• Provides warchest ahead of Business Partners spin out
  • ‘We are attracting capital from different parts of the world’

Brookfield Asset Management Inc.’s private equity division will have a $4 billion war chest to deploy when it’s spun out next month from the country’s largest alternative asset manager, about $500 million more than expected.

Brookfield’s latest private equity fund, which closed Wednesday, was raised in about a year, six months quicker than the previous fund which was a fraction of the size at $1 billion, said Cyrus Madon, chief executive officer of the division, Brookfield Business Partners.

"We’ve made an effort to broaden our investor base and we are attracting capital from different parts of the world," Madon said in a phone interview. The biggest increases in its investor base came from the U.S, the Middle East and Asia, he said.

The closing of the private equity fund Wednesday is part of a record $25 billion that Brookfield raised over the past 12 months for its flagship funds, a reflection of global capital seeking a home outside traditional investments such bond markets, where yields remain near record lows.

The new fund will continue to be focused on opportunities in business services and the industrial sector with equity investments ranging from $200 million into the billions and will focus on regions where Brookfield already operates, including the U.S., Canada, Brazil, Europe and Australia, Madon said.

Lucrative Opportunities

About $1.5 billion of the new fund has already been invested in three companies -- facilities manager Global Integrated Solutions Ltd., a group of former Apache Energy Ltd. oil and gas assets, and graphite manufacturer GrafTech International Ltd.

The private equity arm will expand into other segments over time, he said.

"We generally try to invest in out of favor sectors and industries, so our strategy is not going to change," Madon said. "But we are seeing some potentially very lucrative opportunities."

Brookfield Asset Management shareholders will receive a special dividend of 50 cents a share, or about $500 million, when Brookfield Business Partners is spun out on June 20. It will become the fourth publicly traded Brookfield subsidiary, along with Brookfield Infrastructure Partners, Brookfield Renewable Partners, and Brookfield Property Partners.

Hold Forever

The goal is to grow the unit to the size of the other subsidiaries, Madon said. It’s currently the smallest with about $8.1 billion in assets under management. The largest subsidiary, Brookfield Property Partners, had about $65 billion in assets under management at the end of the first quarter.

The parent company, which has a total $240 billion in assets under management, will retain about a 78 percent ownership stake in the private equity arm.

Bruce Flatt, chief executive of Brookfield Asset Management, encourages investors to hold onto the shares as his management team builds out the business. He has said he would like Brookfield to compete with the largest buyout firms on Wall Street, including Blackstone Group, Carlyle Group and KKR& Co.

Brookfield’s private equity business has a much longer investment horizon than traditional private equity firms, which typically hold their investments for five to seven years. Some of its businesses have been held in the portfolio for 25 years and continue to grow and generate cash flow.

"We can own great businesses forever, and that’s really what our goal is," Madon said.

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