Navigating the Volatility: Partners Value Investments' Q2 2025 Earnings and the Resilience of Brookfield Holdings Amid Remeasurement Accounting

In the second quarter of 2025, Partners Value Investments Inc. (PVII) delivered a financial report that epitomizes the duality of market-driven accounting volatility and operational resilience. The company's net loss of $135 million—driven by a $247 million remeasurement loss on retractable common shares—stands in stark contrast to its underlying investment income of $36.26 million, primarily from stakes in Brookfield Corporation (BN) and Brookfield Asset Management Ltd. (BAM). This divergence underscores a critical question for investors: How should one interpret the structural liabilities of PVII, and what does this mean for the long-term value of its Brookfield holdings in a volatile market?

The Remeasurement Conundrum

PVII's retractable common shares, classified as liabilities due to their cash retraction feature, are marked to market quarterly based on the quoted price of the Partnership's units. In Q2 2025, a $3.39 increase in the unit price triggered a remeasurement loss, as the fair value of these shares rose. This loss was partially offset by gains on warrants ($119 million) and exchangeable shares ($21 million), yet the net impact remained a drag on earnings.

The key takeaway here is that these gains and losses are non-cash and purely accounting-driven. They reflect the sensitivity of PVII's liabilities to market conditions rather than operational performance. For instance, the company's adjusted losses of $21 million for the quarter—excluding remeasurement adjustments—reveal a more stable core business. This metric, while down from prior-year adjusted earnings of $29 million, still highlights the resilience of PVII's investment income, particularly from its 8% stake in BN and 2% stake in BAM.

Brookfield Holdings: A Pillar of Resilience

The appreciation of BN and BAM shares—$61.85 and $55.28 per share as of June 30, 2025, respectively—has been a tailwind for PVII's equity valuation. These positions, which represent a significant portion of the Partnership's portfolio, are not subject to the same remeasurement volatility as retractable shares. Instead, their value is tied to the long-term performance of Brookfield's asset management and infrastructure businesses, which have historically demonstrated stability.

Investors should consider that PVII's exposure to Brookfield is not merely speculative. Brookfield's diversified portfolio—spanning real estate, renewable energy, and infrastructure—provides a buffer against sector-specific downturns. For example, Brookfield's recent investments in green energy projects and its global infrastructure fund have positioned it to benefit from decarbonization trends, a factor that could bolster PVII's holdings over time.

Currency and Structural Risks

A less-discussed but critical factor in PVII's earnings is foreign currency exposure. The Partnership's Canadian dollar liabilities and U.S. dollar-denominated assets create a dynamic where exchange rate fluctuations can amplify or mitigate remeasurement effects. In Q2 2025, unfavorable currency movements contributed to adjusted losses, but this risk is manageable given the hedging strategies typically employed by asset managers.

Moreover, the ten-for-one unit split executed on August 8, 2025, has normalized per-unit metrics, making it easier for investors to assess the Partnership's net book value. As of June 30, 2025, the net book value per unit stood at $11.47 post-split, a figure that, while impacted by short-term losses, remains underpinned by the growing value of Brookfield's equities.

Investment Implications

For long-term investors, PVII's Q2 results highlight two key themes:
1. Separating Noise from Signal: The remeasurement losses are a function of accounting rules, not operational failure. Investors should focus on adjusted metrics and the performance of core holdings like BN and BAM.
2. Strategic Positioning in Brookfield: The appreciation of Brookfield's shares suggests that PVII's equity portfolio is well-positioned to benefit from broader market trends, particularly in infrastructure and sustainable assets.

Conclusion

Partners Value Investments' Q2 2025 earnings report is a case study in the challenges of managing a balance sheet with complex liabilities. While remeasurement accounting creates short-term volatility, the company's strategic investments in Brookfield provide a foundation for long-term value creation. For investors, the path forward lies in looking beyond quarterly accounting swings and evaluating the durability of PVII's core holdings. In a market where volatility is inevitable, PVII's Brookfield stakes may prove to be its most valuable asset.

Investment Advice: Consider PVII as a speculative play for those comfortable with short-term accounting noise and confident in Brookfield's long-term growth trajectory. For a more conservative approach, focus on adjusted earnings and monitor the performance of BN and BAM shares as key indicators of PVII's equity valuation resilience.