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People walk to Brookfield Place off Bay Street in Toronto in this file photo.© Mark Blinch / Reuters

Brookfield Asset Management Inc. is tailoring the way it works with clients amid higher demand for direct access to big deals.

The Toronto-based asset manager is projecting that the world's institutional and sovereign investors, particularly in regions such as Asia, will only increase their focus on alternative asset classes in the coming years. At the same time, Brookfield is swiftly raising money as public market turmoil, sunken commodity prices and a sell-off in high-yield bonds create investment opportunities.

Brookfield said Friday that annual profit was $4.7-billion (U.S.) in 2015, compared to $5.2-billion a year earlier. The firm did $21-billion worth of acquisitions around the world, from toll roads in India to a stake in a major Australian rail and port logistics company. Now Brookfield is raising capital for six funds, seeking $21-billion by midyear, with about $15-billion coming from "third parties."

"There is an enormous change going on in the institutional client world driven by the fact that interest rates have come down dramatically over the last number of years and they need to earn yield within their funds," Bruce Flatt, chief executive officer of Brookfield, said on a call with analysts Friday. "The percentage allocations to real assets hasn't even started to go to the percentages [that] most of them want."

Brookfield had 340 global private fund investors at the end of 2015, up 21 per cent from a year earlier. The average investment commitment of these clients is about $90-million, and two in every five of them are invested in more than one fund, the company said.

As the private funds Brookfield manages have grown larger and more numerous, the company's relationship with its clients has evolved. Brookfield has steadily been decreasing the amount of capital it invests alongside other investors as a percentage of the fund. Brookfield said the "capital harvested from earlier funds should be sizable enough to fund the commitments we have made to later funds" in a way that is self-sustaining.

This could erode a key attribute that has set Brookfield apart from competing money managers – the firm has been known for having a lot of skin in the game alongside clients.

When asked about this shift on the call, Mr. Flatt agreed that the organization's culture had been built on its commitment to invest alongside clients in the funds. But he said clients' investment interests and priorities are evolving.

Brookfield draws and retains some clients not only for returns generated through its investment funds, but also for the unique access it can provide to direct investments in properties, infrastructure and other real assets.

"So they are getting the opportunity to directly invest into [deals] with us on a percentage basis, and that's very important to some of them," Mr. Flatt said. These deeper co-investment relationships keep clients coming back, he added. The company highlighted the $2.8-billion (Canadian) acquisition of Colombian power generator Isagen SA in January as one such deal that included clients as co-investors.

Meanwhile, Brookfield is also sprouting another separately listed partnership, with plans to spin off part of its business services and industrial operations division called Brookfield Business Partners in the first half of the year.

The first partnership to be listed was Brookfield Infrastructure Partners in 2008, which was subsequently joined by Brookfield Property Partners and Brookfield Renewable Energy Partners. The parent company retains a significant investment in each of the partnerships, but the listed businesses are now considered to be self-sufficient in that they can grow on their own, raise capital and sell assets, Brookfield said.

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Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/03/24 4:00pm EDT.

SymbolName% changeLast
BAM-N
Brookfield Asset Management Ltd
-0.9%40.55
BAM-T
Brookfield Asset Management Ltd
-0.99%54.91
BBU-N
Brookfield Business Partners LP
+1.14%20.9

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