BROOKFIELD ASSET MANAGEMENT LTD (BAM) 2019 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Brookfield Asset Management 2019 Third Quarter Results Conference Call and Webcast.

(Operator Instructions) Please be advised that today's conference is being recorded.

(Operator Instructions)

I would now like to hand the conference over to your speaker today, Ms. Suzanne Fleming, Managing Partner.

Ma'am, you may begin.

Thank you, operator, and good morning.

Welcome to Brookfield's Third Quarter 2019 Conference Call.

On the call today are Bruce Flatt, our Chief Executive Officer; and Brian Lawson, our Chief Financial Officer, as well as Anuj Ranjan, Managing Partner and CEO of our business in India and the Middle East.

Bruce will first give an update on our business, followed by Brian, who will discuss the highlights of our financial and operating results for the quarter.

And finally, Anuj will talk about our business in India.

After our formal comments, we'll turn the call over to the operator and take analyst questions.

I'd like to remind you that in responding to questions and in talking about new initiatives and our financial and operating performance, we may make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and U.S. securities laws.

These statements reflect predictions of future events and trends and do not relate to historic events.

They're subject to known and unknown risks, and future events may differ materially from such statements.

For further information on these risks and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U.S. and the information available on our website.

Thank you, and I'll now turn the call over to Bruce.

Thank you, Suzanne, and good morning, everyone.

Since we last spoke to many of you at our Investor Day, we completed our previously announced partnership with Oaktree, acquiring 61% of the business, with the remainder continuing to be owned by the founders and the management team, who are continuing to run the business independently from Brookfield.

We're thrilled to be able to benefit from the Oaktree world-class expertise, as Oaktree has established itself as a premier credit franchise in the world, and we intend to utilize their knowledge to make us better investors in everything we do.

Today, we're working with them to selectively help them scale up some of their strategies and looking at where we can jointly provide products to our clients.

Although it's still early days, we think we're getting some good momentum.

Looking longer term, this partnership also better prepares us to capture opportunities presented during periods of market disruption.

We are positioning ourselves to put our resources behind Oaktree to allow it to excel more than ever, inevitably, when the market turns.

But turning to right now, business fundamentals in most markets remain quite constructive.

With interest rates negative in both Japan and Europe, generally, the market growth is slow, but we're still finding opportunity partly due to our ability to finance for long term at these low rates.

In Europe, we've recently completed term financings sub 100 basis points, and this allows for very strong leverage returns.

India today is under significant capital market stress, which creates opportunity, and that is one of the reasons Anuj Ranjan, our head of the region, is on the call with us today, to provide you with a more in-depth update on that front.

In the United States, the economy is good.

It also appears that we will be in a low interest rate environment for longer than most of us would have imagined.

And what that means for asset values like real -- the real assets generally that we own and that generate cash flow, is that they, in that environment, should be worth more.

And then investing in real assets is a very attractive way to earn returns for institutional and other capital.

With that in mind, we continue to look for and have been finding opportunities to deploy capital in the United States, and this is increasingly in the form of special situations given where the overall capital markets are.

If this low interest rate environment continues which, at the moment, it looks like it will, we think that capital will increasingly be allocated to alternatives as a means of meeting required return targets.

We think that many institutional investors will continue a push towards holding allocations of up to 60% in alternatives.

And as you know, some of the leading groups are at that level, but more and more push towards increased allocations.

In this regard, during the quarter and subsequent to quarter-end, we held additional closes in our current flagship funds in the infrastructure fund, which today is at over $15 billion, and it will be larger when it has its final close later this year.

And last week, we announced the final close of our latest flagship fund for private equity at $9 billion.

Together with our latest real estate flagship fund that closed in January this year and co-investment capital committed to date in 2019, we're on pace to exceed our $50 billion of capital we targeted to raise in this round of funds.

These funds, in aggregate, are approximately 45% invested and therefore, we anticipate that we'll be back in the markets for our respective flagships in 2021, '22 period.

As I mentioned at our Investor Day, we expect this next round of flagship fundraising together with Oaktree's flagship distressed credit fund could reach $100 billion.

Our newer strategies are also seeing significant capital inflows.

Our Special Situations Opportunity program continued to raise commitments during the quarter following its successful initial first close in the second quarter.

And we raised commitments across each of our real estate and infrastructure core perpetual strategies.

We have also been very active in deploying capital.

