More land, buildings and assets you can see and touch – that's what institutional investors want from Brookfield Asset Management Inc.
Brookfield said Monday that it had amassed $9-billion (U.S.) in commitments for a private real estate fund in the latest signal that large investors are hungry for more "real" assets. The fund is a whopping $2-billion larger than its initial target – and more than double the size of the fund's predecessor in 2013.
Real estate has a broad appeal to investors hunting for yield and looking for ways to diversify their investments amid volatile equity market conditions. Brookfield's fund is supported by more than 100 institutional investor groups, including sovereign wealth funds and pension plans. The Toronto-based alternative asset manager has itself pledged $2.3-billion to the fund through its related company Brookfield Property Partners LP.
The new real estate fund, called Brookfield Strategic Real Estate Partners II, has already begun to invest. About 45 per cent of assets have already been promised to pay for properties in the United States, Europe and Brazil.
Investments made with the new Brookfield fund include a broad range of buildings, such as Berlin's Potsdamer Platz office and retail development. Brookfield completed that deal earlier this year.
The fund is also expected to buy the rest of mall owner Rouse Properties Inc. it doesn't already own, after striking a deal to buy the U.S. real estate investment trust earlier this year.
And Brookfield is looking beyond office towers and shopping complexes: The fund will also invest in a portfolio of woodland holiday villages in Britain, designed for quick getaways. One of the properties is in Sherwood Forest in Nottinghamshire, made popular for its ties to the tale of Robin Hood.
"This fundraise eclipsed our target and shows that private capital demand for real estate investment with a strong global sponsor has not abated," Brian Kingston, head of Brookfield Property Group, said in a statement.
At the same time, Brookfield has been seeking more investors who want a piece of the global infrastructure market, an arena of frenzied bidding for airports, toll roads and shipping hubs all over the world.
Brookfield has been seeking capital commitments for a new fund in that asset class, too. The third global infrastructure fund has already raised about $10-billion, according to a source familiar with the fundraising. It is expected to attract about $12-billion in capital by its final closing date expected this summer.
That compares with a final close value of $7-billion on Brookfield Infrastructure Fund II in 2013, which started out aiming to raise just $5-billion.
Brookfield will then go up against the world's largest pension funds, sovereign wealth funds and other infrastructure funds for assets in a crowded market.
Last month, Brookfield secured its investment in Australian port and rail operator Asciano Ltd., after its initial deal announced last August was delayed by months of negotiations and the emergence of competing bidders.
High demand for infrastructure assets and commercial real estate in the private market is leading to high asset valuations.
Chief executive officer Bruce Flatt's view is that most institutions want to invest a lot more in these two asset classes.
He told analysts on a recent conference call that even if a decline in equity markets shrinks the value of these portfolios, large global investors are still going to want to allocate a larger chunk of their total capital to these alternative asset classes.