Brookfield Asset Management: “We’re in the business of owning the backbone of the global economy”

by COMPUTER1313

www.ft.com/content/d6f9b346-9bbc-320c-b5c5-7b9b4f854c91

“We’re in a 50-year transformation of the infrastructure world. We’re 10 years in; we have 40 left to go. By the end of that 50 years most infrastructure in the world will be transferred to private hands,” he says.

A rough calculation indicates that about $100tn could go private over that 50 years, Mr Flatt says, adding that only “maybe 10 per cent” has transferred. In developing countries, existing assets are being sold; in developing markets, new infrastructure is being built by the private sector. That is a huge opportunity for Brookfield, he believes.

“We’re in the business of owning the backbone of the global economy. [But] what we do is behind the scenes. Nobody knows we’re there, and we provide critical infrastructure to people that somebody pays a small amount for . . . the road you drive on, most people think it’s owned by the government. Even if it is a toll road, they wouldn’t actually know who owned it,” says Mr Flatt.

Buying where there is distress, whether companies or countries, remains Brookfield’s hallmark. “There’s a lot of stress in the banking market in India . . . and we’ve been finding the opportunity to buy virtually in all of our sectors [there]. Over the past 36 months . . . there was an enormous void of foreign direct investment into Brazil, therefore we bought a lot of things at what we deemed to be fractions of the replacement cost,” says Mr Flatt.

GGP, the mall group of which Brookfield already owned a third, was under pressure as the crisis in the retail sector hit demand for physical stores. “We don’t buy into the thesis that all retail is going to go online,” says Mr Flatt. The GGP purchase is primarily a redevelopment play, he says, “concentrating these shopping centres with apartments and all these other things”.

Is Brookfield preparing for a crash? “We’re almost 10 years into a recovery, which means that the recovery or the expansion may last for one year, two years, three years, four years more. Four years would be maybe a record . . .[so], just because we’re very conservative people, our view is we should hold more cash, be more conservative,” says Mr Flatt.

He recalls 2007 when Brookfield “began preparing” for a downturn. Brookfield is once again increasing its cash holdings. At the end of June, in its latest results, Brookfield Asset Management held almost $6bn of cash and equivalents, almost double the figure at the end of 2016.

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