We're the backbone behind global
business. And when they need capital,
we fund it. It's one of the world's largest
alternative investment companies. Brookfield owns hydroelectric plants,
cell phone towers, power lines, wind farms, ports and even cities guidelines.
Bruce Flatt has been at the helm for more than two decades, overseeing more
than $900 billion of assets under management.
The veteran chief executive is considered a visionary investor with a
golden touch. But for him, it's all about patience and
finding the right investments. What you might think of is risky.
To us, it's not risky because we've been in this business for these businesses
for a long period of time. In this episode of Leaders with LaCour,
I speak to Bruce Flatt about the secrets of his success, the outlook for
commercial real estate and his own future.
Bruce Flett, thank you so much for coming on Leaders.
How are you? I'm great.
So I'm speaking to you. Brookfield has gone from strength to
strength. If I was a martian meeting you for the
first time. How would you describe your company?
We invest in buy and own the backbone of global economy.
When the water gets delivered to your house, the road you drive on the
pipeline that brings different things to your community.
The telecom towers that transmit your phone.
The data center. The real estate that you live in.
It's what we own and build. So it's it's really what drives the
economy. And you don't often see your name
become good or a bad thing. You know, it's just because we're behind
the scenes, but it's big with $1,000,000,000,000 of assets almost.
We're behind a lot of the things of the global economy.
So being low keyed, do you think it gives you strength?
We just try to be quiet and do our thing.
And some sometimes it helps and sometimes it doesn't.
But I'd say on balance, it's been good for us.
You've been in charge for 22 years. I feel Brookfield seems like a long time
when you say it that way. But two decades over two decades.
What was the most interesting transit? I mean, you've grown the business by so
much. What was the most difficult question
about how to grow it? The amazing thing about this business is
you learning every day and the world is changing all the time.
But if I went back 22 years or 32 years, what we invested in then and now are
very different. Data centers didn't exist then.
Telecom towers were owned by all the phone companies.
So these are things the business evolves and the backbone evolves of the economy.
So it's a really interesting business to be in because you're always learning.
But it's a difficult business because you don't want to be Kodak, right?
You don't want to invest in something that goes nowhere.
Yeah. Look, we're always trying to understand
where is the future going and how do we invest with that.
And often it's listening to your counterparties, your clients, your
partners, and hearing what they're saying and what
they want to do. And we're going with them.
And and that's really where we're the backbone behind global business.
And when they need capital, we fund it.
And I think your North Star, as it were, is three days,
right? Yeah.
Look, I'd say over time, we're always trying to figure out what are the things
and what are the themes. They're going to drive the world.
And, and today, the digitalization of everything, the decarbonization of
everything and the globalization of everything are three, I'd say mega
trends, themes that are going to be very dominant in investing for the next not
not the next two or three years, the next 20 to 30 years.
Geopolitics is, I guess, taking a turn for the worse.
How do you again, keep that trajectory and saying, look, we will digitize
interest rates are also all over the place, so how do you stay the course, as
it were? You know, Francine, what we try to do is
find good countries, go there and stay there, invest in these
things. And whether governments come or go where
interest rates go up a little bit or down a little bit
aren't really relevant to these themes in the long term.
You need to make sure you have liquidity, you can fund yourself and you
run good businesses and that's more important than those general trends.
So we're trying we're investing for ten, 20, 30, 40, 50 years.
So out of the three DS, is digitalization the hardest because of
AI? Because we don't really know where we'll
end up? Look, I'd say digitalization was
happening because of cloud computing and super tech companies getting into
cloud computing and now the whole thing going on.
The amount of things that go to your iPad every day today and it's crazy.
It's amazing what's happened in the past 20 years.
But now with AI, it's just it's almost exponentially taking it up.
And and so that's just another tailwind behind this whole sector.
It was very strong before that. And for the last five, seven, ten years
we had been pushing into it. But the AI, what's going on with AI is
even more dramatic. The digitalization of everything
is being driven by data centers and just the connectivity of everything.
But remember, everyone in the world has in some way committed to let's have less
carbon. Yeah, and it's just transitioning the
economy. It's not it's not good or bad or green
or black. It's just let's just transition the
economy. To have less carbon.
