Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: Bruce Flatt, thank you so much for speaking to Bloomberg.
Speaker 1: Now.
Speaker 2: A lot has happened in the last twelve months. When
Speaker 2: you look at your investment thesis, has anything changed and
Speaker 2: where you see value and where you see our economy's going.
Speaker 3: The short story is not much has changed now. As
Speaker 3: you know, every day the news changes. But what we
Speaker 3: try to focus are on our long term trends and
Speaker 3: focus on the long ball, and within that there are
Speaker 3: going to be fluctuations all the time. I'd say everything
Speaker 3: that has happened over the last year is all positive
Speaker 3: to the long term thesis.
Speaker 1: As we have.
Speaker 3: We're still going to digitalize the world and we're going
Speaker 3: to do it faster, and we're going to have more.
Speaker 3: We're still going to deglobalize and we're going to do
Speaker 3: it faster and we're going to have more. And we
Speaker 3: still are going to transition to renewables, maybe not because
Speaker 3: of renewables, but because we just need more power. So
Speaker 3: I think all those three three trends are maybe more
Speaker 3: important today than they were before.
Speaker 1: So we don't get too.
Speaker 3: Wrapped up in the day to day effects of what's
Speaker 3: going on. On rates or economy or different.
Speaker 1: Things like that.
Speaker 2: Has your US business been impacted at all with some
Speaker 2: of the Trump policies.
Speaker 3: What we do is in go to great countries, invest
Speaker 3: in great businesses or assets on the backbone of the
Speaker 3: global economy with great people, and we don't trade over borders.
Speaker 3: So in the United States we have five hundred billion
Speaker 3: dollars worth of assets.
Speaker 1: They're all local assets.
Speaker 3: We sell the goods to local companies and people, and
Speaker 3: we're a local company, as we are in every other
Speaker 3: country of the world. So there's no doubt there's always
Speaker 3: some raiplicationations on everyone good or bad, But for us,
Speaker 3: it's pretty small because we just invest in places and
Speaker 3: we don't trade over borders.
Speaker 2: When you look at regions around the world, where do
Speaker 2: you see the big next opportunity, we're.
Speaker 1: In thirty countries.
Speaker 3: And therefore, and the success of our investment strategy for
Speaker 3: many decades has been to have global business and to
Speaker 3: be able to pick the spots where value and price
Speaker 3: don't intersect. Where markets are up a lot, we probably
Speaker 3: were selling things, and where markets are down a lot,
Speaker 3: we're probably buying things. And so I would say it
Speaker 3: always differs in Europe for example, it's a value market.
Speaker 3: Multiples are lower in the United States. The trends behind
Speaker 3: what's going on in the United States are very large,
Speaker 3: so they're just different opportunities. But I would say if
Speaker 3: I had to pick spot where more capital will go
Speaker 3: over the next eighteen months, it's probably in the United States.
Speaker 2: What about the Middle East?
Speaker 3: You know, we've had a business there investing in the
Speaker 3: Middle of the East, unlike many others.
Speaker 1: We've been there for twenty five years.
Speaker 3: We have many big businesses from payments to schools to
Speaker 3: real estate, pipelines, and it's been a great place to invest.
Speaker 3: So yes, we're still doing more there. We're the largest
Speaker 3: foreign investor in the UAE, for example. I think we
Speaker 3: have twelve billion dollars of assets. So it's just it's fantastic.
Speaker 3: It's just not we can put twelve billion at a
Speaker 3: crack into investments in the United States.
Speaker 1: Just the size of the economies are just different.
Speaker 3: The United States is the largest, deepest and most robust
Speaker 3: economy in the world, and that's not changing anytime soon.
Speaker 2: The prospects for you are also infrastructure and therefore some
Speaker 2: of the data centers. How much of an increase what
Speaker 2: we see from the Brookfield.
Speaker 1: The thing that.
