Q2 2020 Brookfield Asset Management Inc Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly piece content standby. Thank you for your patience.
[music].
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I'd now like to hand, the conference over to your speaker today, the Suzanne Fleming managing partner. Thank you. Please go ahead.
Thank you operator, and good morning, welcome to Brookfield second quarter 2020 conference call on the call today, a brisk <unk>, our Chief Executive Officer, Nick Woodman, Our Chief Financial Officer, Bahir, Manios CFO of our infrastructure.
Bruce will start off by giving a business update followed by neck, who will discuss our financial and operating results for the quarter and finally, the here will give an update on the infrastructure business.
After our formal comments, we'll turn the call over to the operator and take analyst question.
I'd like to remind you that in today's comments, including in responding to questions and then discussing new initiatives in our financial and operating performance. We may make forward looking statements, including forward looking statements within the meaning of applicable Canadian and U.S. Securities law.
These statements reflect predictions of future events and trends do not relate to start for that.
We are subject to known and unknown risks and future events and results may differ materially from such statements.
Further information on these risks and their potential impact on our company. Please see our filings with securities regulators in Canada, and the U.S. and information available on our website.
Thank you and now I'll turn the call over the brakes.
[music], Thank you Suzanne and good day everyone.
Our business performed well during the quarter and since we last spoke to you we recorded our largest fundraising period ever.
We raised $23 billion across various pools of capital the highlight of which was the $12 billion of initial commitments for our latest.
Flagship distressed credit fund.
This was raised against the backdrop of the global economic shutdown, which impacted many businesses, including some of ours.
Well, we're now seeing economies across the world slowly reopening.
And while it could take well into 2021 for a full recovery are impacted businesses are already showing signs of improvement.
The success of our fundraising in the period highlights the scale and diversity of our product offering.
When we partnered with Oak tree last year, as well as refocused efforts and growing or perpetual private fund offerings.
We didn't show to round out the product offering to ensure we had products that were attractive to our clients.
Crossed all cycles.
This quarter exemplified the benefits of this strategy as we were able to accelerate fun fundraising for flagship distressed debt fund.
And raise capital for more fixed income like perpetual funds.
A record level of fund raising means we now have $77 billion of capital available to deploy into investments.
And we expect the pace of investment to increase over the next 12 months as opportunities present themselves.
Overall, the increased levels of government debt that we have seen as a result of the economic shutdown.
We all have long term effects on many things.
The most important of which is that many countries around the world well have to offload spending onto the private sector and sell assets.
This should belt bode well for the scaling up our infrastructure and our renewable businesses.
And we have bahir manios see up over infrastructure business with us on the call today to give us an update on that business and where we are seeing opportunity.
As government aid temper papers, the private sector will also be increasingly in need of capital and there should be many opportunities for us to invest across all of our pools of capital.
This will include us putting funds to work and non control investments in our recently created special investments program.
Distress data opportunities in our Oaktree funds.
And control investments within our property infrastructure renewable and private equity flagship funds.
Our latest round of flagship funds is approximately 50% deployed in aggregate.
And with the pipeline, we see today, we should be back in the market for all of them.
In 2021.
Turning to interest rates, we have discussed over the past 12 to 18 months about what a low interest rate environment means for our fundraising.
And we are seeing that play out in real time today with the capital raised since may.
But with had zero interest rate environment here and in it increasingly looking like it will be here for five years plus.
This will also have a meaningful impact in a positive way on the real assets that we already own.
The majority of our assets they have long term fixed contracts either long leased property.
Contracted power or utility or utility like assets.
And with interest rates dropping the value ascribed to these cash flow streams increases significantly.
Just in the past few weeks, we've started to see bids for real estate and infrastructure assets.
At higher multiples than pre coke it.
Well the majority of our investments are the long term contracted assets, which I just mentioned, we do have some businesses that saw disruption from the shutdown.