So we're funding that. And the leaders in that today are the
technology companies. So a lot of this is being driven by the
technology companies to go green. So we're one of the largest builders of
solar and wind and now batteries to be able to get carbon out of the system.
And. Whereas years ago, we sell power to the
grid. Today it's more our power is mostly sold
to global corporates. And again, this is you have to take a
bet on what kind of technology or do you have to take a bet on just the
infrastructure that supports it. We were doing wind 15, 18, 20 years ago.
We were doing solar ten years ago, but very small.
And only when the cost curves made solar and wind at the point where they were.
They're the most economic thing way to generate electricity.
And at the point of that, you know, if they're the most economical way to do it
and they have less carbon, they're going to win.
And that that's why we're decarbonizing today, because in most countries this is
the lowest cost energy. But geopolitics must get in the way,
right? Politicians have to be re-elected.
They're pro climate change against climate change.
How do you how do you not waver? Remember?
It just just to me, the important point. In most countries, the lowest cost
energy today for electricity is solar or wind.
You don't need subsidies. And when you did need subsidies,
politics mattered. Today, you don't do globalization.
So this is what bringing back onshore. All it is is,
I think in Covid, I'd say it's always been happening.
And in Covid people just learned we should have production capacity located
in many things located where you use them.
So increasingly, for example, batteries for cars, for example, they're being
used in America and therefore there are battery plants getting built in America,
and there's an enormous need for capital to fund battery plants.
There's enormous need for semiconductors, an enormous need for
manufacturing capacity in various locations around the world.
And it's just natural that everyone doesn't want to have all of their
manufacturing capacity in one country or place.
Let's diversify. So that's just a big theme, which means
it's just a lot of capital. But you make it sound very easy.
But actually this has got you like more than 900 billion in assets under
management. You know, it's it's not easy.
But if you have operating people and you keep repeatable do repeatable things
around the world, it gets easier, it gets simpler.
It's not easy, but it's simpler. And and I guess that's that's why we're
in business, right? It it's we've been doing this a long
time and everything's not the same, but it's
there are, there are a lot of things that rhyme and therefore you can learn
and continue to grow over time. Coming up, Bruce flat on plans to invest
in the financial backbone of the global economy.
We think that's the next the next phase of infrastructure
investing. Infrastructure has been a bright spot
for Brookfield. The company is gathering cash for a new
fund targeting buyout opportunities in the Middle East and it plans to start a
pool that invests in financial infrastructure such as payment systems
as demand grows. I continue the conversation with Bruce
Flatt. Did you know in 2002 that you wanted to
be at 900 billion asset under management or a trillion?
We're just trying to make money for our clients in a thoughtful way, and we've
done that for a long period of time. And the reason why we are at the scale
we are is because we've been thoughtful with their money and we've earned them a
good return and we've not taken a lot of risk.
And if you can do that over long periods of time, you can compound their wealth,
investment, wealth to very large sums of money.
And that's that's what's important for these sovereign institutional pension
investors, because they have very long durations.
They need these type of assets to earn them returns over the longer term.
You've also gone to credit. How much are you expecting that to grow?
Look, what's what's happened with regulations in the banking system is
they've just it's pushed out credit off the balance
sheets of the banks. And the right place where that is being
funded from is institutional investors. And therefore investors like ourselves
are continuing to grow our businesses where we're funding these type of
products. But it's not our our business is not in
competition with the banks. It's actually in partnership with banks.
And as a result of that, I'd say it's facilitating the growth of the global
financial markets as opposed to something that often people talk about
it, that we're at the wrong time in the cycle or whatever it is.
This is going to be growing and happening for a long period of time.
So how big do you expect it's going to get?
Big, Because remember, this is this is where most of the capital is in the
world is in sovereign institutional funds.
These and pensions, these funds are used to be 20 and 30 billion.
Today they're 300 billion, 500 billion, a trillion, trillion and a half dollars.
These are large, large sums of money. They need to put it to work.
