Brookfield Asset Management expects to hold a $14 billion first close on its fourth flagship infrastructure fund later this month, according to information the Toronto-based asset manager released with its first-quarter earnings results.
The first-close amount will equal the total capital the asset manager raised for its previous flagship fund and is “on pace” to be the firm’s largest infrastructure vehicle to date, BAM chief executive Bruce Flatt said during an earnings call last week.
The firm launched Brookfield Infrastructure Fund IV late last year without setting a hard-cap and did not indicate during the call how long fundraising would last after first close. The firm declined to comment further.
Brookfield held a $12 billion first close on BIF III in May 2016 and held the final close two months later.
According to pension documents published online, BIF IV will make investments ranging between $500 million and $1.5 billion and is targeting a 10 percent net return. Brookfield intends to contribute at least 25 percent of the fund’s total commitments.
Documents published in August by the Sacramento County Employees’ Retirement System show BIF III is generating a net return of 13.3 percent.
Recent Brookfield deals include a $600 million investment from the firm’s listed infrastructure vehicle, Brookfield Infrastructure Partners, in North American residential energy company Enercare, as well as a $3.3 billion acquisition of midstream assets in western Canada that Brookfield purchased from Enbridge.
BIF II, which closed on $7 billion in 2013, is generating a 13.1 percent net IRR, according to the New York City Employees’ Retirement System.
Oaktree: the ‘boutique brand’
“From an opportunistic standpoint, as many of you know we have been bolstering our financial resources in preparation for the inevitable downturn in markets in credit that will come at some point in time in the future,” Flatt said during the call, echoing remarks he made during a recent interview with sister publication PERE when discussing the deal.
Flatt provided more detail in his letter to unitholders, where he stated that in the asset classes where the two firms overlap – private equity, real estate and infrastructure – “we intend to retain two premier brands in the marketplace – Brookfield as the mega-transaction brand (with $10 billion to $25 billion funds) and Oaktree as the boutique brand (with funds up to $5 billion).”
Oaktree’s remaining 38 percent that Brookfield did not acquire will continue to be owned by the management group, led by Oaktree’s co-chairmen Bruce Karsh and Howard Marks, who in a recent interview described the merger as a “fundamental transaction”.
Under the terms of the agreement, however, Oaktree’s management group will have the option to sell the remaining 38 percent to Brookfield between 2022 and 2029.
“As a result, we may eventually own 100 percent of the business, but it is more likely, similar to most of our businesses, that our Oaktree management team will be part-owners with us, in some form for the long term,” Flatt said.
The transaction is expected to close in the third quarter of 2019.