Brookfield adds renewables sleeve to BIF IV

Executives on the firm’s earnings call also said that Brookfield Infrastructure Fund III is 85 percent invested or committed.

Brookfield Asset Management is offering investors additional exposure to renewable energy assets through a “sleeve” it has included in its fourth flagship infrastructure fund that will be dedicated to the sector, the firm said during an earnings call.

Bruce Flatt, chief executive of the $350 billion asset manager, said the new product offering, which coincides with a $17 billion fundraising effort, is in response to “strong demand from investors for mature, contracted renewable assets.”

Toronto-based Brookfield is one of the world’s largest infrastructure managers, investing in the sector through its subsidiary Brookfield Infrastructure Partners. It has increasingly made renewables part of its portfolio mix through its publicly-traded renewable power platform. Within the past year, Brookfield Renewable acquired Saeta Yield, a 1.1GW portfolio of solar and wind assets in Spain; established a 50/50 rooftop solar partnership with real estate fund manager GLP in China; and sold a 25 percent interest in a Canadian hydroelectric portfolio.

The renewables sleeve will complement the firm’s ongoing infrastructure fundraising, though its structure and size were not specified. Brookfield declined to comment.

Brookfield Infrastructure Fund IV, which appears to be on track to become the firm’s largest fund ever for the asset class, is expected to hold a first close next month, public pension documents reveal.

According to those same documents, Brookfield plans to contribute its own capital for a quarter of the fund’s total and is targeting a 10 percent net IRR on investments ranging from $500 million to $1.5 billion.

Brookfield also announced its third flagship fund, which closed in July 2016 on $14 billion, is now 85 percent invested or committed. In 2018, Brookfield Infrastructure Fund III made investments including a $600 million deal to acquire North American residential energy company Enercare and a $3.3 billion deal for midstream assets in Western Canada.

Flatt said the firm is increasingly focused on large investment fundraisings because Brookfield believes “infrastructure usually becomes more attractive as investments get larger”.

“The competition for larger acquisitions is less and the sophistication required to operate these assets increases,” Flatt explained.

Leo Van Den Thillard, Brookfield’s managing partner for client relationships, also provided an update on the firm’s open-ended fund that launched last year and held first close on $1 billion in December. That vehicle is targeting assets that do not generate returns as high as its more opportunistic vehicles.

Flatt indicated that Brookfield remains optimistic about managing a large-scale infrastructure strategy for decades to come. “We are in the early stages of the bulk of the infrastructure backbone of the global economy being transferred into private hands from the public sector,” he wrote in a letter to shareholders.

He said markets that Brookfield is most optimistic about in terms of opportunities include Canada and Australia over the short term. The firm is approaching Asia “judiciously” as that market continues to develop. In Europe, political uncertainty has led to “select opportunities to deploy capital,” he said.