Brookfield gathers $125bn 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 $16bn, according to a letter to shareholders from Chief Executive Officer Bruce Flatt on Thursday. Its fifth flagship infrastructure fund stands at $21bn and it has closed a real estate fund with $17bn, Flatt said.

Brookfield jumped nearly 10 per cent to $44.53 — the biggest intraday rise since November 2020 — at 9:35 a.m. in New York.

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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.

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“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 $125bn of deployable capital and the skills to navigate these markets and execute transactions.”

Brookfield’s net income fell to $716 million in the third quarter from $2.7bn 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 $1.47bn in the third quarter, slightly better than the $1.45bn estimated by analysts in a Bloomberg survey.

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

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

Source: BNN Bloomberg

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