisition up to standards established for its intended market position, may be exposed to unexpected risks and costs associated with these investments, including risks arising from alternative technologies that could impair or eliminate the competitive advantage of our managed assets in a particular industry, and/or may be unable to quickly and effectively integrate new acquisitions into existing operations or exit from the investment on favorable terms. In addition, liabilities may exist that we or our managed assets do not discover in due diligence prior to the consummation of an acquisition, or circumstances may exist with respect to the entities or assets acquired that could lead to future liabilities and, in each case, we or our managed assets may not be entitled to sufficient, or any, recourse against the contractual counterparties to an acquisition.
We generally pursue investment opportunities that involve business, regulatory, legal and other complexities. Our tolerance for complexity presents risks, as completing complex transactions on behalf of our managed assets can be more difficult, expensive and time-consuming to finance and execute, and have a higher risk of execution failure. It can also be more difficult to manage or realize value from the assets acquired in such transactions and such transactions sometimes entail a higher level of regulatory scrutiny or a greater risk of contingent liabilities.
At times, we make investments (for one or more of our funds or managed assets) in companies that we do not control. These investments are subject to the risk that the company in which the investment is made may make business, financial or management decisions with which we do not agree or that the majority stakeholders or the management of the company may take risks or otherwise act in a manner that does not serve our interests.Certain strategies may be concentrated in particular asset types or geographic regions, which could exacerbate any negative performance of one or more of our managed assets to the extent those concentrated investments are in assets or regions that experience market dislocation. In addition, certain of our funds hold publicly traded securities, the price of which will be volatile and are likely to fluctuate due to a number of factors beyond our control, including actual or anticipated changes in the profitability of the issuers of such securities; general economic, social, or political developments; changes in industry conditions; changes in governance regulation; inflation; the general state of the securities markets; pandemics/epidemics; and other material events.
The failure of a newly acquired business to perform according to expectations could have a material adverse effect on our assets, liabilities, business, financial condition, results of operations and cash flows. Alternatively, we may be required to sell a business before it has realized our expected level of returns for such business.
If any of our managed investments perform poorly or experience prolonged periods of volatility, or we are unable to deploy capital effectively, our fee-based revenue, cash available for distribution and/or carried interest would decline. Accordingly, our expected returns on these investments may be less than we have assumed in forecasting the value of our business.
Our cash flow must be available to meet our financial obligations when due and enable us to capitalize on investment opportunities when they arise.
We employ debt and other forms of leverage in the ordinary course of business to enhance returns. We are therefore subject to the risks associated with debt financing (directly and indirectly through our managed assets) and refinancing, including but not limited to the following: (i) our cash flow may be insufficient to meet required payments of principal and interest; (ii) payments of principal and interest on borrowings may leave us with insufficient cash resources to pay operating expenses and dividends; (iii) if we are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at high interest rates or on other unfavorable terms, we may have difficulty completing acquisitions or may generate profits that are lower than would otherwise be the case; (iv) we may not be able to refinance indebtedness at maturity due to company and market factors such as the estimated cash flow produced by our assets, the value of our assets, liquidity in the debt markets and/or financial, competitive, business and other factors; and (v) if we are able to refinance our indebtedness, the terms of a refinancing may not be as favorable as the original terms for such indebtedness. If we are unable to refinance our indebtedness on acceptable terms, or at all, we may need to utilize available liquidity, which would reduce our ability to pursue new investment opportunities, or we may need to dispose of one or more of our or our managed assets on disadvantageous terms, or raise equity, thereby causing dilution to existing shareholders. Regulatory changes or changes in economic or market conditions may also result in higher borrowing costs and reduced access to credit.The terms of our various credit agreements and other financing documents may require us to comply with a number of customary
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financial and other covenants, such as maintaining debt service coverage and leverage ratios, adequate insurance coverage and certain credit ratings. These covenants may limit our flexibility in conducting our business and our cash flows, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness, even if we have satisfied and continue to satisfy our payment obligations.A large proportion of our managed assets include physical assets and securities that can be hard to sell, especially if market conditions are poor. Further, because our investment strategy can entail our having representation on public company boards, we may be restricted in our ability to affect sales during certain time periods. A lack of liquidity could limit our ability to vary our managed assets promptly in response to changing economic or investment conditions. Additionally, if financial or operating difficulties of other owners result in distress sales, such sales could depress asset values in the markets in which we manage assets. The restrictions inherent in managing physical assets could reduce our ability to respond to changes in market conditions and could adversely affect the performance of investments across our fund strategies, our financial condition and our results of operations.
Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid or non-public investments, the fair values of such investments do not necessarily reflect the prices that would actually be obtained when such investments are realized. Realizations at values significantly lower than the values at which investments have been recorded would result in losses, a decline in asset management fees and the potential loss of carried interest and incentive fees.
Additionally, from time to time, we may guarantee the obligations of other entities that we manage. If we are required to fund these commitments and are unable to do so, this could result in damages being pursued against us or a loss of opportunity through default under contracts that are otherwise to our benefit.
We may be exposed to risks associated with acquisitions.Part of BAM’s growth strategy involves seeking acquisition opportunities. We will face competition for acquisitions, including from our competitors, many of whom will have greater financial resources than us. There can be no assurance that we will identify and successfully complete acquisitions that will advance our growth strategy, or at all. Any strategic acquisition will likely involve some or all of the following risks, which could materially and adversely affect our business, financial condition or results of operations: the difficulty of integrating the acquired operations and personnel into our current operations; potential disruption of our current operations; diversion of resources, including our management’s time and attention; the difficulty of managing the growth of a larger organization; the risk of entering markets in which we have little experience; the risk of becoming involved in labor, commercial or regulatory disputes or litigation related to the new enterprise; the risk of environmental or other liabilities associated with the acquired business; and the risk of a change of control resulting from an acquisition triggering rights of third parties or government agencies under contracts with, or authorizations held by, the managed assets being acquired. It is possible that due diligence investigations into businesses being acquired may fail to uncover all material risks, or to identify a change of control trigger in a material contract or authorization, or that a contractual counterparty or government agency may take a different view on the interpretation of such a provision to that taken by us, thereby resulting in a dispute.We may be required to make temporary investments and backstop commitments with respect to our business and managed assets and may be unable to syndicate, assign or transfer such investments and commitments.
We periodically may be asked to enter into agreements that commit us to acquire or stand in place of another entity to acquire assets or securities in order to support our managed assets with the expectation that our commitment is temporary. For example, we may acquire an asset suitable for a particular managed business that is fundraising and warehouse that asset through the fundraising period before transferring the asset to the managed business for which it was intended. As another example, our asset management business may commit capital for a particular acquisition transaction as part of a consortium alongside certain of our managed assets with the expectation that we will syndicate or assign all or a portion of our own commitment to investors prior to, at the same time as, or subsequent to, the anticipated closing of the transaction. In all of these cases, our support is intended to be of a temporary nature, and we engage in this activity in order to further the growth and development of our asset management business.Even if our direct participation is intended to be of a temporary nature, we may be unable to syndicate, assign or transfer its interest or commitment as our asset management business intended and therefore may be required to take or keep ownership of assets or securities for an extended period. This would increase the amount of our asset management business’ own capital deployed to certain assets and could have an adverse impact on our asset management business’ liquidity, which may negatively impact its ability to meet other financial commitments.Our revenues may be adversely affected by a decline in the size or pace of investments made by our managed assets.Our revenue is driven in part by the pace at which our funds make investments and the size of those investments, and a decline in the pace or the size of such investments may reduce our revenues. In particular, in recent years we have meaningfully increased the number of perpetual strategies we offer and the assets under management in such strategies. The fees we earn from our perpetual capital strategies represent a significant and growing portion of our overall revenues. If our funds, including our perpetual capital strategies, are unable to deploy capital at a sufficient pace, our revenues would be adversely impacted. Many factors could cause a
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decline in the pace of investment, including a market environment characterized by relative high prices, the inability of our investment professionals to identify attractive investment opportunities, competition for such opportunities among other potential acquirers, decreased availability of capital on attractive terms. Further, we may fail to consummate identified investment opportunities because of business, regulatory or legal complexities or uncertainty and adverse developments in the markets in which we operate, financial markets or geopolitical conditions, and our ability to deploy capital in certain countries may be adversely impacted by government policy changes and regulations.Our revenue, earnings, net income and cash flow can materially vary from quarter to quarter, which may affect our earnings growth and dividend on a quarterly basis and can affect the trading price of the Class A Shares.Our revenue, net income and cash flow can vary materially due to our reliance on incentive distributions and performance-based returns, such as carried interest. We may experience fluctuations in our results, including our revenue and net income, from quarter to quarter due to a number of other factors, including timing of realizations, changes in the valuations of our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degree to which we encounter competition and general economic and market conditions. Achieving steady growth in net income and cash flow on a quarterly basis may be difficult, which could in turn cause our dividend and our ability to pay dividends to fluctuate and lead to large adverse movements or general increased volatility in the price of the Class A Shares. We also do not provide any guidance regarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in the Class A Shares.Our cash flow may fluctuate significantly due to the fact that we receive carried interest from certain of our funds only when investments are realized and achieve a certain preferred return. The payment of performance-based returns, including carried interest, depends on the applicable funds’ performance and opportunities for realizing gains, which may be limited. It takes a substantial period of time to identify attractive investment opportunities, to raise all the funds needed to make an investment and then to realize the cash value (or other proceeds) of an investment through a sale, public offering, recapitalization or other exit. Even if an investment proves to be profitable, it may be a number of years before any profits can be realized in cash (or other proceeds). We cannot predict when, or if, any realization of investments will occur.
The mark-to-market valuations of investments made by our funds are subject to volatility driven by economic and market conditions. Economic and market conditions may also negatively impact our realization opportunities.The valuations of and realization opportunities for investments made by our funds could also be subject to high volatility as a result of uncertainty regarding governmental policy with respect to, among other things, tax, financial services regulation, international trade, immigration, healthcare, labor, infrastructure and energy.
In addition, upon the realization of a profitable investment by any of our funds featuring performance-based returns and prior to our receiving any carried interest in respect of that investment, 100% of the proceeds of that investment must generally be paid to the investors in such fund until they have recovered certain fees and expenses and achieved a certain return on all realized investments by that fund as well as a recovery of any unrealized losses. A particular realization event may have a significant impact on our results for that particular quarter that may not be replicated in subsequent quarters. We recognize revenue on investments in our funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds, and a decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue and possibly cash flow, which could further increase the volatility of our quarterly results. Because our funds have preferred return thresholds to investors that need to be met prior to our receiving any carried interest or other performance-based returns, substantial declines in the carrying value of the investment portfolios of such funds can significantly delay or eliminate any performance-based returns paid to us in respect of that fund since the value of the assets in the fund would need to recover to their aggregate cost basis plus the preferred return over time before we would be entitled to receive any performance-based returns, including carried interest, from that fund.
The timing and receipt of performance-based returns also varies with the life cycle of our funds. During periods in which a relatively large portion of our assets under management is attributable to funds and investments in their “harvesting” period, our funds would make larger distributions than in the fundraising or investment periods that precede harvesting. During periods in which a significant portion of our assets under management is attributable to funds that are not in their harvesting periods, we may receive substantially lower performance-based returns, including carried interest.The varying frequency of payments of our different funds and strategies will contribute to the volatility of our cash flow. Furthermore, we earn this incentive income only if the NAV of a vehicle has increased or, in the case of certain vehicles, increased beyond a particular return threshold, or if the vehicle has earned a net profit. Certain of these vehicles also have “high water marks” whereby we do not earn incentive income during a particular period even though the vehicle had positive returns in such period as a result of losses in prior periods. If one of these vehicles experiences losses, we will not earn incentive income from it until it surpasses the previous
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high water mark. The incentive income we earn is therefore dependent on the NAV or the net profit of the vehicle, which could lead to significant volatility in our results.Our access to retail investors and selling retail directed products in numerous jurisdictions opens us up to potential litigation and regulatory enforcement risks.In 2021, we created a business group in partnership with Oaktree to serve the global wealth management channel, delivering access to Brookfield and Oaktree’s private and public funds. In October 2025, Brookfield and Oaktree announced that they have agreed on a proposed transaction whereby Brookfield will acquire the approximately 26% interest in Oaktree that it does not already own. Our goal is to increase the number and type of investment products we offer to high-net-worth individuals and mass affluent investors in the U.S. and other jurisdictions around the world. In some cases, our unregistered funds are distributed to retail investors indirectly through third-party managed vehicles sponsored by brokerage firms, private banks or third-party feeder providers, and in other cases directly to the qualified clients of private banks, independent investment advisors and brokers. In other cases, we create investment products specifically designed for direct investment by retail investors in the U.S., some of whom are not accredited investors, or similar investors in non-U.S. jurisdictions, including in Europe. Such investment products are regulated by the SEC in the U.S. and by other similar regulatory bodies in other jurisdictions.Accessing retail investors and selling retail directed products exposes us to new and greater levels of risk, including heightened litigation and regulatory enforcement risks. To the extent distribution of retail products is through new channels, including through an increasing number of distributors with whom we engage, we may not be able to effectively monitor or control the manner of their distribution, which could result in litigation or regulatory action against us, including with respect to, among other things, claims that products distributed through such channels are distributed to customers for whom they are unsuitable or that they are distributed in an otherwise inappropriate manner. Although we seek to ensure through due diligence and onboarding procedures that the third-party channels through which retail investors access our investment products conduct themselves responsibly, we are exposed to the risks of reputational damage and legal liability to the extent such third parties improperly sell our products to investors. This risk is heightened by the continuing increase in the number of third parties through whom we distribute our investment products around the world and who we do not control. For example, in certain cases, we may be viewed by a regulator as responsible for the content of materials prepared by third-party distributors.
Similarly, there is a risk that employees involved in the direct distribution of our products, or employees who oversee independent advisors, brokerage firms and other third parties around the world involved in distributing our products, do not follow our compliance and supervisory procedures. In addition, the distribution of retail products, including through new channels whether directly or through market intermediaries, could expose us to allegations of improper conduct and/or actions by state and federal regulators in the U.S. and regulators in jurisdictions outside of the U.S. with respect to, among other things, product suitability, investor classification, compliance with securities laws, conflicts of interest and the adequacy of disclosure to customers to whom our products are distributed through those channels.As we expand the distribution of products to retail investors outside of the U.S., we are increasingly exposed to risks in non-U.S. jurisdictions. While these risks are similar to those that we face in the distribution of products to retail investors in the U.S., securities laws and other applicable regulatory regimes in many jurisdictions, including the U.K. and the European Economic Area, are extensive, complex, and vary by local jurisdiction. As a result, this expansion subjects us to additional litigation and regulatory risk.
Information barriers may give rise to certain conflicts and risks and investment teams managing the activities of businesses that operate on opposite sides of an information barrier will not be aware of, and will not have the ability to manage, such conflicts and risks.
Certain of our investment professionals operate largely independently of one another pursuant to an information barrier. The information barrier restricts businesses on opposite sides from coordinating or consulting with one another with respect to investment activities and/or decisions. Accordingly, these businesses manage their investment operations independently of each other. The investment activities and decisions made by a business on one side of an information barrier are not expected to be subject to any internal approvals by any person who would have knowledge and/or decision-making control of the investment activities and decisions made by a business on the other side of the information barrier. This absence of coordination and consultation will give rise to certain conflicts and risks in connection with the activities of the businesses within our asset management strategies and make it more difficult to mitigate, ameliorate or avoid such situations. These conflicts (and potential conflicts) of interests may include: (i) competing from time to time for the same investment opportunities, (ii) the pursuit by a business on one side of the information barrier of investment opportunities suitable for a business on the other side of the information barrier, without making such opportunities available to such business, and (iii) the formation or establishment of new strategies or products that could compete or otherwise conduct their affairs without regard as to whether or not they adversely impact the strategies or products of businesses operating on the other side of the information barrier. Investment teams managing the activities of businesses that operate on opposite sides of an information barrier are not expected to be aware of, and will not have the need or ability to manage, such conflicts which may impact the investment strategy, performance and investment returns of certain businesses within our asset management strategies.41The investment professionals that operate on opposite sides of an information barrier are likely to be deemed affiliates for purposes of certain laws and regulations notwithstanding that they may be operationally independent from one another. The information barrier does not eliminate the requirement to aggregate certain investment holdings for certain securities laws and other regulatory purposes. This may result in, among other things, earlier public disclosure of investments; restrictions on transactions (including the ability to make or dispose of certain investments at certain times); potential short-swing profit disgorgement; penalties and/or regulatory remedies; or adverse effects on the prices of investments for our investment professionals’ businesses that operate on the other side of such information barrier.
Although these information barriers are intended to address the potential conflicts of interests and regulatory, legal and contractual requirements applicable to us, we may decide, at any time and without notice to our shareholders, to remove or modify the information barriers. In addition, there may be breaches (including inadvertent breaches) of the information barriers and related internal controls. In the event that the information barrier is removed or modified, it would be expected that we will adopt certain protocols designed to address potential conflicts and other considerations relating to the management of the investment activities of those businesses that previously operated on opposite sides of an information barrier. See “Risks Relating to our Organizational and Ownership Structure — Our organizational and ownership structure may create conflicts of interest that may be resolved in a manner that is not in the best interests of our company or the best interests of our shareholders”.
The breach or failure of our information barriers could result in the sharing of material non-public information between investment professionals that operate on opposite sides of an information barrier, which may restrict the acquisition or disposition activities of one of our strategies and ultimately impact the returns generated for our investors. In addition, any such breach or failure could also result in potential regulatory investigations and claims for securities laws violations in connection with our direct and/or indirect investment activities. Any inadvertent trading on material non-public information, or perception of trading on material non-public information by our personnel, could have a significant adverse effect on our reputation, result in the imposition of regulatory or financial sanctions and negatively impact our ability to raise third-party capital and provide investment management services to our clients, all of which could result in negative financial impact to our investment activities.
Risks Relating to our Organizational and Ownership StructureBN exercises substantial influence over BAM.
BN owns approximately 73% of the Class A Shares. As a result, for so long as BN maintains a significant voting interest in BAM, it will have the ability to exert substantial influence over many matters affecting BAM’s business, including: (i) the composition of the Board of Directors of BAM and, through such Board, any determinations with respect to the business plans and policies of BAM, including the appointment and removal of its officers; (ii) determinations with respect to acquisitions of businesses, mergers or other business combinations; and (iii) BAM’s capital structure, including financing activities.
In addition, BN has the right (but not the obligation) to participate up to 25% (net of any participation of our asset management business) in each new sponsored fund of our asset management business. This participation includes any participation by BN’s perpetual affiliates and BWS, but they are also not obligated to invest capital in our funds. Any fees to be paid to our asset management business on BN’s managed capital must be agreed to by BN, in its sole discretion. It is expected that most of BN’s capital will continue to be provided by the perpetual affiliates, for whom existing fee arrangements will continue to apply. For greater certainty, for any new capital, BN has a right to determine that no fees will apply. If BN does not commit all the capital it is entitled to provide, or does not agree for its capital to be fee-bearing, we may have difficulty growing our managed capital or our revenues.Moreover, a significant portion of our Fee-Bearing Capital is represented by the capital of the perpetual affiliates, which are controlled by BN. BN will therefore exercise significant influence over their operation, including (among other things) distribution policies that enable us to earn incentive distributions.
BN has no obligation to provide backstops or other guarantees relating to new investments or acquisitions, or to commit capital on a transitional basis while other investors are being sourced, but any arrangements or understandings existing at the time of completion of the 2022 Arrangement will be continued. Moreover, if BN does make transitory investments it will generally be entitled to receive the same cost of carry for such investment as the relevant fund of our asset management business is entitled to under its fund documents (typically 8%) as well as stand-by / commitment fees at market rates and such other compensation as otherwise may be mutually agreed. It is possible that our ability to deploy capital may be adversely affected by not having BN’s backstops or other guarantees, or we may be required to deploy our own capital, or to pay for other sources of capital.
We depend on our global reputation for integrity and investment acumen. Our business could be negatively impacted by changes in BN’s global reputation. In addition, other than as described in this Annual Report, BN is not committed to an exclusive relationship with us, and we may compete with BN (except for capital represented by the perpetual affiliates, which is exclusive) or compete with other asset managers for BN’s capital.42The ownership of BN may change and the control of BAM may be transferred to a third party without shareholder approval.BN is not required to maintain any ownership level in BAM and may sell the Class A Shares it owns to a third party without the consent of BAM shareholders. Similarly, if a third party were to acquire a significant ownership of BN’s Class A Shares and appoint new directors or officers of its own choosing, it would be able to exercise substantial influence over BAM’s policies and procedures and exercise substantial influence over BAM’s management. Such changes could result in BAM’s capital being used to make acquisitions in which BN has no involvement or to make acquisitions that are substantially different from those targeted by BAM’s current growth strategy. Additionally, BAM cannot predict with any certainty the effect that changes in the ownership of BN would have on the trading price of the Class A Shares or its ability to raise capital or make investments in the future, because such matters would depend to a large extent on the identity of the new owner and the new owner’s intentions with regard to BAM. As a result, BAM’s business, financial condition and results of operations may suffer.Our organizational and ownership structure may create conflicts of interest that may be resolved in a manner that is not in our best interests or the best interests of our shareholders.
Our organizational and ownership structure involves a number of relationships that may give rise to conflicts of interest between us and our shareholders, on the one hand, and BN, on the other hand. For example, except to a limited extent, BN is not committed to an exclusive relationship with us, and we may compete with BN (except for capital represented by the perpetual affiliates, which is exclusive) or may compete with other asset managers for BN’s capital.
Many of our executives and employees have a material portion of their equity compensation awards that are tied to the performance of the shares of BN. If the market value of BAM’s shares and BN’s shares are not fully aligned, the existence of these awards may result in our executives and employees being less focused on BAM’s financial success.
Ineffective maintenance of our culture or ineffective management of human capital could adversely impact our business and financial performance.
Our ability to compete effectively in our business will depend upon our ability to attract new employees and retain and motivate our existing employees. Our senior management team has a significant role in our success and oversees the execution of our investment strategies. If we are unable to attract and retain qualified employees, our ability to compete successfully and achieve our business objectives could be limited, and our business, financial condition and results of operations could be negatively impacted.
Our ability to retain and motivate our management team, attract suitable replacements should any members of our management team leave, or attract new investment professionals as our business grows, is dependent on, among other things, the competitive nature of the employment market and the career opportunities and compensation that we can offer. In all of our markets, we face intense competition in connection with the attraction and retention of qualified employees.We may experience departures of key professionals in the future. We cannot predict the impact that any such departures will have on our ability to achieve our objectives. Our senior management team possesses substantial experience and expertise and has strong business relationships with investors in our managed assets and other members of the business communities and industries in which we operate. As a result, the loss of these personnel could jeopardize our relationships with investors in our managed assets and other members of the business communities and industries in which we operate and result in the reduction of our assets under management or fewer investment opportunities. Accordingly, the loss of services from key professionals or a limitation in their availability could adversely impact our financial condition and cash flow. Furthermore, such a loss could be negatively perceived in the capital markets.Additionally, the departure of certain individuals could trigger certain “key person” provisions in the documentation governing certain of our private funds, which would permit the limited partners of those funds to suspend or terminate the funds’ investment periods or withdraw their capital prior to the expiration of the applicable lock-up date. Our key person provisions vary by both strategy and fund and, with respect to each strategy and fund, are typically tied to multiple individuals, meaning that it would require the departure of more than one individual to trigger the key person provisions. Our human capital risks may be exacerbated by the fact that we do not maintain any key person insurance.
The conduct of our business and the execution of our strategy rely heavily on teamwork. Our continued ability to respond promptly to opportunities and challenges as they arise depends on co-operation and co-ordination across our organization and our team-oriented management structure, which may not materialize in the way we expect.
A portion of the workforce in some of our managed assets is unionized. If we are unable to negotiate acceptable collective bargaining agreements with any of our unions as existing agreements expire, we could experience a work stoppage, which could result in a significant disruption to the affected operations, higher ongoing labor costs and restrictions on our ability to maximize the efficiency of our operations, all of which could have an adverse effect on our financial results.43Risks Relating to Taxation
If BAM is classified as a passive foreign investment company, U.S. persons who own Class A Shares could be subject to adverse U.S. federal income tax consequences.If BAM is classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes, a U.S. taxpayer that owns Class A Shares could be subject to adverse tax consequences, including a greater tax liability than might otherwise apply, an interest charge on certain taxes deemed deferred as a result of BAM’s non-U.S. status, and additional U.S. tax reporting obligations. In general, a non-U.S. corporation will be a PFIC for a taxable year if, taking into account the income and assets of certain of its affiliates, (i) 75% or more of its gross income for such year constitutes passive income or (ii) 50% or more of its assets during such year produce or are held for the production of, passive income. Passive income generally includes interest, dividends, and other investment income.
Based on its current and expected income, assets, and activities, BAM does not expect to be classified as a PFIC for the current taxable year or in the foreseeable future. However, the determination of whether BAM is a PFIC depends upon the composition of its income and assets and the nature of its activities from time to time and must be made annually as of the close of each taxable year. The PFIC determination also depends on the application of complex U.S. federal income tax rules that are subject to differing interpretations. Thus, there can be no assurance that BAM will not be classified as a PFIC for any taxable year, or that the Internal Revenue Service or a court will agree with BAM’s determination as to its PFIC status. Holders of Class A Shares that are U.S. taxpayers are urged to consult their tax advisers regarding the application of the PFIC rules, including the related reporting requirements and the advisability of making any available election under the PFIC rules, with respect to their ownership and disposition of Class A Shares.Changes in Canadian federal income tax law might adversely affect BAM and/or holders of Class A Shares.There can be no assurance that Canadian federal income tax laws, the judicial interpretation thereof, or the administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) will not be changed in a manner that adversely affects BAM and/or holders of Class A Shares. Any such developments could have a material adverse effect on the holders of Class A Shares or our business, financial condition and results of operations.Reassessments by tax authorities or changes in tax laws could create additional tax costs for us.We operate in countries with differing tax laws and tax rates. Our tax reporting is consistent with the tax laws in the countries in which we operate and the application of tax treaties between the various countries in which we operate. Our income tax reporting is subject to audit by tax authorities in the countries in which we operate. Our effective tax rate may change from year to year, based on changes in the mix of activities and income earned among the different jurisdictions in which we operate, changes in tax laws in these jurisdictions, changes in the tax treaties between the countries in which we operate, changes in our eligibility for benefits under those tax treaties, and changes in the estimated values of deferred tax assets and liabilities. Tax laws, regulations and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. Such changes could result in a substantial increase in the effective tax rate on all or a portion of our income.