Speaker 3: I guess that hasn't really been factored in yet is
Speaker 3: that data center build out really only started ten years ago,
Speaker 3: and it was just getting started for Cloud and then
Speaker 3: the chat GPT moment happened, and the amount of increase
Speaker 3: in requirement to train models and for learning is very,
Speaker 3: very significant. And we're talking trillions and trillions. So the
Speaker 3: opportunity for us, as we've always tried to move our
Speaker 3: backbone of the global economy along with what's changing in
Speaker 3: the world, and increasingly today the world is digitalizing and
Speaker 3: the final step of all that is providing computer uh
Speaker 3: and so we continue to work on opportunities like that.
Speaker 1: But these are large, large sums of money.
Speaker 3: Some of these sites, like one thousand megawatt one gigwat
Speaker 3: data center site is with compute capacity. Power to compute
Speaker 3: capacity all the way through is fifty billion dollars. These
Speaker 3: are almost unprecedented investments ever seen.
Speaker 1: In the last in hundreds of years.
Speaker 2: Are we overestimating or underestimating the pace of change that
Speaker 2: this needs to get done?
Speaker 1: You know, I would say, you never know at the
Speaker 1: moment in time, But if I had to, if I
Speaker 1: had to guess we will.
Speaker 3: Everyone gets excited sometimes, but in the in the next
Speaker 3: ten years, it will be we will look back and
Speaker 3: be extremely surprised at the progresses have been made.
Speaker 1: And probably the most important.
Speaker 3: Thing is is that really what's happening is that it's
Speaker 3: the application hat of artificial intelligence into service businesses and
Speaker 3: industrial businesses and the compression of the component of labor.
Speaker 3: And because of that, the productivity advances are going to
Speaker 3: be very significant.
Speaker 1: But that's going to be good for America because it.
Speaker 3: Means you can reshore capacity that you couldn't have made
Speaker 3: in the United States before, and that's going to continue
Speaker 3: to happen over the next ten years.
Speaker 2: Has Deep Sea changed anything for you?
Speaker 3: I think all it does is show that when advances
Speaker 3: get made, they continue to get made and progress. Smart
Speaker 3: entrepreneurs figure out another way, and it just I'd say
Speaker 3: it makes the point we are going to have better
Speaker 3: technology every day.
Speaker 1: We're all learning.
Speaker 3: And I'd say for us, what's really important is we
Speaker 3: provide the backbone.
Speaker 1: Of all of that.
Speaker 3: So we're providing the green power, buying the data center,
Speaker 3: we're providing the compute capacity, We're funding all of that,
Speaker 3: and that's the that's different than I don't. We don't
Speaker 3: own a competitor to deep Seek. If you did, you
Speaker 3: might worry about whether you had that. What it does
Speaker 3: mean probably is that there's more capacity required, which means
Speaker 3: they they need more of our backbone. And as you
Speaker 3: bring costs down with anything, more use cases come about.
Speaker 3: And and that's what's going to happen in the next ten.
Speaker 1: Years as we as we evolve this business.
Speaker 2: If you're sitting in Europe, there's a you know, there's
Speaker 2: concern that actually you're being left out because China is
Speaker 2: going one way. The US is America first. You know,
Speaker 2: you worry about inflationary pressures and trade wars. What does
Speaker 2: that mean for brook Field or are there opportunities to
Speaker 2: be had again?
Speaker 3: We're we're a local investor in countries. We're building out
Speaker 3: data centers all through Europe. We have the largest builder
Speaker 3: of data centers in Europe. We just now it's a
Speaker 3: big deal in France for twenty billion dollars. In all
Speaker 3: of our businesses, we continue to invest across the backbone.
Speaker 1: We're local players in local countries. We sell local things and.
Speaker 3: Sometimes less money being available and less positivity means greater
Speaker 3: opportunity because there's less money available and therefore the opportunities
Speaker 3: are better, and so we're always selective with what we do,
Speaker 3: but I think there are still significant opportunities in Europe
Speaker 3: on private credit.
Speaker 2: You're a big player on private credit.
Speaker 1: Where do you go from here?
Speaker 3: This business is going to get bigger, Our business, and
Speaker 3: the industry in total is going to get bigger and
Speaker 3: bigger because this is just capital being pushed off of
Speaker 3: banks balance sheets. It's less regulatory friendly on their balance sheets.