In our infrastructure business, we closed on the acquisition of a data mobile business in New Zealand.

Within our private equity business, we signed an agreement to acquire controlling interest in the largest residential mortgage insurer in Canada.

And also acquired 45% of a global infrastructure services company largely focused in the U.S.

We're also actively adding capital in all areas across the business.

And while we're cautious about the overall market, I would characterize it that we're still finding attractive opportunities to put capital to work within each of our strategies.

With that, I'll pass the call over to Brian, and he's going to give you an update on the results that we had for the quarter.

Great.

Thanks, Bruce, and good morning to all of you on the call.

Funds from operations, or FFO, totaled $826 million for the quarter.

That's about -- that's $0.80 per share.

And net income was $1.8 billion or $0.91 per share attributable to BAM stockholders.

Both FFO and net income continued to benefit from the continued growth of our asset management franchise and strong performance across many of our businesses.

In particular, we achieved another step change in the level of fee-related earnings and carry potential with the success of our recent vintage flagship private funds, which Bruce just spoke to.

So first, I'll touch on the results of our asset management activities.

Fee-related earnings were $306 million in the quarter, which before performance fees is a 35% increase from the prior year.

As an aside, this does not include any fee-related earnings from Oaktree as that transaction closed the final day of the quarter.

The step-up in fee-related earnings is due to that $28 billion of third-party capital raised over the last 12 months across our flagship funds, but also includes growth in the long-life fund strategies and co-investments.

It also reflects the increase in capitalization at our listed partnerships, all of which benefited from unit price appreciation during the quarter.

And in addition, we began earning fees from the BPY and BPR capital issued as part of the privatization of GGP in August of last year, which had been subject to a 12-month fee waiver.

So starting in Q4, we will see a full quarter of contribution from these fees as well as the contribution from the Oaktree acquisition partnership that added a further $102 billion overall in fee-bearing capital.

These will increase our annualized fee revenues to $2.8 billion and target carried interest of $2.6 billion for a total of $5.4 billion.

As a result of the continued strong fundraising momentum and our well-rounded portfolio of long-dated and perpetual product offerings, which is further strengthened by our partnership with Oaktree, we are raising the target multiple on our fee-related earnings that we use in our business plan values from 20x to 25x, and that's to reflect the increased strength of our franchise and our very favorable growth profile.

As you know, we use the same framework for both internal and external reporting, so we wanted to share this change in thinking with you.

We think this is also in line with how the market is beginning to think about us and our peers, and we will continue to provide you with all the math so that you can assess the numbers as you see fit.

Now turning to carried interest.

We recorded $59 million of realized carry in the quarter, which arose primarily from our first real estate flagship fund.

And over the last 12 months, we've recognized $595 million of carry into income, and we expect to recognize additional carry over the coming quarters as we complete a number of anticipated asset dispositions.

Total unrealized carried interest, based on investment performance to date, now stands at $3.6 billion, and that includes carried interest related to the Oaktree funds.

Turning to invested capital.

Excluding disposition gains, FFO from invested capital in the current quarter was $356 million.

FFO growth across the listed partnerships was quite good as it benefited from same-store growth and development initiatives within our existing businesses as well as contributions from new investments.

This favorable performance was offset, however, by volatility within directly held investments, including larger-than-expected mark-to-markets within one of our seed portfolios and a retracement in results at one of our more cyclical businesses that have reported particularly strong earnings in 2018.

We expect to continue to invest some of our cash flow into value-creating investments on our balance sheet, in addition to our liquidity reserves, so these sorts of items may arise from time to time.

But to be clear, neither of these items give us any cause for concern.

Disposition gains totaled $125 million in the quarter, and that represents our share of gain on the sale of several investments across our portfolios.

Dispositions included the sale of 2 office properties in Sydney and a leading supplier of forest products in North America.

Over the last 12 months, we generated over $2.4 billion of free cash flows.

This cash flow supplements our deployable capital, which today stands at nearly $65 billion.

That includes $14 billion of core liquidity and $51 billion of uncalled private fund commitments when combined with Oaktree.

And finally, I'm pleased to confirm that our Board of Directors has declared a $0.16 quarterly dividend per share, and that's payable at the end of December.

And with that, I will pass the call over to Anuj Rajan.

Anuj leads our Middle East and South Asia regions and will speak about the opportunities we're currently seeing coming from India.

Thank you.