Governments around the world increasingly seek to regulate multinational companies and their use of differential tax rates between jurisdictions. This effort includes a greater emphasis by various nations on coordinating and sharing information regarding companies and the taxes they pay. A number of countries across the globe have also agreed to implement a “two pillar” plan for global tax reform, developed by the OECD/G20 Inclusive Framework on BEPS, to address perceived base erosion and profit shifting (“BEPS”) by some multinational groups. Governmental taxation reforms, policies and practices could adversely affect us and, depending on the nature of such reforms, policies and practices, including the implementation of the BEPS proposals in the jurisdictions in which we operate, could have a greater impact on us than on other companies. As a result of this increased focus on the use of tax planning by multinational companies, our company could be subject to negative media coverage, which may adversely impact our reputation.
Item 7 · Management's Discussion & Analysis
+608 paragraphs −604 paragraphs ~604 changed
FY 2024-12-31 (earlier)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with BAM's consolidated financial statements and the related notes included within this Annual Report.Business EnvironmentIn 2024, global GDP growth is expected to have risen by 3.2% compared to 3.1% in 2023, above the projection of 2.9% at the beginning of 2024. This economic activity was supported by lower inflation, steady employment growth, and less restrictive monetary policy. Labor markets continued to ease, though unemployment generally remained at or near historical lows. Additionally, headline inflation has now returned to target in a number of advanced and emerging-market economies despite lingering pressures in service sectors.
Over the course of 2024, differences in economic performance and monetary policy across countries emerged following the coordinated rate hiking cycle that came before it. Some economies, such as the United States and India, demonstrated above-average growth, whereas others, including the Eurozone, the U.K. and China, grew at slower rates.
GDP growth in the United States remained healthy at 2.8% for 2024, where robust consumption growth was supported by real wage gains. Core consumer price inflation fell from 3.9% at the end of 2023 to 3.3% at the end of 2024. Labor market tightness gradually eased, with the ratio of job vacancies to the number of unemployed people continuing to decline. The unemployment rate increased slightly over the year from 3.8% to 4.1%, remaining low by historical standards, led by the public sector being a strong source of labor demand, with its contribution to total employment growth in 2024 being significantly above pre‑pandemic levels.
Higher interest rates have had the desired effect of bringing inflation down closer to central bank targets in most developed economies. In 2024, monetary policy shifted as most major central banks began easing cycles. By the latter half of the year, most central banks across advanced economies cut policy rates at least once.
Federal Open Market Committee policymakers started the Fed's easing cycle with a larger-than-expected 50 basis point rate cut in September before transitioning to a more gradual pace of easing. Market expectations for Federal Reserve monetary policy fluctuated materially over the course of the year. This saw 2-year treasury yields begin the year at 4.3%, rise above 5.0% in April, fall to 3.8% after unexpectedly weak payroll data, before climbing back to 4.2% to end the year. The Fed's Summary of Economic Projections implies two 25 basis point cuts in 2025, and the Fed's terminal rate has been lifted to 3% from 2.9% previously.
Elsewhere, easing cycles have been gradual, as in the case of the Bank of England with two 25 basis point rate cuts, while others cut rates at a faster pace, such as in the Eurozone with four 25 basis point deposit rate cuts and the Bank of Canada with three 25 basis point and two 50 basis point rate cuts. Conversely, the Bank of Japan ended its negative interest rate policy in March with its first-rate hike since 2007. Policymakers in emerging markets were more varied. The People's Bank of China continued lowering lending rates in 2024, the Reserve Bank of India held steady, while in Latin America, the Brazilian Central Bank returned to rate hikes.
Credit spreads on both investment grade and high yield bond indices ended the year tighter, after a spike in early August due to concerns over a slowdown. Credit default swaps on both indices also tightened over the course of the year. U.S. primary markets for investment grade and high yield bonds continued to recover to close to recent highs with gross issuances increasing by 25% and 66% over the prior year, respectively. Over the course of 2024, demand for credit improved and bond funds recorded their highest inflows over the past decade, as investors sought attractive yields against a backdrop of easing from major central banks.
Equity market performance was strong in 2024 as markets grew increasingly optimistic relative to expectations at the beginning of the year. The MSCI World Index increased by 17%. Additionally, the S&P 500 and Nasdaq increased by 23% and 25%, respectively. For the first time in two and a half decades, the S&P 500 achieved consecutive returns of more than 20% in both 2023 and 2024.
Global M&A volumes increased to $3.5 trillion in 2024 from $3.2 trillion in 2023. Lower interest rates and optimism on growth increased deal volumes from private equities and other financial investors as that class began to regain ground with a 29% increase in deal values compared to the prior year. Corporate M&A, which is less influenced by small movements in the cost of debt, is on track to end the year 12% above 2023. Initial public offering (“IPO”) activity in the Americas saw a strong recovery, reaching its highest IPO activity since 2021, in both volume and proceeds, with 205 IPO’s raising US$33.1billion.
Following a 13% contraction in 2023, commodity prices were largely flat in 2024 as measured by the Bloomberg Commodity Index, as declines in energy and agriculture were balanced by price increases in metals. Precious metals surged 19%, as investors sought haven in gold. For the second consecutive year, energy declined significantly by 8%, primarily driven by a 14% drop in natural gas prices resulting from increased production and lower demand. After the spike in April to $91 per barrel due to geopolitical tensions and output cuts, brent oil prices declined through the remainder of 2024 to end the year at $75 per barrel.
During 2024, a large portion of the world's population took part in general elections that resulted in incumbent governments losing power or suffering setbacks. The U.S. presidential election saw the return of former President Donald Trump and Republican
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majorities in both houses of Congress. Financial markets and risk assets performed strongly against this backdrop with limited volatility. In the U.K., politics moved to the left with the Labor Party ousting the incumbent Conservative Party with a significant majority. Japan's Lower House election saw the incumbent party that has governed for most of the post-World War II era lose their majority. In France, President Macron’s decision to hold snap elections resulted in losses to left-wing and right-wing parties. However, uncertainty over the policies that new governments will implement, as well as geopolitics and the impact on economic activity, may continue to be a feature of the near-term outlook.Our business is well-positioned within the evolving alternative asset management landscape by leveraging a strategic and agile approach to investment opportunities. As investors seek diversification and innovative solutions, we are equipped to navigate market complexities and government policies by delivering value through disciplined strategies. Our ability to adapt to shifting economic conditions and capitalize on emerging trends ensures we remain a trusted partner in achieving long-term financial outcomes.55Review of Financial Results
Income Statement AnalysisConsolidated Statement of Comprehensive Income
The following table summarizes the financial results of BAM for the years ended December 31, 2024, 2023 and the period from July 4, 2022 to December 31, 2022:
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
AND FOR THE PERIOD JULY 4, 2022 TO DECEMBER 31, 2022(MILLIONS)2024 2023 2022 2024 vs 2023 2023 vs 2022
Operating recoveries $ 482 $ 383 $ 37 $ 99 $ 346
Expenses
Compensation and benefits (368) (326) (1) (42) (325)
Other operating expense (7) (5) (35) (2) 30
Carried interest allocation compensation
Realized (61) (24) — (37) (24)
Unrealized (59) (38) (3) (21) (35)
Total carried interest allocation compensation (120) (62) (3) (58) (59)
Interest expense (16) (9) — (7) (9)
Total expenses (511) (402) (39) (109) (363)
Share of income from Brookfield Asset Management ULC 570 470 21 100 449
Net income $ 541 $ 451 $ 19 $ 90 $ 432
Net income consists of BAM’s equity interest in the earnings of the Asset Management Company and compensation and benefit costs, primarily attributable to executive compensation costs of BAM and unrealized carried interest compensation expense. A material portion of these costs are reimbursed by BN and the Asset Management Company in accordance with the Relationship Agreement and the Asset Management Services Agreement.
For the years ended December 31, 2024 and 2023
During the year ended December 31, 2024, BAM recorded net income of $541 million, compared to $451 million in the prior year. On May 2, 2024, Brookfield Wealth Solutions (“BWS”) completed the acquisition of the remaining outstanding common stock of American Equity Investment Life Holding Company (“AEL”) that it did not already own. In connection with the transaction, BAM issued approximately 28.8 million Class A Shares totaling consideration of $1.1 billion to BN in exchange for 28.8 million common shares of the Asset Management Company (the “AEL Mandate”). The AEL Mandate was non-dilutive to BAM Ltd. shareholders and increased BAM's ownership in the Asset Management Company from approximately 25% to approximately 27%.
The increase in net income compared to the prior year was driven by the higher income of the Asset Management Company and our higher ownership resulting from the aforementioned AEL Mandate. This was partially offset by higher interest expense on the credit facility with the Asset Management Company and higher non-recoverable compensation costs.
Refer to the following discussion for details on the earnings of the Asset Management Company.
For the year ended December 31, 2023 and the period from July 4, 2022 to December 31, 2022
During the year ended December 31, 2023, BAM recorded net income of $451 million compared to $19 million for the period from July 4, 2022 to December 31, 2022. Net income of $19 million from the comparative period represents earnings from December 9, 2022 (the date of the 2022 Arrangement) to December 31, 2022 compared to a full year of net income in 2023.
Refer to the following discussion for details on the earnings of the Asset Management Company.
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Consolidated and Combined Statement of Operations
The following table summarizes the Consolidated and Combined Statements of Operations for the Asset Management Company for the years ended December 31, 2024, 2023 and 2022:
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022 2024 vs 2023 2023 vs 2022RevenuesBase management and advisory fees $ 2,957 $ 2,766 $ 2,500 $ 191 $ 266
Incentive fees 424 376 335 48 41Investment income
Carried interest allocationsRealized 25 51 241 (26) (190)
Unrealized (9) 348 249 (357) 99
Total investment income 16 399 490 (383) (91)
Interest and dividend revenue 143 172 258 (29) (86)
Other revenues 440 349 44 91 305
Total revenues 3,980 4,062 3,627 (82) 435Expenses
Compensation, operating, and general and administrative expensesCompensation and benefits (1,154) (1,048) (700) (106) (348)
Other operating expenses (347) (342) (236) (5) (106)
General, administrative and other (64) (56) (81) (8) 25
Total compensation, operating, and general and administrative expenses (1,565) (1,446) (1,017) (119) (429)Carried interest allocation compensationRealized (69) (26) (61) (43) 35
Unrealized (24) (60) (139) 36 79
Total carried interest allocation compensation (93) (86) (200) (7) 114
Interest expense (22) (14) (154) (8) 140
Total expenses (1,680) (1,546) (1,371) (134) (175)
Other (expenses) income, net (93) (129) 1,090 36 (1,219)
Share of income from equity method investments 339 167 146 172 21
Income before taxes 2,546 2,554 3,492 (8) (938)
Income tax expense (438) (417) (627) (21) 210
Net income 2,108 2,137 2,865 (29) (728)
Net (income) loss attributable to:
Redeemable non-controlling interests in consolidated funds — — (909) — 909
Preferred shares redeemable non-controlling interest 211 (262) (35) 473 (227)
Non-controlling interest (151) (36) (6) (115) (30)
Net income attributable to the common stockholders $ 2,168 $ 1,839 $ 1,915 $ 329 $ (76)
The asset management business primarily generates revenue from fees earned pursuant to contractual arrangements with funds, publicly traded vehicles, and investors as well as transaction and advisory fees. These fees include base management fees, incentive distribution rights, and certain advisory fees. Base management fees are long-term, recurring in nature, and correspond to fundraising activity, net asset values of certain of our funds, and market capitalizations of our publicly traded vehicles, specifically BIP, BEP and BBU. Incentive distribution rights are performance fees earned from BIP and BEP for exceeding predetermined distribution thresholds, are long-term, and are not subject to clawback.
The asset management business is entitled to carried interest assuming certain investment returns are achieved, as well as incentive management fees in certain of our structures where we are entitled to contractual fees from an investment fund based on achieving prescribed investment returns.
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The composition of our revenues will vary based on market conditions and the cyclical nature of our businesses. Carried interest allocations generated by our funds and associated carried interest compensation are driven by the performance of the underlying investments as well as overall market conditions. Fair values are affected by changes in the fundamentals of our investments, the industries in which they operate, the overall economy, and other market conditions. The impact of fair values of our underlying investments throughout market cycles may result in material increases or decreases to carry generated, net of expenses.
Expenses within our asset management business primarily include employee base compensation, bonuses, and share-based compensation. Period over period changes in employee base compensation and bonuses generally result from changes in headcount and annual salary changes. Share-based awards are granted in the first quarter of each year and generally vest over 5 years. Equity settled compensation awards vest on a graded basis over the vesting period and cash settled share-based compensation awards are recorded at fair value quarterly based on the trading price of BAM Ltd. Class A Shares. Therefore, for cash settled share-based compensation, an increase or decrease in the share price of BAM Ltd. will result in share-based compensation expense or recovery.
For the years ended December 31, 2024 and 2023
Net income for the year ended December 31, 2024 was $2.1 billion, of which $2.2 billion was attributable to common stockholders. This compares to net income of $2.1 billion for the year ended December 31, 2023, of which $1.8 billion was attributable to common stockholders.RevenuesRevenues for the year ended December 31, 2024 were $4.0 billion, which represents a decrease of $82 million compared to $4.1 billion of revenue for the year ended December 31, 2023.Base Management and Advisory FeesBase management and advisory fees for the year ended December 31, 2024 were $3.0 billion, which represents an increase of $191 million or 7% compared to the year ended December 31, 2023. The increase was predominantly driven by the AEL Mandate, resulting in $49 billion of inflows of Fee-Bearing Capital, as well as annuity-related inflows and other insurance capital generated in BWS. Management fee revenues also increased due to incremental contributions from capital raised for our latest flagship funds, capital deployed across our complementary strategies, as well as a higher trading price of BBU. These increases were partially offset by lower trading prices of BIP, lower net asset value of BPG, and the end of the investment period of certain of our older vintage funds.Incentive FeesIncentive fees for the year ended December 31, 2024, were $424 million, an increase of $48 million or 13% from the year ended December 31, 2023, driven by higher incentive distribution fees earned due to growth in BIP and BEP's dividends of 6% and 5%, respectively.Carried Interest AllocationsRealized carried interest allocations were $25 million for the year ended December 31, 2024, which represents a decrease of $26 million compared to the year ended December 31, 2023. Realized carried interest allocations in the current and prior year were predominantly due to dispositions within our first real estate flagship fund and certain other real estate fund strategies. All realized carried interest income in both the year ended December 31, 2024 and December 31, 2023, net of carry compensation related to mature funds are attributable to BN through our redeemable preferred shares.
The unrealized carried interest allocations reversal of $9 million for the year ended December 31, 2024 represents a decrease of $357 million compared to the year ended December 31, 2023. The change reflects lower valuations across our real estate flagship funds, which is partially offset by higher valuations in our global transition and infrastructure flagship funds.
Carried interest allocations generated by new funds are 66.7% attributable to the asset management business and 33.3% to BN. Within the Consolidated and Combined Statements of Operations, carry interest allocations are presented on a 100% basis and the portion attributable to BN is presented in Net Income Attributable to Non-Controlling Interest. Unrealized carried interest allocations attributable to the asset management business were $257 million for the year ended December 31, 2024, compared to $109 million for the year ended December 31, 2023.Interest and Dividend RevenueInterest and dividend revenue for the year ended December 31, 2024 was $143 million, which represents a decrease of $29 million compared to the year ended December 31, 2023. The decrease was due to the lower deposit balance held with BN driven by the acquisition of our incremental approximately 4.5% interest in Oaktree, our acquisition of an interest in Castlelake, as well as other strategic acquisitions made during the year. In addition, the funding of working capital requirements further decreased our deposit balance with BN.
58Other RevenuesOther revenues were $440 million for the year ended December 31, 2024, an increase of $91 million compared to the year ended December 31, 2023. Other revenues are largely comprised of recoverables from BN related to share and performance-based compensation as defined by the Relationship Agreement, fund expense recharges, and incentive management fees earned on certain funds. The increase compared to the prior year was due to higher incentive management fees earned, fund expense recharges and increased recoveries in share and performance-based compensation. Share-based and performance-based award expenses that are recoverable from BN are recognized in other revenues with the offsetting expense recognized in compensation and benefits, and carried interest allocation compensation, respectively.ExpensesTotal expenses for the year ended December 31, 2024 were $1.7 billion, an increase of $134 million or 9% compared to the year ended December 31, 2023.Compensation and BenefitsCompensation and benefits for the year ended December 31, 2024 were $1.2 billion, which represents an increase of $106 million compared to the year ended December 31, 2023. This was attributable to higher compensation costs from the ongoing growth of our asset management business as well as higher share-based compensation expense in the year due to higher mark-to-market movements on liability-based compensation awards.Other Operating ExpensesOther operating expenses are comprised of professional fees, facilities costs, as well as costs directly associated with our fundraising and investment functions. Other operating expenses were $347 million for the year ended December 31, 2024, compared to $342 million for the year ended December 31, 2023. The increase was primarily attributable to the growth in our business relative to the prior year.Carried Interest Allocation CompensationCompensation expenses related to carried interest allocation compensation were $93 million for the year ended December 31, 2024, which represents an increase of $7 million compared to the year ended December 31, 2023. This was primarily driven by higher relative valuation gains across certain infrastructure, renewable, and private equity funds compared to the prior year. The carried interest compensation expense associated with mature funds is fully recoverable from BN. Carried interest compensation expense on new funds was $7 million during the year.Other Expenses, netOther expenses, net for the year ended December 31, 2024 were an expense of $93 million compared to $129 million in the prior year. This expense primarily consists of mark-to-market movements on our investment in BSREP III and mark-to-market adjustments on put and call options to acquire additional interests in Oaktree, Primary Wave, and Castlelake. Current year expense compared to the prior year were lower due to gains on the various put and call options held by the asset management company and financial instruments associated with various investments. This was partially offset by valuation changes in BSREP III and unrealized foreign exchange losses.Share of Income from Equity Method InvestmentsOur share of income from equity method investments was $339 million compared to $167 million in the prior year, or an increase of $172 million. This is predominantly driven by increased earnings from our investment in Oaktree due to higher management fees earned and unrealized carried interest generated during the year, as well as our higher ownership interest. In addition, our share of income from equity method investments reflects earnings from our Castlelake investment from September 17, 2024.Income Tax ExpenseIncome tax expense was $438 million for the year ended December 31, 2024, which represents an increase of $21 million compared to the year ended December 31, 2023. This increase was driven by changes in tax rates in certain jurisdictions in which we earn income relative to the prior year.Net Loss Attributable to Preferred Share Redeemable Non-Controlling InterestThe asset management business recognizes carried interest income and associated carried interest allocation expense on mature funds within our Consolidated and Combined Statements of Operations on a gross basis. As the net carried interest generated on mature funds is all attributable to BN, the net income or loss attributable to BN via the preferred shares primarily represents the change in carried interest, net of carried interest allocation expense and taxes on mature funds owing to BN.
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Net loss attributable to preferred redeemable non-controlling interest was $211 million for the year ended December 31, 2024 primarily due to lower valuations in certain mature funds.
Net Income Attributable to Non-Controlling Interest
Net income attributable to non-controlling interest was $151 million for the year ended December 31, 2024. The asset management business recognizes carried interest income on new funds within our Consolidated and Combined Statements of Operations on a gross basis. On new funds, 33.3% of carried interest revenue is attributable to BN. This balance is primarily the carried interest generated on new funds that is attributable to BN and fluctuates depending on the carried interest generated on new funds during the year.
For the years ended December 31, 2023 and 2022
Net income for the year ended December 31, 2023 was $2.1 billion, of which $1.8 billion was attributable to common stockholders. This compares to net income of $2.9 billion for the year ended December 31, 2022, of which $1.9 billion was attributable to common stockholders.
Revenues
Revenues for the year ended December 31, 2023 were $4.1 billion, which represents an increase of $435 million or 12% compared to $3.6 billion of revenue for the year ended December 31, 2022.
Base Management and Advisory Fees
Base management and advisory fees for the year ended December 31, 2023 were $2.8 billion, which represents an increase of $266 million or 11% compared to the year ended December 31, 2022. The increase was predominantly driven by incremental contributions from capital raised for our latest flagship funds and capital deployed across our complementary strategies.
Incentive Fees
Incentive fees for the year ended December 31, 2023, were $376 million, an increase of $41 million or 12% from the year ended December 31, 2022, driven by higher incentive distribution fees earned due to growth in BIP and BEP's dividends of 6% and 5%, respectively.
Carried Interest Allocations
Realized carried interest allocations were $51 million for the year ended December 31, 2023, which represents a decrease of $190 million compared to the year ended December 31, 2022. Realized carried interest allocations in the year were primarily driven by dispositions within our real estate flagship funds. Realized carried interest allocations of $241 million for the year ended December 31, 2022 were primarily driven by realizations within our real estate long-term and perpetual funds, as well as a realization within our infrastructure business. All realized carried interest allocations, net of carry compensation for the current and comparative period related to mature funds and are attributable to BN. Realized carried interest allocations on mature funds are attributed to BN through our redeemable preferred shares.
Unrealized carried interest allocations were $348 million for the year ended December 31, 2023, which represents an increase of $99 million compared to the year ended December 31, 2022. The unrealized carried interest allocations were primarily related to growth in valuations in our private equity, real estate and transition flagship funds, partially offset by realizations in the year.
Carried interest allocation generated by new funds are 66.7% attributable to the asset management business and 33.3% to BN. Within the Consolidated and Combined Statements of Operations, carry revenue is presented on a 100% basis and the portion attributable to BN is presented in Net Income Attributable to Non-Controlling Interest. Unrealized carried interest allocations attributable to the asset management business, which represents unrealized carried interest on new funds, was $167 million for the year ended December 31, 2023, compared to $124 million for the year ended December 31, 2022.
Interest and Dividend Revenue
Interest and dividend revenue for the year ended December 31, 2023 were $172 million, which represents a decrease of $86 million compared to the year ended December 31, 2022. The decrease was a result of the transfer of certain investments and loans of the asset management business to BN as part of the 2022 Arrangement. Prior year interest and dividend income was earned from legacy investments and interest bearing loans with affiliates.
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Other Revenues
Other revenues were $349 million for the year ended December 31, 2023, an increase of $305 million compared to the year ended December 31, 2022. Other revenues are largely comprised of recoverables from BN related to share and performance-based compensation as defined by the Relationship Agreement, fund expense recharges, and incentive management fees earned on certain funds. The increase is due to amounts recoverable from BN associated with share and performance based compensation as defined by the Relationship Agreement. A decrease in performance and liability-based compensation resulted in reduced recoveries in the prior year. Share-based and performance-based award expenses that are recoverable from BN are recognized in other revenues with the offsetting expense recognized in compensation and benefits, and carried interest allocation compensation, respectively.
Expenses
Total expenses for the year ended December 31, 2023 were $1.5 billion, an increase of $175 million or 13% compared to the year ended December 31, 2022.
Compensation and Benefits
Compensation and benefits for the year ended December 31, 2023 were $1.0 billion, which represents an increase of $348 million compared to the year ended December 31, 2022. This is primarily attributable to increased compensation costs resulting from the ongoing growth of our asset management business and mark-to-market increases of liability-based awards.
Other Operating Expenses
Other operating expenses are comprised of professional fees, facilities costs, as well as costs directly associated with our fundraising and investment functions. Other operating expenses were $342 million for the year ended December 31, 2023, compared to $236 million for the year ended December 31, 2022. The increase was primarily attributable to the growth in our business relative to the prior year.
Carried Interest Allocation Compensation
Compensation expenses related to carried interest allocation compensation were $86 million for the year ended December 31, 2023, which represents a decrease of $114 million compared to the year ended December 31, 2022. This is predominantly driven by lower relative valuation gains compared to the year ended December 31, 2022 across certain of our funds. The carried interest compensation expense associated with mature funds is fully recoverable from BN. Carried interest compensation expense on new funds was $2 million on a net basis.
Other (Expenses) Income, net
Other (expenses) income, net for the year ended December 31, 2023, primarily consists of mark-to-market movements on our investment in BSREP III and mark-to-market adjustments on call and put options to acquire an additional interest in Oaktree and Primary Wave. BSREP III mark-to-market movements and dividend distributions during 2023 are not attributable to the Asset Management Company on a net basis. The Asset Management Company also recorded impairment charges associated with intangible assets and goodwill of $30 million related to legacy acquisitions, and transaction costs related to the spin-off of the asset management business. Other income in the prior year relates to dividend income received from BSREP III.
Share of Income from Equity Accounted Investments
Our share of income from equity accounted investments was $167 million compared to $146 million in the prior year, or an increase of 14%. This is predominantly our share of income from our investment in Oaktree, primarily driven by unrealized carried interest generated during the year.
Income Tax Expense
Income tax expense was $417 million for the year ended December 31, 2023, which represents a decrease of $210 million compared to the year ended December 31, 2022. This decrease was driven by lower taxable income relative to prior year.
Net Income Attributable to Preferred Share Redeemable Non-Controlling Interest
The asset management business recognizes carried interest income and associated carried interest allocation expense on mature funds within our Consolidated and Combined Statements of Operations on a gross basis. As the net carried interest generated on mature funds is all attributable to BN, the net income or loss attributable to BN via the preferred shares primarily represents the change in carried interest, net of carried interest allocation expense and taxes on mature funds owing to BN.
Net income attributable to preferred redeemable non-controlling interest was $262 million for the year ended December 31, 2023 primarily due to higher valuations in certain mature funds.
