WEBVTT - Brookfield Asset Management CEO Bruce Flatt Talks More Data Center Capacity Needed 0:00:02.520 --> 0:00:07.080 Bloomberg Audio Studios, Podcasts, radio news. 0:00:07.320 --> 0:00:09.559 Bruce Flatt, thank you so much for speaking to Bloomberg. 0:00:09.600 --> 0:00:09.760 Now. 0:00:09.800 --> 0:00:12.720 A lot has happened in the last twelve months. When 0:00:12.760 --> 0:00:15.800 you look at your investment thesis, has anything changed and 0:00:15.840 --> 0:00:18.640 where you see value and where you see our economy's going. 0:00:19.920 --> 0:00:23.880 The short story is not much has changed now. As 0:00:23.920 --> 0:00:27.040 you know, every day the news changes. But what we 0:00:27.200 --> 0:00:31.640 try to focus are on our long term trends and 0:00:32.000 --> 0:00:37.279 focus on the long ball, and within that there are 0:00:37.320 --> 0:00:40.600 going to be fluctuations all the time. I'd say everything 0:00:41.000 --> 0:00:45.120 that has happened over the last year is all positive 0:00:45.200 --> 0:00:46.600 to the long term thesis. 0:00:46.600 --> 0:00:47.080 As we have. 0:00:48.479 --> 0:00:51.360 We're still going to digitalize the world and we're going 0:00:51.400 --> 0:00:53.160 to do it faster, and we're going to have more. 0:00:54.360 --> 0:00:56.680 We're still going to deglobalize and we're going to do 0:00:56.720 --> 0:00:59.240 it faster and we're going to have more. And we 0:00:59.360 --> 0:01:05.120 still are going to transition to renewables, maybe not because 0:01:05.120 --> 0:01:08.720 of renewables, but because we just need more power. So 0:01:08.840 --> 0:01:13.000 I think all those three three trends are maybe more 0:01:13.000 --> 0:01:14.679 important today than they were before. 0:01:15.760 --> 0:01:17.080 So we don't get too. 0:01:17.040 --> 0:01:19.880 Wrapped up in the day to day effects of what's 0:01:19.880 --> 0:01:22.920 going on. On rates or economy or different. 0:01:22.720 --> 0:01:23.240 Things like that. 0:01:23.760 --> 0:01:26.360 Has your US business been impacted at all with some 0:01:26.360 --> 0:01:27.280 of the Trump policies. 0:01:27.400 --> 0:01:31.319 What we do is in go to great countries, invest 0:01:31.360 --> 0:01:34.920 in great businesses or assets on the backbone of the 0:01:34.920 --> 0:01:40.000 global economy with great people, and we don't trade over borders. 0:01:40.520 --> 0:01:42.759 So in the United States we have five hundred billion 0:01:42.800 --> 0:01:43.960 dollars worth of assets. 0:01:44.600 --> 0:01:45.839 They're all local assets. 0:01:45.959 --> 0:01:49.400 We sell the goods to local companies and people, and 0:01:49.600 --> 0:01:51.960 we're a local company, as we are in every other 0:01:52.000 --> 0:01:58.840 country of the world. So there's no doubt there's always 0:01:58.840 --> 0:02:03.880 some raiplicationations on everyone good or bad, But for us, 0:02:03.880 --> 0:02:06.640 it's pretty small because we just invest in places and 0:02:06.680 --> 0:02:07.840 we don't trade over borders. 0:02:09.200 --> 0:02:11.600 When you look at regions around the world, where do 0:02:11.639 --> 0:02:16.840 you see the big next opportunity, we're. 0:02:16.720 --> 0:02:17.560 In thirty countries. 0:02:18.680 --> 0:02:23.400 And therefore, and the success of our investment strategy for 0:02:23.480 --> 0:02:27.600 many decades has been to have global business and to 0:02:27.639 --> 0:02:33.160 be able to pick the spots where value and price 0:02:33.200 --> 0:02:38.520 don't intersect. Where markets are up a lot, we probably 0:02:38.520 --> 0:02:40.360 were selling things, and where markets are down a lot, 0:02:40.440 --> 0:02:43.640 we're probably buying things. And so I would say it 0:02:43.720 --> 0:02:48.920 always differs in Europe for example, it's a value market. 