Thank you, Brian, and good morning, everybody.

Today, I want to talk about our journey in India, our outlook on the Indian economy and where we see investment opportunities emerging.

We've now been in India for more than a decade and have over $16 billion of assets under management with investments across all of our businesses, real estate, infrastructure, power and private equity.

Now while we entered India in 2008, we did not close our first major transaction until 2014.

Since India was a new market for us then, we were guided by our philosophy of being patient and invested capital only where we saw value opportunities.

Initially, when we arrived in India, the country was going through an economic boom that was reflected in valuations that we thought were too high.

So we decided to spend the first 5 years really understanding the market and building out our operating capabilities on the ground.

We did this by creating operating platforms that would provide services to domestic real estate and infrastructure companies.

By 2012, we saw signs of distress and a dislocation of capital emerging, and we spent 2 years putting together what became our first significant transaction in the market, which was a commercial office property owner.

This was a large and complex situation that involved privatizing an offshore public company, backing the local banks and the foreclosure of debt and ultimately, taking over all operations of the business.

We learned a lot in the process, and this was truly the start of our journey in India.

Maintaining this investment and operating discipline, we've incrementally built what is now one of the largest foreign investment platforms in the country.

In our real estate business, we own more than 30 million square feet of high-quality office space across several key markets.

And more recently, we acquired a vertically integrated luxury hospitality group, which has 3,000 owned and managed keys.

Our infrastructure business consists of a roads platform with 5 national highways, the only cross-country gas pipeline and more recently, we signed agreements to acquire the second-largest telecom tower portfolio in the world through a large corporate carve-out.

Our renewable power business owns and operates over 500 megawatts of capacity across solar and wind assets.

And our private equity group has created a financial services business, which provides credit to residential developers who aren't able to access traditional bank financing.

Through this growth, we have built a strong investment and operating team.

Our team is over 40 investment professionals and support staff across our operating businesses, though we also employ well over 6,000 people.

This gives us a unique competitive advantage when evaluating opportunities.

Not only can we provide large amounts of capital where it's needed, but we can more easily assess the risks, challenges and operating requirements of the asset or business.

We're also able to implement and execute our business plans, not necessarily requiring a local partner.

This is very useful, especially when you're using the opportunity to acquire businesses from banks where the prior owner is in some distress.

Moving on to the economy.

There are certainly some near-term challenges in terms of a slowdown being driven by a tightening of credit availability that has led to multiple defaults.

However, we believe the long-term fundamentals of the country continue to be quite strong, and India remains one of the most attractive markets in the world.

More specifically, over the last few years, there have been some significant developments that are very encouraging for the country's long-term growth.

First, to set the context on the economy, it's hard to generalize a country as big as India.

We like to think of it as 3 economies, which we will refer to as India 1, 2 and 3.

India 1 includes the wealthiest 100 million people, which make up only 8% of the population and have very similar metrics to Mexico.

GDP per capita, spending habits and consumer behavior, almost exactly the same as Mexico.

They contribute 40% of India's economy today and have largely historically driven consumption.

Next you have India 2, which is another 100 million people and could be described as the middle-class.

It's similar in economic makeup to the Philippines in terms of GDP per capita and spending.

And finally, we have India 3 with a population in excess of 1 billion people who have a GDP per capita of Sub-Saharan Africa.

These are the poorest people, largely in rural areas who have not historically been a part of the formal economy.

For the first time ever, we're seeing a transformation in which India 2 and India 3 are becoming included in the formal economy, and this is happening for 3 reasons: data penetration, reforms targeting inclusion and a strong government that's driving change.

Let's start with data.

India has risen from being 150th to the first ranked country in the world in mobile data consumption in only the last 3 years.

This explosive growth has been brought about by affordable data plans and falling smartphone prices.

India now has 600 million Internet users, but what is shocking is this is only 40% of the population, implying a sustained and continued growth in the future.

This digitization has contributed substantially to the inclusion of India's large population, and it is translating to high growth across most businesses.

We're excited about this trend and actively evaluating opportunity in data infrastructure, including the acquisition, I earlier mentioned, of the country's largest telecom portfolio.

Secondly, we witnessed landmark steps being taken to create an inclusive, transparent and formal economy.

Policies such as the creation of the Aadhaar card, which is a unique biometric identifier for every Indian citizen and banking for all in which over 300 million bank accounts were rolled out for the rural population have created an integrated ecosystem that can form the backbone for delivering grassroot reforms and growth.

