Brookfield gathers US$125b war chest as CEO sees recession

BROOKFIELD Asset Management’s earnings declined as volatile markets weighed on valuations of private assets, but the firm says it’s still on track for its biggest year of fundraising ever.

Brookfield has launched fundraising for an opportunistic credit fund that it expects to be more than US$16 billion, according to a letter to shareholders from chief executive officer Bruce Flatt on Thursday (Nov 10). Its fifth flagship infrastructure fund stands at US$21 billion and it has closed a real estate fund with US$17 billion, Flatt said.

That gives the Toronto-based asset manager plenty to work with as the world’s major economies are likely headed into a recession, Flatt said.

“The current environment has created dislocation in the financial markets, with access to capital becoming a challenge for many,” Flatt said. “Fortunately, we have approximately US$125 billion of deployable capital and the skills to navigate these markets and execute transactions.”

Brookfield’s net income fell to US$716 million in the third quarter from US$2.7 billion in the same period last year because of lower valuation and disposition gains, the Toronto-based asset manager said in a statement.

Funds from operations, a more closely-watched metric for Brookfield, came in at US$1.47 billion in the third quarter, slightly better than the US$1.45 billion estimated by analysts in a Bloomberg survey.

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The private equity industry is contending with the toughest environment since the 2008 financial crisis as higher interest rates and persistent inflation paint a dark macroeconomic picture. Blackstone, Carlyle Group and KKR reported faltering earnings as tumultuous markets ate into valuations and disrupted dealmaking.

Brookfield’s recent deals include a US$30-billion joint investment with Intel in chip factories in Arizona and the acquisition of two US renewable power companies for a total of US$1.54 billion. The firm also formed a partnership to buy an interest in Deutsche Telekom’s tower business in Germany with a total value of about US$17.5 billion.

Buyout firms are seeking innovative ways of unloading assets. Last month, Brookfield’s private equity arm sold Westinghouse Electric to uranium miner Cameco and another Brookfield affiliate. The deal avoided triggering a change of control, which would have forced Westinghouse to refinance debt. BLOOMBERG