Brookfield: Fundraising ‘stronger than ever’

Brookfield Asset Management sees itself in the strongest cash position ever as it continues its fundraising effort, coming off of a $40 billion cross-platform haul in 2020.

Investor interest for all funds is “stronger than we’ve ever seen and we expect these fund to be larger than their predecessors”, chief executive Bruce Flatt said on a Q1 2021 earnings call Thursday. A “low-ish” interest rate environment will continue to drive inflows into alternative assets, he added.

The firm’s fourth flagship real estate fund will soon hold its first close, with the first-of-its-kind Brookfield Global Transition Fund to have a first close soon thereafter. The fund, which is set up to invest in greenfield developments as well as to provide capital to companies transitioning to a net-zero carbon footprint, has a $7.5 billion target, and the manager has already seeded $2 billion to start it off, according to Private Equity International data.

“There is no fund out there like the fund we have created,” Flatt said of the Transition Fund. “This is a new business for the alternative management industry, which inevitably requires some investor education.” That said, “virtually every investor in the world is interested in figuring out how they deploy money into this sector smartly”.

Brookfield is likely to close the fund’s first transaction soon, Flatt added.

Brookfield continues to deploy capital in infrastructure and private equity, having raised nearly $30 billion over the last two years, and it expects to begin fundraising the next vintages later in 2021 or early in 2022, as PEI reported in February. Those funds were about 60 percent deployed at that time.

Infrastructure spending is set to increase meaningfully as central banks and governments navigate the covid-19 recovery, creating “opportunities for infrastructure investors, like ourselves, for decades”, said Flatt.

BAM’s burgeoning, but already mammoth, secondaries capability, which sister publication Secondaries Investor examined in March, will seek to help mid- to small-size general partners restructure assets or existing funds, Flatt said, calling the sector a “a very attractive area”.

Brookfield has largely decided to grow that capability organically. The firm has raised capital for real estate secondaries, where it has made a number of investments, and is building out infrastructure with plans to turn to private equity next, according to Flatt. These are the same assets BAM deals with on the primary side, making this a highly-additive business as existing clients crave solutions, he went on to say.

Many asset valuations are high, making it harder to find investments. But that scarcity has allowed Brookfield to raise significant cash from asset sales, which have increased as older vintage funds come to maturity and newer business plans ferment, according to chief financial officer Nicholas Goodman.

Of course, deploying that new capital isn’t easy in this highly competitive environment. “We need to be more creative to find value,” he said.

Close to half of realised carried interest in the last five years crystalised in the last six months, Goodman highlighted.