Thank you for standing by. This is the conference operator. Welcome to the Brookfield Asset Management third quarter 2017 conference call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Suzanne Fleming, Managing Partner, Branding and Communications. Please go ahead, Ms. Fleming.
Thank you, operator. Good morning, everyone. Welcome to Brookfield's third quarter conference call. On the call today are Bruce Flatt, our Chief Executive Officer, and Brian Lawson, our Chief Financial Officer. Brian will start off by discussing the highlights of our financial and operating results for the quarter. Bruce will then give an overview of our market outlook and Brookfield's investment approach. After our formal comments, we'll turn the call over to the operator and take your questions. We ask that you refrain from asking multiple questions at one time in order to provide an opportunity for others in the queue. We'll be happy to respond to additional questions later in the call as time permits.
I'd like to remind you that in responding to questions and talking about new initiatives in 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 law. These statements reflect predictions of future events and trends and do not relate to historic events. They are 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. I'll now turn the call over to Brian.
Thank you, Suzanne. Good morning to all of you on the call. We're pleased with the results we reported this morning. Funds from operations, or FFO, totaled $809 million. Looking at the key components, fee-related earnings increased by 8% in line with the year-over-year growth in fee-bearing capital, which now stands at $120 billion. I would note that the growth in fee-related earnings is below trend, that's simply because we brought nearly $30 billion of new funds online in 2016, and we are in that window between these closings and the next series of flagship funds. In that regard, we continue to make good progress on investing these funds. As you're aware, once we have invested 75%-80% of a fund, we can move on to raising a successor fund.
We are through 80% on a real estate fund. We're currently fundraising in that sector, and our infrastructure and private equity funds are through 45% and 70%, respectively. We're also making good progress in building out our credit business, are continuing to grow our core real estate fund, and advancing several other important new funded strategies to develop broader product offerings for our clients and opportunities to continue expanding our fee-bearing capital. We're also seeing an increase in the amount of carried interest generated as a number of our larger funds raised several years ago are now through their investment period and into the value creation and monetization phases. This quarter, we generated $367 million of unrealized carry, $786 million on an LTM basis, which would be brought into FFO and net income down the road as the funds are distributed and the clawback potential dissipates.
Performance in the funds has been strong across the board and benefited particularly from the sale of a European industrial business within our first global real estate opportunity fund at exceptional returns, and are also benefiting in particular from a very successful turnaround in a large industrial business within one of our private equity funds. I will now turn to FFO from our invested capital, which increased by 19%. The pickup reflects the contribution from acquisitions, particularly in our infrastructure business, as well as higher generation and pricing in our renewable power business and strong performance in our short-term investment portfolios. Realized disposition gains in the current quarter included gains on the sales of several office properties, as well as a portion of our investment in Norbord, and we booked $25 million of previously generated carry that was no longer subject to clawback.
Net income prior to tax was $1.3 billion versus $1 billion in 2016 due to the aforementioned operating improvements in fair value gains. After including the impact of tax, which reflected a $1 billion recovery in the prior quarter, net income was $992 million compared to $2 billion. Some of you have noticed that we included in our shareholders' letter a discussion on our use of International Financial Reporting Standards, or IFRS, and in particular, the use of fair value accounting. As a Canadian company, we are required to report under IFRS as are companies in 100 other countries, but not the U.S. Understandably, U.S. investors are therefore less familiar with it, we like to periodically touch on this point. We encourage you to read our letter as well as our disclosures in our annual and interim reports to provide more detail on this matter.
However, I will recap the highlights here. First of all, under IFRS, there are a number of asset classes, real estate in particular, that are carried at fair value as opposed to depreciated cost. It differs from U.S. GAAP in this regard. Most REITs outside the U.S. use IFRS and report their properties at fair value, so we are hardly unique. This includes Europe, Australia, Canada, and the United Kingdom, among others. Second, we have extensive expertise and robust processes around valuing our assets. As an asset manager, valuing assets is a core competency and something that we do day in and day out. Valuations are subject to extensive scrutiny, both internally, and are also benchmarked against external valuations on a regular basis.
