Brookfield Corporation (TSX:BN)

Investor Update

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Sep 16, 2014

Morning to everyone and thank you for attending on behalf of everyone at Brookfield. There will be 4 of us speaking today and we'll be prepared to answer questions on anything. We'll take a few questions through the presentations like we did in the earlier sessions. And then we'll take anything at the end as a wrap up, if people are still interested. And I guess we're here to really just talk about the company overall. We focus this presentation more on asset management than on the business units itself, presuming that people either were in attendance at those sessions or they can get the materials from those presentations. But in the questions, we'd be happy to respond to anything that came out of those. There's 4 of us who are going to speak today, which I'll do just an overview and talk a bit about our business strategy. Leo, Ben and Tiller is going to talk about our private fundraising and the activities that we conduct in that area and the environment and what we see out there for private funds today. Cyrus is going to cover our 4th business group, which is private equity. We had to include them somewhere, so we included them in our presentation. And Brian is going to sum up the presentation on just the financial impact of all of this on overall Brookfield and on our on the values of the company. So with that, I guess I'd just state one more time and this is nothing new, but our goal is really to be the leading manager global manager of real assets. With really two things in mind, 1 to protect capital and secondly, to earn outsized returns for our clients and our shareholders. And I'd put them in that order because we think a lot about downside protection and hopefully you've seen that in a number of the presentations. If you sum up the all of these presentations that we'll make over the next 2 hours, I guess, I had 5 things I wanted to sum up with. Maybe you can leave after this slide if you're interested. But I'd sum them up by saying firstly that we try to compound capital at 12% to 15%. We think we can do that within the businesses and within the capital that we have on average over the longer term. 2nd, our fee business, the asset management business that all flows up to Brookfield Asset Management should head towards $3,000,000,000 of fees over the next 10 years. At normal valuations, this is purely arithmetic. At normal valuations, if you take those assumptions, you should have $150 to $200 valuation for the company in 10 years. The biggest risks to that are what we identify threefold. Number 1, interest rates. There's no doubt that interest rates affect assets like ours. The question was asked earlier about discount rates and cap rates. And the bottom line, we value things on long term expected yields over they do And they do on the margins, but generally not. And therefore, we don't think it's a big deal if interest rates go up to normalized levels, which the And if you're at 4% or 4.5% or even 5% those are normal times and we always expected that. But if you went to a 10 year treasury of 8%, clearly I think that changes your thinking about real assets. Secondly, real asset allocations, a big part of our business is deploying capital for institutional clients. And real asset allocations have been increasing across the globe. Leo is going to talk about that specifically. But I guess I'd just say we see no indications that there is less real asset allocations. In fact, we see significant money going into real assets and across the world in virtually all types of institutions. 3rd is execution and it's probably the biggest risk. It just it comes down to people and execution and we try to deploy a thoughtful way of executing, but you can always make mistakes. And I guess the only thing I'd say is we try to ensure that the mistakes we make never harm the franchise or aren't too big such that they will damage the value of the overall organization. And so but clearly that's I'd say the 3rd big risk. On the upside, there's nothing in our plans anywhere within the system, which really take account for 2 things, which often occur within our business. And the first one is we sometimes repurchase shares. And if we can do that for value over the longer term, that's a tremendously valuable thing to an organization if you can do it. And secondly, there sometimes are transactions which can occur, which advance the overall business of the company. And general growth would have been one of those for our real estate business. Babcock was one of those for our infrastructure business. I can go back 20 years and name others. But they don't they're not every year, but every once in a while there's some of them. And I think I guess we'd hope that during the period of time either those things will be additive to the franchise or they'll make up for some of the small mistakes we make along the way. If you look at the overall business, we're essentially, I guess, we believe built out to the scale that we need to run the business that we have today on slide 7 in your books. And we have approximately 100 offices, 700 investment people and 30,000 operating employees. We're in virtually every country that we want to be in. There may be others that we go to, but we don't feel any real need to put people or capital into other countries other than a few small ones that we will continue to build out. And that gives us a pretty compelling offering to our clients when we deploy their capital. And not many other people in the world have that global scale. It does make us one of the largest managers of real assets and we split it in different ways, but this slide shows it in 3 fashions. 