The head of Brookfield Asset Management Inc. said markets volatility created in the wake of the coronavirus pandemic is much more manageable than previous meltdowns.
“For us, compared to the direct hit we took on 9/11, this uncertainty and volatility feels manageable,” Bruce Flatt, Brookfield Chief Executive Officer, said in a letter to shareholders Monday. “In 2008, with the banking system failing, real asset owners didn’t know if many lenders were going to exist in the future. Today, the banking system is in far better shape. It never feels very good to have this degree of chaos, but this will pass.”
Flatt said that while Brookfield had been expecting a recession and “market washout” for some time, no one could have predicted the coronavirus would be the cause. Despite this, he said he believes Brookfield is “very good shape” to weather the storm with US$12 billion in undrawn bank lines and only about 40 per cent of the US$50 billion it raised in its previous fundraising invested.
Flatt said most of Brookfield’s businesses are resilient and therefore he doesn’t see any major issues. While some of its businesses — including the malls and ports it owns — will likely be impacted by people staying home, the bulk of its investments are in critical infrastructure.
“While many are at home now, people and companies still need corporate premises, infrastructure, power, broadband, utilities and many other critical services that form the backbone of the global economy, and that Brookfield’s businesses provide,” he said.
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In addition, Brookfield agreed to acquire a majority interest in Oaktree Capital Group last year in an effort to build out a credit arm and in anticipation of the debt markets unwinding.
“Now it’s taking place,” Flatt said. “The team at Oaktree is accelerating the pace of deployment of their current distressed debt fund and preparing to launch their next fund, which we think could significantly exceed the size of their last.”
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