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Net Income Attributable to Non-Controlling Interest
Net income attributable to non-controlling interest was $36 million for the year ended December 31, 2023. The asset management business recognizes carried interest income on new funds within our Consolidated and Combined Statements of Operations on a gross basis. On new funds, 33.3% of carried interest revenue is attributable to BN. This balance is primarily the carried interest generated on new funds that is attributable to BN and fluctuates depending on the carried interest generated on new funds during the year.Balance Sheet Analysis
Consolidated Balance SheetsThe following table summarizes the Consolidated Balance Sheets of BAM as at December 31, 2024 and December 31, 2023:AS AT DECEMBER 31,
(MILLIONS, EXCEPT SHARE AMOUNTS)2024 2023AssetsCash and cash equivalents $ 12 $ 9
Due from affiliates 968 886
Other assets 75 40
Investment in Brookfield Asset Management ULC 3,331 2,270
Total assets $ 4,386 $ 3,205LiabilitiesAccounts payable and accrued liabilities $ 879 $ 859
Due to affiliates 229 261
Total liabilities 1,108 1,120
Commitment and contingenciesEquity
Common Stock:Class A, unlimited authorized, 443,135,847 (2023 – 413,026,253) issued and 420,217,136 (2023 – 388,733,466) outstanding as at December 31, 2024 3,475 2,354
Class B, unlimited authorized, 21,280 (2023 – 21,280) issued and outstanding as at December 31, 2024 — —
Class A held in treasury, 22,918,711 (2023 – 24,292,787) shares as at December 31, 2024 (651) (649)
Additional paid-in-capital 565 403
Retained deficit
(143) (35)
Accumulated other comprehensive income 1 3
Total common equity 3,247 2,076
Non-controlling interest 31 9
Total equity 3,278 2,085
Total liabilities, non-controlling interest and equity $ 4,386 $ 3,205
As at December 31, 2024 and December 31, 2023AssetsAs at December 31, 2024, BAM’s total assets were $4.4 billion, an increase of $1.2 billion, or 37% from December 31, 2023. Total assets consist primarily of approximately 27% interest in the Asset Management Company and reimbursements due from affiliates related to long-term executive compensation programs of BAM.
Due from Affiliates
Due from affiliates increased by $82 million from $886 million to $968 million, or 9%, primarily due to higher reimbursable expenses related to long-term executive compensation programs and performance-based awards of BAM. This was partially offset by payments under the Asset Management Services Agreement related to share-based compensation awards and settlements of certain liability-based awards for which BAM was reimbursed.
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Other Assets
Other assets increased from $40 million to $75 million due to the purchase of an option to acquire Brookfield Asset Management ULC’s shares for $35 million. These options track certain awards issued to employees of our asset management business and are exercised at the same time and at the same exercise price as the underlying awards.
Investment in Brookfield Asset Management ULC
The investment in Brookfield Asset Management ULC increased by $1.1 billion, or 47% to $3.3 billion. BAM issued approximately 28.8 million Class A Shares in exchange for approximately 28.8 million shares of the Asset Management Company. The share exchange was valued at $1.1 billion, was non-dilutive to BAM Ltd. shareholders, and increased BAM's ownership from approximately 25% to approximately 27%. The investment balance is net of distributions, partially offset by our share of income during the year.
Liabilities
As at December 31, 2024, BAM’s total liabilities were $1.1 billion, a decrease of $12 million compared to December 31, 2023. This was driven by a decrease in due to affiliates of $32 million, or 12%, due to repayments on BAM's credit facility with the Asset Management Company. Accounts payable and accrued liabilities increased due to movement in liability-based awards, partially offset by the settlement of certain liability-based awards.
Equity
As at December 31, 2024, BAM's total equity was $3.3 billion, which increased by $1.2 billion, or 57% compared to December 31, 2023. This was primarily due to the aforementioned equity issuance. In addition, net income earned and increases in additional paid-in-capital related to stock-based compensation plans were partially offset by distributions in the period.
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Consolidated and Combined Balance Sheets
The following table presents the Consolidated and Combined Balance Sheets of the Asset Management Company as at December 31, 2024 and December 31, 2023:
AS AT DECEMBER 31, (MILLIONS, EXCEPT SHARE AMOUNTS) 2024 2023
Assets
Cash and cash equivalents $ 404 $ 2,667
Accounts receivable and other, net 483 551
Financial assets 231 37
Due from affiliates 2,500 2,504
Investments 9,113 7,522
Investments held for sale 242 —
Investments in consolidated funds 251 —
Property, plant and equipment, net 58 73
Intangible assets, net 38 42
Goodwill 251 251
Deferred income tax assets 586 643
Total assets $ 14,157 $ 14,290
Liabilities
Accounts payable and other, net $ 1,349 $ 1,677
Financial liabilities 228 122
Due to affiliates 1,092 986
Deferred income tax liabilities 46 40
Non-recourse borrowings in consolidated funds 251 —
Total liabilities 2,966 2,825
Commitments and contingencies
Preferred shares redeemable non-controlling interest 2,103 2,166
Equity
Common shares, unlimited authorized, 1,635,428,404 (2023 – 1,635,349,629) issued and 1,630,525,104 (2023 – 1,635,349,629) outstanding as at December 31, 2024 9,017 9,014
Common shares held in treasury, 4,903,300 (2023 – nil) shares as at December 31, 2024 (91) —
Retained deficit (488) (178)
Accumulated other comprehensive income 162 168
Additional paid-in capital 152 122
Total common equity 8,752 9,126
Non-controlling interest 336 173
Total equity 9,088 9,299
Total liabilities, redeemable non-controlling interest and equity $ 14,157 $ 14,290
As at December 31, 2024 and December 31, 2023
Assets
Total assets were $14.2 billion as at December 31, 2024, a decrease of $133 million or 1% compared to December 31, 2023, due to decreases in cash and cash equivalents, partially offset by an increase in investments during the year.
64Cash and Cash EquivalentsCash and cash equivalents were $404 million as at December 31, 2024, a decrease of $2.3 billion or 85% from December 31, 2023. This was largely due to the acquisition of our incremental approximately 4.5% ownership interest in Oaktree, our acquisition of Castlelake, as well as other strategic acquisitions made during the year ended December 31, 2024. This was partially offset by the repayment of a bridge facility made to an affiliate, and reimbursements of fund expenses. Of this balance, $132 million is on deposit with BN.Accounts Receivable and Other, NetAccounts receivable and other, net of $483 million primarily consists of receivables from third parties and prepaid expenses. The decrease of $68 million from December 31, 2023 was largely driven by the timing of collections, partially offset by management fees receivable from third parties and prepayments of stock-based compensation costs to BAM in accordance with the Asset Management Services Agreement.Financial AssetsFinancial assets of $231 million primarily consists of call options to acquire additional interests in Primary Wave and Castlelake in the future and financial instruments associated with various investments. The increase of $194 million from December 31, 2023 was largely driven by mark-to-market valuation increases of certain of our call options, as well as the recognition of new call options recognized during the year.Due from AffiliatesDue from affiliates of $2.5 billion primarily relates to management fees earned but not collected from our managed funds, receivables for expenses paid on behalf of certain of our funds, as well as reimbursements due from BN for long-term compensation awards. The movement of $4 million from December 31, 2023 was primarily the result of collections on management fees, settlement of certain liability-based awards, fund recharge receivables and certain receivables with BN, and repayments of interest bearing related party loans. These decreases were partially offset by management fees receivables on fee revenues earned from our funds during the year and recoverable expenses for certain liability-based awards recoverable from BN.InvestmentsInvestments are comprised of:
• Our approximately 15% limited partnership interest in BSREP III of $1.0 billion;
• Our $4.6 billion interest in Oaktree which increased from approximately 68% to approximately 73% ownership interest during the year;
• Accumulated unrealized carried interest in our mature and new funds of $931 million and $693 million, respectively; and
• Other investments totaling $1.9 billion.
During the year, investments increased by $1.6 billion due to the aforementioned increase in our Oaktree ownership, investments made in Castlelake for approximately $489 million excluding contingent consideration, the purchase of a warehoused investment in GEMS Education for approximately $347 million, for which $97 million has been syndicated as at December 31, 2024, and our investment in Pretium of $351 million.
The investment in BSREP III and carry generated on mature funds are fully attributable to BN through their preferred shares redeemable non-controlling interest and does not impact net income attributable to common stockholders.
Investments in Consolidated Funds
Investments in consolidated funds represents certain funds in which the asset management company holds a sufficient interest to require the consolidation of the fund. Investments in these funds are measured at fair value.Investments Held for SaleInvestments held for sale of $242 million relate to a fund acquired in conjunction with our acquisition of Pinegrove Ventures through Pinegrove Venture Partners, our venture investment platform formed with Sequoia Heritage. We expect to monetize this investment for cash in the near term.LiabilitiesTotal liabilities were $3.0 billion as at December 31, 2024, an increase of $141 million or 5% compared to December 31, 2023.
65Accounts Payable and Other, NetAccounts payable and other, net primarily consists of accrued bonus compensation, performance and cash-settled share-based compensation. The decrease of $328 million compared to December 31, 2023 reflects annual bonus payments, settlement of certain liability-based awards, and timing of taxes paid during the year. This was partially offset by higher performance and liability-based compensation owed to employees.Financial LiabilitiesFinancial liabilities of $228 million primarily consists of contingent consideration associated with our investment in Castlelake and the mark-to-market of derivatives associated with put options on certain of our investments. The increase of $106 million compared to December 31, 2023 reflects the recognition of contingent consideration and put options associated with investments made during the year, and mark-to-market movements of a put option held by third parties to sell additional interests in Primary Wave to the Asset Management Company. This was partially offset by the mark-to-market of a put option held by third parties associated with our investment in Oaktree.Due to AffiliatesDue to affiliates of $1.1 billion reflects amounts owed to affiliates. The increase of $106 million or 11% relative to December 31, 2023 was the result of a new related party loan to fund a warehoused investment, and higher share-based compensation owed to related parties. This was partially offset by the repayment of BAM's credit facility with BN and payments on certain of our loans payable to related parties.
Non-Recourse Borrowings of Consolidated Funds
Non-recourse borrowings in consolidated funds represents borrowings used to finance investments within certain of our funds where the asset management company is required to consolidate the fund due to our economic interest. These borrowings are non-recourse to the asset management business and may fluctuate with the timing of new investments.Preferred Shares Redeemable Non-Controlling InterestOur asset management business recognizes carried interest generated and associated carried interest allocation expense on mature funds within our Consolidated and Combined Statements of Operations. As the net carried interest generated on mature funds is all attributable to BN, this balance primarily represents the accumulated unrealized carried interest, net of carried interest allocation expense and taxes on mature funds owing to BN.
Preferred shares redeemable non-controlling interest was $2.1 billion as at December 31, 2024, a decrease of $63 million compared to $2.2 billion as at December 31, 2023. This movement was due to a decrease in unrealized carried interest on mature funds during the year, partially offset by redeemable preferred share issuances to BN and BAM.
Non-Controlling Interest
Non-controlling interest was $336 million as at December 31, 2024, an increase of $163 million compared to $173 million as at December 31, 2023. This increase was primarily due to carried interest generated by new funds that is owed to BN, non-controlling interests associated with our equity-settled share-based compensation and other non-controlling interests associated with various entities within our asset management business.
66Cash Flow Statement Analysis
Review of Consolidated Statements of Cash FlowsThe following table summarizes the changes in BAM’s cash for the years ended December 31, 2024, 2023 and the period from July 4, 2022 to December 31, 2022:
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 AND FOR THE PERIOD JULY 4, 2022 TO DECEMBER 31, 2022 (MILLIONS) 2024 2023 2022
Operating activities $ 627 $ 508 $ (2)
Investing activities (41) (41) —
Financing activities (583) (459) 3
Change in cash and cash equivalents $ 3 $ 8 $ 1
This statement reflects activities within our consolidated operations and therefore excludes activities within non-consolidated entities.
For the years ended December 31, 2024 and 2023
Operating Activities
During the year ended December 31, 2024, BAM generated operating cashflows of $627 million primarily attributable to the share of income from its investment in the Asset Management Company. During the year ended December 31, 2023, BAM's operating cashflows were $508 million. The increase from the prior year was primarily due to the higher ownership interest held by BAM in the Asset Management Company as well as the impact of the annual dividend increase by the Asset Management Company of 19%.
Investing Activities
Net cash outflows from investing activities totaled $41 million during the year ended December 31, 2024, and $41 million in the prior year. The activity in both years primarily reflects the purchase of an option to acquire additional shares of the Asset Management Company.
Financing Activities
Net cash outflows from financing activities totaled $583 million, primarily attributed to the distributions paid to BAM's shareholders. These outflows were partially offset by prepayments of certain share-based compensation from the Asset Management Company. During the year ended December 31, 2023, net cash outflows from financing activities totaled $459 million, primarily attributed to distributions paid to BAM's shareholders and share repurchases, partially offset by draws on our revolving credit facility with the Asset Management Company and prepayments received for certain of our share-based compensation programs.
For the year ended December 31, 2023 and period ended December 31, 2022
Operating Activities
During the year ended December 31, 2023, BAM's operating activities generated positive cashflows of $508 million primarily attributable to the share of income driven from its investment in the Asset Management Company. During the period from July 4, 2022 to December 31, 2022, BAM's operating cash outflows were $2 million.
Investing Activities
During the year ended December 31, 2023, net cash outflows from investing activities totaled $41 million, primarily reflecting the purchase of an option to acquire additional shares of the Asset Management Company.
Financing Activities
During the year ended December 31, 2023, net cash outflows from financing activities totaled $459 million, primarily attributed to the distributions paid to BAM's shareholders and share buybacks. These outflows were partially offset by cash drawn on the credit facility between BAM and the Asset Management Company.
During the period from July 4, 2022 to December 31, 2022, net cash inflows from financing activities totaled $3 million, primarily attributed to movements of loan balances from an affiliate of BN as a result of the 2022 Arrangement and share subscriptions of BN. These inflows were partially offset by share repurchases.
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Review of Consolidated and Combined Statements of Cash Flows
Refer to the following table that summarizes the Consolidated and Combined Statements of Cash Flows for our asset management business for the years ended December 31, 2024, 2023, and 2022:FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2024 2023 2022
Operating activities $ 1,863 $ 1,439 $ (374)
Investing activities (1,995) (475) 1,706
Financing activities (2,119) (1,842) (280)
Change in cash and cash equivalents $ (2,251) $ (878) $ 1,052This statement reflects activities within our consolidated operations and therefore excludes activities within non-consolidated entities.For the years ended December 31, 2024 and 2023Operating ActivitiesDuring the year ended December 31, 2024, the Asset Management Company's operating activities generated cash inflows of $1.9 billion, compared to cash inflows of $1.4 billion in the prior year. The increase in operating cash flows compared to the prior year was primarily driven by higher cash generated from growth of our asset management business, partially offset by settlement of amounts due to related parties and working capital outlays.Investing ActivitiesNet cash outflows from investing activities totaled $2.0 billion, compared to outflows of $475 million in the prior year. The increase from the prior year was primarily due to the closing of our strategic investment in Castlelake for $489 million, a minority position in Pretium for $351 million, and a net cash outflow associated with the acquisition of a warehoused investment in GEMS Education for $249 million. In addition, the acquisition of Pinegrove Ventures along with a related wholly-owned fund for $258 million, our incremental investment in Oaktree, and $251 million of investment acquisitions within our consolidated funds further added to current year outflows. This increase in outflows were partially offset by higher dispositions of investment assets and lower net advances to related parties in the current year.Financing ActivitiesNet cash outflows from financing activities totaled $2.1 billion, compared to outflows of $1.8 billion in the prior year. The increase in outflows were primarily due to a 19% increase in dividends compared to the prior year and the settlement of our revolving credit facility with BN. The increase in outflows were partially offset by non-recourse borrowings within our consolidated funds and the issuance of a related party loan for the acquisition of a warehoused investment.
For the years ended December 31, 2023 and 2022
Operating Activities
During the year ended December 31, 2023, the Asset Management Company's operating activities generated positive cashflows of $1.4 billion, compared to cash outflows of $374 million in the year ended December 31, 2022. Excluding the net change in working capital and other non-cash operating items, operating cash inflows were $2.1 billion, representing an increase of $76 million or 4% compared to the year ended December 31, 2022, primarily driven by the impact of the 2022 Arrangement.
Investing Activities
During the year ended December 31, 2023, net cash outflows from investing activities totaled $475 million compared to inflows of $1.7 billion in the year ended December 31, 2022. The year ended December 31, 2023 investing activity primarily consists of the purchase of the incremental 4% ownership interest in Oaktree and advances provided to BAM on its credit facility. The year ended December 31, 2022 investing activity inflow was predominantly driven by the disposition of financial assets as part of the 2022 Arrangement.
Financing Activities
During the year ended December 31, 2023, net cash outflows from financing activities totaled $1.8 billion, compared to outflows of $280 million in the year ended December 31, 2022. The year ended December 31, 2023 primarily consists of distributions to shareholders of $2.1 billion, partially offset by borrowings from related parties of $197 million. The year ended December 31, 2022 outflows were primarily as a result of distributions to parent, distributions to redeemable non-controlling interests and capital borrowings, partially offset by inflows from contributions from the parent.
68Key Financial and Operating MeasuresBAM and the Asset Management Company prepare their financial statements in conformity with U.S. GAAP. This report discloses a number of non-GAAP financial and supplemental financial measures which are utilized in monitoring our asset management business, including for performance measurement, capital allocation and valuation purposes. BAM believes that providing these performance measures is helpful to investors in assessing the overall performance of our asset management business. These non-GAAP financial measures should not be considered as the sole measure of BAM’s or our asset management business’ performance and should not be considered in isolation from, or as a substitute for, similar financial measures calculated in conformity with U.S. GAAP financial measures. These non-GAAP financial measures are not standardized financial measures and may not be comparable to similar financial measures used by other issuers. The asset management business includes the asset management activities of Oaktree, an equity accounted affiliate, in its key financial and operating measures for our asset management business. See “Reconciliation of U.S. GAAP to Non-GAAP Measures”, in this report.
Non-GAAP Measures Utilized by Our Asset Management BusinessFee Revenues
Fee Revenues is a key metric analyzed by management to determine the growth in recurring cash flows from our asset management business. Fee Revenues include base management fees, incentive distributions, performance fees and transaction fees. Fee Revenues exclude carried interest and revenues of consolidated funds, but include Fee Revenues earned by Oaktree. The most directly comparable measure of Fee Revenues disclosed in the financial statements is base management and advisory fees. See “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of U.S. GAAP to Non-GAAP Measures” for our reconciliation of Fee Revenues.
Fee-Related Earnings
Fee-Related Earnings is used to provide additional insight into the operating profitability of our asset management activities. Fee-Related Earnings are recurring in nature and not based on future realization events. Fee-Related Earnings is comprised of Fee Revenues less direct costs associated with earning those fees, which include employee compensation and professional fees as well as business related technology costs, and other shared services costs. Fee-Related Earnings exclude revenues and expenses of consolidated funds. The most directly comparable measure of Fee-Related Earnings disclosed in the primary financial statements is net income. See “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of U.S. GAAP to Non-GAAP Measures” for our reconciliation of Fee-Related Earnings.
Distributable EarningsBAM intends to pay out approximately 90% of its Distributable Earnings to shareholders quarterly and reinvest the balance back into the business. The asset management business intends to pay dividends to BAM on a quarterly basis sufficient to ensure that BAM can pay its intended dividend.
Distributable Earnings used by our asset management business provides insight into earnings that are available for distribution or to be reinvested by our asset management business. It is calculated as the sum of its Fee-Related Earnings, realized carried interest, returns from our corporate cash and financial assets, interest expense, cash taxes, and general and administrative expenses excluding equity-based compensation expenses. The most directly comparable measure disclosed in the primary financial statements of our asset management business for Distributable Earnings is net income. See “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of U.S. GAAP to Non-GAAP Measures” for our reconciliation of Distributable Earnings.
Supplemental Financial Measures Utilized by Our Asset Management BusinessAssets Under Management
AUM refers to the total fair value of assets managed, calculated as follows:• Investments that Brookfield, which includes BN, the asset management business, or their affiliates, either:◦ Consolidates for accounting purposes (generally, investments in respect of which Brookfield has a significant economic interest and unilaterally directs day-to-day operating, investing and financing activities), or◦ Does not consolidate for accounting purposes but over which Brookfield has significant influence by virtue of one or more attributes (e.g., being the largest investor in the investment, having the largest representation on the investment’s
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governance body, being the primary manager and/or operator of the investment, and/or having other significant influence attributes),
◦ Are calculated at 100% of the total fair value of the investment taking into account its full capital structure — equity and debt — on a gross asset value basis, even if Brookfield does not own 100% of the investment, with the exception of investments held through our perpetual funds, which are calculated at its proportionate economic share of the investment’s net asset value.• All other investments are calculated at Brookfield’s proportionate economic share of the total fair value of the investment taking into account its full capital structure — equity and debt — on a gross asset value basis.
Our methodology for determining AUM differs from the methodology that is employed by other alternative asset managers as well as the methodology for calculating regulatory AUM that is prescribed for certain regulatory filings (e.g., Form ADV and Form PF).
Fee-Bearing CapitalFee-Bearing Capital represents the capital committed, pledged, or invested in our permanent capital vehicles, private funds and liquid strategies that we manage which entitles us to earn Fee Revenues. Fee-Bearing Capital includes both called (“invested”) and uncalled (“pledged” or “committed”) amounts.When reconciling period amounts, we utilize the following definitions:• Inflows include capital commitments and contributions to our private and liquid strategies funds, and equity issuances from the permanent capital vehicles.
• Outflows represent distributions and redemptions of capital from within the liquid strategies capital.
• Distributions represent quarterly distributions from the permanent capital vehicles as well as returns of committed capital (excluding market valuation adjustments), redemptions and expiry of uncalled commitments within our private funds.
• Market valuation includes gains (losses) on portfolio investments, the permanent capital vehicles and liquid strategies based on market prices.• Other includes changes in net non-recourse leverage included in the determination of the permanent capital vehicle capitalizations and the impact of foreign exchange fluctuations on non-U.S. dollar commitments.
Uncalled Fund Commitments
Total Uncalled Fund Commitments includes capital callable from fund investors, including funds outside of their investment period, for which capital is callable for follow-on investments.70Fee-Bearing Capital Diversification
AS AT DEC 31 (BILLIONS)
Long-term Private FundsAs of December 31, 2024, we managed approximately $262 billion of Fee-Bearing Capital across a diverse range of long-term private funds that target opportunistic (20%+, gross), value-add (15%-16%, gross), core and core plus (9%-13%, gross) returns. These funds are generally closed-end and have a long duration, typically committed for 10 years with 2 one-year extension options.On these products, we earn:
• Diversified and long-term base management fees, typically on committed capital or invested capital, depending on the nature of the fund and where the fund is in its life,
• Transaction and advisory fees on co-investment capital that we raise and deploy alongside our long-term private funds, which vary based on transaction agreements, and• Carried interest or performance fees, which entitle us to a portion of overall fund profits, provided that investors receive a minimum prescribed preferred return. Carried interest is typically paid towards the end of the life of a fund after capital has been returned to investors and may be subject to “clawback” until all investments have been monetized and minimum investment returns are sufficiently assured. BN is entitled to receive 33.3% of the carried interest on new sponsored funds of our asset management business and will retain all of the carried interest earned on our existing mature funds.Permanent Capital and Perpetual StrategiesAs of December 31, 2024, we managed approximately $209 billion of Fee-Bearing Capital across our permanent capital vehicles, perpetual core, and core plus private funds.On these products, we earn:• Long-term perpetual base management fees, which are based on the market capitalization or net asset value of our permanent capital vehicles and on the net asset value of our perpetual private funds.
71• Stable incentive distribution fees from BEP and BIP, which are linked to the growth in cash distributions paid to investors above a predetermined hurdle. Both BEP and BIP have a long-standing track record of growing distributions annually within their target range of 5-9%.• Performance fees from BBU are based on unit price performance above a prescribed high-water mark price, which are not subject to clawback, as well as carried interest on our perpetual private funds.Liquid StrategiesAs of December 31, 2024, we managed approximately $68 billion of Fee-Bearing Capital across our liquid strategies, which included capital that we manage on behalf of our publicly listed funds and separately managed accounts, with a focus on fixed income and equity securities across real estate, infrastructure, and natural resources.On these products, we earn:• Base management fees, which are based on committed capital or fund net asset value, and• Performance income based on investment returns above a minimum prescribed return.72
Analysis of Key Non-GAAP Financial and Operating Measures of our Asset Management Business
The following section contains a discussion and analysis of key financial and operating measures utilized in managing our asset management business, including for performance measurement, capital allocation, and valuation purposes. For further detail on our non-GAAP and performance measures, please refer to “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Measures”, in this report.Fee-Bearing CapitalThe following tables summarize Fee-Bearing Capital as at December 31, 2024, 2023 and 2022:AS AT
(MILLIONS)
Long-term private funds Permanent capital and perpetual strategies Liquid strategies TotalRenewable power and transition $ 34,813 $ 23,044 $ — $ 57,857
Infrastructure 45,738 51,312 — 97,050
Real estate 69,689 23,940 — 93,629Private equity 37,123 8,067 — 45,190Credit 74,697 102,193 67,925 244,815
December 31, 2024 $ 262,060 $ 208,556 $ 67,925 $ 538,541
AS AT
(MILLIONS)
Long-term private funds Permanent capital and perpetual strategies Liquid strategies TotalRenewable power and transition $ 29,663 $ 22,700 $ — $ 52,363
Infrastructure 47,345 47,290 — 94,635
Real estate 66,038 27,406 — 93,444Private equity 33,249 5,600 — 38,849Credit 69,046 45,723 62,938 177,707
December 31, 2023 $ 245,341 $ 148,719 $ 62,938 $ 456,998AS AT
(MILLIONS)
Long-term private funds Permanent capital and perpetual strategies Liquid strategies Total
Renewable power and transition $ 25,902 $ 20,510 $ — $ 46,412
Infrastructure 40,316 42,436 — 82,752
Real estate 63,832 31,801 — 95,633
Private equity 31,500 7,816 — 39,316
Credit 56,245 34,209 63,296 153,750
December 31, 2022 $ 217,795 $ 136,772 $ 63,296 $ 417,863
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The changes in Fee-Bearing Capital are set out in the following tables for the years ended December 31, 2024, 2023 and 2022:AS AT AND FOR THE YEAR ENDED
(MILLIONS)Renewable power and transition Infrastructure Real estate Private equity Credit Total
December 31, 2023 $ 52,363 $ 94,635 $ 93,444 $ 38,849 $ 177,707 $ 456,998
Inflows 8,670 5,313 9,074 3,714 102,211 128,982
Outflows — (11) (481) — (27,396) (27,888)
Distributions (1,594) (2,378) (4,054) (1,302) (8,700) (18,028)
Market valuation (704) 3,669 (2,169) 1,610 6,074 8,480
Other (878) (4,178) (2,185) 2,319 (5,081) (10,003)
Change 5,494 2,415 185 6,341 67,108 81,543
December 31, 2024 $ 57,857 $ 97,050 $ 93,629 $ 45,190 $ 244,815 $ 538,541AS AT AND FOR THE YEAR ENDED
(MILLIONS)Renewable power and transition Infrastructure Real estate Private equity Credit Total
December 31, 2022 $ 46,412 $ 82,752 $ 95,633 $ 39,316 $ 153,750 $ 417,863
Inflows 5,612 12,523 10,168 4,424 40,455 73,182
Outflows — (6) (127) — (20,228) (20,361)
Distributions (1,442) (2,929) (4,690) (1,201) (5,989) (16,251)
Market valuation 1,757 2,241 (2,841) (816) 7,703 8,044
Other 24 54 (4,699) (2,874) 2,016 (5,479)
Change 5,951 11,883 (2,189) (467) 23,957 39,135
December 31, 2023 $ 52,363 $ 94,635 $ 93,444 $ 38,849 $ 177,707 $ 456,998AS AT AND FOR THE YEAR ENDED
(MILLIONS)Renewable power and transition Infrastructure Real estate Private equity Credit Total
December 31, 2021 $ 47,141 $ 66,219 $ 76,642 $ 34,382 $ 139,749 $ 364,133
Inflows 6,351 24,929 17,117 9,135 50,137 107,669
Outflows — — (343) — (21,699) (22,042)
Distributions (1,409) (3,361) (4,149) (808) (2,434) (12,161)
Market valuation (5,873) (5,053) 1,545 (2,546) (8,320) (20,247)
Other 202 18 4,821 (847) (3,683) 511
Change (729) 16,533 18,991 4,934 14,001 53,730
December 31, 2022 $ 46,412 $ 82,752 $ 95,633 $ 39,316 $ 153,750 $ 417,863
For the year ended December 31, 2024
Fee-Bearing Capital was $539 billion as at December 31, 2024 compared to $457 billion as at December 31, 2023. The increase of $81.5 billion, or 18% was primarily attributable to fundraising and capital deployments across our strategies, including our fifth real estate flagship fund, the second vintage of our global transition fund, and follow-on investments in earlier vintages of certain of our flagship funds. The AEL Mandate resulted in $49 billion of inflows of Fee-Bearing Capital, as well as annuity-related inflows and other insurance capital generated in BWS also added to our Fee-Bearing Capital. In addition, Fee-Bearing Capital increased due to the higher market valuations attributable to higher trading prices of BIP and BBU, and our strategic investments in Castlelake and Pinegrove Ventures completed during the year. These increases were partially offset by the lower market capitalization of BEP, lower net asset value of BPG, distributions to our clients, and outflows due to redemptions within our liquid and perpetual strategies.