Speaker 3: They don't really want it on their balance sheets. It's
Speaker 3: being pushed to sponsor groups who are usually lending in
Speaker 3: the area where they have a lot of expertise. And
Speaker 3: our two biggest businesses today or I guess three biggest
Speaker 3: business our real estate, infrastructure and direct lending in corporates
Speaker 3: because we have a lot of expertise in those things.
Speaker 3: We just bought an asset backed lender called Castle Lake
Speaker 3: and we're going to continue to build out the business
Speaker 3: merely because I think the scale opportunity is there and
Speaker 3: our clients can earn extra return in private credit than
Speaker 3: they can just buying bonds in the market, and that's really.
Speaker 1: The we're here for our clients.
Speaker 3: We're here just to service them, and if they can
Speaker 3: earn extra hundred basis points over what they'd get somewhere else,
Speaker 3: this is a very exciting place for them to put money.
Speaker 2: How much bigger do you think this market can? Again?
Speaker 2: If you're good, it seems like you're doing really well,
Speaker 2: But if you're in that mid level, Yeah.
Speaker 1: We're three hundred billion today. I think it can be
Speaker 1: much much larger.
Speaker 2: And what kind of time for you?
Speaker 1: Look it? It will grow with us. It's with us.
Speaker 3: We always try to grow methodically. Once in a while
Speaker 3: we buy something, but we grow methodically. It can grow,
Speaker 3: it can double, it can driple, it can quadruple over
Speaker 3: the longer term, and we'll.
Speaker 1: Just keep building it out. But I'd say, the.
Speaker 3: Thing we want to make sure with every business we have,
Speaker 3: we're super responsible. The foremost thing we have to do
Speaker 3: is make clients. Make our clients the returns we promise them.
Speaker 3: And if we can do that, this business will be very,
Speaker 3: very large twenty five years.
Speaker 2: From now, do you expect consolidation in that space? In
Speaker 2: your space?
Speaker 1: Look, the.
Speaker 3: Asset management industry started from nothing thirty years ago. Circuit
Speaker 3: thirty years ago, there are five or seven big players today.
Speaker 3: Some of us have done acquisitions to add in are
Speaker 3: sources of skills into the businesses. We've done, some others
Speaker 3: have done some. I think there's going to be a
Speaker 3: it's never one size never fits all, but there's gonna
Speaker 3: be some very large players. We're one of those, and
Speaker 3: then there's going to be some niche players that fit
Speaker 3: a certain area. What's happening in the middle is it
Speaker 3: so far in the last eighteen twenty four ouns it
Speaker 3: hasn't been easy for them to raise money. We raised
Speaker 3: one hundred and thirty five billion dollars last year in
Speaker 3: our asset management business.
Speaker 1: Not many others can raise that type of capital.
Speaker 2: Are you looking to buy anything?
Speaker 3: We're always on the lookout for complimentary things that can
Speaker 3: add to the business and that we can deliver to
Speaker 3: our clients in a seamless way that don't conflict or
Speaker 3: compromise the investing skills that we have as an overall business.
Speaker 3: We need to be We need to be able to
Speaker 3: say to our clients, we're pleased to offer you an
Speaker 3: oak Tree fund because the team at oak Tree, Bruce Howard,
Speaker 3: arm and are the best in the world, and that
Speaker 3: they do great in opportunities and investing, and when we
Speaker 3: can do that, we're proud to have them as part.
Speaker 1: Of the team.
Speaker 2: Can you talk to me about oak Tree? So you
Speaker 2: have seventy percent of oak Tree? Well you have you know,
Speaker 2: become one?
Speaker 1: Do you know?
Speaker 3: We're sort of one, But I've had we've had a
Speaker 3: different attitude towards the acquisitions we've made. We like to
Speaker 3: partner with management teams. Today the management has been transitioned
Speaker 3: to Arman Panosian and Bob and O'Leary, and the two
Speaker 3: of them are running the business and it's run as
Speaker 3: a separate unit and they own a part of the business.
Speaker 1: And I think it's good.
