Brookfield to launch new ‘flagship’ fund next year

The Canadian firm revealed plans for fundraisings across private equity, infrastructure and real estate.

Canada’s Brookfield Asset Management has revealed it expects to begin fundraising for a new flagship private equity fund next year.

Last summer the firm closed Brookfield Capital Partners IV on $4 billion, above its $3.5 billion target and four times larger than its predecessor, which closed on $1 billion in September 2011.

The 2016 vehicle included a $1 billion commitment from Brookfield, as well as commitments from 98 limited partners, according to a US Securities and Exchange Commission filing in April 2016.

That fund is now 55 percent invested, the firm told shareholders in a letter late last week. Its $14 billion Brookfield Infrastructure Fund III, which closed in July last year and was at the time the world’s largest infrastructure fund, is now 45 percent invested, and its $9 billion real estate fund is 80 percent deployed.

“Given this [investment], we expect to launch fundraising for our next real estate flagship fund later this year and to begin fundraising for our next infrastructure and private equity flagship funds in 2018,” chief executive Bruce Flatt wrote.

Brookfield declined to comment on a planned target for the new private equity fund.

In the letter, Flatt wrote that Brookfield continues to focus on “developing new investment products where we see attractive opportunities”, with credit strategies being a particular area of focus.

“Within our infrastructure business, we recently launched a debt fund to provide loans backed by high quality core infrastructure assets. In our real estate business we launched our first open-ended debt fund in North America, which is in addition to our existing mezzanine credit funds. Within our private equity business we are originating loans to companies that lack access to traditional capital markets in the mid-market credit area.”

Brookfield’s private equity team recently completed the $1 billion acquisition of a water distribution business in Brazil, which it has renamed BRK Ambiental. BRK operates water and sewage treatment systems and serves around 17 million people, a little over 8 percent of the Brazilian population.

In the letter, Flatt wrote that there were “many challenges that caused most logical buyers not to pursue this opportunity”, including the recession in Brazil and the government corruption scandal in which BRK’s seller was implicated.

“We took a long-term view of this opportunity at a time when few others could, and therefore competition was limited,” Flatt wrote. “This was largely due to our strong presence and reputation in Brazil, our access to capital, and the scale of operations necessary to complete a transaction of this size.”

The private equity team has also announced the acquisition of a gas station business in Canada for around $410 million.

In closing, Flatt wrote that Brookfield remains committed to investing in “high quality, simple to understand assets which earn a solid cash return on equity, while emphasizing downside protection for the capital employed”.

“The primary objective of the company continues to be generating increased cash flows on a per share basis, and as a result, higher intrinsic value per share over the longer term.”