Third, we believe that fair value information is useful to investors, needs to be considered in the context of other metrics, and that it is, at the end of the day, an estimate. In fact, our primary performance metric, funds from operation, does not include fair value changes. We believe that our ability to increase FFO is the primary determinant and creator of value in the long run. Finally, the real test of our performance and our valuations come when we sell an asset. We are very comfortable with our record on this. Of the more than 400 assets sold over the past five years, we've realized aggregate value of $44 billion, compared with the associated IFRS values of $41 billion, representing 110% of the value we held them at.
Finally, I'm pleased to confirm that our board of directors has declared the regular $0.14 dividend payable at the end of December. With that, I will hand the call over to Bruce.
Thanks, Brian, good morning, everyone. As Brian noted, assets under management and fees associated with them continue to grow at a rapid pace. Most of our operations performed well, we continue to find ways to invest capital despite a competitive environment. We put that down to largely our three main competitive strengths, which are size, global presence, and our operating platforms. Fundraising in both private and public markets for real assets remains strong as institutional funds continue to allocate greater amounts of capital to our sectors. With interest rates still very low, this should continue for the foreseeable future. As a number of you know, we held our 13th annual Investor Day in New York this quarter. For those not able to attend, the presentation materials and transcripts are on our website.
We believe they provide a good summary of our business plan, we encourage you to read them to understand where we're going with the business. We covered overall Brookfield and each of the four partnerships that trade on the stock market. Our short story is that we're now benefiting from the work over the last 20 years of building up our institutional relationships. These investors that we built the relationships with are allocating more capital now to real assets because of a few factors. The first one being low volatility, the second being strong returns compared to alternatives, and the third being yield and upside from the assets that we purchase for them. We expect the percentages of overall capital pools to continue to increase substantially from today's level.
The size of capital institutional funds is growing, the compounding effect of both will be significant on allocations to real assets. As a result of that, if we achieve our plans over the next 5 years, we should double the size of our business by most metrics, which should result in significant growth in intrinsic value of a BAM share. The keys to doing this are successfully looking after all of our fund investors, performing for them, and growing each of our listed partnerships, both in size and in returns. In our presentations, we laid out the goals for each of these businesses, I'll just mention a couple of things on each.
In our property partnership, Brookfield Property Partners, we're focused on bringing to completion several major development projects, investing our opportunistic capital that we have available, and capitalizing on the retail property changes occurring in the U.S. In Brookfield Infrastructure, we're building out each of our businesses that we've built over the last 10 years. We see today significant opportunity in the global telecom tower build-out and growth in India, coming from both population growth more broadly, but more specifically from an under-financed corporate sector. In Renewable Partners, we're one of the few well-financed renewable companies amid what we see as a once-in-a-generation shift over the next 25 years of the energy stack in most countries to renewables.
Lastly, our Business Partners' launch has been successful, and we're positioned now to make long-term focused decisions because of our permanent capital and the ability to make long-term commitments to both partners and counterparties. These days, the most asked question to us as a management group by investors is: How do we put the capital to work, and why are we able to acquire certain assets in an otherwise competitive environment? I will highlight our TerraForm investment as it is a great example of why we earn the returns we earn and what differentiates some of the things that we do. Bottom line, it's quite a simplistic story. It's just a lot of hard work. In this situation, we followed SunEdison and its affiliates for many years as we participated in the same markets and in many cases, competed for the same assets. In 2015, SunEdison encountered serious financial issues.
We assessed the situation and considered participating in the reorganization by buying debt and eventually converting it to equity. Based on our knowledge of the asset values and the trading values of the debt, we didn't think it was prudent at that time. We continued to follow the bankruptcy, eventually, when SunEdison filed, TerraForm Power and TerraForm Global, their two yieldcos, traded down substantially. We knew they had great assets. After the filing of SunEdison, the shares came into a range where we finally saw value. At that point, we decided to buy common shares, eventually making proposals to the boards of both companies and their creditors, and ultimately, we were chosen to sponsor a recapitalization. All of this led us to recently conclude the purchase of 51% of TerraForm Power, and we'll act as its new sponsor.
We expect to shortly close the acquisition of 100% of TerraForm Global, which in aggregate, the two transactions will expand our renewable operations by 3,600 megawatts with an investment on our part of about $1.4 billion. In summary, why did this happen? First, we had $1.4 billion to invest. Not too many have that amount of capital in a concentrated investment. Second, we understood the business very well, as we own the same type of assets that they owned. Not many others have that. Third, we have flexible capital to lock up toehold positions. Many don't have the flexibility in their fund or their capital to do that. Fourth, we could be flexible as to buying 100% of a company or 50%. That was very important here and maybe was one of the most important things in the transaction. Most can't do that.