Speaker 3: Each asset management organization has a special culture and ours
Speaker 3: is right for us, but it may not be right
Speaker 3: for that group or whatever other group we work with.
Speaker 1: So I think it's a fine line.
Speaker 3: Entrepreneurialism in alternative managers managers is really important, and therefore
Speaker 3: we've had this partner manager model and it's worked so far,
Speaker 3: and so we're pretty happy with it.
Speaker 2: If we talk about your three d's, so decarbonization, digitization
Speaker 2: and deglobalization, how do you think that's changed the last
Speaker 2: twelve months? Is there one that will be accelerated compared
Speaker 2: to where you thought it would do twelve months ago.
Speaker 3: Everyone out in the world thought the decarbonization was going
Speaker 3: to be the big thing, and we're going to everything's
Speaker 3: going to net zero. That wasn't That wasn't exactly the
Speaker 3: case when it was. Today it's the news story is
Speaker 3: less that, but I think it's the same. We need
Speaker 3: power preferably. Most companies want green power, and the good
Speaker 3: news is green power is largely the lowest cost energy
Speaker 3: anywhere in the world, most countries of the world. Therefore,
Speaker 3: that one just continues. I'd say the two that have
Speaker 3: ramped up very substantially on the amounts of money they're
Speaker 3: going in is the digitalization of the world, largely because
Speaker 3: of artificial intelligence and what's required to build out the
Speaker 3: backbone for it, which had been coming, but it's now.
Speaker 1: On at way different levels.
Speaker 3: And because of that, there will be reshoring of industrial
Speaker 3: capacity back to other countries, assisted in some places by tariffs,
Speaker 3: I might add, but even the terroriffs might not have
Speaker 3: worked if you didn't have what's going on with artificial intelligence.
Speaker 2: When you look at real assets and this is what
Speaker 2: you like, and this is what Brookfield buys, what can
Speaker 2: we expect from you in the next twelve months.
Speaker 3: For my whole career, I've just said the same thing
Speaker 3: we did before, But we always change, and fifty percent
Speaker 3: of the assets we own today we didn't exist as
Speaker 3: an asset class to invest into fifteen years ago, ten
Speaker 3: fifteen years ago. I find it amazing how the world changes,
Speaker 3: and it.
Speaker 1: Doesn't change overnight.
Speaker 3: But in investing, if you don't evolve your investing skills,
Speaker 3: maybe you do the same things. We're value investors through
Speaker 3: and through. We like to buy cash flows, we discount
Speaker 3: them back. We like proven technologies. But if you don't
Speaker 3: evolve your thinking as to what's going on in the
Speaker 3: world and try to see forward to where we're going,
Speaker 3: you get left in the dust. And so we're just
Speaker 3: always trying to see out in the future where we're going,
Speaker 3: and that's increasingly what a few of us at Brookfield
Speaker 3: are spending our time on, just understanding where the world's
Speaker 3: going and how we can we can add value to
Speaker 3: our clients by just being ahead of the game.
Speaker 2: Can you tell me one thing that you've seen that
Speaker 2: you think is new.
Speaker 1: I think the.
Speaker 3: I think the application or early days, the application of
Speaker 3: artificial intelligence in our service and industrial businesses.
Speaker 1: Is seeing productivity.
Speaker 3: Advances and investment returns of numbers almost never seen before.
Speaker 3: We're talking fifty to one hundred percent cash on cash
Speaker 3: investment returns and that's very significant to productivity, which which
Speaker 3: may mean if it all works out, that we're in
Speaker 3: an investment led era for the next twenty years which
Speaker 3: is highly productive and can be deployed into highly productive
Speaker 3: and drop big and significant amounts cash flow to the
Speaker 3: bottom line. And if that occurs, we're going to have
Speaker 3: a very strong economy. Of course, cycles have not been repealed,
Speaker 3: but we should have a pretty good period of time
Speaker 3: for the next twenty years as that deploys within business,
Speaker 3: but it takes a lot of capital and you have
Speaker 3: to be smart to deploy it with the right people.
Speaker 1: Bruce, thank you so much for joining us. Thank you
Speaker 1: for having me. Francy