0:02:49.400 --> 0:02:52.960 Multiples are lower in the United States. The trends behind 0:02:53.000 --> 0:02:55.079 what's going on in the United States are very large, 0:02:55.480 --> 0:02:58.680 so they're just different opportunities. But I would say if 0:02:58.720 --> 0:03:02.240 I had to pick spot where more capital will go 0:03:02.360 --> 0:03:04.960 over the next eighteen months, it's probably in the United States. 0:03:05.320 --> 0:03:06.320 What about the Middle East? 0:03:06.919 --> 0:03:09.960 You know, we've had a business there investing in the 0:03:09.960 --> 0:03:12.640 Middle of the East, unlike many others. 0:03:12.680 --> 0:03:14.799 We've been there for twenty five years. 0:03:15.720 --> 0:03:18.480 We have many big businesses from payments to schools to 0:03:18.760 --> 0:03:24.240 real estate, pipelines, and it's been a great place to invest. 0:03:24.280 --> 0:03:27.840 So yes, we're still doing more there. We're the largest 0:03:27.919 --> 0:03:32.640 foreign investor in the UAE, for example. I think we 0:03:32.680 --> 0:03:36.760 have twelve billion dollars of assets. So it's just it's fantastic. 0:03:37.520 --> 0:03:41.040 It's just not we can put twelve billion at a 0:03:41.080 --> 0:03:44.080 crack into investments in the United States. 0:03:44.120 --> 0:03:46.280 Just the size of the economies are just different. 0:03:46.920 --> 0:03:52.400 The United States is the largest, deepest and most robust 0:03:52.480 --> 0:03:56.320 economy in the world, and that's not changing anytime soon. 0:03:56.960 --> 0:04:01.400 The prospects for you are also infrastructure and therefore some 0:04:01.480 --> 0:04:04.920 of the data centers. How much of an increase what 0:04:05.000 --> 0:04:07.000 we see from the Brookfield. 0:04:07.160 --> 0:04:07.840 The thing that. 0:04:10.040 --> 0:04:13.000 I guess that hasn't really been factored in yet is 0:04:13.040 --> 0:04:18.640 that data center build out really only started ten years ago, 0:04:19.360 --> 0:04:22.920 and it was just getting started for Cloud and then 0:04:23.000 --> 0:04:28.960 the chat GPT moment happened, and the amount of increase 0:04:29.040 --> 0:04:36.000 in requirement to train models and for learning is very, 0:04:36.120 --> 0:04:39.960 very significant. And we're talking trillions and trillions. So the 0:04:40.000 --> 0:04:47.200 opportunity for us, as we've always tried to move our 0:04:47.279 --> 0:04:51.200 backbone of the global economy along with what's changing in 0:04:51.240 --> 0:04:57.159 the world, and increasingly today the world is digitalizing and 0:04:57.360 --> 0:05:01.200 the final step of all that is providing computer uh 0:05:01.600 --> 0:05:04.320 and so we continue to work on opportunities like that. 0:05:04.360 --> 0:05:06.360 But these are large, large sums of money. 0:05:06.400 --> 0:05:09.760 Some of these sites, like one thousand megawatt one gigwat 0:05:10.520 --> 0:05:13.640 data center site is with compute capacity. Power to compute 0:05:13.680 --> 0:05:16.719 capacity all the way through is fifty billion dollars. These 0:05:16.800 --> 0:05:20.720 are almost unprecedented investments ever seen. 0:05:22.120 --> 0:05:24.680 In the last in hundreds of years. 0:05:25.279 --> 0:05:28.760 Are we overestimating or underestimating the pace of change that 0:05:28.800 --> 0:05:29.920 this needs to get done? 0:05:30.080 --> 0:05:35.240 You know, I would say, you never know at the 0:05:35.279 --> 0:05:38.359 moment in time, But if I had to, if I 0:05:38.400 --> 0:05:40.000 had to guess we will. 0:05:41.160 --> 0:05:44.840 Everyone gets excited sometimes, but in the in the next 0:05:44.839 --> 0:05:49.040 ten years, it will be we will look back and 0:05:49.080 --> 0:05:53.080 be extremely surprised at the progresses have been made. 0:05:53.120 --> 0:05:55.120 And probably the most important. 