Fifth, we had the people to run the business from an operations perspective. Few have that. Last, we negotiated for two years with counterparties to complete this transaction. Not too many can afford that patience. Bottom line, our strength in competing for transactions is usually one or all of scale, capital, time, scope, patience, or operating skills. In this case, it was virtually all six of them. With that, operator, I conclude my remarks, and I'll turn it over to you, and we'll take questions if there are any.
Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question is from Cherilyn Radbourne with TD Securities. Please go ahead.
Thanks very much, and good morning. Wanted to start by asking about the acquisition of Center Coast Capital, which I appreciate is not an overly large deal. Can you just talk about why you decided to buy versus build in that case, and whether the retail distribution capability that they bring can enhance the retail distribution of your private funds?
Just for everyone's benefit, the question relates to the acquisition of a master limited partnership manager that largely buys oil and gas master limited partnerships and other master limited partnerships in the U.S., which we acquired in the quarter, and it was acquired by our public securities group. We've managed real estate securities, infrastructure securities, both long only and in a hedge fund format for a number of years. In the context of our infrastructure management, we do MLPs, but we've never had a specific fund for master limited partnerships. We just felt we found a team that we were really excited about, and they wanted to join us.
We've brought them into the group, and we think it's going to be a win-win because our platform will be able to help them a lot, and they're bringing those skills to us to manage master limited partnerships. I think from that perspective, it's a win-win. The second part of your question relates to their retail distribution which we also acquired. We think it's important for their business. We think it's important for our public securities business. More broadly, we think longer term, it could be important for our overall business as we continue to broaden out the retail clients and different types of distribution that we use across the franchise. I'd say the first decisions were made just off the business we bought, but we think it could be important for the overall franchise longer term.
Great. Separately, the expanded disclosure around carry in the supplemental this quarter. We've obviously seen a big jump year-over-year in your LTM generated carried interest, and I just wondered if you could talk about roughly how much of that represents compounding through the passage of time as your funds mature versus specific transactions over the period.
Yeah. Thanks, Cherilyn. It's Brian. That reflects a couple things. First of all, as you've noted, it did step up a fair bit this quarter. To some degree, that's, as I think you may have been alluding to, the passage of time, meaning that when the funds are in the early stage, that investment period, you're putting the money to work, and the fund isn't fully invested until you get through that. Sometimes that'll take you a couple of years, at which point in time you get into the whole value creation side of things, and that's when you'll see the actual value start to accrete in the fund and enhance the associated performance and therefore the carry. That's, I guess, essentially the J curve effect.
It increases throughout the life of the fund and then tapers off a bit as you distribute things. I think a lot of it is simply the passage of time, getting the funds, put to work, getting into that hole, getting to work on the assets, creating the value. As I noted in the remarks, there have been a couple things in particular where you can then capture and sometimes even enhance that value when you go through the monetization phase. In particular with the industrial portfolio in Europe would've been a particular instance of that, where the specific transaction will establish a higher level of carry as well.
Great. That's my two. Thank you.
Thank you.
The next question is from Anne Day with KBW. Please go ahead.
Thanks. Good morning, and thanks for taking my question. My first one is for Bruce. You briefly referenced capitalizing on changes in the retail space in the U.S. in your prepared remarks. I guess I was just wondering if you could kind of refresh our memories on what you think the market might currently be underappreciating about your current retail investments and their relative positioning. I guess I'm wondering if you were to be looking to invest further into the space, whether you'd be more likely to look inside of the GGP franchise and stick to what you know, or maybe also look at third-party brands.
I would just say our view is that the retail industry is undergoing three general changes. The first one is that we came off very strong retail sales over the past eight years since the recession in 2008. Retail sales grew exponentially, that can't go on forever. Eventually, retail sales levelize out to a normalized amount. That's the first thing. Second, there's no doubt the internet is affecting some amount of retail sales, there's debate on whether it will go to X or Y % of retail sales in America. There's some form of numbers going in there. Third, there's no doubt there is an overcapacity in the United States for retail, our view is that there's great retail, which will continue to be great retail longer term, there's retail that needs to be repurposed and redeveloped.