And therefore it's going to continue to grow
for a long period of time. And you focus when you look at regions,
is it mainly the GCC countries we invest for people in the for the long term, try
to earn them good returns by taking moderate risk.
And if we can do that, it's all around the world for you.
What you want to do in your own portfolio is take moderate risk and earn
a good return. But what's moderate risk?
So again, again, you make it sound easy, but actually this is a no How so do you
look into you know, you're also quite acquisitive.
Yeah. Look, I would say we in the businesses
that we are in, we have more information than most people about what we do.
Therefore, what you might think of is risky to us.
It's not risky because we've been in this business for these businesses for a
long period of time. We have the information of everything we
know. We know what's getting shipped across
the ocean in our containers. We know what's getting booked into the
ports in different countries. We know what what's traveling on the
roads. We know what the who how many people are
going into a shopping mall. We know all of those things.
And that just informs us. So we have, I'd say, better information
to base our decisions than most people. And
but we're always, you know, we're trying to take so we're trying to lower the
risks by doing that. Of course, investing investing is tough.
It's not easy. And therefore, you're always taking some
form of risk. How do you choose what company to buy?
You know, thoughtful analysis about what's in the business, proper pricing
when things are up a lot, just wait. And most people invest at the wrong time
because they get excited about what the markets are telling them about a
business and therefore where that's usually when
we're not investing and just wait for the time when it'll be
a little better to invest. Do you accept I mean, I think you've
spoken in the past about, you know, possible big acquisition that would be
transformational for Brookfield. You know, I would say we're always in
the we're always looking for additions to the business.
In 2018, we brought Oaktree into our fold and we have a partnership with the
management there that's been transformative to our credit business.
And we're always looking for things like that to continue to build the business
and just grow over time. And but if not, we'll just we just keep
plugging away every day. So this is so it's more partnerships
than outright acquisitions like Altera is.
I mean, this is a different kind of carbon fund.
Our transition business, we started we, we
split off from our main infrastructure business, a four and a half, four or
five years ago, we raised a large first time fund.
We just did a first close of our second fund for.
$10 billion. And then we
we started an emerging markets business. So I'd say that's just a split, right?
This is just all we're trying to do is we we informed ourself about transition.
We built a team over a long period of time.
Now, are some people said to us, can you solve emerging markets as opposed to
just developed markets? We didn't feel it appropriate to put the
two in the same fund. So we're creating another fund to do
that. And some of our clients will come along
with us and we're quite excited about it.
Is that a template for for possible future kind of spinoffs?
You know, we we have in our private equity business, we have a buyout
sponsor business, but we're also doing we're just in the
midst of creating a strategy for the Middle East, which will be a separate
pool of money. We're creating a strategy for financial
infrastructure because we think that's the next
the next phase of infrastructure investing is in the financial backbone
of the global economy. And a lot of the world has been pushing
towards financial infrastructure, and it's not appropriate for our
infrastructure fund. But so we're creating a new pool of
money to do that. And so we we're there's a fine line
between to having too many things and making sure your clients who want to be
invested with you in that type of area have have a pool to be able to do it
with us. When you look at infrastructure, I mean,
there's consolidation. It was really the I guess the name for
the last six months is does that make your job easier or tougher?
Look, we we we were the maybe one I'm going to say one of the pioneers of
infrastructure in the original. You want us in?
Well, going into institutional clients, we were the original because we were in
industrial businesses ourselves. And how we got into the infrastructure
business is we decided we didn't like the up and down of many of the
industrial businesses we had in mining businesses, but we really liked the
backbone infrastructure that was in these businesses.
And the 20 years ago we started doing it for institutional clients.
At that time, nobody would listen to us and nobody would invest with us.
So it's quite it's quite it's great that that this has
become mainstream today. The good news, I'd say we're still a
leader in it. We have very large funds, in fact, the
largest in the world, and therefore we just continue to try to differentiate
our investment strategies and with size,
scale, operating people and the ability just to grow in the places we are.
So I think we're just two others getting stronger.
Help us. Probably not, but it doesn't really
bother us. And I think there's a place for us to
continue to grow in the business. Coming up, why Bruce Flatt has faith in
the future of commercial real estate. There's opportunity coming and if you
know what you're doing, you can pick the right assets.