0:05:54.720 --> 0:05:58.840 Thing is is that really what's happening is that it's 0:05:59.279 --> 0:06:06.560 the application hat of artificial intelligence into service businesses and 0:06:06.640 --> 0:06:12.880 industrial businesses and the compression of the component of labor. 0:06:13.640 --> 0:06:18.040 And because of that, the productivity advances are going to 0:06:18.080 --> 0:06:19.480 be very significant. 0:06:20.640 --> 0:06:22.280 But that's going to be good for America because it. 0:06:22.240 --> 0:06:25.080 Means you can reshore capacity that you couldn't have made 0:06:25.560 --> 0:06:28.159 in the United States before, and that's going to continue 0:06:28.200 --> 0:06:30.919 to happen over the next ten years. 0:06:31.200 --> 0:06:32.839 Has Deep Sea changed anything for you? 0:06:33.760 --> 0:06:36.719 I think all it does is show that when advances 0:06:36.760 --> 0:06:40.720 get made, they continue to get made and progress. Smart 0:06:40.880 --> 0:06:44.520 entrepreneurs figure out another way, and it just I'd say 0:06:44.520 --> 0:06:47.920 it makes the point we are going to have better 0:06:47.960 --> 0:06:49.800 technology every day. 0:06:50.640 --> 0:06:51.599 We're all learning. 0:06:51.760 --> 0:06:55.160 And I'd say for us, what's really important is we 0:06:55.240 --> 0:06:57.000 provide the backbone. 0:06:56.480 --> 0:06:57.120 Of all of that. 0:06:57.839 --> 0:07:00.839 So we're providing the green power, buying the data center, 0:07:00.839 --> 0:07:03.560 we're providing the compute capacity, We're funding all of that, 0:07:04.160 --> 0:07:08.000 and that's the that's different than I don't. We don't 0:07:08.040 --> 0:07:11.520 own a competitor to deep Seek. If you did, you 0:07:11.640 --> 0:07:14.240 might worry about whether you had that. What it does 0:07:14.280 --> 0:07:18.560 mean probably is that there's more capacity required, which means 0:07:18.600 --> 0:07:21.600 they they need more of our backbone. And as you 0:07:21.680 --> 0:07:27.280 bring costs down with anything, more use cases come about. 0:07:28.000 --> 0:07:30.560 And and that's what's going to happen in the next ten. 0:07:30.480 --> 0:07:34.560 Years as we as we evolve this business. 0:07:35.520 --> 0:07:37.720 If you're sitting in Europe, there's a you know, there's 0:07:37.800 --> 0:07:40.400 concern that actually you're being left out because China is 0:07:40.440 --> 0:07:43.640 going one way. The US is America first. You know, 0:07:43.680 --> 0:07:47.720 you worry about inflationary pressures and trade wars. What does 0:07:47.720 --> 0:07:49.760 that mean for brook Field or are there opportunities to 0:07:49.760 --> 0:07:50.880 be had again? 0:07:51.000 --> 0:07:54.960 We're we're a local investor in countries. We're building out 0:07:55.040 --> 0:07:57.280 data centers all through Europe. We have the largest builder 0:07:57.320 --> 0:07:59.800 of data centers in Europe. We just now it's a 0:07:59.800 --> 0:08:04.440 big deal in France for twenty billion dollars. In all 0:08:04.480 --> 0:08:08.160 of our businesses, we continue to invest across the backbone. 0:08:08.560 --> 0:08:12.320 We're local players in local countries. We sell local things and. 0:08:13.920 --> 0:08:21.400 Sometimes less money being available and less positivity means greater 0:08:21.480 --> 0:08:24.920 opportunity because there's less money available and therefore the opportunities 0:08:24.920 --> 0:08:29.680 are better, and so we're always selective with what we do, 0:08:29.760 --> 0:08:33.200 but I think there are still significant opportunities in Europe 0:08:33.559 --> 0:08:34.400 on private credit. 0:08:34.440 --> 0:08:36.240 You're a big player on private credit. 