And our private equity business, we witnessed some businesses with sales down more than 50% with the shutdowns in April and May.
But virtually all or operations are now experience increased activity with some approach me approaching comparable results to last year in July August.
In our retail business, our U.S. retail centers were shut down by government mandate for two months.
All but one reopened by June thirtyth with foot traffic now back to more than 50% of normal levels and improving every week.
85% of stores in the retail malls are now open.
Rents are now being collected and our teams are focused on discussions about collection for the shutdown period with some tenants.
Well, a smaller part of our business most of our hotels have now also began to reopen.
The largest hospitality business, we own is called center parks in the United Kingdom, which is experienced experiencing higher forward bookings than at this time last year.
Our Joes is out of it being a domestic offering when international offerings are hard to access.
[noise] as another anecdote we are experienced significantly increased sales in are you at single family housing operations.
As an example last year on average we sold 65 homes.
To put that into perspective and April it was close to zero and today, we're selling between 80 and 100 per week.
That is 20% to 30% higher than last year.
And I would note for you that virtually all single family builders have similar scale are experiencing that's not just us.
This is further flowed to wood products were where prices have tripled since March this bodes well for our investment in Norbord, which has similarly tripled its price in the stock market since March and looked at the company looks like it has significant room to generate super profits this year.
As it relates to office buildings, our views are laid out in the shareholder letter.
And in the next short while we will post client white paper on the subject for you to review on our website.
Simply stated our view is that companies use their offices to foster culture collaboration collaboration and development of talent.
This.
Cannot be replicated from a home office.
Further reinforcing these views I would note a few facts.
First our sole office buildings, which were among the first shutdown globally.
Our now back to 90 per cent employee occupancy.
And I would note for you that Korea is a very tech savvy place.
Shanghai is back to almost the same.
In addition, we collect bad swipes on employees at our office properties.
This totals a million people who work in our properties globally.
This is a very large sample of global office workers. The overall information as powerful as we know who comes and goes for how long when and how they move around.
I tell you it's in virtually every day on average since may one the numbers in the office have increase this gives us hard data base our views on.
Therefore, please consider those comments when you read news, which suggests that nobody will ever go back to the office.
Ironically, often provided by some of those who benefit from people staying at home.
So please consider those views our views are based on hard data.
And very extensive discussions with large groups of corporations, who we leased space to not merely conjecture.
With those comments I would gladly turn it over to Nick Goodman, who will cover our results for the quarter.
Thank you Bruce and good morning, everyone.
So we had strong results during the second quarter, especially when considering the economic environment, Our asset management earnings continue to exhibit very strong growth.
Most of our operating company should the resiliency.
We generated $605 million of cash available for distribution or what we called Calstar during the quarter, 20% increase from the second quarter of 2019, when excluding impact of carried interest.
Strong cash generation combined with corporate and third party fundraising activities has increased our deployable capital to $77 billion.
This positions us well to pursue growth opportunities in the coming months quarters in years.
75% of our businesses are backed by contractual cash flows from utilities renewable power offices data infrastructure, a critical surface infrastructure are there for unaffected by the economic shutdown.
However, we did have some businesses that reported no income for the quarter well be recorded some noncash revaluations and net income to reflect the current environment.
This result is a net loss attributable to shareholders for the second quarter of $656 million for 43 cents per share.
But more relevant to the operating performance of the business is our funds from operations or ask vessel, which was $1.2 billion for the quarter or 73 cents per share.
Starting with our asset management results fee related earnings before performance fees increased by 23% to $324 million for the three month period.
Totaled $1.3 billion over the last 12 months, an increase of 41% from the same period in 2019.
The growth and our fee related earnings as a reflection of the latest round fundraising on our flagship funds.
Contribution from our partnership with Oaktree and the growth of our perpetual strategies.
Today, our fee bearing capital totals $277 billion and our annual fee revenue stand at $2.8 billion.