For the year ended December 31, 2023
Fee-Bearing Capital was $457 billion as at December 31, 2023 compared to $418 billion as at December 31, 2022. The increase of $39 billion was primarily attributable to fundraising and capital deployments across our strategies, including our fifth real estate and infrastructure flagship funds, and our sixth private equity flagship fund. Inflows within our credit strategy were due to capital deployed within our closed-end funds and other investments in BWS. The overall increase of Fee-Bearing Capital was partially offset by distributions to our clients and outflows due to redemptions within our credit funds and liquid strategies.
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Distributable Earnings of the Asset Management BusinessFOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2024 2023 2022Base management fees 1$ 4,233 $ 3,956 $ 3,620
Incentive distributions 424 378 335
Transaction and advisory fees 49 47 93
Fee Revenues 4,706 4,381 4,048Less: direct costs 1,2(2,136) (2,014) (1,792)
2,570 2,367 2,256
Less: Fee-Related Earnings not attributable to the asset management business (114) (126) (148)Fee-Related Earnings 3$ 2,456 $ 2,241 $ 2,108
Add back: equity-based compensation costs and other income 4
208 199 86
Cash taxes (301) (196) (98)
Distributable Earnings $ 2,363 $ 2,244 $ 2,096
1. Base management fees and direct costs are presented on a 100% basis. Base management fees and direct costs for Oaktree totaled $955 million and $660 million for the year ended December 31, 2024 (2023 – $897 million and $618 million, respectively). Refer to Note 3 “Investments” of the Consolidated and Combined Financial Statements for additional disclosures related to Oaktree revenues, expenses, and net income.2. Direct costs include compensation expense, other operating expenses and general, administrative, and other expenses, and related Oaktree direct costs at 100%.3. Fee-Related Earnings include Oaktree’s Fee-Related Earnings at our approximate 73% ownership interest (December 31, 2023 – 68%).
4. This adjustment adds back equity-based compensation and other income associated with the Asset Management Company's portion of partly owned subsidiaries’ investment income, realized carried interest, interest income received and charges paid on related party loans, and other income.
For the years ended December 31, 2024 and 2023
Fee Revenues for the year ended December 31, 2024 were $4.7 billion, an increase of $325 million or 7% compared to the prior year. This increase was predominantly due to an increase in base management fees of $277 million or 7%, driven by incremental fees in credit as a result of earnings from our strategic partnerships. Fee Revenues also increased from capital raised in BWS, capital deployed across our credit strategies, higher market capitalization of BBU, the AEL Mandate, and higher net asset values in certain of our credit funds. In addition, fees earned from fundraising across the latest vintages of our flagship funds over the last twelve months also generated incremental Fee Revenues, specifically our fifth real estate and infrastructure flagship funds, the second vintage of our global transition fund, and the sixth vintage of our private equity flagship fund. These increases in base management fees were partially offset by lower fees from our listed permanent capital vehicles due to a decrease in the net asset value of BPG and lower market capitalization of BIP, and the end of investment periods in certain of our older vintage funds.
Incentive distributions increased by $46 million or 12% as a result of an increase in BEP and BIP's quarterly dividend over the prior year of 5% and 6%, respectively.
Direct costs increased by $122 million or 6% from the prior year as we continue to scale our asset management business.
Distributable Earnings were $2.4 billion for the year ended December 31, 2024, an increase of $119 million compared to the prior year. The increase was primarily driven by higher Fee-Related Earnings and higher investment income in certain of our strategic investments, partially offset by a decrease in other income due to lower interest earned on our deposit with BN and higher cash taxes on Fee-Related Earnings.
For the years ended December 31, 2023 and 2022
Fee Revenues for the year ended December 31, 2023 were $4.4 billion, an increase of $333 million or 8% compared to prior year. This increase was predominantly due to an increase in base management fees of $336 million or 9%, driven by fees earned from fundraising for our latest infrastructure, real estate and private equity flagship funds and incremental fees earned in our credit platform as a result of capital deployed across our opportunistic credit funds. In addition, fees from our perpetual strategy increased due to the increase in net asset values of underlying assets. The increase in base management fees was partially offset by lower fees from our listed permanent capital vehicles due to decreases in market capitalizations.
Incentive distributions increased by $43 million or 13% as a result of an increase in BEP and BIP's quarterly dividend over the prior year of 5% and 6%, respectively.
Direct costs increased by $222 million or 12% from the prior year as we continue to scale our asset management business and higher equity-based compensation.
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Distributable Earnings were $2.2 billion for the year ended December 31, 2023, an increase of $148 million or 7% compared to the prior year. The increase was driven by higher Fee-Related Earnings and higher equity-based compensation costs and other income of $113 million , primarily driven by higher interest income on our deposit with BN. The overall increase in Distributable Earnings was partially offset by an increase in Cash taxes of $98 million due to higher Fee-Related Earnings .Investment Strategy ResultsIn each of our product categories, we invest globally in various investment strategies, each benefiting from strong secular tailwinds that provide an expanding multi-trillion dollar investa ble universe. Our investment strategies are (a) renewable power and transition, (b) infrastructure, (c) real estate, (d) private equity, and (e) credit.The following tables summarize Fee-Bearing Capital and Fee Revenues by investment strategy:
Fee-Bearing Capital
AS AT DECEMBER 31,
(MILLIONS)2024 2023 2022
Renewable power and transition $ 57,857 $ 52,363 $ 46,412
Infrastructure 97,050 94,635 82,752
Real estate 93,629 93,444 95,633
Private equity 45,190 38,849 39,316
Credit 244,815 177,707 153,750
Total Fee-Bearing Capital $ 538,541 $ 456,998 $ 417,863FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2024 2023 2022
Balance, beginning $ 456,998 $ 417,863 $ 364,133
Inflows 128,982 73,182 107,669
Outflows (27,888) (20,361) (22,042)
Distributions (18,028) (16,251) (12,161)
Market valuation 8,480 8,044 (20,247)
Other (10,003) (5,479) 511
Change 81,543 39,135 53,730
Balance, ending $ 538,541 $ 456,998 $ 417,863
Fee Revenues
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022
Renewable power and transition $ 642 $ 595 $ 576
Infrastructure 1,202 1,216 1,045
Real estate 968 920 871
Private equity 470 475 434
Credit 1,424 1,175 1,122
Total Fee Revenues $ 4,706 $ 4,381 $ 4,048
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Renewable Power and TransitionSummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing C apital of o ur renewable power and transition investment strategy as at December 31, 2024, 2023 and 2022, and Fee Revenues for the years then ended.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual Strategies
■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual StrategiesThe following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2024 2023 2022
Long-term private funds $ 34,813 $ 29,663 $ 25,902
Permanent capital and perpetual strategies
23,044 22,700 20,510
Total Fee-Bearing Capital $ 57,857 $ 52,363 $ 46,412
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022
Balance, beginning $ 52,363 $ 46,412 $ 47,141
Inflows 8,670 5,612 6,351
Outflows — — —
Distributions (1,594) (1,442) (1,409)
Market valuation (704) 1,757 (5,873)
Other (878) 24 202
Change 5,494 5,951 (729)
Balance, ending $ 57,857 $ 52,363 $ 46,412
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For the year ended December 31, 2024
During the year ended December 31, 2024, Fee-Bearing Capital increased by $5.5 billion or 10% to $58 billion. This increase was driven by fundraising for the second vintage of our global transition fund, capital deployments across our fund strategies, as well as inflows from BEP's issuance of medium term and perpetual green subordinated notes. These increases were partially offset by distributions to BEP's unitholders and limited partners of our permanent and long-term private funds and the lower market capitalization of BEP due to the decrease in its share price. Additionally, Fee-Bearing Capital decreased due to the end of the investment period in one of our earlier vintage funds during the year.
For the year ended December 31, 2023
During the year ended December 31, 2023, Fee-Bearing Capital increased by $6.0 billion or 13% to $52 billion. This increase was driven by inflows attributable to fundraising for the second vintage of our global transition fund, capital deployments across our fund strategies, as well as BEP's $650 million equity offering in the second quarter of 2023. In addition, the market capitalization of BEP increased due to an increase in its share price during the year. These increases were partially offset by distributions paid to BEP’s unitholders and limited partners of our long-term private funds.Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022Management and advisory fees
Long-term private funds
Flagship funds$ 259 $ 239 $ 206Co-investment and other funds2 11 15
261 250 221Perpetual strategiesBEP 1
204 205 245Co-investment and other funds20 9 —
224 214 245
Catch-up fees 9 10 13
Transaction and advisory fees 19 9 2
Total management and advisory fees 513 483 481
Incentive distributions 129 112 95
Total Fee Revenues $ 642 $ 595 $ 576
1. BEP Fee-Bearing Capital as at December 31, 2024 is $21.5 billion (December 31, 2023 – $22.1 billion; December 31, 2022 – $20.5 billion)
For the year ended December 31, 2024
Fee Revenues increased by $47 million for the year ended December 31, 2024 relative to the year ended December 31, 2023. Incentive distributions from BEP increased by $17 million due to a 5% increase in distributions compared to the prior period. Fees from our perpetual strategies increased $10 million predominantly due to fundraising from co-investors in certain of our perpetual funds. In addition, higher management fees and transaction fees were earned on the second vintage of our global transition fund, and other follow-on investments during the year. These increases were partially offset by lower fees earned from co-investment capital in our long-term private funds.
For the year ended December 31, 2023
Fee Revenues increased by $19 million, or 3% for the year ended December 31, 2023 relative to the year ended December 31, 2022. Fees from our long-term private funds increased $29 million relative to the prior year due to an increase in fees earned on our first global transition fund, which benefitted from a full year of fee revenues from 2022 fundraising, as well as an increase in fundraising and capital deployments across our other private funds. Incentive distributions from BEP increased by $17 million, due to a 5% increase in distributions compared to the prior year. These increases were partially offset by a decrease in perpetual strategy fees of $31 million predominantly due to lower fees earned from BEP resulting from a decrease in its average market capitalization relative to the prior year.
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InfrastructureSummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital of our Infrastructure investment strategy as at December 31, 2024, 2023 and 2022, and Fee Revenues for the years then ended.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual Strategies
■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual StrategiesThe following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2024 2023 2022
Long-term private funds $ 45,738 $ 47,345 $ 40,316
Permanent capital and perpetual strategies 51,312 47,290 42,436
Total Fee-Bearing Capital $ 97,050 $ 94,635 $ 82,752
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022
Balance, beginning $ 94,635 $ 82,752 $ 66,219
Inflows 5,313 12,523 24,929
Outflows (11) (6) —
Distributions (2,378) (2,929) (3,361)
Market valuation 3,669 2,241 (5,053)
Other (4,178) 54 18
Change 2,415 11,883 16,533
Balance, ending $ 97,050 $ 94,635 $ 82,752
For the year ended December 31, 2024
During the year ended December 31, 2024, Fee-Bearing Capital increased by $2.4 billion or 3% to $97 billion. This increase was predominantly due to the higher market capitalization of BIP due to the increase in its share price, fundraising for co-investments alongside our fifth flagship fund as well as capital deployed and valuation increases across our perpetual strategies. These increases were partially offset by the end of the investment period of our fourth flagship fund, distributions paid to BIP unitholders, and distributions paid to limited partners in our long-term private funds and perpetual strategies.
For the year ended December 31, 2023
During the year ended December 31, 2023, Fee-Bearing Capital increased by $11.9 billion or 14% to $95 billion. This increase was predominantly due to capital raised for our fifth flagship fund, as well as capital deployed for follow-on investments within our third flagship fund. Additionally, Fee-Bearing Capital increased as a result of debt issuances from BIP, follow-on investments within our other perpetual and long-term strategies, and an increase in market valuations as a result of a higher market capitalization of BIP and other perpetual strategies. These increases were partially offset by distributions paid to limited partners in our long-term private funds and to BIP and other unitholders across our permanent capital vehicles.
79Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022Management and advisory fees
Long-term private funds
Flagship funds$ 369 $ 371 $ 274Co-investment and other funds6 18 20
375 389 294Perpetual strategiesBIP 1
393 401 421Co-investment and other funds133 99 55
526 500 476
Catch-up fees 1 37 2
Transaction and advisory fees 5 24 33
Total management and advisory fees 907 950 805
Incentive distributions 295 266 240
Total Fee Revenues $ 1,202 $ 1,216 $ 1,045
1. BIP Fee-Bearing Capital as at December 31, 2024 is $31.9 billion (December 31, 2023 – $31.2 billion; December 31, 2022 – $29.2 billion).
For the year ended December 31, 2024
Fee Revenues decreased by $14 million or 1% for the year ended December 31, 2024 relative to the year ended December 31, 2023. The decrease was driven by one-time catch-up fees and transaction and advisory fees in the prior year and lower fees earned from BIP due to a lower average market capitalization in the current year. This was partially offset by higher Fee Revenues from an increase in incentive distributions of $29 million predominantly due to a 6% increase in BIP's quarterly dividend, as well as capital raised and deployed by certain of our perpetual strategies.
For the year ended December 31, 2023
Fee Revenues increased by $171 million or 16% for the year ended December 31, 2023 relative to the year ended December 31, 2022. Fees from our long-term private funds increased by $95 million primarily due to capital raised for our fifth flagship fund. Fee Revenues from our perpetual strategies increased by $24 million, driven by capital deployed, partially offset by lower fees earned from BIP due to a lower average market capitalization compared to the prior year. Catch-up fees increased by $35 million due to follow on closes for our fifth flagship fund and incentive distributions increased by $26 million due to an increase in BIP's quarterly dividend. The increases were partially offset by a decrease of $9 million of transaction and advisory fees as the prior year benefited from higher fees on co-investment transactions.
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Real EstateSummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital for our Real Estate investment strategy as at December 31, 2024, 2023 and 2022, and Fee Revenues for the years then ended.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual Strategies
■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual Strategies
The following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2024 2023 2022
Long-term private funds $ 69,689 $ 66,038 $ 63,832
Permanent capital and perpetual strategies 23,940 27,406 31,801
Total Fee-Bearing Capital $ 93,629 $ 93,444 $ 95,633
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022
Balance, beginning $ 93,444 $ 95,633 $ 76,642
Inflows 9,074 10,168 17,117
Outflows (481) (127) (343)
Distributions (4,054) (4,690) (4,149)
Market valuation (2,169) (2,841) 1,545
Other (2,185) (4,699) 4,821
Change 185 (2,189) 18,991
Balance, ending $ 93,629 $ 93,444 $ 95,633
81
For the year ended December 31, 2024
During the year ended December 31, 2024, Fee-Bearing Capital increased by $185 million to $94 billion. This increase was predominantly due to inflows attributable to fundraising within our fifth flagship fund, follow-on investments in our third flagship fund, and equity issuances in BPG. Additional closes and capital deployed across various other fund strategies also contributed to our Fee-Bearing Capital. These increases were partially offset by distributions from our permanent and perpetual strategies, flagship and other private funds. Additionally, Fee-Bearing Capital for BPG and certain long-term and perpetual strategies decreased due to a net decline in valuations.
For the year ended December 31, 2023
During the year ended December 31, 2023, Fee-Bearing Capital decreased by $2.2 billion or 2% to $93 billion, predominantly due to distributions from our perpetual strategies, flagship and other private funds. Additionally, our long-term private funds Fee-Bearing Capital decreased due to the change in the fee base of one of our flagship funds from committed capital to invested capital as a result of the end of its commitment period. Our permanent capital vehicles and perpetual strategies decreased due to a decline in the market valuation of certain assets. These decreases were partially offset by inflows attributable to fundraising within our fifth flagship fund, follow-on investments in our third flagship fund, and capital deployed across various other fund strategies.Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022Management and advisory fees
Long-term private funds
Flagship funds$ 457 $ 396 $ 354Co-investment and other funds217 228 166
674 624 520Perpetual strategiesBPG 1
195 196 225
Co-investment and other funds
74 93 93
269 289 318
Catch-up fees 25 4 33
Transaction and advisory fees — 3 —
Total Fee Revenues $ 968 $ 920 $ 871
1. BPG Fee-Bearing Capital as at December 31, 2024 is $16.6 billion (December 31, 2023 – $17.9 billion; December 31, 2022 – $20.8 billion).
For the year ended December 31, 2024
During the year ended December 31, 2024, Fee Revenues increased by $48 million or 5% relative to the year ended December 31, 2023. This was primarily from fees earned from our long-term private funds, driven by fundraising and catch-up fees for our fifth flagship fund and follow-on investments in our third flagship fund. These increases were partially offset by lower net asset values in certain of our perpetual strategies and long-term private funds.
For the year ended December 31, 2023
During the year ended December 31, 2023, Fee Revenues increased by $49 million or 6% due to the increase in revenues earned from fundraising for our fifth flagship fund and commitments throughout 2022 to our fourth flagship fund. In addition, fees increased from capital invested in our residential, U.S., and other fund investments. These increases were partially offset by catch-up fees recognized on our fourth flagship fund in the prior year and a decrease in fees earned by our perpetual vehicle due to the decrease in Fee-Bearing Capital of BPG as well as the disposition of investments within earlier vintages of our flagship funds.
82
Private EquitySummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital for our Private Equity investment strategy as at December 31, 2024, 2023 and 2022, and Fee Revenues for the years then ended.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual Strategies
■ Long-term Private Funds
■ Permanent Capital Vehicles and Perpetual StrategiesThe following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2024 2023 2022
Long-term private funds $ 37,123 $ 33,249 $ 31,500
Permanent capital and perpetual strategies 8,067 5,600 7,816
Total Fee-Bearing Capital $ 45,190 $ 38,849 $ 39,316
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022
Balance, beginning $ 38,849 $ 39,316 $ 34,382
Inflows 3,714 4,424 9,135
Outflows — — —
Distributions (1,302) (1,201) (808)
Market valuation 1,610 (816) (2,546)
Other 2,319 (2,874) (847)
Change 6,341 (467) 4,934
Balance, ending $ 45,190 $ 38,849 $ 39,316
For the year ended December 31, 2024
During the year ended December 31, 2024, Fee-Bearing Capital increased by $6.3 billion or 16% to $45 billion. The increase was primarily driven by our acquisition of Pinegrove Ventures, and capital deployments and fundraising for co-investments in certain of our long-term private funds. In addition, growth of Fee-Bearing Capital was attributable to the higher market capitalization of BBU as a result of an increase in its share price. These increases were partially offset by distributions from other long-term strategies.
For the year ended December 31, 2023
During the year ended December 31, 2023, Fee-Bearing Capital decreased by $467 million or 1% to $39 billion. The expiration of the management fee period of a mature flagship fund and distributions to our investors was partially offset by inflows of $4.4 billion for our long-term private funds. This was largely driven by capital raised for our sixth flagship private equity fund and capital deployed across other strategies.
83Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022Management and advisory fees
Long-term private funds
Flagship funds$ 162 $ 177 $ 137
Other long-term funds 175 174 186Co-investment and other funds10 10 8
347 361 331Perpetual strategiesBBU 1
92 87 94
92 87 94
Catch-up fees 7 16 —
Transaction and advisory fees 24 11 9
Total Fee Revenues $ 470 $ 475 $ 434
1. BBU Fee-Bearing Capital as at December 31, 2024 was $8.1 billion (December 31, 2023 – $5.6 billion; December 31, 2022 – $7.8 billion).
For the year ended December 31, 2024
Fee Revenues decreased by $5 million for the year ended December 31, 2024 relative to the year ended December 31, 2023. This decrease was primarily due to the end of the investment period for our fifth flagship fund, realizations and returns of capital in our fourth flagship fund, and catch-up fees recognized in the prior period related to our sixth flagship fund. These decreases were partially offset by capital raised for our sixth flagship fund, higher market capitalization of BBU, capital deployed across several of our other funds, and higher transaction fees related to certain of our long-term private funds.
For the year ended December 31, 2023
Fee Revenues increased by $41 million or 9% for the year ended December 31, 2023 relative to the year ended December 31, 2022. This increase was primarily due to capital raised for our sixth flagship fund which experienced a $59 million increase in Fee Revenues and catch up fees attributable to the timing of fundraising. This increase was partially offset by a decrease in fees earned within our other funds due to the end of the management fee period for certain earlier vintage funds.
84Credit
Summary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital for our Credit investment strategy as at December 31, 2024, 2023 and 2022, and Fee Revenues for the years then ended.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)■ Long-term Private Funds
■ Perpetual Strategies
■ Liquid Strategies
■ Long-term Private Funds
■ Perpetual Strategies
■ Liquid StrategiesThe following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2024 2023 2022
Long-term private funds $ 74,697 $ 69,046 $ 56,245
Permanent capital and perpetual strategies 102,193 45,723 34,209
Liquid strategies 67,925 62,938 63,296
Total Fee-Bearing Capital $ 244,815 $ 177,707 $ 153,750
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022
Balance, beginning $ 177,707 $ 153,750 $ 139,749
Inflows 102,211 40,455 50,137
Outflows (27,396) (20,228) (21,699)
Distributions (8,700) (5,989) (2,434)
Market valuation 6,074 7,703 (8,320)
Other (5,081) 2,016 (3,683)
Change 67,108 23,957 14,001
Balance, ending $ 244,815 $ 177,707 $ 153,750
For the year ended December 31, 2024
During the year ended December 31, 2024, Fee-Bearing Capital increased by $67.1 billion or 38% to $245 billion, primarily due to the AEL Mandate, resulting in $49 billion of inflows of Fee-Bearing Capital. BWS also contributed inflows of insurance-related capital.
Inflows of Fee-Bearing Capital also included our investment in Castlelake, capital deployed in our Oaktree credit, liquid credit, and other platform credit funds, as well as valuation gains in certain Oaktree liquid credit funds. These increases were partially offset by annuity-related outflows in BWS, redemptions in our liquid and perpetual strategies, and returns of capital within our Oaktree, infrastructure, and real estate debt strategies.
85
For the year ended December 31, 2023
During the year ended December 31, 2023, Fee-Bearing Capital increased by $24 billion or 16% to $178 billion, due to growth across all strategies. The increase in our long-term private funds was driven by deployments within our eleventh and twelfth flagship opportunistic credit funds, and capital deployed in certain of our debt funds. In addition, our perpetual strategies increased primarily due to capital deployments and inflows from BWS as well as higher market valuations in our liquid strategy and open-end credit portfolios. This overall increase was partially offset by redemptions adversely impacting our liquid strategies.Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2024 2023 2022Management and advisory feesLong-term private funds $ 781 $ 678 $ 604Permanent and perpetual strategies400 266 206Liquid strategies 1242 231 263
Transaction and advisory fees 1 — 49
Total Fee Revenues $ 1,424 $ 1,175 $ 1,1221. Represents open-end funds within our credit strategies, and Oaktree's investment in a fixed income manager, as well as in publicly listed securities.For the year ended December 31, 2024
Fee Revenues increased by $249 million or 21% for the year ended December 31, 2024 relative to the year ended December 31, 2023. The increase was attributable to incremental fees earned on our perpetual strategies and long-term private funds. Fees from perpetual strategies increased by $134 million as a result of higher Fee-Bearing Capital driven by the AEL Mandate, and capital deployed across these strategies. In addition, fees from our long-term private funds increased due to deployments across our credit flagship and other debt funds and higher fees earned from our strategic partnerships.
For the year ended December 31, 2023
Fee Revenues increased by $53 million or 5% for the year ended December 31, 2023 relative to the year ended December 31, 2022. The increase was predominately attributable to incremental fees earned on our long-term private funds and perpetual strategies. Fees from our long-term private funds increased due to deployments across our credit flagship and other debt funds. In addition, fees from perpetual strategies increased by $60 million as a result of higher Fee-Bearing Capital driven by valuation increases and capital deployed across these strategies. These increases were partially offset by a $32 million decrease in our liquid strategies due to redemptions.
86Reconciliation of U.S. GAAP to Non-GAAP Measures
Reconciliations of Distributable Earnings, Fee-Related Earnings and Fee Revenues to the most directly comparable financial measures calculated and presented in conformity with U.S. GAAP are presented below. In addition to net income and revenue, management assesses the performance of its business based on these non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, net income or other financial measures presented in conformity with U.S. GAAP.