0:08:36.320 --> 0:08:37.360 Where do you go from here? 0:08:38.800 --> 0:08:42.160 This business is going to get bigger, Our business, and 0:08:42.240 --> 0:08:44.520 the industry in total is going to get bigger and 0:08:44.520 --> 0:08:47.120 bigger because this is just capital being pushed off of 0:08:47.400 --> 0:08:52.400 banks balance sheets. It's less regulatory friendly on their balance sheets. 0:08:52.440 --> 0:08:55.480 They don't really want it on their balance sheets. It's 0:08:55.520 --> 0:09:02.160 being pushed to sponsor groups who are usually lending in 0:09:02.200 --> 0:09:06.000 the area where they have a lot of expertise. And 0:09:06.720 --> 0:09:09.880 our two biggest businesses today or I guess three biggest 0:09:09.880 --> 0:09:14.920 business our real estate, infrastructure and direct lending in corporates 0:09:14.920 --> 0:09:17.280 because we have a lot of expertise in those things. 0:09:17.320 --> 0:09:21.800 We just bought an asset backed lender called Castle Lake 0:09:22.000 --> 0:09:24.840 and we're going to continue to build out the business 0:09:25.240 --> 0:09:29.439 merely because I think the scale opportunity is there and 0:09:29.640 --> 0:09:33.920 our clients can earn extra return in private credit than 0:09:33.920 --> 0:09:37.760 they can just buying bonds in the market, and that's really. 0:09:37.480 --> 0:09:39.160 The we're here for our clients. 0:09:40.559 --> 0:09:42.360 We're here just to service them, and if they can 0:09:42.440 --> 0:09:46.120 earn extra hundred basis points over what they'd get somewhere else, 0:09:46.640 --> 0:09:49.319 this is a very exciting place for them to put money. 0:09:49.480 --> 0:09:51.320 How much bigger do you think this market can? Again? 0:09:51.360 --> 0:09:53.440 If you're good, it seems like you're doing really well, 0:09:53.480 --> 0:09:55.400 But if you're in that mid level, Yeah. 0:09:55.200 --> 0:09:58.720 We're three hundred billion today. I think it can be 0:09:58.880 --> 0:10:00.520 much much larger. 0:10:01.520 --> 0:10:02.480 And what kind of time for you? 0:10:04.559 --> 0:10:09.280 Look it? It will grow with us. It's with us. 0:10:09.360 --> 0:10:12.000 We always try to grow methodically. Once in a while 0:10:12.040 --> 0:10:16.280 we buy something, but we grow methodically. It can grow, 0:10:16.920 --> 0:10:19.880 it can double, it can driple, it can quadruple over 0:10:19.920 --> 0:10:21.240 the longer term, and we'll. 0:10:21.120 --> 0:10:22.920 Just keep building it out. But I'd say, the. 0:10:22.880 --> 0:10:25.120 Thing we want to make sure with every business we have, 0:10:25.360 --> 0:10:30.000 we're super responsible. The foremost thing we have to do 0:10:30.040 --> 0:10:32.880 is make clients. Make our clients the returns we promise them. 0:10:33.679 --> 0:10:37.400 And if we can do that, this business will be very, 0:10:37.520 --> 0:10:40.199 very large twenty five years. 0:10:40.000 --> 0:10:43.520 From now, do you expect consolidation in that space? In 0:10:43.559 --> 0:10:44.080 your space? 0:10:44.160 --> 0:10:45.160 Look, the. 0:10:47.040 --> 0:10:51.960 Asset management industry started from nothing thirty years ago. Circuit 0:10:52.000 --> 0:10:55.600 thirty years ago, there are five or seven big players today. 0:10:56.960 --> 0:11:00.199 Some of us have done acquisitions to add in are 0:11:00.480 --> 0:11:04.280 sources of skills into the businesses. We've done, some others 0:11:04.360 --> 0:11:07.360 have done some. I think there's going to be a 0:11:09.320 --> 0:11:11.840 it's never one size never fits all, but there's gonna 0:11:11.840 --> 0:11:15.720 be some very large players. We're one of those, and 0:11:15.760 --> 0:11:17.600 then there's going to be some niche players that fit 0:11:17.679 --> 0:11:22.000 a certain area. What's happening in the middle is it 0:11:22.200 --> 0:11:24.679 so far in the last eighteen twenty four ouns it 0:11:24.679 --> 0:11:27.000 hasn't been easy for them to raise money. We raised 0:11:27.000 --> 0:11:29.080 one hundred and thirty five billion dollars last year in 0:11:29.120 --> 0:11:30.240 our asset management business. 