We also have a further $29 billion of cap to they will become fee bearing went invested when fully deployed this cap to will generate approximately $315 million incremental fee revenues annually.
Our unrealized carried interest bound stands at $2.9 billion largely consistent with the first quarter.
This is a reflection of the stability that our investments provide to our clients.
Most of the assets that we manage our privately owned and generate stable cash flows with strong downside protection of cap to making them resilient and protected from public market marks.
While we expect to crystallize the unrealized carried interest the slow down and economic activity digitally a number of our planned asset sales and therefore delayed carry realization.
That led to a reduction in our realized carried interest this quarter, although we did recognize $76 million of carry in the quarter and we have recognized $499 million over the last 12 months.
A number of the sales processes that were delayed our no restarting and retain our conviction.
And the fact of both the high quality nature of the assets on their cash flows combined with the low interest rate environment makes these assets under businesses very attractive to prospective buyers.
In the last two months, we've completed secondary offers for BP and see combined these two transactions allowed us to realize approximately $700 million of cash proceeds to further enhance our liquidity that we will look to redeploy into other opportunities overtime.
We continue to maintain significant holdings in each of these companies and continue to view each as I've standing businesses to invest and I believe these transactions will further support their growth to increasing the public full on liquidity of the underlying units and shares.
And importantly, it also shows the fast liquidity that we hold at Brookfield asset management as none of these investments, which kind of the days' notice be turned to cash should we wish are counted and our liquidity numbers.
Turning to our balance sheet investments.
Excluding disposition gains after full for the quarter was $333 million decrease compared to the prior year was primarily caused by the disruption from the economic shutdown.
Which lowered earnings at our modest number of hospitality assets and other investment properties in particular, our retail investments as well as at certain directly held investments.
As mentioned, we believe earnings will return to normalized levels as the economy progress is on its path of recovery.
In the quarter, we recognize disposition gains of $473 million, primarily from the aforementioned secondary offering of B P units.
Today, our liquidity and capitalization remained very strong.
In addition to $61 billion of Uncalled fund commitments, we have approximately $16 billion of core liquidity across the group, including nearly $6 billion directly a bomb for a total of $77 billion of deployable capital.
And if you were to include an estimate of our non core holdings of our affiliates have it bring that number closer to $90 billion.
And our balance sheet remains conservatively capitalized with an implied corporate debt to market capitalization ratio was 13% of the ended the quarter an average remaining terminal corporate debt over 11 years, and we have no individual piece of debt maturing before 2023.
Finally, I am pleased confirmed our board of directors has declared a 12 cents per share dividend payable at the end of September.
With that I will turn the call over to the here My news.
Thank you Nick and good morning, everyone.
Many sectors were hard hit following the shutdown if economies around the world. However, the infrastructure sector demonstrated wonder if its most coveted characteristics being it's highly resilient cash flows.
While it's too early to comment on learnings from this challenging period, our conviction regarding that tractors in essence sustainability of the infrastructure sector has been reinforced.
It is with considerable pride weaken report that every operating business owned by Brookfield infrastructure was deemed and essential service and thus has been operating throughout this period.
Our assets performed well on a local currency basis, and only a very small portion of our overall revenue was affected by this global economic shutdown.
We currently estimate that the true economic impact of the shutdown represents less than 2% of the infrastructure groups overall cash flows.
Within the infrastructure platform, we have a tremendous amount of liquidity across Brookfield infrastructure partners are publicly listed vehicle and our private funds, which today sits at close to 20 billion that is available for deployment.
Before I touch on where we're seeing opportunities in the current environment I thought I'd provide an update on two of our infrastructure Fund private fund strategies that have had a great deal of success recently, both from a fundraising and investment perspective, thereby demonstrating the diversity of not only to sources.
Capital that are available to us, but also the types of transactions that were taking part in.
These are Super core open ended infrastructure fund and our closed and ended infrastructure debt funds.
Our Supercar fund just focused on long term very stable almost bond like cash flows and was established at the end of 2018.
