We're more cautious now than we were in 2009: Brookfield CEO
Holding lots of cash and staying diversified is how one of the largest asset managers in the world plans on weathering an eventual economic downturn, according to its longstanding chief executive.
While he doesn’t think it will happen “tomorrow morning,” the CEO of Brookfield Asset Management Inc. said it’s inevitable there will be a recession in developed markets “at some point in time,” adding that some countries, particularly in Europe, are already headed there.
“We are close to 11 years in this economic cycle. I don’t think economic cycles have been repealed,” Bruce Flatt said in an exclusive interview Friday with BNN Bloomberg’s Amanda Lang. He added that Brookfield is more cautious today than it was in 2009, when the world was reeling from the financial crisis.
“There will be disruption in credit markets, in stock markets. Our view is when you’re in an environment that is more robust than what you might otherwise have in an average environment, you should just be careful. So we have more dry powder in funds, more cash on our balance sheets,” Flatt said.
Flatt added Brookfield’s success since its founding more than two decades ago has hinged on being highly diversified. He said the company — which has approximately US$500 billion in assets under management — doesn’t give preference to any of the particular asset classes it invests in whether it be real estate, infrastructure or renewable energy.
“If many people are bidding up infrastructure in a certain country, we just don’t participate. We have 29 other countries we can go to, we have three other businesses. So we can ebb and flow our capital and therefore we’re not forced,” Flatt said. “The worst thing anyone can do is have too much money in one sector and need to put it work. We don’t need to put money to work in any one country or business.”
Flatt also said the firm has the advantage of being an early investor in renewable energy, which has become a more mainstream and crowded space as the world becomes more cognizant of the realities of climate change.
“We happened upon one of the great businesses in the world. I think we can continue to use our competitive advantages to make our investment strategy different from most of the [competing pools of capital] because most people don’t have the size, they don’t have the global operations, they don’t have the operating capabilities,” he said.