Brookfield Asset Management Ltd. BAM-T has raised US$19-billion so far this year, shrugging off a tough fundraising environment and turning increasingly to the Middle East and Asia to attract new money for its investment funds.
A tough economic outlook and the impact of interest-rate increases have made capital relatively scarce, setting up a hard slog for many institutional investors looking to raise funds. But Brookfield, which raised US$13-billion in the first quarter and nearly US$100-billion over the past year, still sees “the potential for our fundraising to accelerate throughout the year,” said chief executive officer Bruce Flatt and president Connor Teskey in a letter to shareholders.
In part, Brookfield is benefiting from its size and reach, with more than US$825-billion in assets under management and operations in 30 countries. Where institutional investors do have money to put to work, they “are increasingly concentrating their commitments among the largest asset managers who can offer a range of asset types and investment strategies,” Mr. Flatt and Mr. Teskey said.
As capital has grown harder to come by in North America, Brookfield has raised more cash from countries such as Australia, South Korea, Saudi Arabia and Qatar. After setting up offices in the Middle East and Asia over the past decade, Brookfield raised about 40 per cent of its new capital from those regions over the past year. Almost 70 per cent of its fundraising over the past year came from pension funds, sovereign wealth funds and insurance companies.
“We are currently seeing an increased proportion of our fundraising coming from non-U. S. clients,” Mr. Flatt and Mr. Teskey said.
Brookfield is also expecting to take advantage as business conditions get tougher for banks and rival investors with rising rates and slowing economic growth. The asset manager expects there will be consolidation among alternative investment managers that could create opportunities for acquisitions in the coming years. And it plans to move more aggressively into private lending as banks pull back, with a tougher economic outlook and a crisis in U.S. regional banks dampening the supply of new loans.
Brookfield is launching a direct lending strategy through its majority stake in Oaktree Capital Group LLC that will originate senior secured loans of US$500-million or more to U.S. companies owned by private-equity backers. Brookfield also disclosed that it paid US$174-million in cash to boost its stake in Oaktree to 68 per cent from 64 per cent, and expects to incrementally add to its ownership in the coming years.
“With banks retrenching, this creates a very meaningful, long-term growth opportunity for our business where we’re well-positioned to step into that void that’s created,” Mr. Teskey said on a conference call with analysts.
In the first quarter, Brookfield invested US$17-billion, some of it in support of major acquisitions including part of Australian power generator Origin Energy Ltd. with a consortium of investors, and shipping container giant Triton International Ltd., as Brookfield eyes opportunities from efforts to rework global supply chains.
Brookfield said it has total capital of nearly US$80-billion available to make new investments.
On Wednesday, the asset manager reported its first full quarter of earnings since it was spun off from parent Brookfield Corp. as a stand-alone entity last year.
Profit was US$516-million or 32 cents a share, compared with US$348-million or 21 cents in the same quarter last year.
Fee-related earnings were US$547-million, up 15 per cent year over year, or 33 cents a share. And distributable earnings – a measure of cash flow that shows how much of company profits could be paid out to shareholders – rose 15 per cent to US$563-million or 34 cents.
Brookfield’s fee-bearing capital was US$432-billion, up US$14-billion in the first quarter and 14 per cent over the past year, and Brookfield expects to be able to more than double it to US$1-trillion over the next five years.
To reach that goal, Brookfield is raising new funds in infrastructure, real estate, private equity and private credit, in addition to launching a second climate transition fund to make investments in clean energy and decarbonization.