Since inception, we've raised over $2.6 billion, including through this recent market volatility and an economic uncertainty.
We truly believe this business has great potential could grow in the size of tens of billions of dollars over the next five to 10 years.
On the infrastructure debt side, we raised our first two debt funds being a global fund Dennis smaller European focus fund in 2016, and 2017 would aim of investing in the mezzanine debt of infrastructure companies that have stable regulated or contracted cash flows.
Over the past few years, we focused on debt investments across the transport data energy and renewable power sectors and these continue to be areas of focus for us.
We recently completed an initial or first close for the next vintage of this fund series raising $1.8 billion of capital.
From a new investment perspective, we believe this is an attractive environment for Brookfield infrastructure to source opportunities for the foreseeable future.
Economic cost of the downturn will be that many industrial companies and all governments will be significantly more in debt it.
Once the immediate measures to stabilize economies and businesses have been implemented governments and business is a like well need to evaluate alternatives to source capital to repay excessively high debt levels.
You probably have heard a number if I speak about this in the past about the secular trend of government seeking investment from the private sector to acquire and Buildout infrastructure.
With inflated deficits, along with the desired to stimulate economic activity, we expect the impetus for this to become even more pronounced.
In addition, many corporations will be susceptible to tighter credit markets and they will need to reduce debt levels through asset sales.
We're currently focused on executing several medium sized tuck in acquisitions for various businesses in our energy transport and data operations.
The result of the potential synergies, we believe that these acquisitions should be highly accretive if secured.
Furthermore, we're evaluating numerous new investment opportunities in all of our key regions.
And ongoing area of focus for us is data infrastructure.
We thought would spend some time today on on today's call discussing our progress and views on this exciting high growth asset class.
We're currently witnessing a once in a 100 year investment upgrade cycle.
Aging broadband copper infrastructure is no longer April April to cope with the demands imposed by an increasingly interconnected and always online world.
These networks are being replaced by new state of the art fiber infrastructure, which can support increases.
In data demand lower latency and faster broadband speeds.
Concurrently wireless networks.
Our undergoing a transformation to support the enhanced conductivity expected from Fiveg.
On a combined basis. These upgrades are estimated to require trillions of dollars if investment over the next five to seven years.
Historically these investments were funded by telecom operators.
Given the increasing demands on their capital. These operators are now seeking new funding partners.
They are increasing their reliance on neutral host shared infrastructure models to alleviate pressures on their balance sheets.
As a result, the investable universe for data infrastructure is expanding in a very meaningful way.
Our original thesis for investing in data was based on the believed that data infrastructure assets have utility light characteristics.
With favorable growth trajectory stopped play a central role in connecting people places and objects.
The importance of these networks was further reinforce during this recent shutdown as access to robust and reliable connectivity became a basic need to perform routine activities such as working from home remote learning and Tele medicine.
This was exemplified as an example on our UK fiber networks, where average data consumption increased by 40% compared to the same period last year.
Over the past five years, we've established a leading global data infrastructure business.
As we expand our current business by either building and or acquiring high quality data infrastructure assets, we're well positioned to leverage our expertise into key areas.
First we have investments that span the entire connectivity value chain comprised of one of the largest tower portfolios with a contracted base of over 180000 sites in six countries.
We also own a growing global data center business with approximately 70 sites in 13 countries that are able to serve the scale and latency requirements of a diverse customer base.
And finally extensive fixed and far wireless networks that serves over 2.5 million residential and enterprise customers.
There are very few investment managers that operate across the complete value chain that I just described.
We are another had how first hand knowledge from deploying an operating networks, such as Fiveg and Fox and fixed wireless access across several geographies.
We can leverage is operational knowhow and unique insights to capitalize on new trends as they emerge.
Second there are significant number of opportunities, which are embedded across our broader Brookfield business.
Continued adoption in cloud computing is expected to require an incremental approximately 30 gigawatts of data center capacity over the next 10 years.