Reconciliation of Net Income to Fee-Related Earnings and Distributable EarningsThe following presents a reconciliation of net income to Fee-Related Earnings and Distributable Earnings for the years presented for the asset management business.FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2024 2023 2022
Net Income $ 2,108 $ 2,137 $ 2,865Add or subtract the following:
Provision for taxes (a)438 417 627Depreciation and amortization (b)14 14 13Carried interest allocations (c)(16) (399) (490)Carried interest allocation compensation (c)93 86 200Other income and expenses (d)93 129 (1,090)
Interest expense paid to related parties (e)
22 14 154Interest and dividend revenue (e)(143) (172) (258)Other revenues (f)(372) (300) (44)Share of income from equity method investments (g)(339) (167) (146)
Fee-related earnings of partly owned subsidiaries at our share (g)
330 271 252
Costs recovered from affiliates (h)
218 156 —Non-recurring restructuring costs (i)— 35 —
Fee Revenues from BSREP III & other (j)
10 20 25
Fee-Related Earnings $ 2,456 $ 2,241 $ 2,108
Cash taxes (k)
(301) (196) (98)
Equity-based compensation expense and other (l)
208 199 86
Distributable Earnings $ 2,363 $ 2,244 $ 2,096
(a) This adjustment removes the impact of income tax provisions on the basis that we do not believe this item reflects the present value of the actual tax obligations that we expect to incur over the long-term due to the substantial deferred tax assets of our asset management business.
(b) This adjustment removes the depreciation and amortization on property, plant and equipment and intangible assets, which are non-cash in nature and therefore excluded from Fee-Related Earnings.
(c) These adjustments remove the impact of both unrealized and realized carried interest allocations and the associated compensation expense. Unrealized carried interest allocations and associated compensation expense are non-cash in nature. Carried interest allocations and associated compensation costs are included in Distributable Earnings once realized.
(d) This adjustment removes other income and expenses associated with fair value changes.
(e) This adjustment removes interest and charges paid or received from related party loans.
(f) This adjustment adds back other revenues earned that are non-cash in nature.
(g) These adjustments remove our share of partly owned subsidiaries' earnings, including items (a) to (f) above and include its share of partly owned subsidiaries' Fee-Related Earnings.(h) This item adds back compensation costs that will be borne by affiliates.(i) This item represents non-recurring restructuring costs that are not considered as part of the ongoing asset management business.(j) This adjustment adds base management fees earned from funds that are eliminated upon consolidation and other items.(k) Represents the impact of cash taxes paid by the business.
(l) This adjustment adds back equity-based compensation and other income associated with the Company's portion of partly owned subsidiaries’ investment income, realized carried interest, interest income received and charges paid on related party loans, and other income.
87Reconciliation of Revenues to Fee RevenuesThe following presents our reconciliation of management fee revenues to Fee Revenues for the years presented.FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2024 2023 2022
Base management and advisory fees $ 2,957 $ 2,766 $ 2,500Incentive fees (a)424 376 335Fee Revenues from equity method investments (b)1,335 1,240 1,165
BSREP III Fees & other (c)
(10) (1) 48
Fee Revenues $ 4,706 $ 4,381 $ 4,048
(a) This adjustment adds incentive distributions that are included in Fee Revenues.
(b) This adjustment adds management fees at 100% ownership.
(c) This adjustment involves base management fees earned from BSREP III and other funds that are eliminated upon consolidation.
88Fee Revenues by Geography
The majority of our revenues are earned in the U.S. The following tables set out Fee Revenues disaggregated by investment strategy and geography.FOR THE YEAR ENDED DECEMBER 31, 2024 (MILLIONS) Renewable power and transition Infrastructure Real estate Private equity Credit TotalManagement and advisory fees, netUnited States of America $ 111 $ 124 $ 634 $ 227 $ 1,055 $ 2,151
Canada 159 354 40 74 40 667
United Kingdom 156 182 16 84 206 644
Other 87 247 278 85 123 820
Incentive distributions 129 295 — — — 424
$ 642 $ 1,202 $ 968 $ 470 $ 1,424 $ 4,706
FOR THE YEAR ENDED DECEMBER 31, 2023 (MILLIONS) Renewable power and transition Infrastructure Real estate Private equity Credit TotalManagement and advisory fees, netUnited States of America $ 103 $ 210 $ 642 $ 222 $ 864 $ 2,041
Canada 176 422 44 104 12 758
United Kingdom 151 204 191 69 148 763
Other 53 114 43 80 151 441
Incentive distributions 112 266 — — — 378
$ 595 $ 1,216 $ 920 $ 475 $ 1,175 $ 4,381
FOR THE YEAR ENDED DECEMBER 31, 2022 (MILLIONS) Renewable power and transition Infrastructure Real estate Private equity Credit TotalManagement and advisory fees, netUnited States of America $ 131 $ 201 $ 573 $ 223 $ 900 $ 2,028
Canada 182 346 46 89 8 671
United Kingdom 125 167 139 71 156 658
Other 43 91 113 51 58 356
Incentive distributions 95 240 — — — 335
$ 576 $ 1,045 $ 871 $ 434 $ 1,122 $ 4,048
89Liquidity and Capital Resources
LiquidityBAM undertakes limited activities, primarily receiving dividends from our asset management business as its main source of income and, in turn, making distributions to shareholders in accordance with its dividend policy. It employs a limited number of resources which provide services to our asset management business and for whom associated costs are largely reimbursed. Additional liquidity is available through a credit facility that is provided by our asset management business.
BAM Credit Facility with the Asset Management Company
On November 8, 2022, the Asset Management Company, as lender, established a five-year revolving credit facility with BAM for the amount of $500 million. This is available in U.S. and Canadian dollars, where U.S. dollar borrowings are subject to the U.S. Base Rate or SOFR plus a margin of 165 basis points, and Canadian Dollar borrowings are subject to the Canadian Prime Rate or Canadian Overnight Repo Rate Average (“CORRA”) plus a margin of 165 basis points. As at December 31, 2024, BAM has drawn $219 million from this credit facility.
Our Asset Management Business Liquidity
Our asset management business maintains sufficient liquidity at all times, enabling it to participate in opportunities as they arise, withstand sudden adverse changes in economic conditions, and sustain distributions to BAM and BN. Its primary sources of liquidity, which we refer to as corporate liquidity, consist of cash, short-term financial assets, as well as the undrawn portions of the $300 million revolving credit facility established on November 8, 2022, with BN as lender, and a $750 million five-year revolving credit facility established on August 29, 2024 through bilateral agreements with a group of lenders. Both facilities are available in U.S. and Canadian dollars. U.S. dollar draws from the $300 million facility are subject to the U.S. Base Rate or SOFR plus a margin of 165 basis points, while Canadian dollar draws are subject to the Canadian Prime Rate or CORRA plus a margin of 165 basis points. U.S. dollar draws from the $750 million facility are subject to the U.S. Base Rate or SOFR plus a margin of 110 basis points, while Canadian dollar draws are subject to the Canadian Prime Rate or CORRA plus a margin of 110 basis points. As at December 31, 2024 both the $300 million and the $750 million facilities are undrawn.
As at December 31, 2024, corporate liquidity for our asset management business is $1.8 billion. This consists of $792 million in cash and short term financial assets, including cash on deposit with BN and investments that are convertible to cash within twelve months, as well as $1.1 billion in undrawn credit facilities. This liquidity can be deployed for use without any material tax consequences to support our asset management business in funding strategic transactions as well as seeding new investment products.
The following table presents deployable capital of our asset management business:
Corporate Group (a)
AS AT (MILLIONS) December 31 December 31 December 31 December 31
2024 2023 2024 2023
Cash and financial assets, net $ 792 $ 2,847 $ 54,329 $ 29,222
Undrawn committed credit facilities 1,050 103 7,928 5,764
Corporate liquidity $ 1,842 $ 2,950 $ 62,257 $ 34,986
Uncalled private fund commitments — — 91,463 85,658
Total deployable capital $ 1,842 $ 2,950 $ 153,720 $ 120,644
(a) Group deployable capital consists of: (1) corporate liquidity of the Company and the perpetual affiliates, and (2) uncalled private fund commitments, which are third-party commitments available for drawdown in the private funds of our asset management business.
90Uncalled Fund CommitmentsThe following presents our Uncalled Fund Commitments as of December 31, 2024 by period and December 31, 2023:AS AT DECEMBER 31,
(MILLIONS)2025 2026 2027 2028 2029 + Total 2024 Dec. 2023
Renewable power and transition $ 181 $ — $ — $ 753 $ 20,081 $ 21,015 $ 17,129
Infrastructure 234 — — 255 12,359 12,848 14,264
Real estate 701 1,834 — — 13,110 15,645 22,507
Private equity 471 — 112 1,190 9,587 11,360 8,788
Credit 1,394 2,022 914 126 26,139 30,595 22,970
$ 2,981 $ 3,856 $ 1,026 $ 2,324 $ 81,276 $ 91,463 $ 85,658
Approximately $53 billion of the Uncalled Fund Commitments are currently not earning fees, but will become fee-bearing once the capital is invested. Once invested, we expect these commitments will earn approximately $530 million of additional Fee Revenues.Capital Resources
Clawback ObligationsPerformance allocations are subject to clawback to the extent that the performance allocations received to date with respect to a fund exceeding the amount due to our asset management business based on cumulative results of that fund. The amounts and nature of our clawback obligations are described in Note 2 “Summary of Significant Accounting Policies” of the Consolidated and Combined Financial Statements of the Asset Management Company as at December 31, 2024, and December 31, 2023, and for the years ended December 31, 2024, December 31, 2023, and December 31, 2022.Capital RequirementsCertain U.S. and non-U.S. entities of BAM are subject to various investment advisor and other financial regulatory rules and requirements that may include minimum net capital requirements. These requirements have been met for the year ended December 31, 2024.Contractual ObligationsOn January 31, 2019, a subsidiary of the Company committed $2.8 billion to BSREP III, of which $2.1 billion has been funded as at December 31, 2024 (December 31, 2023 – $2.1 billion). The remainder of the commitment will be funded by BN.
In the normal course of business, the Company enters into contractual obligations which include commitments to provide bridge financing and other equity commitments. As at December 31, 2024, the Company had $3.3 billion of such commitments outstanding (2023 – $ 2.1 billion).
The Company established a $750 million five-year revolving credit facility on August 29, 2024 through bilateral agreements with a group of lenders. The facility is available in U.S. and Canadian dollars, where U.S. dollar draws are subject to the U.S. Base Rate or SOFR plus a margin of 110 basis points, while Canadian dollar draws are subject to the Canadian Prime Rate or CORRA plus a margin of 110 basis points. As at December 31, 2024, the Company has not made any draws on the $750 million facility.
91
The following table presents the contractual obligations of BAM and the asset management business by payment periods:Payments Due by Period of BAMAS AT DEC. 31, 2024 (MILLIONS) Less than 1 Year 1 – 3 Years 4 – 5 Years After 5 Years Total
Accounts payable and other, net $ 175 $ 226 $ 207 $ 271 $ 879
Due to affiliates 229 — — — 229
Payments Due by Period of the Company
AS AT DEC. 31, 2024 (MILLIONS) Less than 1 Year 1 – 3 Years 4 – 5 Years After 5 Years Total
Accounts payable and other, net $ 716 $ 27 $ 70 $ 489 $ 1,302
Due to affiliates 891 60 62 80 1,093
Lease obligations 9 14 22 2 47
Accounts payable and other, net of BAM represent amounts owing to employees for carried interest compensation and share based compensation, both of which have vesting periods of up to 5 years. Due to affiliates of BAM represents amount due to the asset management business associated with the revolving credit facility established with the Company. This revolving credit facility is due on demand.
Accounts payable and other, net of the Company represents amounts due to employees for equity-based compensations costs and carried interest compensation costs. Most awards have a vesting period of up to 5 years. Due to affiliates represents amounts owed to related parties associated with equity and liability-based compensation as well as carried interest compensation. Lease obligations represent expected payments associated with current leases entered into by the Company.Exposures to Financial InstrumentsAs discussed elsewhere in this report, we utilize various financial instruments in our business to manage risk and make better use of our capital. The fair values of these instruments that are reflected on our balance sheets are disclosed in Note 5 “ Fair Value Measurements of Financial Instruments ” to our Consolidated and Combined Financial Statements of the Asset Management Company as at December 31, 2024, and December 31, 2023 and for the years ended December 31, 2024, December 31, 2023, and December 31, 2022.Off-Balance Sheet ArrangementsBAM may from time to time enter into guarantees given in respect of co-investments in which there is carried interest. The amount guaranteed is up to the carry amount paid to the General Partner, net of taxes. No known amounts are currently due or owed under these guarantees.Related Party TransactionsBAM and our asset management business entered into a number of related party transactions with BN and other affiliates. See Note 17 “ Related Party Transactions ” of the Consolidated and Combined Financial Statements of the Asset Management Company and Note 7 “ Related Party Transactions ” of the Consolidated Financial Statements of BAM as at December 31, 2024, and 2023 and for the years ended December 31, 2024, 2023, and the period from July 4, 2022 to December 31, 2022.BAM DividendsThe dividends paid by BAM on outstanding securities for the years ended December 31, 2024, 2023, and 2022 are summarized in the table below.Distribution per Security2024 2023 2022
Per Class A Share and Class B Share
$ 1.52 $ 1.28 $ —
92Summary of Significant Accounting PoliciesCritical Accounting Policies, Critical Accounting Estimates and Judgements of BAM
BAM prepares consolidated financial statements in conformity with U.S. GAAP. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates that affect the amounts reported. Management believes that estimates utilized in the preparation of the consolidated financial statements are presented fairly, in all material respects. Such estimates include those used in the valuation of investments and the measurement of deferred tax balances (including valuation allowances) and the determination of control or significant influence. Actual results could differ from those estimates and such differences could be material. BAM believes the following critical accounting policies could potentially produce materially different results of BAM, if underlying assumptions, estimates and/or judgments were to be changed. For a full description of accounting policies, see Note 2 “Summary of Significant Accounting Policies” of the Consolidated Financial Statements of BAM as at December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023, and the period from July 4, 2022 to December 31, 2022.
All intercompany balances and transactions have been eliminated on consolidation.Equity Method InvestmentsInvestments in which BAM is deemed to exert significant influence, but not control, are accounted for using the equity method of accounting. BAM has significant influence over the Asset Management Company and therefore accounts for its investment under the equity method.
The carrying value of equity method investments is determined based on amounts invested by BAM, adjusted for the equity in earnings or losses of the investee allocated based on the relevant agreements, less distributions received. Further, the carrying value of the equity method investment is adjusted as a result of any share-based awards granted by BAM to employees of the Asset Management Company. Under the equity method of accounting, BAM's share of earnings from equity investments is included in the share of income from equity investments in the Consolidated Statements of Comprehensive Income. BAM evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.
Refer to Note 3 “ Investments ” of the Consolidated Financial Statements of BAM for further details of BAM's equity method investments.
Critical Accounting Estimates and Judgements of BAM
Management is required to make critical judgements and estimates when applying its accounting policies. The following judgements and estimates have the most significant effect on the consolidated financial statements.Control or Level of InfluenceWhen determining the appropriate basis of accounting for BAM's and the asset management business’ investees, BAM makes judgments about the degree of influence that it exerts directly or through an arrangement over the investees’ relevant activities. This may include the ability to elect investee directors or appoint management. Control is obtained when BAM has the power to direct the relevant investing, financing and operating decisions of an entity and does so in its capacity as principal of the operations, rather than as an agent for other investors. Operating as a principal includes having sufficient capital at risk in any investee and exposure to the variability of the returns generated as a result of the decisions of BAM as principal. Judgment is used in determining the sufficiency of the capital at risk or variability of returns. In making these judgments, BAM considers the ability of other investors to remove BAM as a manager or general partner in a controlled partnership.
Indicators of Impairment
Judgment is applied when determining whether indicators of impairment exist when assessing the carrying values of BAM ULC’s assets, including: the determination of BAM’s ability to hold financial assets; the determination of discount and capitalization rates; and when an asset’s carrying value is above the value derived using publicly traded prices which are quoted in a liquid market.
Income Taxes
BAM makes judgments when determining the future tax rates applicable and identifying the temporary differences. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply during the year when the assets are realized or the liabilities settled, using the tax rates and laws enacted or substantively enacted at the consolidated balance sheet dates.
93Carried Interest Allocations - Unrealized
The change in the fair value of investments is a significant input into carried interest allocations - unrealized. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds. See “Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments.
Fair ValueThe asset management business uses fair value throughout the reporting process. For details of our accounting policies related to fair value refer to Note 2. “ Summary of Significant Accounting Policies — Fair Value of Financial Instruments ” and “ Summary of Significant Accounting Policies — Revenue Recognition ” in the “ Notes to Consolidated and Combined Financial Statements ”. The following discussion is intended to provide supplemental information about how the application of fair value principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.
The fair value of the investments held by the asset management business's funds is the primary input to the calculation of certain of our management fees, incentive fees, performance fees and the related compensation we recognize. In the absence of observable market prices, we utilize valuation methodologies applied on a consistent basis and assumptions that we believe market participants would use to determine the fair value of the investments. For investments where little market activity exists management’s determination of fair value is based on the best information available in the circumstances, which may incorporate management’s own assumptions and involves a significant degree of judgment, and the consideration of a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks.Management has elected the fair value option for certain equity method investments. Additionally, management is required to measure specific financial instruments at fair value, including debt instruments, equity securities, and freestanding derivatives.Our primary approach to determining the fair value of our investments is generally the income approach, which estimates fair value based on the present value of expected future cash flows generated by a business. The most commonly used method within this approach is the discounted cash flow method, which incorporates key assumptions about the investment’s projected net earnings or cash flows, discount rate, capitalization rate, and exit multiple.
Alternatively, management uses the market approach as a secondary methodology. This approach primarily relies on valuations of comparable public companies, transactions, or assets, requiring judgment in selecting appropriate comparables. Depending on the specific facts and circumstances of the investment, alternative primary and secondary methodologies may be applied, including option value, contingent claims or scenario analysis, yield analysis, projected cash flow through maturity or expiration, discount to sale, probability-weighted methods, or recent financing rounds.Assessments and Changes in Internal Control over Financial Reporting
Management has evaluated the effectiveness of BAM’s internal control over financial reporting (as defined in the applicable U.S. and Canadian securities laws) as of December 31, 2024 and based on that assessment concluded that, as of December 31, 2024, our internal control over financial reporting was effective. Refer to “Part II—Item 9A. Controls and Procedures—Management’s Report on Internal Control Over Financial Reporting.” There have been no changes in our internal control over financial reporting during the quarter or year ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management, including the CEO and Chief Financial Officer, has evaluated the effectiveness of BAM's disclosure controls and procedures (as defined in the applicable U.S. and Canadian securities laws) as of December 31, 2024. Based on that evaluation, the CEO and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of December 31, 2024.
FY 2025-12-31 (later)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with BAM's consolidated financial statements and the related notes included within this Annual Report.This section of the Annual Report discusses activity as of and for the years ended December 31, 2025 and 2024. For discussion on activity for the year ended December 31, 2024 and period-over-period analysis on results for the year ended December 31, 2024 to 2023, refer to Part II, “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended December 31, 2024, which specific discussion is incorporated herein by reference.Business EnvironmentIn 2025, global GDP growth is estimated to have risen by 3.2% compared to 3.3% in 2024. Economic activity continued to be supported by easing inflationary pressures, resilient employment conditions, and the gradual normalization of monetary policy across most advanced economies. Labor markets continued to rebalance, though unemployment rates generally remained low by historical standards. Headline inflation in most advanced economies remained near central bank targets, with services inflation and wage growth proving more persistent.
Divergences in economic performance across regions persisted in 2025. The U.S. and parts of Asia continued to outperform, supported by domestic demand and investment, while growth in the Eurozone, the United Kingdom, and China remained comparatively subdued due to structural constraints and weaker demand.
U.S. economic growth slowed modestly in 2025 to 2.1% from the elevated pace of 2.8% recorded in 2024. Inflation continued to ease, with core measures trending lower over the year. Labor market conditions cooled gradually, reflected in declining job openings and improved labor force participation. The unemployment rate increased modestly but remained low by historical standards, indicating a decelerating yet resilient labor market.
Monetary policy normalization continued across most developed markets in 2025. Following the initiation of easing cycles in 2024, central banks generally adopted a more measured pace of rate adjustments, balancing progress on inflation against financial stability considerations and elevated fiscal issuance. Policy rates across advanced economies ended the year below peak levels but remained above pre‑pandemic norms.
In the U.S., the Federal Reserve continued its easing cycle with 75 basis points of cuts in 2025, in line with improving inflation dynamics and moderating growth. Treasury yields remained volatile, reflecting shifting expectations for the terminal policy rate, fiscal supply dynamics, and global demand for safe assets.
Elsewhere, the European Central Bank and the Bank of England continued gradual easing, while the Bank of Japan proceeded cautiously following the exit from negative interest rate policy. Monetary policy outcomes in emerging markets varied, reflecting differences in inflation trajectories, currency pressures, and domestic growth conditions.
Credit market conditions remained constructive in 2025. Investment grade and high yield credit spreads stayed tight by historical standards, despite episodic volatility driven by macroeconomic data releases and geopolitical developments. Primary market issuance remained supported by refinancing activity and sustained investor demand for income‑oriented assets.
In 2025, equity markets delivered strong returns following the robust performance seen in prior years. The S&P 500 posted a total return of ~17.9% and reached new all-time highs, supported by easing monetary policy and resilient corporate earnings. The Nasdaq Composite and Nasdaq-100 also registered notable gains of about ~21%, driven by strength in technology and growth sectors. International equity markets outperformed U.S. benchmarks, with broad global indices such as the MSCI All Country World ex-U.S. and other developed market indices rising by ~30%.
Global merger and acquisition activity improved further in 2025, supported by lower financing costs and improved corporate confidence. The rebound was global, with strong growth in the number and value of deals in the U.S., Asia, Europe, the Middle East and Africa. The global initial public offering market showed signs of recovery and stabilization during 2025, with total proceeds increasing compared with the prior year across a broad range of sectors.
Political developments continued to influence the global macroeconomic backdrop in 2025 following political elections in 2024. Markets adjusted to evolving policy priorities in the U.S., Europe, and parts of Asia. While financial markets remained relatively resilient, uncertainty related to fiscal policy, geopolitics, and trade dynamics continued to affect investor sentiment and capital allocation decisions.Our business is well-positioned within the evolving alternative asset management landscape by leveraging a strategic and agile approach to investment opportunities. As investors seek diversification and innovative solutions, we are equipped to navigate market complexities and government policies by delivering value through disciplined strategies. Our ability to adapt to shifting economic conditions and capitalize on emerging trends ensures we remain a trusted partner in achieving long-term financial outcomes.49Review of Financial Results
Income Statement AnalysisConsolidated Statements of Operations
The following table summarizes the consolidated statements of operations for BAM for the years ended December 31, 2025, 2024 and 2023:
FOR THE YEARS ENDED DECEMBER 31,(MILLIONS)2025 2024 2023 2025 vs 2024 2024 vs 2023RevenuesBase management and advisory fees $ 3,384 $ 2,957 $ 2,766 $ 427 $ 191
Incentive fees 560 424 376 136 48Investment income
Carried interest allocationsRealized — 25 51 (25) (26)
Unrealized 209 (9) 348 218 (357)
Total investment income 209 16 399 193 (383)
Interest and dividend revenue 98 143 172 (45) (29)
Interest and dividend revenue of consolidated funds 31 — — 31 —
Other revenues 535 440 349 95 91
Total revenues 4,817 3,980 4,062 837 (82)Expenses
Compensation, operating, and general and administrative expensesCompensation and benefits (1,373) (1,154) (1,048) (219) (106)
Other operating expenses (354) (347) (342) (7) (5)
General, administrative and other (56) (64) (56) 8 (8)
Total compensation, operating, and general and administrative expenses (1,783) (1,565) (1,446) (218) (119)Carried interest allocation compensationRealized (155) (69) (26) (86) (43)
Unrealized 9 (24) (60) 33 36
Total carried interest allocation compensation
(146) (93) (86) (53) (7)
Interest expense (87) (22) (14) (65) (8)
Interest expense of consolidated funds (28) — — (28) —
Total expenses (2,044) (1,680) (1,546) (364) (134)
Other expenses, net (297) (93) (129) (204) 36
Share of income from equity method investments 402 339 167 63 172
Other income, net of consolidated funds 47 — — 47 —
Income before taxes 2,925 2,546 2,554 379 (8)
Income tax expense (527) (438) (417) (89) (21)
Net income 2,398 2,108 2,137 290 (29)
Net loss (income) attributable to:
Preferred shares redeemable non-controlling interest 480 211 (262) 269 473
Non-controlling interest in consolidated entities (369) (151) (36) (218) (115)
Non-controlling interests in consolidated funds (24) — — (24) —
Net income attributable to the common stockholders $ 2,485 $ 2,168 $ 1,839 $ 317 $ 329
BAM primarily generates revenue from fees earned pursuant to contractual arrangements with funds, publicly traded vehicles, and investors, as well as transaction and advisory fees. These fees include base management fees, incentive fees, and certain advisory fees. Base management fees are long-term, recurring in nature, and correspond to fundraising activity, NAVs of certain of our funds, and market capitalizations of our publicly traded vehicles, specifically BIP, BEP and BBU. Incentive fees are performance fees earned from BIP and BEP for exceeding predetermined distribution thresholds, are long-term, and are not subject to clawback. Incentive fees also include performance fees earned from BBU for exceeding the current high watermark threshold and are not subject to clawback.
50
BAM is entitled to carried interest allocations assuming certain investment returns are achieved, as well as incentive management fees in certain of our structures where we are entitled to contractual fees from an investment fund based on achieving prescribed investment returns.
The composition of our revenues will vary based on market conditions and the cyclical nature of our businesses. Carried interest allocations generated by our funds and associated carried interest compensation are driven by the performance of the underlying investments, as well as overall market conditions. Fair values are affected by changes in the fundamentals of our investments, the industries in which they operate, the overall economy, and other market conditions. The impact of fair values of our underlying investments throughout market cycles may result in material increases or decreases to carried interest generated, net of expenses.
