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