As one small example, in a very short time, this has already led to an increase in bank deposits of $15 billion.

Thirdly, we're in a period of sustained political stability with a strong government at the helm.

The government has launched some breakthrough reforms, including the Insolvency and Bankruptcy Code, goods and services tax and a 10% reduction in corporate rates.

While the processes are being streamlined and there's some teething issues which remain, as a result of these initiatives, India has moved up 67 places in the global ease of doing business rankings in the past 3 years.

This has, in turn, led to record foreign investment inflows.

This is all supported by the fact that the Central Bank has done an incredible job targeting inflation and getting it under control.

Consumer price inflation, which used to be as high as 10%, is now under 4% and has been in the target range for over 5 years.

This gives India one of the highest spreads in the world between the current bank rate and inflation, leaving ample room to cut rates further.

Now while data inclusion and good government are creating a platform for India to, one day, become a $5 trillion economy, there exist some immediate challenges that the country is grappling with.

India's banking system has saddled with close to $130 billion of nonperforming loans, which at roughly 10% is the highest ratio among the top 10 economies in the world.

This is compounded further by the crisis in the shadow banking sector, which makes up over 20% of India's overall credit.

Unlike developed markets where shadow banks do only specialty or high-risk lending, in India, due to regulatory restrictions, the nonbanking financial companies are also providing credit where banks can't lend, for example, loans against property, margin loans against shareholder equity.

Most of the distressed debt is in wholesale or corporate credit, which presents a sizable opportunity for us to acquire high-quality businesses at a time when capital is needed.

To conclude, we're excited about the opportunity India provides.

On the one hand, we have the fastest-growing major economy in the world, taking steps to access their enormous population by including them in the formal economy.

On the other hand, in the short term, liquidity is scarce and the credit markets are in distress, creating a tremendous opportunity for private capital providers like us.

The challenge is that while businesses or assets can come at attractive valuations, operating them under Indian conditions can be a challenge, which is where our 6,000-person strong operating platforms give us a unique advantage.

To navigate India in this period, our key investment themes are to focus on businesses that benefit from inclusion of that final 1 billion people, acquiring assets or businesses from over-labeled corporates, making stable bond-like investments that generate a high cash yield, and lastly, looking at private credit opportunities where banks cannot lend.

Thank you.

That concludes my remarks.

I will now turn the call back to the operator for questions.

(Operator Instructions) And our first question comes from Cherilyn Radbourne from TD Securities.

To start, now that you've closed the Oaktree deal, I was hoping you could give us a little more color on the client overlap, what the early feedback has been from clients and some of the early integration progress?

Yes.

Look, Cherilyn, it's Bruce.

I'll just -- I'll try a couple of things.

And I'll just say, firstly, it's early days.

Second, I'd say the reaction from shareholders, investors, clients, employees has been virtually all positive, very seldom does that occur, but it truly has been an extremely positive environment.

So we're thrilled with that and hope that we can continue to do that.

As you know, we're going to keep Oaktree as an independent business.

It's going to run its investment affairs the way they always have, and Howard Marks and Bruce Karsh will continue to lead the business.

So it's not going to be integrated within Brookfield.

Having said that, there are specific things that we're trying to work with them on where we can -- we have some unique advantages or vice versa, where they have some things that they can help us with.

So I like to -- I guess I'd just characterize it that we're quite pleased so far with all of the operations.

On the client side, I think the -- maybe the only comment I'll make, and I generally don't talk -- we generally don't talk too much about our clients, but I would say that our -- the Oaktree franchise is extremely strong in the United States in client relationships, and it's much stronger in private and high net worth.

And our business has historically and is today much stronger in Middle East and in Asia.

And so I think those are -- those will be -- those 2 things will be additive to the equation in the longer term.

Okay.

That's helpful.

And then just given the comments you made in the letter regarding governance and stewardship, just curious what your level of concern is around some of the anti-private equity rhetoric that's emerged as the U.S. kind of gears up for a 2020 election?

Yes.

I'm not sure I want to be quoted on anything.

I would just say, look, our -- we're a long-term investor into real assets globally.

We operate in many, many countries.

We respect all the rules of the countries.

And our business is about long-term investing and creating wealth for communities and owners of businesses.

So I don't really have any specific comment on it.