0:11:31.480 --> 0:11:33.520 Not many others can raise that type of capital. 0:11:33.880 --> 0:11:35.840 Are you looking to buy anything? 0:11:38.120 --> 0:11:44.079 We're always on the lookout for complimentary things that can 0:11:44.120 --> 0:11:46.640 add to the business and that we can deliver to 0:11:46.679 --> 0:11:51.920 our clients in a seamless way that don't conflict or 0:11:51.960 --> 0:11:54.840 compromise the investing skills that we have as an overall business. 0:11:55.160 --> 0:11:56.839 We need to be We need to be able to 0:11:56.880 --> 0:12:00.480 say to our clients, we're pleased to offer you an 0:12:00.480 --> 0:12:06.640 oak Tree fund because the team at oak Tree, Bruce Howard, 0:12:08.640 --> 0:12:13.600 arm and are the best in the world, and that 0:12:13.679 --> 0:12:16.760 they do great in opportunities and investing, and when we 0:12:16.760 --> 0:12:18.640 can do that, we're proud to have them as part. 0:12:18.480 --> 0:12:19.040 Of the team. 0:12:20.000 --> 0:12:21.280 Can you talk to me about oak Tree? So you 0:12:21.280 --> 0:12:24.960 have seventy percent of oak Tree? Well you have you know, 0:12:25.200 --> 0:12:25.720 become one? 0:12:26.200 --> 0:12:26.480 Do you know? 0:12:26.840 --> 0:12:29.839 We're sort of one, But I've had we've had a 0:12:29.880 --> 0:12:34.200 different attitude towards the acquisitions we've made. We like to 0:12:34.360 --> 0:12:40.760 partner with management teams. Today the management has been transitioned 0:12:40.800 --> 0:12:46.760 to Arman Panosian and Bob and O'Leary, and the two 0:12:46.800 --> 0:12:49.520 of them are running the business and it's run as 0:12:49.520 --> 0:12:52.800 a separate unit and they own a part of the business. 0:12:52.840 --> 0:12:54.320 And I think it's good. 0:12:55.520 --> 0:13:00.640 Each asset management organization has a special culture and ours 0:13:00.720 --> 0:13:03.040 is right for us, but it may not be right 0:13:03.120 --> 0:13:06.440 for that group or whatever other group we work with. 0:13:06.920 --> 0:13:08.400 So I think it's a fine line. 0:13:09.559 --> 0:13:17.360 Entrepreneurialism in alternative managers managers is really important, and therefore 0:13:18.679 --> 0:13:23.199 we've had this partner manager model and it's worked so far, 0:13:23.600 --> 0:13:25.160 and so we're pretty happy with it. 0:13:26.280 --> 0:13:29.920 If we talk about your three d's, so decarbonization, digitization 0:13:30.320 --> 0:13:33.880 and deglobalization, how do you think that's changed the last 0:13:33.880 --> 0:13:37.080 twelve months? Is there one that will be accelerated compared 0:13:37.080 --> 0:13:39.720 to where you thought it would do twelve months ago. 0:13:41.360 --> 0:13:46.200 Everyone out in the world thought the decarbonization was going 0:13:46.280 --> 0:13:48.240 to be the big thing, and we're going to everything's 0:13:48.240 --> 0:13:52.080 going to net zero. That wasn't That wasn't exactly the 0:13:52.160 --> 0:13:56.400 case when it was. Today it's the news story is 0:13:56.600 --> 0:14:02.040 less that, but I think it's the same. We need 0:14:02.160 --> 0:14:08.680 power preferably. Most companies want green power, and the good 0:14:08.720 --> 0:14:12.800 news is green power is largely the lowest cost energy 0:14:12.920 --> 0:14:15.720 anywhere in the world, most countries of the world. Therefore, 0:14:15.720 --> 0:14:19.920 that one just continues. I'd say the two that have 0:14:20.480 --> 0:14:24.000 ramped up very substantially on the amounts of money they're 0:14:24.040 --> 0:14:29.120 going in is the digitalization of the world, largely because 0:14:29.160 --> 0:14:34.520 of artificial intelligence and what's required to build out the 0:14:34.560 --> 0:14:40.440 backbone for it, which had been coming, but it's now. 0:14:40.280 --> 0:14:42.880 On at way different levels. 