The chief executive of Toronto-based Brookfield Asset Management believes interest rates may peak in the next six months, but many of the major economies of the world will experience a recession.
Still, Bruce Flatt, who heads up the company with 750 billion U.S. dollars in assets under management, including US$246 billion in real estate, sees an opportunity.
"The current environment has created dislocation in the financial markets, with access to capital becoming a challenge for many. We believe this will abate over time, but for the time being, it has led to a significant slowdown in transaction volume despite an increased need for capital for many companies," said Flatt in his quarterly letter to shareholders.
"Fortunately, we have approximately US$125 billion of deployable capital and the skills to navigate these markets and execute transactions. As a result, the current markets present a good opportunity for us."
For the period that ended Sept. 30, the company had US$716 million in net income compared to US$2.7 billion a year earlier. The previous period included higher valuation and disposition gains, so it was higher on a total basis.
"As a result of the strength of our franchise, we are increasingly becoming the partner of choice for global corporates for the deployment of capital at scale — as evidenced by our recent US$30 billion partnership with Intel, our US$17.5 billion partnership with Deutsche Telekom Towers on their portfolio of 36,000 telecom towers, and our US$8 billion partnership with Cameco," said Nick Goodman, chief financial officer of Brookfield, in a statement that noted the company plans to complete the distribution to shareholders and listing of a 25% interest in its asset management business by the end of the year.
Brookfield has also completed fundraising for its fourth flagship real estate fund, raising US$17 billion.
Nevertheless, in the current rising rate environment, several developers have put real estate projects on hold, including Brookfield, according to the Wall Street Journal.
Flatt said, in his letter, private assets continue to be advantageous to investors by better allowing owners to wait out volatile markets.
While Brookfield took its main real estate Brookfield Property Partners private in 2021, Flatt said Brookfield Asset Management closed on the acquisition of three real estate companies in the quarter with US$9 billion of assets at what he called "deep discounts to replacement cost."
Brookfield Asset Management is on track to have its largest fundraising year ever, with inflows of US$33 billion since the end of last quarter.
"We will have one of the largest discretionary pools of alternative assets globally," said Flatt, referring to the US$125 billion. "The corporation will not face any restrictions on how we use this capital, and our sole focus will be on allocating capital among our operating businesses and new business initiatives while targeting a 15% plus total return for our shareholders over the long term."