It's just -- it's more that our business is often a little bit different.

Our next question comes from Bill Katz from Citi.

First one also sticks with Oaktree.

I was just sort of wondering -- Bruce or Brian for yourself, thanks for the sort of the top line contribution from Oaktree.

I was just wondering if you could help us understand what sort of full year FFO contribution might be assuming no growth in the platform?

And then from an accounting perspective, given that you -- sort of some of your statistics had 100% inclusion of Oaktree in some of the data points, how should we be thinking about the roll forward to the funds from operations?

Will there be an NCI adjustment?

Or how should we be thinking about that?

Sure.

So we'll obviously give you more color and some of the specifics when we get in the full year results and reporting.

In essence, to pick up on one of your comments about presenting the information at 100% of the fee-bearing capital and the revenues and things like that, what we're really getting at there is, what is the scale of the 2 organizations together?

Because that's really what matters in terms of what -- how our clients view us and our business activities, and so we think that's an important way to think about the business.

Having said that, we also recognize the importance for people to be able to take that and translate it in what it means for a BAM stockholder as well in terms of the underlying metrics.

So what we will do is give you -- and I think, we've given you some of that to date in perhaps -- in some of the details, is what it means on the 100% basis, but then taking it back to what it means for a BAM net result for the stockholders by showing how much of the noncontrolling interest comes at you on that.

So I think that's a big part of it.

So if you wanted to, for example, think about what it might look like going forward, some of that comes through in -- I think maybe the best metric to think about is what has it meant from an annualized fee-related earnings going forward.

And so I think that's -- what we would see is, on a net basis, it's around $150 million of annualized fee-related earnings at our share.

And then in terms of the target carried interest on the basis that we would look at it, would be a little bit shy of $300 million on an annualized basis.

So hopefully, that gives you a bit of context.

That's very helpful.

And just as a follow-up, just wondering if you could sort of maybe dive down another layer or so on the realization opportunity as you looked out over the next several years.

But if you look quarter-to-quarter, it looks like the histogram has gotten a little bit better in terms of what falls in the 03 buckets so forth, as have the dollars.

How should we be thinking about maybe the pacing of the magnitude of realizations as we look into year-end '19 and 2020?

I think you had some general commentary as well in some of your prepared remarks earlier.

Sure.

So it's a little bit of a challenging one to talk to specifically, Bill, because, for obvious reasons, you try and time these things or execute them at the point in time when it makes the most sense.

And one of the things we obviously do is give ourselves as much latitude to hit the right spots on that.

And so we are -- we do continue to see some strong potential for realizations over the next couple of quarters.

And some of that, candidly, is some of the stuff that we thought we might get done by the end of this year, but that we've chosen to push that into Q1 and Q2 and some of it into Q4 of this year, really just to ensure that we're maximizing value.

So it's a bit of a tough one to get too specific, I don't know.

Our next question comes from Robert Lee from KBW.

So maybe going back to Oaktree a bit, and understanding it's early days and there's kind of a lot of work to do, but I mean, if I look at Oaktree over the past 4 or 5 years, I mean, they've kind of struggled to grow their own kind of fee-bearing capital.

And obviously, they've got ops Fund 10 turning on, so that'll give you a short-term boost.

But I mean, what is it do you think you can bring to the table to kind of help accelerate what's been kind of modest growth at best in their business for a while?

Yes.

I'll say the following.

I think they would have and they will be able to maybe do a little bit better if -- in an environment where we can help them.

If you're in an economic environment, it's always positive.

But the real value will be created in this franchise when the market turns and they can put sensible capital into stress and distress.

So the reason we purchased this wasn't to be able to benefit from the positive times, the real value will come when negative times come.

And we're quite confident that recessions have not been repealed, and as a result of that, there will be a point in time.

So I think it'll a be good but not spectacular business until the market turns, and at that point in time, it will be one of our great businesses to put money behind and will enhance our overall franchise because of it.

Okay.

Great.

And maybe just as a follow-up, and thinking about the next flagship fundraising cycle that maybe starts up in 2021 or so.

I mean you put out the kind of $100 billion number, which, considering the cycle, was $50 billion.

And even if you kind of assume a 30% upsize or so in the funds and even if you upsize the flagship, the stress funds or something from Oaktree, it kind of still feels like that's pretty big number.

So can you maybe kind of help us how you're thinking about that development?