There aren't that many great malls available to be purchased. What we have been taking advantage of, both in GGP and both in our opportunity funds where we have other retail strategies, we've been buying retail centers, which are really just forms of real estate being repurposed. These take very long periods of time, they can be extremely lucrative if you can repurpose apartments, multi-family hotels, et cetera, office buildings on those parcels of land. Usually what these are very large pieces of urban land, which can be repurposed because they're in the middle of big cities in the United States. Especially on the coast, some of those pieces of land are very valuable, it takes a lot of skills, money, capital, and vision to be able to do it. Everyone isn't capable of doing that.
I appreciate the color. I guess as my follow-up, I'd just like to take the discussion of distribution a bit broader, I know this is still a work in progress, can you talk a little bit about the investments that you've made or are making into growing the distribution footprint across your platform, not just in public markets? Do you have any updated numbers around how your client base has grown as you've expanded distribution and your product set and capabilities?
It's Brian, Anne. Thanks for that. I think as we referred to at our Investor Day as well, is a push to expand our distribution more into the high net worth channels. In particular, there's a couple of ways that we've been doing it. One is we have worked with some of the major financial institutions in introducing our funds into their clients and into their high net worth distribution systems. That's one element of it, and we've been making some good progress in that regard. Of the past series of closes, there's been, let's say, a modest amount of capital that was placed in that regard, and we're looking to step that up with the next series of funds.
Then the other part is working with specific channels to distribute more broadly into their high net worth distributions, and we've got a couple of fund strategies that we're working on there. We don't have any concrete numbers for you today in terms of the quantum of capital that's been placed in that regard because with the most recent ones, it's still in process. Having said that, I think we've indicated that getting up around the 10% level would be a near-term target in that regard, and we seem to be heading in that direction.
Thanks very much.
The next question is from William Katz with Citigroup. Please go ahead.
Okay. Thanks so much. I appreciate the color on the international accounting. Just on that vein, just sort of going back to your Investor Day, I remember one of the surveys you took was, well, would investors like to see more. It felt like there might be a little bit more discussion around the concept of ENI or economic net income, very much like some of your U.S. counterparts present their information. Where are you in your thinking in terms of your presentation of your financials beyond the funds from operations construct?
Yeah. Thanks, Bill. It's Brian. Yes, absolutely, we're trying to get our disclosures aligned in a way that we can make it easier for folks to benchmark our performance or understand our performance relative to the other alt managers. In that regard, what we have done in the quarter is while we haven't gone out and explicitly called it economic net income or. I'll come back to that point. We've essentially captured that for our asset management activities by presenting fee-related earnings and generated carry together. Which would be essentially, in our view, what most of the other alt managers are doing. The one difference, in particular with us, is because we do have a substantial amount of our capital, $30-some odd billion, invested alongside our clients in our various funds.
In some cases, an alt manager, their concept of ENI would also include all of the investment earnings and mark-to-markets and things like that, with respect to their investment capital, their investment portfolios as well. Which as I mentioned, in our case, that's a much larger number. Our thinking in that regard is to essentially give people what is ENI for our asset management activities, and then separately give everybody also the performance of our invested capital. You can understand the one relative to the alts. The invested capital is just what the investment capital is. You add the two together, and setting aside overall franchise value, which we'd never want to underestimate, that should give you a good sense of the performance of Brookfield. We're trying to move along that road, but we're not entirely comparable in that regard.
Okay. That is helpful. Just, sorry to hit the same topic one more time, but I'm sort of intrigued with the sort of the focus on the U.S. retail, not so much in real estate, but just in terms of from a distribution perspective, and obviously this transaction sort of moves along a little bit, the CCC deal. When you sort of think about getting retail up to about 10% of your business, was that just a construct of incremental distribution or is that more a function of AUM? If it's more the latter or fee-bearing capital, I'm also wondering how you think about the interplay between incremental volume versus economics, specifically in terms of maybe margins for the business looking ahead.
Well, just to be specific, there's a balance between how much it costs to get incremental retail distribution, and to maintain it, and to administer it versus bringing in institutional money. On the other hand, large institutional clients sometimes drive different economics on funds. There's a fine balance. Our long-term view is retail high net worth. We're probably never going to do retail-retail. That's what our listed securities are. Retail high net worth is probably an important balance for our broad distribution that we have within the company. We think it's important, and it introduces us to a lot of different groups and people across the world. Actually, sometimes, even just like on the institutional side, it brings us transactions because you get to know people.
