People walk to Brookfield Place off Bay Street on the day of the annual general meeting for Brookfield Asset Management shareholders in Toronto, May 7, 2014.Mark Blinch/Reuters
Top executives at Brookfield Asset Management Ltd. BAM-T are betting that wild swings in stock markets over the past month – including in the company’s own shares – reflect “sentiment more than substance.”
Brookfield chief executive officer Bruce Flatt and president Connor Teskey made the case that the US$1-trillion asset manager is well insulated from turmoil caused by tariffs in a letter to shareholders published Tuesday morning with the company’s first-quarter financial results.
After making strong gains for most of the past year, Brookfield’s share price fell sharply in March and early April, in step with the broader market.
A week after U.S. President Donald Trump’s “Liberation Day” tariffs announcement, Brookfield’s shares had dropped by more than 30 per cent to $61.07 from a late-January peak of $88.51.
In a sign of confidence that investors had overreacted, Brookfield bought back more than two million shares in the first quarter.
Over the past month, Brookfield’s shares have regained some ground, and closed at $74.49 on Monday on the Toronto Stock Exchange.
Mr. Flatt and Mr. Teskey made the case Tuesday that Brookfield is well insulated against the impact from tariffs, and posed to raise billions of dollars of new capital to invest in energy security, data capacity and onshoring in the face of more protectionist trade relationships.
“While it would be reckless to diminish the impact of tariffs and what they’ve done to markets, we really don’t see it changing our fundraising trajectory,” Mr. Teskey told analysts on a conference call. “We actually think that this environment – maybe not week to week, but over months and quarters – is going to create an even bigger opportunity for our franchise.”
As economic stress mounts from uncertainty over tariffs, some of Brookfield’s investing businesses are waiting to pounce as owners of assets and businesses come under increasing pressure.
Brookfield announced Tuesday that it raised US$7.1-billion for its real estate arm in the first quarter, including US$5.9-billion for the fifth vintage of its flagship real estate fund, which could be Brookfield’s largest yet.
With some central banks holding off on rate cuts, keeping interest rates elevated for the time being, “that’s going to create very attractive opportunities to buy quality assets with imperfect capital structures at significant discounts to replacement costs,” Mr. Teskey said. “And that’s actually what this strategy already has been doing early in its vintage.”
Brookfield’s credit arm, which focuses on making private loans, also raised US$14-billion in the quarter, nearly half of it from the company’s insurance subsidiaries. Mr. Teskey said its Oaktree Capital Management subsidiary, which specializes in distressed-debt investing, is expecting to see high demand.
“This is the environment where Oaktree goes to work,” he said.
In total, Brookfield raised US$25-billion in the first quarter, and more than US$140-billion over the past 12 months.
The company made US$16-billion of new investments, and sold US$10-billion of assets.
Brookfield benefits from having cash flows that come from fees investors pay on pools of capital entrusted to Brookfield. The fee-bearing capital the company manages increased by 20 per cent to US$549-billion over the past year.
Large private-asset managers are increasingly looking to retail investors as their next wave of fee-paying clients, rolling out products that blur the line between public and private markets and partnering with more traditional investment forms.
Brookfield is watching the space carefully and “having a number of conversations of our own,” Mr. Teskey said. “We view this as a long game, and it is something we would consider in the future,” he said.
The company reported Tuesday that its distributable earnings – a measure asset managers use as a proxy for cash earnings that could be paid to shareholders – also rose by 20 per cent to US$654-million, or 40 US cents per share, in the quarter that ended March 31.
That compared with distributable earnings of US$547-million, or 34 US cents per share, in the same quarter last year.
On average, that met analysts’ estimate of 40 US cents per share, according to data from S&P Global Market Intelligence.