At the same time. These operators are focused on achieving their stated carbon reduction targets over the next 10 years.
We are very well positioned to help support these goals.
We're exploring the potential to bundle data centers and renewable power to provide a turnkey green data center solution.
This would differentiate us or our offering relative to more traditional data center operators and could be a game changer for us.
We're also pursuing several other initiatives, including leveraging our existing rights of way to deploy fiber and our existing real estate portfolio to deploy in building wireless solutions.
We're very excited by this asset class and believed that there would be significant opportunity to at least double the size of our existing business given that we're still in the very early stages of this massive investment cycle that I touched on earlier.
In general we would describe our current investment posture, especially with respect to larger size new investments as optimistically patient.
We believe that a large scale value opportunity will arise over the next 12 months.
We're reminded of our experience during the global financial crisis in 2009 2010.
When the transformative Babcock and brown investment or BB I that we made did not present itself to us until almost nine months after the Lehman bankruptcy.
We passed on many opportunities before the right one came along.
We'll also be focused in the second half of 2020 in 2020% 2021 on executing our capital recycling program.
As both Bruce and Nick alluded to earlier, we're confident that the merits of investing in mature de risk cash flow producing infrastructure assets will be more appealing to prospective buyers than ever before.
Typically with expectation for low interest rates for the foreseeable future.
Lastly, before I conclude my remarks, we're very pleased with the market's response, thus far to Brookfield infrastructure Corporation for Bips C, which was listed on the Toronto and New York Stock Exchange on March 30, Onest of this year.
Bip see was recently added to the Russell 2000 U.S. index.
We intend to support the growth of Bips Ses public float over time to improve the company's trading liquidity and the first initiative. In this regard was recently undertaken that Nick touched on in his remarks earlier.
And so with that thanks.
For your time this morning, and I'll turn the call over to the operators to open the lines for questions.
As a reminder to ask the question you will need to press star one on your telephone to.
To withdraw your question press the pound key.
Please standby, while we compile the Q on a roster.
Our first question comes from Bill Katz with Citigroup. Your line is now open.
Okay. Thank you very much for the added disclosure displaying discussion Bruce maybe one for you just as you mentioned that you sort of bring it forward the the flagship opportunity.
In the past you've commented on sort of incremental sizing that's what I'm wondering just given all the ins and outs over the last six months seven months of the or what's going on with sort of virtual road shows what have you. How are you feeling about allocations and maybe the sizing of the successor funds and then when you say 21.
As this beginning of the year second after you actually figuring or is it against the pace of deployment. Thank you.
So its Bruce I'll answer and Nick and add some things if.
He thinks of something else, but I, just first I, maybe going from back to front on on.
On timing during the year.
There are three funds the deployment will.
Never know what the deployment is so we said 21 I suspect it could be anywhere from late this later this year.
For one of the funds.
Through to the end of next year, depending on deployment within each of the different funds. So it all depends on our deployment of capital in opportunity. So.
The the greater pure the greater number of opportunities we find obviously deployment will be quicker as to sizing our our view is that.
The plan our platform gets larger the opportunities that come to us our bigger and therefore, the capital that we can deploy.
With a competitive advantage in scale.
Continues to increase so I think you'll see our funds will be larger.
At some point in time.
After 10 years or 15 years of increasing the scale of these funds at some point in time, they may taper off in the quantum's of increase but at the current time, we don't we don't see that and continue to see large places large opportunities to put money to work.
Okay, great. Thank you very much.
Thank you.
Our next question comes from Cherilyn Radbourne with TD Securities. Your line is now open.
Thanks, very much and good morning.
In terms of the zero interest rate environment, and the pressure that's likely to put on close of pools of capital that need to earn call at high single digit returns clearly your recent fundraising would suggest that some clients have reacted already but how long would you expect it to take four portfolio allocations to just more broadly.