I'd say it just helps broaden out our franchise to a greater group of people, and that is helpful.
Okay. Thank you.
The next question is from Andrew Kuske with Credit Suisse. Please go ahead.
Thank you. Good morning. Given the fact that BSREP 2 is at 80% invested or committed at this stage, you're going out and really ascertaining interest from clients at this stage on the next fund, what's the dynamic between really fundraising on a pooled basis as you've done in the past versus, say, direct investments on assets? What's really the appetite from the client base right now?
I'd say it's similar to what it's been in the last five years. It's not really that much different. Our investors, and probably all institutional managers investors, break out into the categories of, there's a few that do direct investing on their own. There's some that invest in our funds and like us to bring them co-investments. Then there's some that just don't have the capabilities, and they like us to do the investments for them. There's different groups, and we deal with all of them. The good news about our business is that we generate large transactions. They often come with co-investments, and we have our listed vehicles, which do direct investments.
Often there's things that don't fit the specific funds or either the type of investment, the country it's in, the concentration limit allows us to bring our clients other types of investments. We do those with many people that come into our funds. As a first priority.
Make sure that we cement the relationship with them. I'd say generally that's how it breaks out, and it's not much different than it's been over the last number of years.
Maybe just an extension on that, is there any evolution from either the co-investors morphing into a perpetual kind of construct that you've proposed in the past in specific asset classes?
Our view is that if interest rates stay low, more and more fixed income allocations are going to flow into these type of products. What the ideal investments are long-term hold, relatively modest yield investments with low risk. Those are perpetual funds, and that's going to continue to grow and grow and grow. We're eventually going to set them up in all our businesses and manage those type of assets for investors. Really what they are is long-term fixed income alternatives to help balance their portfolios with moderate risk.
Okay. That's helpful. If I may just sneak one more in on Center Coast. How would you compare Center Coast to, say, the past deals you had in the history of Hyperion and KG Redding? Like, how is it similar? How is it different?
Yeah. Each one of these has never been relevant to the overall franchise. What they brought us was a special capability or people to be able to grow in an area of the business. Therefore, I think over the longer-term, they're all highly additive. Each one of them has been great in their own way over the past, although we've never been big on buying managers, and they're modest amounts of money that we've done it with.
Okay. That's great. Thank you.
The next question is from Dean Wilkinson with CIBC. Please go ahead.
Thanks. Morning, everyone. Bruce, a bigger picture question for me. Given the amount of capital you've got to invest, sort of a doubling of that potentially over the next five years, as you look out the next year or so, where do you think the sort of single best opportunity is? Or perhaps said another way, where are the greatest chances for mispricing of assets, and if you had a preference, what would you sort of be looking towards?
I would say more broadly, if you look at our business, it's about the franchise tracks, finds, locates. Every fund is filled with 50% of investments which just come because of the businesses we're in, the people we have, the franchise we have, the relationships we have, and they're just singles and doubles, and we're just tucking them in. They're normally in the businesses that we already operate. They're something down the street or something in another city or something, just like the one we have. I would say, no matter what environment we're in, that occurs, and that's just ready, stable, and I'll just call it 50% of all the funds. The other 50% generally changes from time to time based on capital flows around the world and where we've set up.
We've set up our people to be able to take advantage of those, and we're never actually sure where that's going to be. Over the past 24 months, that was in South America and most specifically in Brazil. That's still in existence but less so than it was 18 months ago because the market's bottomed and recovering. India, we've done a number of things, and I think we'll continue to see it because there's an underfinanced corporate sector, and therefore, there's a lot of opportunities coming out of that as banks try to take loans to the sectors off their books. We always surprise ourselves where the opportunities come from. Those, I guess, would be the two ones that where there's the least capital in the world today at the current time.
Fair to say that the view is perhaps a little less domestic than it may have been historically.
If we went through the real estate fund, the last real estate or the current real estate fund we're investing and just closing off, despite the environment that we've been in, which has been very good, and we've been sellers of a lot of assets in Europe and in the U.S. I think I'm just going to guess here. I think 50% of the portfolio that we invested in a $9 billion portfolio of equity was invested in the U.S. Despite that, because of the advantages we have of size, capital availability, scope, geography, et cetera, we were able to find 50% domestic investment. We always find things. On balance, 2009, reflecting back to 2009, we hadn't thought U.S. would be where all our money would go, and it just so happened.
