India over the next 10 years will see a dramatic increase in FDI: Bruce Flatt, CEO, Brookfield

Emerging from a Canadian industrial conglomerate, Brookfield is today among the top three alternative asset managers in the world with over $800 billion in assets under management (AUM) across real estate, infrastructure, renewable power, private equity and credit. It is also among the world’s largest owners and operators of hard assets--pipelines, port terminals in Brisbane and Sydney among others, airports, office blocks such as Canary Wharf in London, telecom towers such as T-Mobile’s in Germany, solar parks and data centres. In India, it has already deployed $22 billion in 12 years in Reliance Jio’s telecom towers and RIL’s gas pipeline in Andhra Pradesh, 50+ million square feet in office properties in key Indian cities along with 3,400 hospitality keys (Hotel Leelaventure). Last year, Brookfield Global Transition Fund (BGTF) raised $15 billion, making it the world’s largest private fund dedicated to facilitating the global transition to a net-zero carbon economy. As of February, approximately $7 billion had already been invested or committed. Chief executive officer Bruce Flatt and Anuj Ranjan, president, private equity, spoke to Arijit Barman & Bodhisatva Ganguli about Brookfield’s global outlook and its plans for India. Edited excerpts:

Till last year, the firm’s investments, including dividends, have returned more than 3,700% since you took over. That compares with about 500% for the S&P 500 Index. You invest in hard assets such as toll roads, airports, ports, utilities and real estate. How have you managed to outperform so consistently? And is this sustainable considering the volatility that we currently find ourselves in?

Bruce Flatt: Our business is about buying, uh, good businesses in good places, holding for long periods of time. We are focused on backbone of the economy across the world. What we have found, is by entering those businesses or buying those type of assets and operating them well and selectively selling them at sometimes greater than what the fair value is very important. There are two things that are highly relevant to most businesses and in particular to what we do. One is the value of an asset, which is generally determinable by the discounted cash flow of an asset and second is the price. But the price, that's in the stock market is often affected by things which are out of the ordinary. You just saw what happened in the United States recently with regards to Silicon Valley Bank. The stock markets went down by 5% on Friday and 3% on Thursday and 2% on Wednesday That's 10% down for the week. But that had nothing to do with value of most businesses. Therefore, the price and value are very different and our goal over time is to make investments where we get good value. So, if we can, we buy assets or businesses when the price is lower than its value and sell them when the value is higher. Or at least when the price is greater than the value.

So, I'd say the returns that we have been generating over the last 20,25 years has been a combination of that investing style and the building of an asset management business for alternatives.

But the alternative asset management business has been relatively a new phenomenon?

Bruce Flatt: When we started alternatives, there wasn't really a business. Institutional clients across the world invested originally in bonds, then they invested in equities. And 20-25 years ago, we, and a few others started introducing other products to them. And when I say other products - it's investments in real estate, infrastructure, renewables, private equity, credit, energy transition all of those types of products. Our returns are both the investment success for our own balance sheet, but also what we have done for our clients, as those clients have institutionalized their business into alternatives as well. I guess we have ridden this wave of institutionalization of alternatives. The number of alternatives when we started out 25 years ago was at 2% and today that 2% has become something like 16%, but for some institutions it's 60%.

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