Pershing Square Inc. on Brookfield Corporation

Pershing Square believes Brookfield is substantially undervalued following a 20% year-to-date share price decline caused primarily by concerns affecting the alternative asset management industry and rising interest rates. Although investors worry that higher rates will delay asset monetizations and carried interest realization, carried interest represented only 8% of Brookfield's trailing twelve-month earnings and therefore provides more upside optionality than downside risk to current profitability. Brookfield's focus on real assets should make the company more resilient than alternative managers with greater exposure to other asset classes. Higher interest rates also create opportunities for Brookfield Wealth Solutions to earn attractive investment spreads on long-duration insurance liabilities, including the $40 billion liability portfolio acquired through Just Group. Management recently established a five-year target of 24% compounded EPS growth, while Pershing Square expects at least mid-teens distributable EPS growth over the next twelve months. At approximately 11 times earnings and a valuation roughly 20% below KKR and Apollo, the fund sees highly attractive prospective investment returns.