Bruce Flatt, chief executive officer of Brookfield Asset Management Inc., is putting Blackstone Group, Carlyle Group, KKR & Co., and others on notice that his Toronto– based firm is about to make a major push into private equity.
Flatt says his buyout firm will earn comparisons to the largest of Wall Street's alternative-asset managers.
"If you don't mention it today, you should," Flatt said in an interview at his New York office with Bloomberg Television's Erik Schatzker.
That may take time. While Brookfield Asset Management oversees a total of more than $225-billion (U.S.) in assets, its private-equity arm, Brookfield Business Partners, has just $7.7-billion. Blackstone's buyout business has $91-billion, while Carlyle has $63-billion.
Flatt has history on his side. Brookfield, which grew out of the Canadian billionaire Bronfman family's Brascan Corp. holding company, has increased book value by almost 10-fold since Flatt became CEO in 2002, more than twice as fast as Warren Buffett's Berkshire Hathaway Inc. Over the same period, Brookfield shares have returned more than 800 per cent versus about 170 per cent for Berkshire.
Flatt says Brookfield retains the Brascan approach to investing, and that sets it apart from rivals such as KKR and Blackstone, whose founders were bankers. "They're all savvy and they're all excellent organizations," he said. "We're owner-operators. We buy businesses we hold for long periods of time. We earn greater multiples of capital. We're just a little different."
Until now, Flatt has been content to build his businesses with little fanfare. Brookfield's personality, he said, is "generally low key, generally conservative, worried about downside protection."
Flatt says the company's private-equity arm, which is expected to be spun out from the parent in the next few months, could one day be as big as Brookfield's other investment units, which run as much as $138-billion.
The current turmoil in global markets that has sent stocks and commodities reeling, isn't a deterrent for long-term investors like Brookfield. The company is intentionally counter– cyclical, and is excited about opportunities in volatile markets like China and Brazil. Flatt said the oil and gas and broader commodity sector present buying opportunities, making them net buyers in those places, along with Europe, Canada and India, and net sellers in the U.S. after strong gains there.
"We're a net buyer in anything that is out of favour," he said. "As contrarian investors we're always trying to find those spots around the world."
That conservative model of investing in "economic backbone assets" has served the parent company well over the years as it amassed $220-billion worth of assets under management. The Canadian company, which was established in 1899 in Brazil as Brascan, is now larger than the biggest pension funds in the country, including Canada Pension Plan Investment Board, taking into consideration currency conversion, which has about $273-billion (Canadian) under management.
The company's value has soared along with its assets. Brookfield shares have risen fourfold since the end of the financial crisis in 2009, for a market value of more than $28-billion. That's in line with Blackstone, and more than twice as big as New York-based KKR.
Brookfield is in the midst of raising an additional $25-billion to fund future acquisitions. Flatt said the pace of growth at Brookfield is largely due to its scale and its presence in more than 30 countries across four diverse investment areas including power, infrastructure, real estate and private equity.
Brookfield is devoting "significant" resources and people in China to reap the benefits of long-term growth in the world's second-biggest economy.
"Five years from now and 10 years from now there will be amazing opportunities to be in the country" Flatt 50, said. "It will be great to be there."
Flatt has a similar take on Brazil, which he describes as a "mess" right now, with the currency and economy plunging.
"This country is going to come around," Flatt said. "We've continued to put money into the country over the last while."
Bridge to Canada
One area that is once again showing promise is at home in Canada, where the weak Canadian dollar is creating some buying opportunities, Flatt said. Canada has pledged to double its infrastructure spending over the next decade to $125-billion. Brookfield would consider participating in that, Flatt said.
"Canada is still a great place to invest," he said. About 10 per cent of Brookfield's portfolio is in the country, compared with about 50 per cent in the U.S, he said. "It probably ranks as good or better than the United States, in particular because of our heritage."
"I'd say maybe for the first time in a long time, there may be opportunities for us to put more money into work in Canada," he added.