There's a great opportunity here. From the United States to Europe,
plunging office valuations are spooking investors, raising fears about a broader
contagion. As one of the world's biggest owners of
commercial real estate, Brookfield is at the center of a global industry
shakeout. For the chief executive, Bruce Flatt,
who made his name in real estate, sees opportunities where others see risks.
We continue the conversation. Commercial real estate.
So a lot of people say, look, this is not this is not the right time.
We're going to see a shake out in commercial real estate.
There are opportunities that you see. I think, look, the next the next story
is that integrates coming down. Fundamentals are pretty good in a lot of
commercial real estate. Of course, there are some there's a tale
of some investors that had properties that for this environment the
fundamentals either don't support it or the financing they have can't be
supported and therefore those have to get dealt with.
So that's a tale that's getting dealt with within the financial system.
Fundamentals are actually getting better.
Interest rates are coming down, which means the values are going to improve.
But that tail, there's opportunity coming.
And if you know what you're doing, you can pick the right assets.
There's a great opportunity here. And we've we've done this for a long
period of time and we've seen these cycles before.
Real estate's cyclical and you can make a lot of money when you pick the
inflection point of markets. And I remember it in the early nineties,
I remember it in early 2000, so I remembered it in 2009,
ten, 11, 12. There are points when
when there's an inflection point and we're at one of those inflection points.
So you're buying we are buying our opportunistic fund.
We just bought some we foreclosed on some loans for multifamily in the U.S.
recently. We're very excited about that and we
continue to look at a bunch of things. Do you see anything in Europe?
Absolutely. I think there will be, you know, the
biggest most liquid markets are in the United States.
That doesn't mean, therefore, because of the most liquid, you always find the
most opportunities, but you're up, there's less capital and therefore there
will be there will be opportunities here as well.
But how do you make a difference between the ones that you know will get better
and the ones that actually you just you should forget?
You know, I would just say it. It depends on
the types of real estate. You just need quality wins always.
It always has. It always will.
What you spend most of your time thinking about.
You know, I personally, I spend my time sometimes helping our teams with
business. Sometime I'd say a third that a third
with clients, helping them understand what we're doing, where we're going.
And a third is just internal people running the organization, I'll call it.
And and with that, we spend an enormous amount of time
building our people and transitioning our people within all of our businesses.
And it's just a it's not something that happens once sapping all the time in our
whole goal is our culture of our place is bring people up that are very young,
give them opportunities that they'd never get anywhere else.
Grow them throughout the organization, make sure they're entrepreneurial,
hardworking, and and want to win. And and if you have that, you have a
great culture in a company. And that's sort of what we spend all of
our a huge amount of our time trying to build within the organization,
bring them up to test them or just to make them learn, look, we can
bring them up to take on roles and eventually, eventually I will
I will become an executive chairman and I'll still be around, but somebody
else, will you ever retire? Well, you know, I will.
I will become an executive chairman at some point in time.
And what that means is I'm here to help mentor young people, help with business
development, look after clients that that can be helpful to the overall
organization. But at some point in time, it's this is
a hard business. We're in 30 countries.
We have lots of people. It's better to have younger people grow
the business. I took over 30 in my 30 early thirties
and and I probably slower today than I was
then. Not that I've slowed down, but I'm
slower today and at some point in time it's the right thing just to bring to
give the people those roles. And so we're continually evolving the
organization in that way. But are you going anywhere anytime soon?
No. Is this the biggest mistake actually,
for politicians and chief executives? Is is staying on for too long or is it
is leadership in 2024 different to what it was in early 2000?
You know, I think it all depends on the organization.
Some organizations fit one way, some fit another.
I'm not suggesting our culture. Here is what works for everybody else.
But we have a culture where our elders stay around for long periods
of time to help and our young people get opportunities
which they wouldn't otherwise get if the elders stayed in place in a full time
role. And that's what we do.
But maybe it doesn't work for everyone, and that's okay.
Maurice Black, thank you so much for joining us today.