Such that we see a larger migration of traditional fixed income and into alternatives.
So I would just say.
I think the the floodgates of only started to open.
The reason is that if.
If you're trying to earned 567, 8% within a institutional pool of money.
There really is no hope to do that with.
Traditional fixed income and as a result of that other than holding cash for liquidity purposes or for short bonds for liquidity purposes, or some form a long bonds just for safety. All other pools of former fixed income allocations are going to come to lower risk alternatives and.
Therefore, that's going to enhance private credit.
[music].
Opportunities, it's going to hands.
Real estate infrastructure and all the products that we offer so I think you started to see.
What I would say is we've been seeing it for 15 years, it's accelerated over the past five years and it's even going to accelerate more now if we've gone from 2% to 3% interest rates to zero and zero and when I say zero zero almost every.
Country in the world and even in some of the emerging markets were down to 2% to 3% interest rates.
Which is even sending their stock markets another.
Alternative products they have.
In value.
Okay and then in light of recent news flow, maybe you could comment just generally on the extent to which you think that logistics may play a larger role in how some of the space in your mall portfolio gets re purpose.
Yeah look I I'd, just say, our our view has been and still is that online retailers and a store retailers are going to mashed together and there is going to be one.
On delivery system of products to customers and that will include both.
Deliveries to the door picking up and locations and stores, where people shop and it'll depend on the type of product it's being offered.
And increasingly that will include many other offerings and.
We're at the forefront of conversions of portions of the real estate to both that.
And and also to other uses within the centers. So it's a I think there's there's a lot of change going forward and for great real estate it will be a very positive.
Positive effect.
Thank you that's my too.
Thank you. Our next question comes from Robert Lee with KBW. Your line is now open.
Great. Thank him for taking my questions. This morning.
I'm just.
Curious.
Maybe the first first question is on.
On.
Capstar I guess, that's what you call. It a mid few I guess, a year or so ago, you kind of talked about that doubling over a five year period and as that.
As that grows in particularly as the asset management business transforms with more third party capital that that would.
Lead free up more capital whether to redeploying share repurchase or whatnot, and obviously that the ways out but could you maybe update us on your thoughts around the pace of cash flow growth and.
And deployment of capital overtime is that still part of the goal plan or do you see that being.
Set aside for a while.
Hey, Rob it's Nick I don't think our outlook for kept our has really changed I think our growth projections that we laid out we're really aligned to step changes in the growth of the business and we had the big step change with the loss trend the flagship fund raising and I think as we embark on the knick trying to fluctuates with this late this.
Distressed debt fund being the first am off before if you will that'll be the knicks sort of step change growth and in the meantime, we continued to grow the perpetual offerings and that will contribute along the way. So I don't think anything has really changed from the outlook.
We knew this year was going to be maybe smaller growth than last year, just given not pass were on but nothing has changed and I think the use of the cash has not changed significantly we're generating as you know significant free cash flow from a combination of the asset management business and our invested capital and we plan to use that to to reinvest into business too too.
Opportunistic legal that business like last year.
Most of that cash would have gone towards the oaktree transaction, which retaining cash allows us to have that flexibility and will support the franchise and then as we start to step through this thing carry starts to pick up and realization picks up then we will have excess cash that we will look to return to shareholders over shareholders overtime. So yes.
Nothing has changed I would say.
Okay, Great and then maybe as my follow up many of the US peers have focused a lot of attention and resources on.
Growing their insurance businesses, or I should say grinders or acquiring insurance businesses theme global Atlantic they've all done something different degrees it seems.
And now that you own.
Already stake in Oak tree, which would seem to have a lot of the requisite credit skills in a few do youve any ambitions are thoughts about that as a as into future area for for growth.
Spanning your insurance.
Activities.
So I think your last point.
It's Bruce I think your last point, it's actually.
The most relevant one is that in insurance business is about putting credit to work at it small amounts can be put into more traditional alternatives that are franchise is largely been about but credit is the biggest portion of it and.