Or are you thinking, gee, next round's not a 30% upsize, it's some magnitude above that?

Yes.

I'd just say it -- look, I think, these funds and the co-investment capital and the pools of money that we bring beside our flagship funds are getting bigger and bigger every year -- every time.

And there is -- the capital in the world seems to be splitting down the middle.

There are small knee strategies and there's very large strategies, we fortunately fit into the latter, and we just think the scalability of the franchise just gets better and better.

Great.

And if I could just one -- maybe one last question.

Can you maybe -- how do you think of fundraising kind of in the -- between now and the bridge to the next big fundraising cycle?

I mean, how do you -- what do you think is kind of your kind of, I'll call it, normal course kind of fundraising capability over next 12 months or so?

And maybe as a follow-on, I know perpetual capital is part of that.

Could you kind of size what those pools of capital are now?

Yes.

So Brian may have some other specifics.

But I'll just say that while we often talk about our flagships, we have many other funds, which are out in the market, and we're fundraising all the time.

And those funds probably are upwards of 10 strategies at any one time, and these are $1 billion, $2 billion, $3 billion, $4 billion or $5 billion strategies.

So we're continuously fundraising for many of those strategies, and those will all end up -- accumulating up to pretty large numbers, even when we're not raising a flagship fund specifically.

In addition to that, we're always raising co-investment capital for deals and sometimes direct investment with partners that we are investing beside our partnerships.

The last thing, and just to comment on your question on open-ended or perpetual strategies, I think if we're in -- we think if we're in an environment of low interest rates, these perpetual strategies are ideal fixed income alternatives, and they're going to continue to get bigger and bigger and bigger.

And our infrastructure and real estate funds should continue to grow, and they just continuously bring in capital.

And as they get larger, more and more institutions are able to invest into them because some of them have size restrictions, and therefore, you need a certain size for them to be invest into it.

So they get more attractive as they get bigger.

Our next question comes from Dean Wilkinson from CIBC.

On the Oaktree acquisition, it looks like you picked up about a net $824 million or so in unrealized carry.

Would the expectation that, that turns into generated in line with your existing sort of pool of carry?

Or is it a little shorter dated, longer dated?

How should we be thinking of that potentially coming in?

And are there any clause in that may be different from your existing funds?

Yes.

So those funds are -- or I'll say more of that carry relates to funds that have been in existence relatively longer than the comparable amount for us.

So yes, it should -- that carry should have a shorter term to fruition than ours on average.

And Oaktree follows a pretty similar approach in terms of how they determine and quantify carry as we do.

Okay, great.

And then, Bruce, in your letter, I think, you rightfully pointed out the big discount on BPY and it being sort of at a historic and perhaps unprecedented level.

Is there an upper ownership limit that Brookfield Asset Management has when it's thinking about their stake in BPY, either individually or perhaps with a joint player?

No -- look, I would say, we're in -- we floated BPY because we thought it was an attractive way to finance the business and that we would own a stake and over time dilute ourselves down.

We have diluted ourselves down from, I guess, where we started at 85%, down to 50%.

We -- look, just to be clear, we have no intentions of selling shares at this point in time.

So we're not going to be selling shares to decrease our interest.

As we repurchase shares in the company, our interest goes higher, but the market cap is pretty big.

So it takes a lot of capital to do that within -- as they repurchase or if we purchase shares.

So we don't really have any -- we -- companies that have larger float usually trade at better prices, but we'll respond to opportunities as it goes along.

And so our goal would be to have a proper float.

But also, we're in the business of making money for the owners of the company, and that will probably override anything else.

Our next question comes from Andrew Kuske from Crédit Suisse.

I think it's been almost 3 years since we saw the Insolvency Code come into force in India, and there's been a number of challenges on the legislation since that period of time.

So I guess the question is, to what degree do you have confidence just on the court process and the predictability of outcomes with the IBC?

Sure.

It's Anuj.

I'll take that.

You're right, it's been about 3 years.

It's a very good code, but the jurisprudence is still being worked up.

So we are seeing a lot of the judgments being challenged in court.

The -- some of the key cases that happened about 3 years ago are now finally in Supreme Court and getting final judgments, which should be used in the future to speed up any future cases that go to the IBC.

So we're quite confident that the jurisprudence is coming along, and things should get better.

However, what we're also happy about is the government has been taking steps to make it easier for companies prior to ending up in the state where they need to go insolvent to get -- have a resolution put in place.

