Brookfield CEO Bruce Flatt: Invest in real assets that produce cash flow

we are live at the Baron Investments conference at Lincoln Center in New York City one of the companies in the baron funds portfolio is Brookfield Asset Management which recently brought bought a majority stake in oak tree joining us right now is Bruce flat he's the CEO of Brookfield Asset Management which has about five hundred billion dollars in assets under management of course our guest host Ron Barron who has been an investor in Brookfield since 2007 this is one of his long-term holdings Bruce thanks for joining us today it's good to see you thank you let's talk a little bit about what you see in the environment out there where you think the best opportunities are what what do you think is happening right so I'd start off by just saying the macro situation is there seems to be a shift going on in the world and where we've in the last 12 months we've seen where people thought interest rates were going up and it appears that they're going to be down for a while and and irrespective they were going to stay relatively low anyway but we we've just shifted the curve down and what that means is that asset values in areas for real assets or tangible things that produce cash flow are going to be worth much much more and institutional investors globally really can earn returns out of fixed income and they're therefore being able to invest in those real assets with people like us are doing it themselves is a very attractive way for them to earn the returns they need for their portfolios Ron you you agree with that perspective right yeah Bruce is telling me a couple weeks ago how he was financing a building in London for 70 bits and so interest 70 bits and so interest rates are extraordinary and extraordinary though and extraordinary attractive for a long period of time because it's so much uncertainty and the economies in Europe are not doing very well and the United States can't be the only country in the world with I rates they say have to come down also so if you see real estate in London as an opportunity what else do you see out there in the dark our business is just buying globally buying infrastructure real estate renewable power plants and they all just generate cash and we try to we try to take our raise large sums of money have the operations around the world and then go to places where there's lack of capital and one spot where to pick one in the world where there is very attractive opportunities because there is lack of capital for entrepreneurs and for businesses and that's India India is going undergoing financial stress in their banking system today and that generates opportunities and the biggest thing that creates opportunity for real asset investors is being able to buy assets at less than what you would cost to build them or replace them and that that usually means that the number one reason why you can you have a margin of safety on your side I remember talking to years and years ago the the CEO of UTX at the time was George David and he said he'd rather operate in China than in India because in India it was so difficult to get through all the different layers of government and all the bureaucracies has that changed over time look I'd say we'd like them both they're both more complicated for a Western organization to operate in than you'd otherwise operate in but but they have different they have different nuances one is more difficult from a larger perspective and one India is more difficult from a micro perspective but they put each one of them is extremely craft attractive these are billion people markets they're growing people are getting richer than the middle class is getting larger what that means there's opportunity so we've been going slowly in those countries but I think 20 years from now we will have a much much larger percentage or a business in both of those countries how is the risk perspective in China changed just over the last two years or even last year given the tensions between our two countries don't tend to think about the next year we're investing these projects we build or we buy and on we all know - 5 10 15 20 30 50 100 forever and therefore what happens tomorrow morning isn't relevant we need to find what happened morning may not be relevant but if we are truly talking about a different paradigm relationship between the United States and China where you know nationalistic tense the tendencies get up you see what happens with the NBA with Apple with other countries so we're a local investor in every country we go there we bring money over the border as long as it's a good country we're a local investor in each of the 35 countries we ran we just invest locally trade doesn't really matter now long-term positive business conditions in a country are important and therefore if it changes the paradigm for that then then it would it would matter but other than that we try to pick great countries and go there for long periods what describes a great country is it boy the booming economy demographics what rule of law culture of respecting capital well I don't think China necessarily qualifies on either culture of respecting capital yes they you know generally do size where we can actually invest and where we can operate with standards that we have to operate around the world so we need to and and and yes you're right China isn't as like the United States but it's improving every year and as I said we've been slowly working into those markets Ron what else do you like that you've heard ideas about places you mentioned the 70 basis points in London in terms of being able to to get capital for building and they're putting into whatever he goes I go all right so let's talk a little bit more about the infrastructure that that is a really interesting play because a lot of its government money that's going to be putting into these things - what do you like there are there countries that you think were better prepared here's what's happening governments are over indebted and that's even gotten worse over the last ten years everywhere in the world because the you know money had to put in the banking system the faster prices into government's what that means is that they have to get money and where big money gets spent in countries is an infrastructure you need to provide the services for people over the next 50 years our prediction is virtually all infrastructure will move from government spending into private hands and there is this enormous amount of capital that's sitting in sovereign plans and institutional clients and it needs to earn five six seven eight percent return we're really happy but they're all really happy with that and that's what infrastructure is transferring from governments into those institutional clients hands you can make a percent return yes yes yeah and sometimes better Wow really Brisbane California by the way the government agent CalPERS CalSTRS they can't make seven percent no they have to take more private equity investment services position to provide ability for them to do that private equity what kind of returns do you anticipate getting over the next decade or two you know our last 20 years of private equity returns have been circuit 20% what I would say is even though rates come down and this is the this is the great value of what institutions see in real estate private equity infrastructure renewables all alternatives is that the spread between what you can earn if if people can do it can do the work that we do the spread you earn compared to Treasuries is still very very high and as a result of that they're very attractive and institutional client funds first want to thank you for your time it's really a pleasure thank you for having you

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Id: TGVsOBxdx2c

Length: 8min 12sec (492 seconds)

Published: Fri Oct 25 2019