Historically, our credit franchise was not that big so if we bought a big ensure our we would add a tough time, putting the credit to work.
With Oak tree, we can now that opens up other opportunities for us so.
It's something we we may and could look at and and we do have the requisite skills to open up that opportunity. So I think it expands our universe of things we can look at to broaden the franchise if we so choose.
Great. Thank for taking my questions.
Thank you. Our next question comes from Mario Sars with Scotiabank. Your line is now open.
Okay. Thank you. Good morning, just two quick follow up questions. One on six wells were from Regan sorry, one on are realizing valuation.
Straight environment.
Just on the successor funds.
In the past sizing has been driven in part and based on the that for the potential acquisition pipelines.
I've noted the expectations to sell assets.
Given your spending but also fairly quick recovery in public market valuations. So I guess my question is just how.
How's the size of our acquisition pipeline changed post is towards the corporate conduct Mccann.
How is that in parts of your confidence level in terms of achieving $100 sundries and target.
Look I I'd say.
It's highly probable that the opportunity for us to.
A raise capital and be put money to work is greater today than it was 12 months ago.
And that's largely because.
Our customers.
On one hand need our services more and governments, who governments are corporations.
Our more indebted today, and therefore, they need our services more and as a result of it I'd say the combination that too is a much more.
Positive.
Macro backdrop to what we do.
Despite short term disruptions over the last six months and maybe another six months, but the certainly the global backdrop is very positive too.
Our business.
Okay, and then secondly, just in terms of.
Hi, real often valuations in order to shareholders is rough markets. Booming example, involving long term good covenant cash flow apparently the export could rise in value implies lower discount rate or cap rate. Thank Bruce in your prepared remarks, you noted.
All right, you're starting to see higher multiples being paid.
But market relative to pre corporate levels.
But generally speaking what do you think is the big capital goods for more broad based discount rate recovery pushing through cool in the public market consuming and brokers are comfortable with.
And please parcels for goes wrong.
Look I could.
Comment I just made in the remarks and I'd just add to it is that.
We're starting to see that occur but.
Most are many investors today haven't decided that it's time to put money to work.
And as the comfort ability of the fact that were.
I'm going to come through this situation that we've been in gets greater and interest rates are low you will start to see more money being put to work and higher valuations paid for assets that fit that category and you're already seeing it in the stock markets.
But you'll start seeing in the private markets. It's just the in the private markets logistically. It was difficult for most people to do things over the past three months.
Okay. Thank you.
Thank you.
A reminder, ladies and gentlemen that Star then one to ask a question.
Our next question comes from Andrew Coskey with Credit Suisse. Your line is now open.
Thank you. Good morning, you could maybe give us a bit of perspective about how your clients think about your super core product and also perpetual product and our they're thinking up more and the lines of an allocation towards let's call. It six income plus.
Or is that a real asset allocation to them.
Good morning, Andrew maybe I'll pick that one on just on.
On behalf of the infrastructure group given.
Recent success, we've had with our Super core.
Launch Weve been which we've been doing now for about a two plus years as I alluded to in my remarks Weve.
Raved about $2.6 billion from clients and and invested thus far 1.6 billion and have a pretty active.
Pipeline and here, our client side and as I mentioned.
Targeting mature de risked infrastructure.
You know with minimum volume risks located predominantly or exclusively in developed markets.
We're targeting got high single digit type returns.
Most of that coming from current yield so thats a very important.
Characteristic for our investors.
If you look at the pool of GAAP, where we've been raising this from.
We have about 50 LP, thus far in the fund.
Most of that is coming from smaller pensions and.
Insurance companies average ticket size is around 50 million or so.
And so it doesn't really overlap with our other Brookfield infrastructure core series a funds.
As well so so from an infrastructure perspective, that's sort of five.
The game plan for Us and as I mentioned in my remarks, we expect this strategy to grow materially.