So prior, what would happen is, a company that was in distress wouldn't have many options other than going into insolvency where it would get stuck in these court processes.

They're now coming up with new policies and procedures to allow us to -- or groups like us to work with these companies in advance of that actually happening when the business is in better shape.

So we remain quite confident.

So I guess the follow-up would be, when you look at the NPLs that sit on a lot of the Indian banks and just some of the issues in the economy and then the case law and the legislative framework effectively improving, do you see an ability to put more capital to work in India in a much greater fashion than you have already?

I'd say the answer is, yes.

Today, in India, we -- I mean, the last 12 months, really have put a lot more capital to work.

So we've probably more than doubled the size of our assets in the last 12 months on the back of this current situation.

If this environment continues, I think we would continue to put outside capital to work in the country, given the fact that we can find pretty attractive opportunities.

And we are -- it is a tricky situation where there are great valuations, great opportunities available, but they need a heavy operating hand in order to drive the businesses once acquired.

And so that's where we're spending a lot of our time.

Our next question comes from Sohrab Movahedi from BMO Capital Markets.

I just wanted to maybe ask a bit of a longer-term question.

I mean you've obviously made the case, and I think we see it, that there is great interest in the alternative asset management space and funds flow is coming in.

I just want to get a sense, do you think you'll have to make any concessions on your return hurdles?

Given that, first, there's lots of liquidity.

And then secondarily, we are just in a prolonged low rate environment.

Does a 15% hurdle return still make sense?

Or will that have to be kind of ratcheted down, do you think?

So one never knows what the future brings.

But I would say that our experience to date has been that if you have scale, if you are a global investor and if you have operating capability, the opportunities available are not investable by most of the people that have capital to put into investments.

So I think in -- we think in this -- even in this environment and in -- where continued large amounts of capital get allocated to alternatives, there are not too many people that have the operating capabilities and the scale that we have to be able to compete.

And there are some, and no one should ever think there isn't competition.

But in general, I would say, we don't really see it compressing returns in a substantial basis.

And just, Bruce, on that then and -- you don't see any pressure to give any concessions in fundraising either, whether it's through, I don't know, promising higher returns or, I don't know, discounting or anything like that?

I would -- again, one never knows the future.

But to date, our -- the alternative managers' skills are very a specific skill that not that many people have, and we've spent a long time building up the skills.

And people seem to be willing to compensate us for running essentially an outsourced investment management organization for them and alternatives because it's tough for most people to do what we do.

Understood.

And just one last question.

I understand the focus on India, but when situations like the one in Chile have transpired, let's say, over the last month or so, do those present opportunities?

Or do you really need to see that ripple into an economic downturn before you would look to kind of deploy capital?

So I guess I'd characterize -- I'd answer the question by just saying, our business is -- one of our competitive advantages is putting people in countries, understanding the markets, understanding the people, understanding the businesses and having capital available to be flexible to move to places when the opportunities present themselves.

So to the extent that we believe a country hasn't been irreparably harmed and hasn't changed, and we're already there, then if there's disruption in the market and opportunities present themselves, we can be an investor in.

And I'd say the #1 country in the world today that fits that is India, which is why we talked about it today.

Because it is a good -- as Anuj described, it's a very good country longer term that has a lot of winds behind its back, but it's undergoing significant stress today and capital -- and lack of capital, and as a result, there's opportunity.

That could and will apply in other countries around the world.

3 years ago, that was in Brazil.

8, 9 years ago, that was in the United States.

So it changes from time to time.

Your next question comes from Mario Saric from Scotiabank.

Just more of a broader question in terms of kind of balancing the opportunities and the risks.

So from a macro perspective, because as you mentioned, interest rates are in the plus or minus 2% range, your fee-related earnings are growing at 35% driven by these rising allocations to alternative assets that sit at 25% today, and you've highlighted it could go to 60% over time, supporting $100 billion fundraising goal for the next of your funds.

So both the near term and the macro and the longer-term macro appear positive at the moment.

How are you thinking about the primary risks to the franchise today in light of that environment relative to the primary risks to the franchise that you would have identified 3 years ago?

And what are you doing perhaps differently today to assess those or to address those risks relative to the strategy 3 years ago?

So I'll make a couple of comments.

I hope that answers at least part of your question.