Why would you go anywhere else if you can buy 50% of replacement cost in the U.S.? It just all depends on what capital flows.
Okay. That's great. That's it for me. Thanks, guys. I'll hand it back.
The next question is from Neil Downey with RBC Capital Markets. Please go ahead.
Thank you. On the subject of, I'll call it accrued versus realized carry. We do see a list of your private funds in your supplemental information package. Can you help us think about which funds in particular over the next, let's call it two years, are really moving through that monetization stage? Obviously, we've seen the deal to sell Gazeley in Europe, and that's closing, I believe, in the fourth quarter. You generated a sizable carry accrual on that. Which funds are going to continue to go in through that monetization stage?
Hey, Neil. Brian. I'd say the fund that you pointed to there, which would be our first global real estate opportunity fund, BSREP I, is definitely into that mode. We've got a couple of the private equity funds that are a little bit further along in terms of their vintage. They're a bit smaller, but they have stepped into that phase as well. I'd say, it's a general observation. You tend to get a slightly shorter investment duration, within the private equity and the real estate opportunity funds than, for example, in the infrastructure fund. Those tend to be a little bit longer dated. I'd say those ones will take a little bit longer in terms of getting into the actual distribution phase and hence locking in the carry.
Having said that, the infrastructure funds, as we've noted, the last one's already 40% invested, and that's a pretty big fund. There's a fair bit of capital that's at work and has been invested and hence is accreting in value and therefore generating carry, even if it's not getting through the clawback period and brought into FFO.
Okay. Thank you.
Thank you.
Once again, if you have a question, please press star then one. The next question is from Mario Saric with Scotiabank. Please go ahead.
Hi, good morning. Just looking at the percentage of your respective flagship funds that committed real estate infrastructure, private equity at 80%, 45% and 70% respectively. When you launch these funds, how does the commitment kind of pace or capital deployment compare to your original expectation on the various funds?
Yeah. I would say they're generally pretty much in line. Part of the reason why I say that, Mario, is by the time you're getting towards the end of raising the funds, you're always looking around for those investment opportunities, and you're always processing them through. You've got some pretty good visibility. In some cases, you can have a fund that you know is going to be pretty well spoken for within the first year. I mean, the investment period is three years for a reason, to give you that time to go through it.
I guess just given the comments Bruce made earlier in our ability to have visibility on a number of things, either, let's say, generate tangential to our existing businesses and operations, the things that we find more opportunistically, is such that we find we can put the capital to work at a measured pace, but one that's generally shorter than the investment period.
Got it. Okay. My second question is, I appreciated the color on the singles and doubles in the letters to shareholders, especially on the back of a pretty exciting World Series that we've seen. As you get bigger over time, presumably, you've indicated scale is very important in your ability to source transactions and arguably deploy capital. As the funds get bigger and Brookfield gets bigger, how should we think about the proportion of singles and doubles versus home run that others may not necessarily be able to compete on?
Yeah. I would say that if you look back, I see no reason it wouldn't be the same going forward. Just the general investments we make that are straight down the middle based on our franchise that can earn us an easy 15% or 20% return, depending on the type of investment we're making and which fund, probably are half of the fund. That just gives us a good base of investments. We're taking not a lot of risk, and we can find them easily, and the other half is allocating capital to the most interesting jurisdictions. We kind of try to balance it out to make sure that we have a balance of both in each different type of fund.
Okay. Maybe just on real estate in particular, have you seen any change in kind of client attitudes towards opportunistic versus core plus versus core on the margin?
Yeah. For real estate, I would say opportunistic is highly sought after. People want returns in their funds, and we see no abating of allocations to opportunistic real estate globally. Some institutions are always, and have been for years, worried about interest rates and therefore worried about buying core real estate. There's an enormous amount of other people behind them that have been buying core real estate. I think there's still lots of investors for all of those products.
Okay. Thank you.
This concludes the question and answer session. I will now hand the call back over to Ms. Suzanne Fleming for closing remarks.
Thank you, operator. With that, we will end today's call. Thank you everyone for participating.
This concludes today's conference call. Thank you for participating, and have a pleasant day.