0:14:43.480 --> 0:14:49.440 And because of that, there will be reshoring of industrial 0:14:49.480 --> 0:14:55.320 capacity back to other countries, assisted in some places by tariffs, 0:14:55.520 --> 0:14:59.320 I might add, but even the terroriffs might not have 0:14:59.360 --> 0:15:02.760 worked if you didn't have what's going on with artificial intelligence. 0:15:03.960 --> 0:15:05.640 When you look at real assets and this is what 0:15:05.680 --> 0:15:08.640 you like, and this is what Brookfield buys, what can 0:15:08.680 --> 0:15:16.479 we expect from you in the next twelve months. 0:15:13.240 --> 0:15:15.440 For my whole career, I've just said the same thing 0:15:15.480 --> 0:15:19.600 we did before, But we always change, and fifty percent 0:15:19.640 --> 0:15:22.880 of the assets we own today we didn't exist as 0:15:22.880 --> 0:15:26.440 an asset class to invest into fifteen years ago, ten 0:15:26.520 --> 0:15:33.600 fifteen years ago. I find it amazing how the world changes, 0:15:33.960 --> 0:15:34.240 and it. 0:15:34.200 --> 0:15:35.600 Doesn't change overnight. 0:15:36.360 --> 0:15:41.160 But in investing, if you don't evolve your investing skills, 0:15:41.520 --> 0:15:44.080 maybe you do the same things. We're value investors through 0:15:44.120 --> 0:15:46.400 and through. We like to buy cash flows, we discount 0:15:46.400 --> 0:15:51.400 them back. We like proven technologies. But if you don't 0:15:51.440 --> 0:15:53.840 evolve your thinking as to what's going on in the 0:15:53.880 --> 0:15:56.520 world and try to see forward to where we're going, 0:15:57.080 --> 0:16:00.760 you get left in the dust. And so we're just 0:16:01.000 --> 0:16:05.560 always trying to see out in the future where we're going, 0:16:05.560 --> 0:16:09.600 and that's increasingly what a few of us at Brookfield 0:16:09.600 --> 0:16:12.120 are spending our time on, just understanding where the world's 0:16:12.160 --> 0:16:16.320 going and how we can we can add value to 0:16:16.320 --> 0:16:18.480 our clients by just being ahead of the game. 0:16:18.880 --> 0:16:21.400 Can you tell me one thing that you've seen that 0:16:21.440 --> 0:16:23.280 you think is new. 0:16:23.560 --> 0:16:24.200 I think the. 0:16:26.240 --> 0:16:31.000 I think the application or early days, the application of 0:16:31.120 --> 0:16:36.080 artificial intelligence in our service and industrial businesses. 0:16:37.240 --> 0:16:40.160 Is seeing productivity. 0:16:39.480 --> 0:16:47.240 Advances and investment returns of numbers almost never seen before. 0:16:47.880 --> 0:16:50.880 We're talking fifty to one hundred percent cash on cash 0:16:50.920 --> 0:16:56.800 investment returns and that's very significant to productivity, which which 0:16:56.880 --> 0:17:00.280 may mean if it all works out, that we're in 0:17:00.320 --> 0:17:06.640 an investment led era for the next twenty years which 0:17:06.680 --> 0:17:14.160 is highly productive and can be deployed into highly productive 0:17:14.200 --> 0:17:17.440 and drop big and significant amounts cash flow to the 0:17:17.440 --> 0:17:19.800 bottom line. And if that occurs, we're going to have 0:17:20.080 --> 0:17:27.040 a very strong economy. Of course, cycles have not been repealed, 0:17:27.640 --> 0:17:30.240 but we should have a pretty good period of time 0:17:30.280 --> 0:17:33.720 for the next twenty years as that deploys within business, 0:17:33.800 --> 0:17:37.359 but it takes a lot of capital and you have 0:17:37.440 --> 0:17:40.480 to be smart to deploy it with the right people. 0:17:41.359 --> 0:17:42.879 Bruce, thank you so much for joining us. Thank you 0:17:42.880 --> 0:17:43.719 for having me. Francy