And I guess, what I would say is we -- every year that goes by, in the last 5 years, we're 1 year further into an economic recovery.

And at some point in time, we will have economic retracement, and that will cause stress and distress, in particular, in developed economies, which are -- get affected the most by these type of events.

And at that point in time, we need to be prepared.

So every year, we get more cautious on our balance sheet, on our financing, on the underwriting we're doing, on businesses we continue to buy.

And the Oaktree acquisition was part of us preparing for it.

So I guess, we continue to be more cautious as we get further into this cycle.

Okay.

And then -- that's helpful.

And then just -- so Oaktree kind of deals with the GP portion of it.

In terms of how you believe the listed subs are positioned today relative to the GFC in '08, '09, strategically, how are you positioning the underlying subs from an operational fundamental perspective for that eventual downturn?

And how would you compare and contrast where the subs sit today versus back in '08 and '09?

So look, I would say they were in their infancy 10 years ago.

Today, they're all mature, well-established businesses that have been financed with all of the thought that I just described in mind and have enormous resources within each of the companies.

So I think they're dramatically different than they were then, and we're in much, much better shape to withstand an economic situation than we were before, given the undrawn bank lines we have, the commitments we have, the capital from other sources, all the partners we have, the financial institutions that we deal with, et cetera.

So I'd say we're in much, much better shape.

(Operator Instructions) And our next question comes from Bill Katz from Citi.

So just one big picture and a couple of nits.

On a big picture perspective, I was wondering if you could refresh us on your thinking around capital management from here.

I guess the Oaktree deal is now, I guess, a couple of weeks behind you in terms of the deployment of capital.

You obviously get their run rate earnings power.

Your own debt-to-equity capitalization is pretty conservative.

Your cash flow is pretty strong overall.

You've mentioned previously about potentially stepping in and buying back some stock.

And obviously, you have a lot of growth in front of you.

So how do you counter balance all those variables and then maybe think about capital return to investors?

So I'll start off and just say that this business, if it achieves what we think it can achieve, is highly cash generative without that many uses of capital within it, other than if we choose to do things.

And those are choices, and the choice that, one -- a management team should always consider is whether they should use that capital to buy back stock.

I think, I guess, our view generally is that over the next 10 years, there will be points in time where we should return substantial capital to owners.

And there probably will be periods of time where we do, whether that be in the share repurchases, dividends, spinoffs or other things, we will return capital to owners.

But it never does cease to amaze me that we find opportunities that come along to also put capital to work.

Sometimes at more attractive -- as attractive possibly or possibly more attractive ways because it both enhances the internal business that we have.

So in the -- I guess, the last comment is, in the absence of better opportunities, all of the cash we generate will be returned to the owners of the business over the next 10, 15, 20 years.

But sometimes, from time to time, there will be great opportunities to put that money to work.

Okay.

And just some nits here, I apologize.

But just -- I was wondering, Brian, perhaps if you could just -- maybe a couple of sentences on 3 different line items that were particularly variable, I think, quarter-to-quarter, at least, relative to, I think, most expectations.

Maybe just underlying sort of quarterly change on ? Maybe peel back the other listed investment dynamic?

And then maybe on energy marketing, is there a more favorable inflation coming on that line item?

Sure.

So BBU private equity, that's really getting at -- we had a couple of -- well, one operation, in particular, in the panelboard side that did extremely -- had very, very robust earnings last year.

And it's -- the product that they sell does have some cyclical price variances in that.

And so that one was really a question of retracement of earnings to a lower level today based on what we saw, but the fundamentals of the business, we think, longer term is still good.

The other one you mentioned within the -- this all probably covers BBU and that other category because we -- some of its owned within the other category.

And then on the energy marketing that was largely a reflection of the fact that we did have some higher generation in the one region where that energy marketing business applies to.

And so while the good news was that we had a lot higher generation levels, which benefits BEP and in turn benefits us through our ownership in BEP.

Having said that, we do have a negative price variance today on that contract.

And so when the volumes go up, the aggregate hit to us increases as well.

Now that differential, we see moderating over time and turning into a positive, but in the current environment, it is a drag.

And I am showing no further questions from our phone lines.

And I'd like to turn the conference back over to Suzanne Fleming for any closing remarks.

Thank you, operator.

And with that, we will wrap up the call today.

Thank you, everyone, for joining us.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program, and you may all disconnect.

Everyone, have a wonderful day.