In the next few years.
Okay. That's good I appreciate that extra color and then maybe to follow up.
You do see the two markets as being very disturbing the lower return stabilized long term contracted cash flows for Super core and then more opportunistic and your traditional flagship infrastructure fund.
The first part about it but is there potential enter play on the future.
Some of the assets that you have stabilized in the flagship buttons that eventually maybe transition over time.
Two super core couple of products.
Hey, Andrew it's Nick.
Listen I think you know what we look to do in the flagship fund as we buy assets and where we believe we can bring or operating expertise to drive outsized returns and I would say often when we stabilized and them sell them. Sometimes they would then go for returns that would be tighter than our super core funds, so and that doesn't always work.
The obvious answer as we're obligated to strike best value from our flagship funds, we will look to do that and there are some synergies potentially with using the super core capital when looking at acquisitions and on carving up portfolios and that the game plan is not to sort of buy assets and one called capital to sell to another we'd look to to manage them independently.
Each other.
That's great. Thank you.
Thank you. Our next question comes from so Rob will the heading with BMO capital markets. Your line is now open.
Okay. Thank you I just wanted to see if you could provide a bit more color just around the fundraising environment.
I don't know if you could.
Obviously, there wasn't an overlap between your existing funders and be Oaktree.
New geographies, there's been a little bit us kind of noise around.
Capital Snows in restrictions, maybe in certain jurisdictions and oil prices and the like so I'm. Just curious if you could give us a bit more color as to.
Why it was so successful if you will and and what sort of optimism you have.
What's that success continue.
Yes beyond the zero rate environment.
Yes look I would just say ER.
Couple of comments first one is that.
Those that have established franchises in periods of time, where there is disruption get all money.
And I guess the quality as if you had a new Thunder Guy had Oh, we're going to go try to raise a new fund it was virtually impossible for someone to do that meeting in new strategy or a new manager and the reason is because you couldn't visit somebody's office talk to them explain your situation and try to co.
Some into your fund if you Didnt know them already Sobi established brands are being one of them ours I'll call. It Brookfield Oaktree.
Being one of them is is going to get it and the other established brands got all the money who is probably allocated than last four months. So the first point is.
These type of situations money has gone to established brands versus new.
Types of situations.
Secondly, the the products that we happened to have today that are on offer our.
Exactly what our clients one there are fixed income alternatives that are.
Being our or a supplement to their portfolios with their now looking at zero return zero percent returns.
And secondly, it's distressed credit which is.
Appears like it should be over the next 12 months one of the great places to invest capital into and and therefore that was attractive to institution. So I'd just say that in the short while we had the right products for the market and I think when we come with our next flagships.
Like all as.
We should we these are neither strategies that weve deployed for many years and we should be able to attract capital for those so.
I think we have.
I think the success in the last three months is just the fact, we had good products in this period of time.
Okay. That's helpful. Bruce Thanks, very much in fact, you just have a quick follow up on that when you do come back with or when you do return for flagship fund raising is there any reason to believe that Chad you may have to.
Alter a hurdle returns or a fee rate shorting year that kind of stuff as far as at the structure of stills are concerned into cash future cash flows whether its management fees or performance fees were carried interest or whatever so that the for Brookfield asset.
So I would just say I would I would just say that that.
To date, we have not experienced any of that no. One can know the future, but our services are attractive to our clients and and we haven't had that issue.
At the current time, and we don't expect in the future. Thank.
Thank you very much.
Thank you I'm not showing any further questions at this time I would now like turn the call back over Suzanne unfolding for any closing remarks.
Thank you operator, and with that we'll end the call. Thank you for joining us today and we look forward to continue at our Investor Day in September we expect will be there in person in New York and we'll have grown for some of the English to join US in person as we did last year will be on streaming today for those who aren't able to Jonathan person.
Current seeing it arm thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Thanks.
Okay.
All right.
[laughter].
Thanks.