Brookfield Seeks $150 Billion in Perpetual Funds Amid Low RatesBy
Products targeting U.S. real estate already reached $3 billion
Renewable energy and infrastructure offerings considered
Brookfield Asset Management Inc. has started to create funds for investors who want to indefinitely hold on to assets like real estate as a supplement to fixed income portfolios, with a view to offerings that could grow to more than $150 billion.
The so-called private perpetual funds will allow clients to invest in an asset class for a longer period of time than a traditional fund that has a certain number of years to reap the returns, Chief Executive Officer Bruce Flatt said.
Brookfield, Canada’s largest alternative asset manager, has started with a private perpetual fund focused on real estate in the U.S., which over the past 12 months has accumulated $2 billion in gross assets and $1 billion of equity investments.
"If interest rates stay relatively low, then this opportunity is going to stay for a very long time," Flatt said on a conference call Thursday. "Over the next five to seven to ten years, as long as we’re in a low interest rate environment, this business is going to expand exponentially because it’s going to really replace a portion, or a significant portion, of traditional fixed income investments in pension and other sovereign plans."
Brookfield is also considering similar products for renewable energy and infrastructure assets. Each one of the three businesses could grow to over $50 billion, Flatt said.
"It’s like owning real estate as a perpetual investor," he said. "Therefore they just buy it and it’s owned for a very long period of time. So the fees and the incentives for the managers are set up to have very long duration capital invested and therefore investors get the benefits of owning a piece of infrastructure or real estate and they don’t have to sell it."