Expenses primarily include employee base compensation, bonuses, and share-based compensation. Period over period changes in employee base compensation and bonuses generally result from changes in headcount and annual salary changes. Share-based awards are granted in the first quarter of each year and generally vest over 5 years. Equity settled compensation awards vest on a graded basis over the vesting period and cash settled share-based compensation awards are recorded at fair value quarterly based on the trading price of BAM Class A Shares. Therefore, for cash settled share-based compensation, an increase or decrease in the share price of BAM will result in share-based compensation expense or recovery.
For the years ended December 31, 2025 and 2024
Net income for the year ended December 31, 2025 was $2.4 billion, of which $2.5 billion was attributable to common stockholders. This compares to net income of $2.1 billion for the year ended December 31, 2024, of which $2.2 billion was attributable to common stockholders.RevenuesRevenues for the year ended December 31, 2025 were $4.8 billion, which represents an increase of $837 million or 21% compared to $4.0 billion of revenue for the year ended December 31, 2024.Base Management and Advisory FeesBase management and advisory fees for the year ended December 31, 2025 were $3.4 billion, which represents an increase of $427 million or 14% compared to the year ended December 31, 2024. Management fee revenues increased by $123 million from capital raised for the fifth vintage of our real estate flagship fund, $114 million from capital raised for the second vintage of our global transition flagship fund, and $65 million attributable to fundraising from our perpetual infrastructure complementary strategies. In addition, management fees increased $55 million from insurance capital inflows from BWS and $44 million from a higher trading price of BIP, BEP, and BBU. These increases were partially offset by $17 million of lower fees from earlier vintages of our real estate flagship funds and certain infrastructure funds as a result of monetizations.Incentive FeesIncentive fees for the year ended December 31, 2025, were $560 million, an increase of $136 million or 32% from the year ended December 31, 2024. This increase was primarily driven by BBU performance fees of $95 million as a result of the share price exceeding the previous high watermark. In addition, incremental incentive fees were recognized as a result of a 6% growth in BIP dividends of $24 million and 5% growth in BEP dividends of $17 million.Carried Interest AllocationsCarried interest allocations are a performance fee arrangement which is earned from those arrangements where BAM has a general partner capital interest and is entitled to a disproportionate allocation of investment income. Each of these general partners is generally entitled to a carried interest that allocates to it 20% of the net profits realized by the limited partners from the fund’s investment subject to the return of contributed capital and a preferred return of typically 8% per annum to the limited partners. At the end of each reporting period, the Company calculates the balance of accrued carried interest that would be due to BAM for each fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized.
Realized carried interest allocations were $nil for the year ended December 31, 2025, which represents a net decrease of $25 million compared to the year ended December 31, 2024. Realized carried interest allocations in the prior year were predominantly due to dispositions within our first real estate flagship fund and certain other real estate fund strategies. All realized carried interest income for the year ended December 31, 2024, net of carried interest compensation related to mature funds and are attributable to BN through our redeemable preferred shares.
51
The unrealized carried interest allocations of $209 million for the year ended December 31, 2025 represents an increase of $218 million compared to the year ended December 31, 2024. The gross increase of $943 million compared to the prior year reflects changes in fund valuations associated with the fifth vintage of our infrastructure flagship fund of $416 million and the first vintage of our global transition flagship fund for $297 million. In addition, $187 million of increases were associated with various private equity funds including the sixth vintage of our private equity flagship fund. This was partially offset by a decrease of $734 million compared to the prior year reflecting lower relative valuations across various mature real estate flagship funds.
Carried interest allocations generated by new funds are 66.7% attributable to BAM and 33.3% to BN. Within the consolidated statements of operations, carried interest allocations are presented on a 100% basis and the portion attributable to BN is presented in net loss (income) attributable to non-controlling interest in consolidated entities. Unrealized carried interest allocations attributable to BAM were $629 million for the year ended December 31, 2025, compared to $257 million for the year ended December 31, 2024.
The following table presents the carried interest in new funds, and related performance compensation by investment strategy.
Net New Fund Carried Interest
2025
2024
FOR THE YEAR ENDED DECEMBER 31,
(MILLIONS)
Carried interest allocations 1
Carried interest compensation
Carried interest, net
Carried interest allocations 1
Carried
interest compensation
Carried interest, net
Infrastructure
$ 420 $ (13) $ 407 $ 151 $ — $ 151
Renewable power and transition
297 (17) 280 166 (2) 164
Private equity
187 (18) 169 89 (3) 86
Real estate
39 (5) 34 (18) (1) (19)
$ 943 $ (53) $ 890 $ 388 $ (6) $ 382
1. Carried interest generated within our partner managers in Credit is presented within the investment balance of our partner managers rather than accrued carried interest and as a result is excluded from the table above.
The following table presents the change in accrued carried interest in new funds by investment strategy.
2024 Activity during the year
2025
AS AT DECEMBER 31,
(MILLIONS)
Accrued carried
interest allocations 1
Unrealized
Realized
Accrued carried interest allocations 1
Infrastructure
$ 150 $ 420 $ — $ 570
Renewable power and transition
237 297 — 534
Private equity
276 187 — 463
Real estate
30 39 — 69
$ 693 $ 943 $ — $ 1,636
1. Carried interest generated within our partner managers in Credit is presented within the investment balance of our partner managers rather than accrued carried interest and as a result is excluded from the table above.Interest and Dividend RevenueInterest and dividend revenue for the year ended December 31, 2025 was $98 million, which represents a decrease of $45 million compared to the year ended December 31, 2024. The decrease was primarily due to lower interest income earned on our deposit with BN.
Interest and Dividend Revenue of Consolidated Funds
Interest and dividend revenue of consolidated funds for the year ended December 31, 2025 was $31 million, which represents interest and dividends earned from investments held by BSI II in which BAM holds a sufficient interest to require the consolidation of the fund.
52Other RevenuesOther revenues are largely comprised of recoverables from BN related to share and performance-based compensation as defined by the Services Agreement, fund expense recharges, and incentive management fees earned on certain funds. Share-based and performance-based award expenses that are recoverable from BN are recognized in other revenues with the offsetting expense recognized in compensation and benefits, and carried interest allocation compensation, respectively. Other revenues were $535 million for the year ended December 31, 2025, an increase of $95 million compared to the year ended December 31, 2024. Of the total increase, $45 million was due to higher recoveries in share and performance-based compensation. In addition, the increase was also driven by $38 million of general operating cost recoveries from affiliates.ExpensesTotal expenses for the year ended December 31, 2025 were $2.0 billion, an increase of $364 million or 22% compared to the year ended December 31, 2024.Compensation and BenefitsCompensation and benefits for the year ended December 31, 2025 was $1.4 billion, which represents an increase of $219 million compared to the year ended December 31, 2024. This was attributable to higher share-based compensation expense of $65 million on our share and performance-based awards reflecting additional existing cash-settled awards recognized upon the completion of the 2025 Arrangement. This increase was partially offset by a decrease in the trading price of Class A Shares during the year. The remaining increase is due to higher compensation costs from the ongoing growth of our business.Other Operating ExpensesOther operating expenses are comprised of professional fees, facilities costs, as well as costs directly associated with our fundraising and investment functions. Other operating expenses were broadly consistent with the prior year at $354 million for the year ended December 31, 2025, compared to $347 million for the year ended December 31, 2024.Carried Interest Allocation CompensationCompensation expenses related to carried interest allocation compensation was $146 million for the year ended December 31, 2025, which represents a change of $53 million compared to the year ended December 31, 2024. This was primarily driven by higher relative valuations across certain renewable, infrastructure, and private equity funds compared to the prior year. The carried interest compensation expense associated with mature funds is fully recoverable from BN. Carried interest compensation expense on new funds was $53 million during the year.
Interest Expense
Interest expense for year ended December 31, 2025 was $87 million, which represents an increase of $65 million compared to the year ended December 31, 2024. This was primarily driven by BAM's increased borrowings from our senior note offerings completed during the year.
Interest Expense of Consolidated Funds
Interest expense of consolidated funds for the year ended December 31, 2025 was $28 million, which was primarily driven by borrowings made by BSI II in which BAM holds a sufficient interest to require the consolidation of the fund.Other Expenses, netOther expenses, net for the year ended December 31, 2025 was $297 million compared to $93 million in the prior year. This increase was driven by a mark-to-market loss of $180 million on our investment in BSREP III during the year ended December 31, 2025 compared to a loss of $82 million during the year ended December 31, 2024. The remaining increase was due to mark-to-market revaluations in put and call options to acquire additional interests in our partner managers.
Other Income, net of Consolidated Funds
Other income, net of consolidated funds for the year ended December 31, 2025 was $37 million compared to $nil in the prior year. This represents the underlying fair value changes of investments held by BSI II in which BAM holds a sufficient interest to require the consolidation of the fund.Share of Income from Equity Method InvestmentsOur share of income from equity method investments was $402 million compared to $339 million in the prior year, an increase of $63 million. This increase was driven by $160 million of incremental earnings primarily from Castlelake and Concora as well as other partner managers, offset by $97 million of lower earnings from Oaktree.
53Income Tax ExpenseIncome tax expense was $527 million for the year ended December 31, 2025, which represents an increase of $89 million compared to the year ended December 31, 2024. The increase in income tax expense was predominantly driven by the impairment of deferred tax assets during the year.Net Loss Attributable to Preferred Share Redeemable Non-Controlling InterestBAM recognizes carried interest income and associated carried interest allocation expense on mature funds within our consolidated statements of operations on a gross basis. As the net carried interest generated on mature funds is attributable to BN, the net income or loss attributable to BN via the preferred shares primarily represents the change in carried interest, net of carried interest allocation expense and taxes on mature funds owing to BN.
Net loss attributable to preferred redeemable non-controlling interest was $480 million for the year ended December 31, 2025 primarily due to lower valuations in certain mature real estate funds.
Net Income Attributable to Non-Controlling Interest of Consolidated Entities
Net income attributable to non-controlling interest of consolidated entities was $369 million for the year ended December 31, 2025. BAM recognizes carried interest allocations on new funds within our consolidated statements of operations on a gross basis. On new funds, 33.3% of carried interest allocations are attributable to BN. This balance is primarily the carried interest generated on new funds that is attributable to BN and fluctuates depending on the carried interest generated on new funds during the year.
Net Income Attributable to Non-Controlling Interest of Consolidated Funds
For income earned by certain funds in which BAM holds a sufficient interest to require the consolidation of the funds, a portion of the income earned is attributable to other parties invested in the funds. Net income attributable to non-controlling interest of consolidated funds was $24 million for the year ended December 31, 2025.
54Balance Sheet Analysis
Consolidated Balance SheetsThe following table presents the consolidated balance sheets of BAM as at December 31, 2025 and 2024:AS AT DECEMBER 31,
(MILLIONS, EXCEPT SHARE AMOUNTS)2025 2024AssetsCash and cash equivalents $ 1,583 $ 404
Accounts receivable and other, net 333 483
Financial assets 417 231
Due from affiliates 3,280 2,500
Investments 9,795 9,113
Investments held for sale — 242
Investments of consolidated funds 505 251
Property, plant and equipment, net 92 58
Intangible assets, net 234 38
Goodwill 236 251
Deferred income tax assets 572 586
Total assets $ 17,047 $ 14,157LiabilitiesAccounts payable and other, net $ 2,459 $ 1,349
Financial liabilities 449 228
Due to affiliates 720 1,092
Corporate borrowings 2,478 —
Borrowings of consolidated funds 462 251
Deferred income tax liabilities 169 46
Total liabilities 6,737 2,966
Commitments and contingencies
Preferred shares redeemable non-controlling interest 1,398 2,103Equity
Common Stock:Class A, no par value, unlimited authorized, 1,637,942,656 (December 31, 2024 - 1,637,156,992) issued and 1,608,492,642 (December 31, 2024 - 1,614,238,281) outstanding as at December 31, 2025
9,153 9,017
Class A held in treasury, no par value, 29,450,014 (December 31, 2024 - 22,918,711) shares as at December 31, 2025
(526) (91)
Class B, no par value, unlimited authorized, 21,280 (December 31, 2024 - 21,280) issued, and outstanding as at December 31, 2025
— —
Additional paid-in capital 154 152
Retained deficit (851) (488)
Accumulated other comprehensive income 188 162
Non-controlling interest in consolidated entities 773 336
Non-controlling interest in consolidated funds 21 —
Total equity 8,912 9,088
Total liabilities, redeemable non-controlling interest and equity $ 17,047 $ 14,157
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As at December 31, 2025 and 2024AssetsTotal assets were $17.0 billion as at December 31, 2025, an increase of $2.9 billion or 20% compared to December 31, 2024.Cash and Cash EquivalentsCash and cash equivalents were $1.6 billion as at December 31, 2025, an increase of $1.2 billion from December 31, 2024. This was largely driven by cash inflows of $2.5 billion from BAM's senior note offerings during the year. The increase was partially offset by cash outflows of approximately $555 million due to investments made in Oaktree, Concora, Primary Wave, Angel Oak and warehoused investments made by BAM to support its various strategies. Share repurchases made during the year resulted in a further decrease of $412 million in cash and cash equivalents.Accounts Receivable and Other, NetAccounts receivable and other, net of $333 million primarily consists of receivables from third parties and prepaid expenses. The decrease of $150 million from December 31, 2024 was largely driven by the timing of collections.Financial AssetsFinancial assets of $417 million primarily consists of call options to acquire additional interests in Primary Wave, Castlelake, LCM and Angel Oak in the future and financial instruments associated with various other investments. The increase of $186 million from December 31, 2024 was largely driven by mark-to-market valuation increases on certain call options.Due from AffiliatesDue from affiliates of $3.3 billion primarily relates to management fees earned but not collected from our managed funds, receivables for expenses paid on behalf of certain of our funds, as well as reimbursements due from BN for long-term compensation awards. The movement of $780 million from December 31, 2024 reflects additional receivables owing from BN associated with existing share-based compensation and carried interest compensation awards upon the completion of the 2025 Arrangement.InvestmentsInvestments are mainly comprised of our:
• approximate 74% economic interest in Oaktree of $4.7 billion (2024 – $4.6 billion);
• limited partnership interest in BSREP III of $700 million (2024 - $1.0 billion);
• economic interest in Castlelake of $720 million (2024 – $538 million);
• accumulated unrealized carried interest in our mature and new funds of $197 million (2024 - $931 million) and $1.6 billion (2024 - $693 million), respectively;
• approximate 11% economic interest in Pretium of $330 million (2024 - $351 million);
• 44% economic interest in Primary Wave of $261 million (2024 – $147 million);
• 49.9% economic interest in LCM of $221 million (2024 – $186 million);
• 51.3% economic interest in Angel Oak of $133 million (2024 - $nil); and
• limited partner interests in funds of $368 million (2024 - $29 million) including Pinegrove Fund (2025 – $230 million; 2024 – $25 million), BPE (2025 – $92 million; 2024 - $nil), BGTF II (2025 - $36 million; 2024 - $nil);
The investment in BSREP III and carried interest generated on mature funds are fully attributable to BN through their preferred shares redeemable non-controlling interest and does not impact net income attributable to common stockholders. Accrued carried interest in new funds, including current funds and open-ended funds, as defined therein, is attributed to BN at 33.3%. The remaining accrued carried interest in new funds, net of associated compensation is attributable to common stockholders.
During the year, net investment increases of $682 million were primarily due to investments made by BAM during the year in Castlelake's acquisition of Concora ($197 million), Pinegrove Fund ($172 million), Angel Oak ($149 million), and Primary Wave ($84 million). In addition, investments also increased due to changes in value of accumulated unrealized carried interest on new funds ($943 million), partially offset by a decrease in accumulated unrealized carried interest on mature funds ($734 million).
56Investments Held for SaleInvestments held for sale was $nil at December 31, 2025. The decrease of $242 million compared to December 31, 2024 was a result of BAM's disposition of its interest in Redwood Evergreen Fund LP for approximately $257 million during the year ended December 31, 2025.
Investments of Consolidated Funds
Investments of consolidated funds represents investments held in BSI II in which BAM holds a sufficient interest to require the consolidation of the fund. Investments in BSI II are measured at fair value. The increase of $254 million compared to December 31, 2024 was driven by additional investments made by BSI II.
Intangible assets, net
Intangible assets, net was $234 million as at December 31, 2025 and was recognized upon the completion of the 2025 Arrangement.LiabilitiesTotal liabilities were $6.7 billion as at December 31, 2025, an increase of $3.8 billion or 127% compared to December 31, 2024.Accounts Payable and Other, NetAccounts payable and other, net primarily consists of accrued bonus compensation, performance and cash-settled share-based compensation. The increase of $1.1 billion compared to December 31, 2024 reflects additional existing cash-settled awards recognized upon the completion of the 2025 Arrangement.Financial LiabilitiesFinancial liabilities of $449 million primarily consists of contingent consideration associated with our investment in Castlelake and the mark-to-market of derivatives associated with put options on certain of our other partner managers. The increase of $221 million compared to December 31, 2024 predominantly reflects the change in value of the Castlelake options during the year.Due to AffiliatesDue to affiliates of $720 million reflects amounts payable to related parties for share and cash-based compensation, as well as for services received in the normal course of business including operating expenses payable. The decrease of $372 million or 34% relative to December 31, 2024 was due to the elimination of certain amounts owing as a result of the 2025 Arrangement and payments made on certain amounts payable to related parties.
Corporate Borrowings
Corporate borrowings increased by $2.5 billion as a result of BAM's senior note offerings during the year ended December 31, 2025.
Borrowings of Consolidated Funds
Borrowings of consolidated funds represents borrowings used to finance investments within BSI II where BAM is required to consolidate the fund due to our economic interest. These increased borrowings of $211 million compared to December 31, 2024 was driven by borrowings made by BSI II to fund additional investments.Preferred Shares Redeemable Non-Controlling InterestBAM recognizes carried interest generated and associated carried interest allocation expense on mature funds within our consolidated statements of operations. As the net carried interest generated on mature funds is all attributable to BN, this balance primarily represents the accumulated unrealized carried interest, net of carried interest allocation expense and taxes on mature funds owing to BN.
Preferred shares redeemable non-controlling interest was $1.4 billion as at December 31, 2025, a decrease of $705 million compared to $2.1 billion as at December 31, 2024. This movement was due to a decrease in unrealized carried interest on mature real estate flagship funds, as well as settlements of amounts owed to BN during the year ended December 31, 2025.
Non-Controlling Interest in Consolidated Entities
Non-controlling interest in consolidated entities was $773 million as at December 31, 2025, an increase of $437 million compared to $336 million as at December 31, 2024. This increase was primarily due to carried interest generated across the latest vintages of our flagship funds of which 33.33% is owed to BN, non-controlling interests associated with our equity-settled share-based compensation and other non-controlling interests associated with various entities within BAM.
57Cash Flow Statement Analysis
Review of Consolidated Statements of Cash FlowsRefer to the following table that summarizes the consolidated statements of cash flows for BAM for the years ended December 31, 2025, 2024 and 2023:FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2025 2024 2023
Operating activities $ 2,101 $ 1,612 $ 1,439
Investing activities (339) (1,744) (475)
Financing activities (590) (2,119) (1,842)
Change in cash and cash equivalents $ 1,172 $ (2,251) $ (878)This statement reflects activities within our consolidated operations and therefore excludes activities within non-consolidated entities.For the years ended December 31, 2025 and 2024Operating ActivitiesDuring the year ended December 31, 2025, the Company's operating activities generated cash inflows of $2.1 billion, compared to cash inflows of $1.6 billion in the prior year. Cash flows from operating activities primarily include the receipt of base management and advisory fees, incentive fees, realized carried interest, and interest and dividend revenue, offset by the payment of operating expenses incurred in the normal course of business, including compensation, operating and general and administrative expenses, and income tax payments.Investing ActivitiesNet cash outflows from investing activities totaled $339 million, compared to outflows of $1.7 billion in the prior year. Net outflows of $339 million during the year ended December 31, 2025 were primarily attributable to approximately $1.0 billion of investments, including BAM's participation in Castlelake's acquisition of Concora, our step-up in ownership of Oaktree and Primary Wave, and an investment in Angel Oak. These outflows were partially offset by $619 million of proceeds from investment dispositions and distributions received from certain investments. The $1.7 billion net cash outflows in the prior year were largely attributable to $1.9 billion of investments related to Castlelake, Pretium, Redwood Evergreen Fund LP and GEMS Education.Financing ActivitiesNet cash outflows from financing activities totaled $590 million, compared to outflows of $2.1 billion in the prior year. Net cash outflows of $590 million during the year ended December 31, 2025 were primarily attributable to $2.8 billion (2024 - $2.5 billion) of dividend distributions and $412 million of share repurchases, which was partially offset by $2.5 billion of senior note issuances during the year.
58Key Financial and Operating MeasuresBAM prepares its financial statements in conformity with U.S. GAAP. This report discloses a number of non-GAAP financial and supplemental financial measures which are utilized in monitoring our asset management business, including for performance measurement, capital allocation and valuation purposes. BAM believes that providing these performance measures is helpful to investors in assessing the overall performance of our asset management business. These non-GAAP financial measures should not be considered as the sole measure of BAM’s performance and should not be considered in isolation from, or as a substitute for, similar financial measures calculated in conformity with U.S. GAAP financial measures. These non-GAAP financial measures are not standardized financial measures and may not be comparable to similar financial measures used by other issuers. The financial results of BAM includes the asset management activities of Oaktree, an equity accounted affiliate, in its key financial and operating measures for our asset management business. See “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of U.S. GAAP to Non-GAAP Measures”, in this report.
Non-GAAP Measures Utilized by BAMFee Revenues
Fee Revenues is a key metric analyzed by management to determine the growth in recurring cash flows from our asset management business. Fee Revenues include base management fees, incentive distributions, performance fees and transaction fees. Fee Revenues exclude carried interest and revenues of consolidated funds, but include Fee Revenues earned by Oaktree. The most directly comparable measure of Fee Revenues disclosed in the financial statements is base management and advisory fees. See “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of U.S. GAAP to Non-GAAP Measures” for our reconciliation of Fee Revenues.
Fee-Related Earnings
Fee-Related Earnings is used to provide additional insight into the operating profitability of our asset management activities. Fee-Related Earnings are recurring in nature and not based on future realization events. Fee-Related Earnings is comprised of Fee Revenues less direct costs associated with earning those fees, which include employee compensation and professional fees as well as business related technology costs, and other shared services costs. Fee-Related Earnings exclude revenues and expenses of consolidated funds. The most directly comparable measure of Fee-Related Earnings disclosed in the primary financial statements is net income. See “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of U.S. GAAP to Non-GAAP Measures” for our reconciliation of Fee-Related Earnings.
Distributable EarningsBAM intends to pay out at least approximately 90% of its Distributable Earnings to shareholders quarterly and reinvest the balance back into the business.
Distributable Earnings provides insight into earnings that are available for distribution or to be reinvested by BAM. It is calculated as the sum of its Fee-Related Earnings, realized carried interest, returns from our corporate cash and financial assets, interest expense, cash taxes, and general and administrative expenses excluding equity-based compensation expenses. The most directly comparable measure disclosed in the primary financial statements of our asset management business for Distributable Earnings is net income. See “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of U.S. GAAP to Non-GAAP Measures” for our reconciliation of Distributable Earnings.
Supplemental Financial Measures Utilized by BAMAssets Under Management
AUM refers to the total fair value of assets managed, calculated as follows:• Investments that Brookfield, which includes BAM, BN, or their affiliates, either:◦ Consolidates for accounting purposes (generally, investments in respect of which Brookfield has a significant economic interest and unilaterally directs day-to-day operating, investing and financing activities), or◦ Does not consolidate for accounting purposes but over which Brookfield has significant influence by virtue of one or more attributes (e.g., being the largest investor in the investment, having the largest representation on the investment’s governance body, being the primary manager and/or operator of the investment, and/or having other significant influence attributes),
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◦ Are calculated at 100% of the total fair value of the investment taking into account its full capital structure — equity and debt — on a gross asset value basis, even if Brookfield does not own 100% of the investment, with the exception of investments held through our perpetual funds, which are calculated at its proportionate economic share of the investment’s NAV.• All other investments are calculated at Brookfield’s proportionate economic share of the total fair value of the investment taking into account its full capital structure — equity and debt — on a gross asset value basis.
Our methodology for determining AUM differs from the methodology that is employed by other alternative asset managers as well as the methodology for calculating regulatory AUM that is prescribed for certain regulatory filings (e.g., Form ADV and Form PF).
Fee-Bearing CapitalFee-Bearing Capital represents the capital committed, pledged, or invested in our perpetual affiliates, private funds and liquid strategies that we manage which entitles us to earn Fee Revenues. Fee-Bearing Capital includes both called (“invested”) and uncalled (“pledged” or “committed”) amounts.When reconciling period amounts, we utilize the following definitions:• Inflows include capital commitments and contributions to our private and liquid strategies funds, and capital issuances in our perpetual affiliates.
• Outflows represent distributions and redemptions of capital from liquid and perpetual capital.
• Distributions represent quarterly distributions from perpetual affiliates as well as returns of committed capital (excluding market valuation adjustments), redemptions and expiry of uncalled commitments within our private funds.
• Market valuation includes gains (losses) on portfolio investments, perpetual affiliates and liquid strategies based on market prices.• Other includes changes in net non-recourse leverage included in the determination of the permanent capital vehicle capitalizations and the impact of foreign exchange fluctuations on non-U.S. dollar commitments.
