Brookfield (BN 4.33%) and Blackstone (BX 5.85%) are behemoths in the alternative investment world. Both have over $1 trillion in assets under management (AUM). They've grown briskly as more investors have increased their allocations to alternatives.
The global investment firms have enriched their shareholders over the years. Blackstone has delivered a 26.5% annualized total return over the last decade, while Brookfield's is a robust 18.3%, both exceeding the S&P 500's 15.9% return. Here's a look at which one will make you richer in the future.
Image source: Getty Images.
A potentially more enriching business model
Blackstone has a straightforward business model. It's an alternative asset management company focused on private equity, credit & insurance, real estate, and hedge funds. It generates steady management and advisory fees, as well as performance fees, when the funds it manages exceed their targeted returns. The company's earnings grow as it increases its fee-related AUM and delivers strong investment returns for fund investors. Blackstone typically grows its earnings by about 20% annually and returns most of its profits to investors through dividends and share repurchases.
Brookfield also operates a leading alternative asset management business. Additionally, the company has a wealth management platform (insurance and annuities) and a portfolio of operating companies (renewable energy, infrastructure, private equity, and real estate). In many ways, Brookfield is like a combination of Blackstone and Berkshire Hathaway. It manages capital for investors in its funds and invests capital directly in its funds (something Blackstone doesn't typically do) and in operating businesses.
NYSE: BN
Key Data Points
Brookfield believes its strategy will deliver annual earnings growth of more than 25% over the next five years. That's an acceleration from the 22% annualized growth rate it has delivered over the past five years. Despite that robust growth, the company's current stock price (around $47 per share) is well below Brookfield's estimated intrinsic value of its business ($68 per share).
While Blackstone should continue to enrich its investors, Brookfield's undervalued stock and robust earnings growth outlook set it up to make its investors even richer in the coming years.