Uncalled Fund Commitments
Total Uncalled Fund Commitments includes capital callable from fund investors, including funds outside of their investment period, for which capital is callable for follow-on investments.60Fee-Bearing Capital Diversification
AS AT DEC 31 (BILLIONS)
Long-term Private FundsAs of December 31, 2025, we managed approximately $285 billion of Fee-Bearing Capital across a diverse range of long-term private funds that target opportunistic (20%+, gross), value-add (15%-16%, gross), core and core plus (9%-13%, gross) returns. These funds are generally closed-end and have a long duration, typically committed for 10 years with 2 one-year extension options.On these products, we earn:
• Diversified and long-term base management fees, typically on committed capital or invested capital, depending on the nature of the fund and where the fund is in its life,
• Transaction and advisory fees on co-investment capital that we raise and deploy alongside our long-term private funds, which vary based on transaction agreements, and• Carried interest or performance fees, which entitle us to a portion of overall fund profits, provided that investors receive a minimum prescribed preferred return. Carried interest is typically paid towards the end of the life of a fund after capital has been returned to investors and may be subject to “clawback” until all investments have been monetized and minimum investment returns are sufficiently assured. BN is entitled to receive 33.3% of the carried interest on new sponsored funds of BAM and will retain all of the carried interest earned on our existing mature funds.Permanent Capital and Perpetual StrategiesAs of December 31, 2025, we managed approximately $241 billion of Fee-Bearing Capital across our permanent capital vehicles, perpetual core, and core plus private funds.On these products, we earn:• Long-term perpetual base management fees, which are based on the market capitalization or NAV of our permanent capital vehicles and on the NAV of our perpetual private funds.• Stable incentive distribution fees from BEP and BIP, which are linked to the growth in cash distributions paid to investors above a predetermined hurdle. Both BEP and BIP have a long-standing track record of growing distributions annually within their target range of 5-9%.61
• Performance fees from BBU are based on unit price performance above a prescribed high watermark price, which are not subject to clawback, as well as carried interest on our perpetual private funds.Liquid StrategiesAs of December 31, 2025, we managed approximately $77 billion of Fee-Bearing Capital across our liquid strategies, which included capital that we manage on behalf of our publicly listed funds and separately managed accounts, with a focus on fixed income and equity securities across real estate, infrastructure, and natural resources.On these products, we earn:• Base management fees, which are based on committed capital or fund NAV, and• Performance income based on investment returns above a minimum prescribed return.Analysis of Key Non-GAAP Financial and Operating Measures
The following section contains a discussion and analysis of key financial and operating measures utilized in managing our business, including for performance measurement, capital allocation, and valuation purposes. For further detail on our non-GAAP and performance measures, please refer to “Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Financial and Operating Measures”, in this report.Fee-Bearing CapitalThe following tables summarize Fee-Bearing Capital as at December 31, 2025, 2024 and 2023:AS AT
(MILLIONS)
Long-term private funds Permanent capital and perpetual strategies Liquid strategies TotalInfrastructure $ 47,950 $ 58,448 $ — $ 106,398
Renewable power and transition 39,068 28,177 — 67,245
Private equity 38,859 9,147 — 48,006
Real estate 72,045 29,637 — 101,682
Credit 86,892 115,103 77,388 279,383
December 31, 2025 $ 284,814 $ 240,512 $ 77,388 $ 602,714
AS AT
(MILLIONS)
Long-term private funds Permanent capital and perpetual strategies Liquid strategies Total
Infrastructure $ 45,738 $ 51,312 $ — $ 97,050
Renewable power and transition 34,813 23,044 — 57,857Private equity 37,123 8,067 — 45,190Real estate 69,689 23,940 — 93,629Credit 74,697 102,193 67,925 244,815
December 31, 2024 $ 262,060 $ 208,556 $ 67,925 $ 538,541
AS AT
(MILLIONS)
Long-term private funds Permanent capital and perpetual strategies Liquid strategies TotalInfrastructure $ 47,345 $ 47,290 $ — $ 94,635
Renewable power and transition 29,663 22,700 — 52,363Private equity 33,249 5,600 — 38,849Real estate 66,038 27,406 — 93,444Credit 69,046 45,723 62,938 177,707
December 31, 2023 $ 245,341 $ 148,719 $ 62,938 $ 456,99862
The changes in Fee-Bearing Capital are set out in the following tables for the years ended December 31, 2025, 2024 and 2023:AS AT AND FOR THE YEAR ENDED
(MILLIONS)Infrastructure Renewable power and transition Private equity Real estate Credit Total
December 31, 2024 $ 97,050 $ 57,857 $ 45,190 $ 93,629 $ 244,815 $ 538,541
Inflows 5,888 10,394 5,302 16,234 53,026 90,844
Outflows — — — (242) (21,918) (22,160)
Distributions (4,395) (3,453) (1,116) (6,721) (11,129) (26,814)
Market valuation 6,083 5,495 2,004 (84) 11,269 24,767
Other 1,772 (3,048) (3,374) (1,134) 3,320 (2,464)
Change 9,348 9,388 2,816 8,053 34,568 64,173
December 31, 2025 $ 106,398 $ 67,245 $ 48,006 $ 101,682 $ 279,383 $ 602,714AS AT AND FOR THE YEAR ENDED
(MILLIONS)Infrastructure Renewable power and transition Private equity Real estate Credit Total
December 31, 2023 $ 94,635 $ 52,363 $ 38,849 $ 93,444 $ 177,707 $ 456,998
Inflows 5,313 8,670 3,714 9,074 102,211 128,982
Outflows (11) — — (481) (27,396) (27,888)
Distributions (2,378) (1,594) (1,302) (4,054) (8,700) (18,028)
Market valuation 3,669 (704) 1,610 (2,169) 6,074 8,480
Other (4,178) (878) 2,319 (2,185) (5,081) (10,003)
Change 2,415 5,494 6,341 185 67,108 81,543
December 31, 2024 $ 97,050 $ 57,857 $ 45,190 $ 93,629 $ 244,815 $ 538,541AS AT AND FOR THE YEAR ENDED
(MILLIONS)Infrastructure Renewable power and transition Private equity Real estate Credit Total
December 31, 2022 $ 82,752 $ 46,412 $ 39,316 $ 95,633 $ 153,750 $ 417,863
Inflows 12,523 5,612 4,424 10,168 40,455 73,182
Outflows (6) — — (127) (20,228) (20,361)
Distributions (2,929) (1,442) (1,201) (4,690) (5,989) (16,251)
Market valuation 2,241 1,757 (816) (2,841) 7,703 8,044
Other 54 24 (2,874) (4,699) 2,016 (5,479)
Change 11,883 5,951 (467) (2,189) 23,957 39,135
December 31, 2023 $ 94,635 $ 52,363 $ 38,849 $ 93,444 $ 177,707 $ 456,998
For the year ended December 31, 2025
Fee-Bearing Capital was $603 billion as at December 31, 2025 compared to $539 billion as at December 31, 2024, representing a net increase of $64.2 billion, or 12%:
• Inflows of $90.8 billion include capital commitments and contributions to our long-term private funds and liquid strategies, and issuances from our perpetual affiliates. During the year ended December 31, 2025, infrastructure inflows of $5.9 billion were predominantly attributable to fundraising from our co-investment vehicles and perpetual strategies as well as the issuance of debt from BIP. Renewable power and transition inflows of $10.4 billion were primarily attributable to closes on the second vintage of our flagship global transition fund and our catalytic transition fund, inflows from other long-term private funds and perpetual strategies, and the issuance of debt from BEP. Private equity inflows of $5.3 billion were driven by new commitments to our co-investment vehicles as well as fundraising from complementary strategies and other long-term private funds. Real estate inflows of $16.2 billion were attributable to capital deployment and fundraising from our real estate flagship funds including co-invest capital as well as opportunistic debt repayment within our permanent real estate vehicle. Credit inflows of $53.0 billion were primarily driven by insurance capital inflows from BWS, fundraising and capital deployed across long-term, perpetual, and liquid strategies, and fundraising associated with our partner managers.
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• Outflows represent distributions and redemptions of capital from liquid and perpetual strategies. During the year ended December 31, 2025, outflows of $22.2 billion were predominantly driven by outflows of related to BWS insurance capital as well as redemptions within certain of our liquid and perpetual strategies.
• Distributions represent quarterly distributions from our perpetual affiliates as well as returns of committed capital and redemptions and expiry of uncalled commitments within our private funds. During the year ended December 31, 2025, distributions of $26.8 billion were driven by $8.9 billion from Oaktree long-term private funds, $6.3 billion from infrastructure, private equity, and real estate flagship funds, $4.7 billion from our listed affiliates and BPG, $2.6 billion attributable to partner managers, and the remainder attributable to certain complementary strategies as well as various earlier vintages of our long-term private funds.
• Market valuation includes gains (losses) on portfolio investments, perpetual affiliates and liquid strategies based on market prices. During the year ended December 31, 2025, increases of $24.8 billion were driven by $12.0 billion as a result of higher market prices of BEP, BIP, and BBU, $10.0 billion attributable to liquid and perpetual credit strategies, $2.2 billion attributable to certain credit long-term private funds, and $1.3 billion attributable to perpetual infrastructure strategies.
• Other includes $2.5 billion of changes in net recourse leverage included in the determination of the permanent capital vehicle capitalizations and the impact of foreign exchange fluctuations on non-U.S. dollar commitments. Private equity movements of $3.4 billion primarily relate to lower valuations within earlier vintages of our flagship funds and co-investment vehicles and debt repayment by BBU. Credit movements of $3.3 billion were primarily attributable to the addition of Angel Oak partially offset by changes in fee-basis associated with certain perpetual and long-term private fund vehicles. Renewable power and transition changes of $3.0 billion were as a result of a one-time rebalancing of Fee-Bearing Capital between infrastructure and renewable power and transition strategies based on investment mix as well as debt repayment by BEP. Infrastructure increases of $1.8 billion were driven by a rebalancing of Fee-Bearing Capital between infrastructure and renewable power and transition based on investment mix. Real estate changes of $1.1 billion primarily related to lower valuations within an earlier vintage flagship fund. The impact of foreign exchange contributed to certain movements of Fee-Bearing Capital within long-term private funds across the business.
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Distributable EarningsFOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2025 2024 2023Base management fees 1$ 4,896 $ 4,233 $ 3,956
Incentive distributions 466 424 378
Performance fees 95 — —
Transaction and advisory fees 30 49 47
Fee Revenues 5,487 4,706 4,381Less: direct costs 1,2(2,410) (2,136) (2,014)
3,077 2,570 2,367
Less: Fee-Related Earnings not attributable to BAM (82) (114) (126)Fee-Related Earnings 3$ 2,995 $ 2,456 $ 2,241
Cash taxes (377) (301) (196)
Add back: equity-based compensation costs 4
44 38 39
Add back: Investment and other income (net of interest expense) 5
33 170 160
Distributable Earnings $ 2,695 $ 2,363 $ 2,244
1. Base management fees and direct costs are presented on a 100% basis for BAM and BAM's investment in Oaktree.2. Direct costs include compensation expense, other operating expenses and general, administrative, and other expenses, and related Oaktree direct costs at 100%.3. Fee-Related Earnings include Oaktree’s Fee-Related Earnings at our approximate 74% ownership interest (December 31, 2024 – 73%).
4. This adjustment adds back equity-based compensation costs.
5. This adjustment adds back other income associated with our portion of partly owned subsidiaries’ investment income, realized carried interest, interest income and interest expense.
For the year ended December 31, 2025
Fee Revenues for the year ended December 31, 2025 were $5.5 billion, an increase of $781 million or 17% compared to the prior year. This increase was predominantly due to an increase in base management fees of $663 million or 16%, driven by $123 million of incremental fee revenue from the fifth vintage of our flagship real estate fund and $114 million from the second vintage of our flagship global transition fund. Additionally, $235 million of incremental Fee Revenues were primarily as a result of earnings from partner manager acquisitions during the year which are not reflected in the comparative year. BAM also realized additional fees of $174 million from fundraising and growth across our private funds and complementary strategies and $48 million of higher Fee Revenues from our listed affiliates as a result of higher share prices of BIP, BEP, and BBU as well as a higher NAV of BPG. In addition, we recognized incremental fee revenue of $55 million from BWS due to the AEL Mandate. These increases were partially offset by $86 million in lower fees from certain credit strategies and earlier vintages of flagship funds due to distributions made to clients during the year.
Incentive distributions increased by $42 million or 10% as a result of an increase in BEP and BIP's quarterly dividend over the prior year of 5% and 6%, respectively.
Performance fees of $95 million for the year were earned from BBU as BBU's share price surpassed its high watermark threshold above which a performance fee based on $31.53 is earned by BAM. This increase in the share price set a go forward high watermark of $33.81 per unit. BBU's high watermark threshold was not reached in 2024, thus no performance fees were earned in the prior year.
Transaction and advisory fees also decreased by $19 million as the prior year reflected higher fees from our renewable power and transition, and private equity strategies offset by higher transaction revenues from infrastructure in the current year.
Direct costs increased by $274 million or 13% from the prior year as we continue to scale our business.
Fee-Related Earnings not attributable to BAM decreased by $32 million due to lower Fee-Related Earnings from Oaktree.
Distributable Earnings were $2.7 billion for the year ended December 31, 2025, an increase of $332 million or 14% compared to the prior year. The increase was primarily driven by $539 million of higher Fee-Related Earnings, partially offset by $137 million of lower investment income primarily due to higher interest expense as a result of our corporate debt as well as lower interest income earned on our cash deposit with BN, and $76 million of higher cash taxes on Fee-Related Earnings.
65Investment Strategy ResultsIn each of our product categories, we invest globally in various investment strategies, each benefiting from strong secular tailwinds that provide an expanding multi-trillion dollar investable universe. Our investment strategies are (a) infrastructure, (b) renewable power and transition, (c) private equity, (d) real estate, and (e) credit.The following tables summarize Fee-Bearing Capital and Fee Revenues by investment strategy:
Fee-Bearing Capital
AS AT DECEMBER 31,
(MILLIONS)2025 2024 2023
Infrastructure $ 106,398 $ 97,050 $ 94,635
Renewable power and transition 67,245 57,857 52,363
Private equity 48,006 45,190 38,849
Real estate 101,682 93,629 93,444
Credit 279,383 244,815 177,707
Total Fee-Bearing Capital $ 602,714 $ 538,541 $ 456,998
Fee RevenuesFOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2025 2024 2023
Infrastructure $ 1,287 $ 1,202 $ 1,216
Renewable power and transition 828 642 595
Private equity 556 470 475
Real estate 1,090 968 920
Credit 1,726 1,424 1,175
Total Fee Revenues $ 5,487 $ 4,706 $ 4,381
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InfrastructureSummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital of our Infrastructure investment strategy as at December 31, 2025, 2024 and 2023, and Fee Revenues for the years ended December 31, 2025, 2024 and 2023.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)The following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2025 2024 2023
Long-term private funds $ 47,950 $ 45,738 $ 47,345
Permanent capital and perpetual strategies 58,448 51,312 47,290
Total Fee-Bearing Capital $ 106,398 $ 97,050 $ 94,635
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Balance, beginning $ 97,050 $ 94,635 $ 82,752
Inflows 5,888 5,313 12,523
Outflows — (11) (6)
Distributions (4,395) (2,378) (2,929)
Market valuation 6,083 3,669 2,241
Other 1,772 (4,178) 54
Change 9,348 2,415 11,883
Balance, ending $ 106,398 $ 97,050 $ 94,635
For the year ended December 31, 2025
During the year ended December 31, 2025, Fee-Bearing Capital increased by $9.3 billion or 10% to $106 billion. The $5.9 billion of inflows were primarily driven by perpetual strategies of $2.9 billion, long-term private funds of $2.2 billion, and debt and equity issuances from BIP of $730 million. In addition, Fee-Bearing Capital increased by $4.7 billion from a higher market capitalization of BIP due to increases in its share price and $1.3 billion of favorable market valuations associated with certain perpetual strategies. Other increases of $1.8 billion predominantly related to the rebalancing of Fee-Bearing Capital between infrastructure and renewable power and transition within the latest vintage of our infrastructure flagship fund based on investment mix. These increases were partially offset by distributions of $4.4 billion paid to investors in our long-term private funds and perpetual strategies as well as BIP unitholders.
67Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023Management and advisory fees
Long-term private funds
Flagship funds$ 364 $ 369 $ 371Co-investment and other funds1 6 18
365 375 389Perpetual strategiesBIP 1
414 393 401Co-investment and other funds172 133 99
586 526 500
Catch-up fees — 1 37
Transaction and advisory fees 16 5 24
Total management and advisory fees 967 907 950
Incentive distributions 2
320 295 266
Total Fee Revenues $ 1,287 $ 1,202 $ 1,216
1. BIP Fee-Bearing Capital as at December 31, 2025 is $35.1 billion (December 31, 2024 – $31.9 billion) and includes $5.4 billion of net debt (December 31, 2024 - $4.9 billion).
2. Consists solely of incentive distributions earned from BIP.
For the year ended December 31, 2025
Fee Revenues increased by $85 million or 7% for the year ended December 31, 2025 relative to the year ended December 31, 2024. The increase was primarily driven by $39 million of higher Fee Revenues due to capital raised and deployed from certain perpetual strategies and $21 million related to BIP as a result of a higher share price during the year. In addition, Fee Revenues benefited from $11 million of higher transaction and advisory fees associated with our flagship infrastructure funds and an increase in incentive distributions of $25 million due to a 6% increase in BIP's quarterly dividend. These increases were partially offset by a $10 million decrease in Fee Revenues as the prior year reflected higher fees from earlier vintages of flagship funds and complementary strategies.
Segment Earnings
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Segment Revenues $ 967 $ 907 $ 950
Segment Expenses
Compensation and benefits ( 255 ) (235) (223)
Other operating expenses (92) (71) (73)
Segment Earnings $ 620 $ 601 $ 654
For the year ended December 31, 2025
Segment Earnings increased by $19 million for the year ended December 31, 2025 relative to the year ended December 31, 2024. The increase in Segment Earnings was primarily due to higher Segment Revenues driven by BIP due to a higher share price during the year and our complementary perpetual strategies, partially offset by higher Segment Expenses as we continue to scale our business.
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Renewable Power and TransitionSummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital of our Renewable Power and Transition investment strategy as at December 31, 2025, 2024 and 2023, and Fee Revenues for the years ended December 31, 2025, 2024 and 2023.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)The following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2025 2024 2023
Long-term private funds $ 39,068 $ 34,813 $ 29,663
Permanent capital and perpetual strategies 28,177 23,044 22,700
Total Fee-Bearing Capital $ 67,245 $ 57,857 $ 52,363
FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)
2025 2024 2023
Balance, beginning $ 57,857 $ 52,363 $ 46,412
Inflows 10,394 8,670 5,612
Outflows — — —
Distributions (3,453) (1,594) (1,442)
Market valuation 5,495 (704) 1,757
Other (3,048) (878) 24
Change 9,388 5,494 5,951
Balance, ending $ 67,245 $ 57,857 $ 52,363
For the year ended December 31, 2025
During the year ended December 31, 2025, Fee-Bearing Capital increased by $9.4 billion or 16% to $67 billion. This increase was predominantly driven by $10.4 billion of inflows of which $5.4 billion was from the final closes within the second vintage of our flagship global transition fund, $2.1 billion of fundraising and capital deployments within our long-term as well as permanent and perpetual fund strategies, and $1.8 billion from fundraising for our catalytic transition fund. In addition, Fee-Bearing Capital increased by $5.5 billion predominantly from a higher market capitalization of BEP due to an increase in its share price during the year. These increases were partially offset by $3.5 billion of distributions to BEP's unitholders and investors in our long-term private funds and perpetual strategies. Movement of $3.0 billion in other was predominantly due to a rebalancing of Fee-Bearing Capital between infrastructure and renewable power and transition within the latest vintage of our infrastructure flagship fund based on investment mix as well as debt repayment by BEP.
69Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023Management and advisory fees
Long-term private funds
Flagship funds$ 330 $ 259 $ 239Co-investment and other funds39 2 11
369 261 250Perpetual strategiesBEP 1
222 204 205Co-investment and other funds39 20 9
261 224 214
Catch-up fees 46 9 10
Transaction and advisory fees 6 19 9
Total management and advisory fees 682 513 483
Incentive distributions 2
146 129 112
Total Fee Revenues $ 828 $ 642 $ 595
1. BEP Fee-Bearing Capital as at December 31, 2025 is $25.8 billion (December 31, 2024 – $21.5 billion) and includes net debt of $3.7 billion (December 31, 2024 - $3.9 billion).
2. Consists solely of incentive distributions earned from BEP.
For the year ended December 31, 2025
Fee Revenues increased by $186 million for the year ended December 31, 2025 relative to the year ended December 31, 2024. Total management and advisory fees increased by $169 million anchored by long-term private funds which generated $78 million of higher fee revenues from subsequent closes of the second vintage of our flagship global transition fund and $36 million of incremental fee revenues from certain complementary strategies, partially offset by $9 million of lower fee revenues from older vintages of certain long-term private funds. In addition, our perpetual strategies earned $37 million of higher fee revenues primarily driven by an increase of $19 million from certain of our complementary strategies and $18 million of higher fee revenues from BEP as a result of a higher average market capitalization in the current year. Catch-up fees increased by $37 million as a result of subsequent closes in the second vintage of our global transition fund and catalytic transition fund, which were partially offset by $13 million of lower transaction and advisory fees in the current year. In addition, incentive distributions from BEP increased by $17 million due to a 5% increase in distributions compared to the prior year.
Segment Earnings
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Segment Revenues $ 682 $ 513 $ 483
Segment Expenses
Compensation and benefits ( 168 ) (132) (116)
Other operating expenses (63) (35) (31)
Segment Earnings $ 451 $ 346 $ 336
For the year ended December 31, 2025
Segment Earnings increased by $105 million for the year ended December 31, 2025 relative to the year ended December 31, 2024. The increase in Segment Earnings was primarily due to higher Segment Revenues driven by additional closes of the second vintage of our flagship global transition fund and inflows from perpetual funds resulting in incremental fee revenues. In addition, increases to Segment Revenues were as a result of a higher average market capitalization of BEP in the current year. These increases were partially offset by higher Segment Expenses to support the scaling of our business.
70
Private EquitySummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital of our Private Equity investment strategy as at December 31, 2025, 2024 and 2023, and Fee Revenues for the years ended December 31, 2025, 2024 and 2023.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)The following provides explanations of significant movements in Fee-Bearing Capital for the periods then ended.Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2025 2024 2023
Long-term private funds $ 38,859 $ 37,123 $ 33,249
Permanent capital and perpetual strategies 9,147 8,067 5,600
Total Fee-Bearing Capital $ 48,006 $ 45,190 $ 38,849
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Balance, beginning $ 45,190 $ 38,849 $ 39,316
Inflows 5,302 3,714 4,424
Outflows — — —
Distributions (1,116) (1,302) (1,201)
Market valuation 2,004 1,610 (816)
Other (3,374) 2,319 (2,874)
Change 2,816 6,341 (467)
Balance, ending $ 48,006 $ 45,190 $ 38,849
For the year ended December 31, 2025
During the year ended December 31, 2025, Fee-Bearing Capital increased by $2.8 billion or 6% to $48 billion. The increase was primarily driven by inflows of $5.3 billion associated with certain long-term private funds and co-investments made within our complementary strategies. In addition, market valuation increases of $2.0 billion were primarily driven by BBU due to a higher share price during the year. These increases were partially offset by other changes associated with write-downs from earlier vintages of our flagship funds and co-investment vehicles resulting in a decrease of $1.5 billion. In addition, changes in other included $1.8 billion from the impact of changes in fee-basis and foreign exchange on certain co-investment vehicles and lower corporate debt at BBU. Distributions of $1.1 billion were driven by our fourth flagship fund, other long-term private funds, and BBU.
71Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023Management and advisory fees
Long-term private funds
Flagship funds$ 156 $ 162 $ 177
Other long-term funds 192 175 174Co-investment and other funds9 10 10
357 347 361Perpetual strategiesBBU 1
96 92 87
96 92 87
Catch-up fees — 7 16
Transaction and advisory fees 8 24 11
Total management and advisory fees 461 470 475
Performance fees 2
95 — —
Total Fee Revenues $ 556 $ 470 $ 475
1. BBU Fee-Bearing Capital as at December 31, 2025 was $9.1 billion (December 31, 2024 – $8.1 billion) and includes net debt of $1.3 billion (December 31, 2024 - $2.1 billion).
2. Consists solely of performance fees earned from BBU.
For the year ended December 31, 2025
Fee Revenues increased by $86 million for the year ended December 31, 2025 relative to the year ended December 31, 2024. This increase was primarily driven by performance fees of $95 million earned as a result of the share price of BBU exceeding the previous high watermark threshold, attributable to an increase in the volume weighted average unit price during the year. The high watermark threshold to earn additional performance fees as at December 31, 2025 was $33.81 per unit, reflecting the adjusted high watermark. In addition, incremental fee revenues from our complementary strategies and a higher share price of BBU contributed to $21 million of higher fee revenues. These increases were partially offset by $6 million of lower fee revenues from our earlier vintages of our flagship funds as a result of the end of the investment period. Furthermore, catch-up and transaction and advisory fees decreased by $23 million as the prior year reflected higher catch-up fees from the sixth vintage of our flagship fund and higher transaction and advisory fee revenue.
Segment Earnings
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Segment Revenues
$ 450 $ 470 $ 475
Segment Expenses
Compensation and benefits
(244) (235) (229)
Other
(85) (74) (69)
Segment Earnings $ 121 $ 161 $ 177
For the year ended December 31, 2025
Segment Earnings decreased by $40 million for the year ended December 31, 2025 relative to the year ended December 31, 2024. Segment Earnings were lower in the current year as Segment Revenues reflected lower management fees from flagship funds as a result of monetizations and distributions during the year as well as higher transaction and advisory fees and catch-up fees recognized in the prior year. These decreases were offset by higher Segment Revenues associated with our complementary strategies. Segment Earnings also decreased as a result of higher Segment Expenses associated with growth in the business .
72
Real EstateSummary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital of our Real Estate investment strategy as at December 31, 2025, 2024 and 2023, and Fee Revenues for the years ended December 31, 2025, 2024 and 2023.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)The following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2025 2024 2023
Long-term private funds $ 72,045 $ 69,689 $ 66,038
Permanent capital and perpetual strategies 29,637 23,940 27,406
Total Fee-Bearing Capital $ 101,682 $ 93,629 $ 93,444
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Balance, beginning $ 93,629 $ 93,444 $ 95,633
Inflows 16,234 9,074 10,168
Outflows (242) (481) (127)
Distributions (6,721) (4,054) (4,690)
Market valuation (84) (2,169) (2,841)
Other (1,134) (2,185) (4,699)
Change 8,053 185 (2,189)
Balance, ending $ 101,682 $ 93,629 $ 93,444
For the year ended December 31, 2025
During the year ended December 31, 2025, Fee-Bearing Capital increased by $8.1 billion, or 9% to $102 billion. The increase was predominantly driven by $16.2 billion of inflows of which $5.6 billion was attributable to the opportunistic repayment of debt within BPG, $4.7 billion from the fifth vintage of our flagship fund, as well as $3.6 billion from co-investment capital and capital deployments across other flagship funds. In addition, $2.3 billion of inflows were attributable to certain long-term private funds and complementary strategies. These increases were partially offset by $6.7 billion of distributions from BPG, flagship funds and other long-term private funds. In addition, other changes of $1.1 billion were as a result of lower valuations within an earlier vintage flagship fund as well as the net impact of foreign exchange.
73Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023Management and advisory fees
Long-term private funds
Flagship funds$ 505 $ 457 $ 396Co-investment and other funds221 217 228
726 674 624Perpetual strategiesBPG 1
201 195 196
Co-investment and other funds
89 74 93
290 269 289
Catch-up fees 74 25 4
Total Fee Revenues $ 1,090 $ 968 $ 920
1. BPG Fee-Bearing Capital (of which BPY represents substantially all of the balance) as at December 31, 2025 is $19.0 billion (December 31, 2024 – $16.6 billion).
For the year ended December 31, 2025
During the year ended December 31, 2025, Fee Revenues increased by $122 million or 13% relative to the year ended December 31, 2024. This increase was driven by $76 million of higher Fee Revenues predominantly from the latest vintage of our flagship fund, partially offset by $24 million of lower Fee Revenues from our earlier flagship fund vintages due to realizations. In addition, Fee Revenues from BPG and other perpetual strategies increased by $21 million as a result of the aforementioned growth in Fee-Bearing Capital. Furthermore, Fee Revenues included higher catch-up fees of $49 million primarily from follow-on closes for our fifth flagship fund.
Segment Earnings
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Segment Revenues $ 1,083 $ 968 $ 920
Segment Expenses
Compensation and benefits ( 364 ) (340) (360)
Other operating expenses (116) (121) (132)
Segment Earnings $ 603 $ 507 $ 428
For the year ended December 31, 2025
Segment Earnings increased by $96 million for the year ended December 31, 2025 relative to the year ended December 31, 2024. The increase in Segment Earnings was primarily due to higher Segment Revenues associated with subsequent closes of our fifth flagship fund, partially offset by higher Segment Expenses due to scaling of our business.
74Credit
Summary of Key Financial and Operating MeasuresThe following charts provide the Fee-Bearing Capital of our Credit investment strategy as at December 31, 2025, 2024 and 2023, and Fee Revenues for the years ended December 31, 2025, 2024 and 2023.Fee-Bearing Capital Fee Revenues
AS AT DEC 31 (BILLIONS) FOR THE YEARS ENDED DEC 31 (MILLIONS)The following provides explanations of significant movements in Fee-Bearing Capital for the years then ended.
Fee-Bearing CapitalAS AT DECEMBER 31, (MILLIONS) 2025 2024 2023
Long-term private funds $ 86,892 $ 74,697 $ 69,046
Permanent capital and perpetual strategies 115,103 102,193 45,723
Liquid strategies 77,388 67,925 62,938
Total Fee-Bearing Capital $ 279,383 $ 244,815 $ 177,707
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Balance, beginning $ 244,815 $ 177,707 $ 153,750
Inflows 53,026 102,211 40,455
Outflows (21,918) (27,396) (20,228)
Distributions (11,129) (8,700) (5,989)
Market valuation 11,269 6,074 7,703
Other 3,320 (5,081) 2,016
Change 34,568 67,108 23,957
Balance, ending $ 279,383 $ 244,815 $ 177,707
For the year ended December 31, 2025
During the year ended December 31, 2025, Fee-Bearing Capital increased by $34.6 billion or 14% to $279 billion, primarily due to $24.5 billion of capital deployed within long-term private funds as well as perpetual and liquid credit strategies, $22.5 billion of insurance capital inflows from BWS, $3.7 billion of capital raised within our partner managers, and $2.3 billion of fundraising from our real estate and infrastructure debt strategies. In addition, we recognized $11.3 billion of market valuation increases associated with our liquid and perpetual strategies as well as certain long-term private funds which further increased Fee-Bearing Capital. These increases were partially offset by $11.0 billion of redemptions within certain of our liquid and perpetual strategies and $10.9 billion of outflows associated with BWS insurance capital. In addition, distributions of $8.5 billion from our long-term private funds and complementary strategies, and $2.6 billion from our partner managers partially reduced Fee-Bearing Capital. Credit changes in other primarily related to the acquisition of Angel Oak as well as the impact of foreign exchange revaluation across perpetual and liquid strategies partially offset by changes in fee-basis associated with certain perpetual and long-term private fund vehicles.
75Fee RevenuesFOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023Management and advisory feesLong-term private funds $ 1,002 $ 781 $ 678Permanent and perpetual strategies463 400 266Liquid strategies 1261 242 231
Transaction and advisory fees — 1 —
Total Fee Revenues 2
$ 1,726 $ 1,424 $ 1,1751. Represents open-end funds within our credit strategies, and Oaktree's investment in a fixed income manager, as well as in publicly listed securities.2. Across the various categories, Fee-Bearing Capital from BWS as at December 31, 2025 was $108 billion which generated $234 million of Fee Revenues under the investment management agreement for the year ended December 31, 2025 (December 31, 2024 - Fee-Bearing Capital of $92 billion and Fee Revenues of $167 million).
For the year ended December 31, 2025
Fee Revenues increased by $302 million or 21% for the year ended December 31, 2025 relative to the year ended December 31, 2024. Fees from our long-term private funds increased by $221 million primarily due to higher fees earned in our partner managers, most notably Castlelake, as well as other complementary strategies. Fees from permanent and perpetual strategies increased by $63 million as the current year reflected an additional quarter of fees from the AEL Mandate relative to the prior year, and capital deployed across our private credit strategies. In addition, liquid strategies generated incremental fee revenues of $19 million driven by net inflows and positive valuation changes resulting in higher Fee-Bearing Capital.
Segment Earnings
FOR THE YEARS ENDED DECEMBER 31, (MILLIONS) 2025 2024 2023
Segment Revenues
$ 1,633 $ 1,402 $ 1,149
Segment Expenses
Compensation and benefits
( 643 ) (628) (563)
Other
(289) (253) (204)
Segment Earnings $ 701 $ 521 $ 382
For the year ended December 31, 2025
Segment Earnings increased $180 million for the year ended December 31, 2025 relative to the year ended December 31, 2024. The increase in Segment Earnings was driven by higher Segment Revenues as a result of incremental earnings from our partner managers, most notably from Castlelake relative to the prior year, partially offset by higher Segment Expenses as a result of growth in the business.
76Reconciliation of U.S. GAAP to Non-GAAP Measures
Reconciliations of Distributable Earnings, Fee-Related Earnings and Fee Revenues to the most directly comparable financial measures calculated and presented in conformity with U.S. GAAP are presented below. In addition to net income and revenue, management assesses the performance of its business based on these non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, net income or other financial measures presented in conformity with U.S. GAAP.
Reconciliation of Net Income to Fee-Related Earnings and Distributable EarningsThe following presents a reconciliation of net income to Fee-Related Earnings and Distributable Earnings for the years ended December 31, 2025, 2024 and 2023.FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2025 2024 2023
Net Income $ 2,398 $ 2,108 $ 2,137Add or subtract the following:
Provision for taxes (a)527 438 417Depreciation and amortization (b)68 14 14Carried interest allocations (c)(209) (16) (399)Carried interest allocation compensation (c)146 93 86Other income and expenses (d)250 93 129
Interest expense (e)
115 22 14Interest and dividend revenue (e)(129) (143) (172)Other revenues (f)(570) (372) (300)Share of income from equity method investments (g)(402) (339) (167)
Fee-related earnings of equity method investments at our share (g)
494 330 271
Compensation costs recovered from affiliates (h)
298 218 156Non-recurring restructuring costs (i)— — 35
Other adjustments (j)
9 10 20
Fee-Related Earnings $ 2,995 $ 2,456 $ 2,241
Investment and other income (net of interest expense) (k)
33 170 160
Equity-based compensation expense (l)
44 38 39
Cash taxes (m)
(377) (301) (196)
Distributable Earnings $ 2,695 $ 2,363 $ 2,244
(a) This adjustment removes the impact of income tax provisions on the basis that we do not believe this item reflects the present value of the actual tax obligations that we expect to incur over the long-term due to the substantial deferred tax assets of BAM.
(b) This adjustment removes the depreciation and amortization on property, plant and equipment and intangible assets, which are non-cash in nature and therefore excluded from Fee-Related Earnings as well as certain capital depreciation costs recharged from BAM's affiliates.
(c) These adjustments remove the impact of both unrealized and realized carried interest allocations and the associated compensation expense. Carried interest allocations and associated compensation costs are included in Distributable Earnings once realized.
(d) This adjustment removes other income and expenses associated with fair value changes for consolidated entities and funds.
(e) This adjustment removes interest and charges paid or received by consolidated entities and funds.
(f) This adjustment removes other revenues earned that are non-cash in nature.
(g) These adjustments remove our share of equity method investments' earnings, including items (a) to (f) above and include its share of equity method investments' Fee-Related Earnings.(h) This item adds back compensation costs that will be borne by affiliates.(i) This item represents non-recurring restructuring costs that are not considered as part of the ongoing asset management business(j) This adjustment adds base management fees earned from funds that are eliminated upon consolidation and other items.(k) This adjustment adds back other income associated with our portion of partly owned subsidiaries’ investment income, realized carried interest, interest income received and interest expense.
(l) This adjustment adds back equity-based compensation costs.
(m) Represents the impact of cash taxes paid by the business.
77Reconciliation of Revenues to Fee RevenuesThe following presents our reconciliation of base management and advisory fees to Fee Revenues for the years ended December 31, 2025, 2024 and 2023.FOR THE YEARS ENDED DECEMBER 31,
(MILLIONS)2025 2024 2023
Base management and advisory fees $ 3,384 $ 2,957 $ 2,766Incentive fees (a)561 424 376Fee Revenues from equity method investments (b)1,569 1,335 1,240
Other adjustments (c)
(27) (10) (1)
Fee Revenues $ 5,487 $ 4,706 $ 4,381
(a) This adjustment adds incentive distributions and performance fees that are included in Fee Revenues.
(b) This adjustment adds Oaktree management fees at 100% ownership and our proportionate share of earnings from other partner managers excluding Oaktree.
(c) This adjustment involves base management fees earned from funds that are eliminated upon consolidation and other items.
78Fee Revenues by Geography
The majority of our revenues are earned in the U.S. The following tables set out Fee Revenues disaggregated by investment strategy and geography.FOR THE YEAR ENDED DECEMBER 31, 2025
(MILLIONS)
Infrastructure Renewable power and transition Private equity Real estate Credit TotalManagement and advisory fees, netUnited States $ 143 $ 111 $ 225 $ 653 $ 1,419 $ 2,551
United Kingdom 223 221 82 195 222 943
Canada 401 203 74 50 36 764
Other 200 147 80 192 49 668
Incentive distributions 320 146 95 — — 561
$ 1,287 $ 828 $ 556 $ 1,090 $ 1,726 $ 5,487
FOR THE YEAR ENDED DECEMBER 31, 2024
(MILLIONS)
Infrastructure Renewable power and transition Private equity Real estate Credit TotalManagement and advisory fees, netUnited States $ 124 $ 111 $ 227 $ 634 $ 1,055 $ 2,151
United Kingdom 182 156 84 16 206 644
Canada 354 159 74 40 40 667
Other 247 87 85 278 123 820
Incentive distributions 295 129 — — — 424
$ 1,202 $ 642 $ 470 $ 968 $ 1,424 $ 4,706
FOR THE YEAR ENDED DECEMBER 31, 2023 (MILLIONS) Infrastructure Renewable power and transition Private equity Real estate Credit TotalManagement and advisory fees, netUnited States of America $ 210 $ 103 $ 222 $ 642 $ 864 $ 2,041
United Kingdom 204 151 69 191 148 763
Canada 422 176 104 44 12 758
Other 114 53 80 43 151 441
Incentive distributions 266 112 — — — 378
$ 1,216 $ 595 $ 475 $ 920 $ 1,175 $ 4,381
79Liquidity and Capital Resources
LiquidityBAM maintains sufficient liquidity at all times, enabling it to participate in investment opportunities as they arise, withstand sudden adverse changes in economic conditions, and sustain distributions. Typical cash flow activities include earning fees on assets managed, paying operating expenses, and paying cash dividends to shareholders. From time to time, BAM may draw on a revolving credit facility to bridge timing differences between the receipt and outflow of funds. It may also issue additional debt to finance growth through strategic investments. The primary sources of liquidity, which we refer to as corporate liquidity, consist of cash, short-term financial assets, as well as the undrawn portions of the revolving credit facilities.
As at December 31, 2025, corporate liquidity for BAM is $3.0 billion. This consists of $1.6 billion in cash and short term financial assets that are convertible to cash within twelve months, as well as $1.4 billion in undrawn credit facilities. This liquidity can be deployed for use without any material tax consequences to support BAM in funding strategic transactions as well as seeding new investment products.
• On November 18, 2025, BAM completed a debt offering, issuing $600 million of 5-year bonds at a fixed annual coupon of 4.653% and $400 million of 10-year bonds at a fixed annual coupon of 5.298%. BAM previously issued $750 million of 30-year bonds at a fixed annual coupon of 6.077% on September 9, 2025 and $750 million of 10-year bonds at a fixed annual coupon of 5.795% on April 24, 2025.
• On August 29, 2024, a $750 million five-year revolving credit facility was established through bilateral agreements with a group of lenders. On September 5, 2025, BAM finalized the upsize of the facility from $750 million to $1.1 billion. U.S. dollar draws are subject to the U.S. Base Rate or SOFR plus a margin of 110 basis points, while Canadian dollar draws are subject to the Canadian Prime Rate or CORRA plus a margin of 110 basis points. As at December 31, 2025, the facility is undrawn.
• On November 8, 2022, a $300 million revolving credit facility was established, with BN as lender. U.S. dollar draws are subject to the U.S. Base Rate or SOFR plus a margin of 165 basis points, while Canadian dollar draws are subject to the Canadian Prime Rate or CORRA plus a margin of 165 basis points. As at December 31, 2025, the facility is undrawn.
The following table presents our deployable capital:
Corporate (a)
Group (b)
AS AT DECEMBER 31,
(MILLIONS)
2025 2024 2025 2024
Cash and financial assets, net $ 1,611 $ 792 $ 63,189 $ 54,329
Undrawn committed credit facilities 1,350 1,050 9,565 7,928
Uncalled private fund commitments 110,854 91,463
Total deployable capital $ 2,961 $ 1,842 $ 183,608 $ 153,720
(a) Corporate deployable capital represents the corporate liquidity of BAM.
(b) Group deployable capital consists of: (1) corporate liquidity of BAM, consolidated funds, and the perpetual affiliates, and (2) uncalled private fund commitments, which are third-party commitments available for drawdown in the private funds of BAM.Uncalled Fund CommitmentsThe following presents our Uncalled Fund Commitments as of December 31, 2025 by period and December 31, 2024:AS AT DECEMBER 31,
(MILLIONS)2026 2027 2028 2029 2030 + Total 2025
Dec. 2024
Infrastructure $ 190 $ — $ 208 $ — $ 12,171 $ 12,569 $ 12,848
Renewable power and transition — — 801 — 21,884 22,685 21,015
Private equity 271 125 472 465 11,890 13,223 11,360
Real estate 2,241 — — 2,447 17,895 22,583 15,645
Credit 2,815 938 144 1,967 33,930 39,794 30,595
$ 5,517 $ 1,063 $ 1,625 $ 4,879 $ 97,770 $ 110,854 $ 91,463
Approximately $63 billion of the Uncalled Fund Commitments are currently not earning fees, but will become fee-bearing once the capital is invested. Once invested, we expect these commitments will earn approximately $630 million of additional Fee Revenues.
80Capital Resources
Clawback ObligationsPerformance allocations are subject to clawback to the extent that the performance allocations received to date with respect to a fund exceed the amount due to BAM based on cumulative results of that fund. The amounts and nature of our clawback obligations are described in Part II, Item 8, Note 2 “Summary of Significant Accounting Policies” of the consolidated financial statements of BAM as at December 31, 2025, and 2024, and for the years ended December 31, 2025, 2024, and 2023.Capital RequirementsCertain U.S. and non-U.S. entities of BAM are subject to various investment advisor and other financial regulatory rules and requirements that may include minimum net capital requirements. See "Part I—Item 1. Business—Regulatory Matters". These requirements have been met for the year ended December 31, 2025.Contractual ObligationsOn January 31, 2019, a subsidiary of BAM committed $2.8 billion to BSREP III, of which $2.2 billion has been funded as at December 31, 2025 (December 31, 2024 – $2.1 billion). The remainder of the commitment will be funded by BN.
In the normal course of business, BAM enters into contractual obligations which include commitments to provide bridge financing and other equity commitments. As at December 31, 2025, the Company had $6.6 billion of such commitments outstanding (2024 – $3.3 billion).
BAM established a $750 million five-year revolving credit facility on August 29, 2024 through bilateral agreements with a group of lenders. The facility is available in U.S. and Canadian dollars, where U.S. dollar draws are subject to the U.S. Base Rate or SOFR plus a margin of 110 basis points, while Canadian dollar draws are subject to the Canadian Prime Rate or CORRA plus a margin of 110 basis points. During the year ended December 31, 2025, BAM increased the facility from $750 million to $1.1 billion. As at December 31, 2025, the facility is undrawn.
The following table presents the contractual obligations of BAM by payment periods:Payments Due by Period of BAMAS AT DECEMBER 31, 2025
(MILLIONS)
Less than 1 Year 1 – 3 Years 4 – 5 Years After 5 Years Total
Accounts payable and other, net $ 822 $ 384 $ 378 $ 807 $ 2,391
Due to affiliates 712 — — 8 720
Lease obligations 12 24 23 9 68
Corporate borrowings 1
— — 600 1,900 2,500
1. Excludes deferred financing costs
Accounts payable and other, net of BAM represents amounts due to employees for equity-based compensations costs and carried interest compensation costs. Most awards have a vesting period of up to 5 years. Due to affiliates represents amounts owed to related parties associated with share-based compensation as well as carried interest compensation. Lease obligations represent expected payments associated with current leases entered into by the Company.Exposures to Financial InstrumentsAs discussed elsewhere in this report, we utilize derivatives and other financial instruments in our business to manage risk and optimize the use of our capital. The notional and fair values of these instruments are disclosed in Part II, Item 8, Note 6 “Fair Value Measurements of Financial Instruments” and Note 8 “Derivatives,” to the consolidated financial statements of BAM as at December 31, 2025, and 2024 and for the years ended December 31, 2025, 2024, and 2023.Off-Balance Sheet ArrangementsBAM may from time to time enter into guarantees given in respect of co-investments in which there is carried interest. The amount guaranteed is up to the carried interest amount paid to the General Partner, net of taxes. No known amounts are currently due or owed under these guarantees.Related Party TransactionsBAM entered into a number of related party transactions with BN and other affiliates. See Part II, Item 8, Note 20 “Related Party Transactions” of the consolidated financial statements of BAM as at December 31, 2025, and 2024 and for the years ended December 31, 2025, 2024, and 2023.
81BAM DividendsThe dividends paid by BAM on outstanding securities for the years ended December 31, 2025, 2024, and 2023 are summarized in the table below.Distribution per Security2025 2024 2023
Per Class A Share and Class B Share $ 1.75 $ 1.52 $ 1.28
Subsidiary Public Issuers
BAM Finance LLC (the “U.S. Finco”) is a Delaware limited liability company formed on March 26, 2025 and is a subsidiary of the Company. As at December 31, 2025, the U.S. Finco had no debt outstanding.
BAM Finance (Canada) Inc. (the “Canadian Finco”) was incorporated on March 26, 2025 under the Business Corporations Act (Ontario) and is a subsidiary of the Company. As at December 31, 2025, the Canadian Finco had no debt outstanding.
The U.S. Finco and Canadian Finco (together the “Finance Debt Issuers”) have no independent activities, assets or operations other than in connection with any securities that they may issue. Any debt securities issued by the Finance Debt Issuers will be fully and unconditionally guaranteed as to payment of principal, premium (if any), interest and certain other amounts by the Company.
During the year ended December 31, 2025, BAM's $750 million senior notes due 2035, $750 million senior notes due 2055, $600 million senior notes due 2030 and $400 million senior notes due 2036, were all issued directly by BAM.
The following tables contain summarized financial information of the Company, U.S. Finco, Canadian Finco and non-guarantor subsidiaries:
AS AT AND FOR THE YEAR ENDED
DECEMBER 31, 2025 (3)
(MILLIONS)
BAM U.S. Finco
Canadian Finco
Other subsidiaries of BAM (1)
Consolidating Adjustments (2)
BAM Consolidated
Revenues $ 86 $ — $ — $ 7,684 $ (2,953) $ 4,817
Net income (loss) attributable to shareholders 2,905 — — 2,160 (2,580) 2,485
Total assets 11,452 — — 45,111 (39,516) 17,047
Total liabilities 3,334 — — 11,307 (7,904) 6,737
Preferred shares redeemable non-controlling interest — — — 1,398 — 1,398
AS AT AND FOR THE YEAR ENDED
DECEMBER 31, 2024
(MILLIONS)
BAM U.S. Finco
Canadian Finco
Other subsidiaries of BAM (1)
Consolidating Adjustments (2)
BAM Consolidated
Revenues $ 1,368 $ — $ — $ 5,474 $ (2,862) $ 3,980
Net income (loss) attributable to shareholders 1,460 — — 3,347 (2,639) 2,168
Total assets 13,558 — — 36,641 (36,042) 14,157
Total liabilities 4,806 — — 4,679 (6,519) 2,966
Preferred shares redeemable non-controlling interest — — — 2,103 — 2,103
AS AT AND FOR THE YEAR ENDED
DECEMBER 31, 2023
(MILLIONS)
BAM U.S. Finco
Canadian Finco
Other subsidiaries of BAM (1)
Consolidating Adjustments (2)
BAM Consolidated
Revenues $ 456 $ — $ — $ 5,201 $ (1,595) $ 4,062
Net income (loss) attributable to shareholders 11,423 — — 2,529 (12,113) 1,839
Total assets 15,640 — — 33,443 (34,793) 14,290
Total liabilities 6,514 — — 2,581 (6,270) 2,825
Preferred shares redeemable non-controlling interest — — — 2,166 — 2,166
1. This column accounts for investments in all subsidiaries of BAM other than the Finance Debt Issuers, on a combined basis.
2. This column includes the necessary amounts to present BAM on a consolidated basis.
3. Reflects the completion of the 2025 Arrangement.
82Summary of Significant Accounting PoliciesCritical Accounting Policies, Critical Accounting Estimates and Judgements
BAM prepares consolidated financial statements in conformity with U.S. GAAP. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates that affect the amounts reported. Management believes that estimates utilized in the preparation of the consolidated financial statements are presented fairly, in all material respects. Such estimates include those used in the valuation of investments and the measurement of deferred tax balances (including valuation allowances) and the determination of control or significant influence. Actual results could differ from those estimates and such differences could be material. BAM believes the following critical accounting policies could potentially produce materially different results of BAM, if underlying assumptions, estimates and/or judgments were to be changed. For a full description of accounting policies, see Part II, Item 8, Note 2 “Summary of Significant Accounting Policies” of the consolidated financial statements as at December 31, 2025 and December 31, 2024 and for the years ended December 31, 2025, 2024, and 2023.Equity Method InvestmentsInvestments in which BAM is deemed to exert significant influence, but not control, are accounted for using the equity method of accounting. BAM has significant influence over our partner managers and therefore accounts for these investments under the equity method.
The carrying value of equity method investments is determined based on amounts invested by BAM, adjusted for the equity in earnings or losses of the investee allocated based on the relevant agreements, less distributions received. Under the equity method of accounting, BAM's share of earnings from equity investments is included in the share of income from equity investments in the consolidated statements of operations. BAM evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.
Refer to Part II, Item 8, Note 4 “Investments” of the consolidated financial statements for further details of our equity method investments.Control or Level of InfluenceWhen determining the appropriate basis of accounting for BAM's investees, BAM makes judgments about the degree of influence that it exerts directly or through an arrangement over the investees’ relevant activities. This may include the ability to elect investee directors or appoint management. Control is obtained when BAM has the power to direct the relevant investing, financing and operating decisions of an entity and does so in its capacity as principal of the operations, rather than as an agent for other investors. Operating as a principal includes having sufficient capital at risk in any investee and exposure to the variability of the returns generated as a result of the decisions of BAM as principal. Judgment is used in determining the sufficiency of the capital at risk or variability of returns. In making these judgments, BAM considers the ability of other investors to remove BAM as a manager or general partner in a controlled partnership.Carried Interest Allocations - Unrealized
The change in the fair value of investments is a significant input into carried interest allocations - unrealized. Estimates and assumptions are made when determining the fair value of the underlying investments within the funds. See “Fair Value” below for further discussion related to significant estimates and assumptions used for determining fair value of the underlying investments.
Fair ValueBAM uses fair value throughout the reporting process. For details of our accounting policies related to fair value refer to Part II — Item 8. Note 2. “Summary of Significant Accounting Policies — Fair Value of Financial Instruments” and “Summary of Significant Accounting Policies — Revenue Recognition” in the “Notes to the consolidated financial statements”. The following discussion is intended to provide supplemental information about how the application of fair value principles impact our financial results, and management’s process for implementing those principles including areas of significant judgment.
The fair value of the investments held by BAM's funds is the primary input to the calculation of certain of our management fees, incentive fees, performance fees and the related compensation we recognize. In the absence of observable market prices, we utilize valuation methodologies applied on a consistent basis and assumptions that we believe market participants would use to determine the fair value of the investments. For investments where little market activity exists management’s determination of fair value is based on the best information available in the circumstances, which may incorporate management’s own assumptions and involves a significant degree of judgment, and the consideration of a combination of internal and external factors, including the appropriate risk adjustments for non-performance and liquidity risks.Management has elected the fair value option for certain equity method investments. Additionally, management is required to measure specific financial instruments at fair value, including debt instruments, equity securities, and freestanding derivatives.83Our primary approach to determining the fair value of our investments is generally the income approach, which estimates fair value based on the present value of expected future cash flows generated by a business. The most commonly used method within this approach is the discounted cash flow method, which incorporates key assumptions about the investment’s projected net earnings or cash flows, discount rate, capitalization rate, and exit multiple.
Alternatively, management uses the market approach as a secondary methodology. This approach primarily relies on valuations of comparable public companies, transactions, or assets, requiring judgment in selecting appropriate comparables. Depending on the specific facts and circumstances of the investment, alternative primary and secondary methodologies may be applied, including option value, contingent claims or scenario analysis, yield analysis, projected cash flow through maturity or expiration, discount to sale, probability-weighted methods, or recent financing rounds.