1 is our listed partnerships, which as you know are about $40,000,000,000 of capital. Our private funds, which are around $30,000,000,000 and our public market assets, which are $16,000,000,000 So it's about $84,000,000,000 managed for others. On top of that is the capital on our balance sheet and the other assets that we manage off our funds. And I hope that you've seen throughout the presentations of the other sessions a common thread within the businesses that we run. And it's our model is pretty simple and we fund we try to have one of the most sophisticated funding arrangements to be able to generate capital and availability of capital. But what we do at the asset level is really pretty simple. We source equity from clients. We use the global REITs we've built out to find assets. We finance them conservatively and we put the money to work in those assets and try to optimize them by using our operating people to increase the value of those assets. And some of the things Rick talked about this morning on Manhattan West or some of the other things we've been doing, very few people have the capability to take assets and enhance them the way that we do on a global basis. One of the greatest advantages that we think we have in the real asset space is that, we can be value investors. And often when you get to the scale of our organization, you're forced to just do things because you want to put money to work. And we never wanted to be in that situation. And to ensure that we weren't, we felt years ago we had to be in multiple businesses and we had to be in multiple countries, because there's always a real asset or a sector or a country that's out of favor. And what it allowed us to do was to take money and have capital flexibility to go to one place or the other. And that ensured that we could continue to be value investors in the areas where we operate. And we invest in these multiple markets really for three reasons. The first where we can do it, the first is really size. And given the $200,000,000,000 of assets that we have under management and approximately $16,000,000,000 of discretionary liquidity that we have, it puts us in a category that allows us to invest where few others can invest. So that's just one competitive advantage. The second one is this global scale. There's not too many others that can respond to opportunities when they come in from somebody who calls us or that we reach out to with a global platform like we have. And the third is really the operating people that we have. And there's I'd say there's no doubt that the 28,000 people add value every day to the assets we have. Maybe more importantly to the senior people in the organization is the confidence it gives us to be able to make the investments when we make them. And I can give you a few examples, but I'm quite positive that many of the things that we do, we wouldn't have the confidence if we couldn't sit with and or call the people on the ground that carry a Brookfield card and say, what do you think about this and what's going on in the market? And that gives us a tremendous competitive advantage. 3 or 4 examples, just quickly, Brian talked about UCP in India. I'm quite confident that the Real Estate Group would not have been able to make that investment if we didn't if we hadn't have put a significant number of people into India outside of that business on top of their real estate people. In addition, this requires the construction and completion of a number of properties in India. And we put our construction people and business in India a few years ago and they will help and at least oversee what's going on in this portfolio. And that gives us tremendous confidence versus somebody that had no people in the country to be able to do that. In Brazil, we recently invested in VLI. Sam talked about it yesterday in the infrastructure presentation. And this is a very broad business in Brazil. Today, the country is in recession. We think it will surely come out of that and Brazil is a great country to invest. Not many people have the confidence to invest there, but with people on the ground and with the reputation we have in the country that has given us a tremendous advantage in investing. In China, we invested in a business called Shintandi, which is a number of commercial properties in Shanghai. And I'd say that transaction came to us because of the reputation of the organization. And it allowed us to enter into a transaction, which I'm not sure too many others could have accomplished for them or that this individual company would have allowed someone else in as a partner. And as a result of that, it just gave us a unique transaction, which not wasn't available to many others. In Ireland, we were able to expand our energy business to a significant investment in Ireland and it was when people were not too enthused about the EU and everyone thought it was going to end and there was going to be no euro again. And we took a view just given the people we have there and the confidence and knowledge that we have that we could A, invest in these assets B, we could ensure downside protection and 3, the upside came from redeveloping a number of the assets in the portfolio that we could do because of our development platform and not many other people would take on the, I guess, the hard work and the perceived risk to be able to develop those assets. In all of those transactions, I guess they really have 6 things that we try to look at when we're buying infrastructure and real estate. And the first one is that it's an essential asset to the economy or the business or the environment. 2nd, that it has stable cash flows or we believe we can convert it into something that will have stable cash flow. So we made to buy a development asset, but believing that we can sign a long term contract on the building. 3rd, we believe that over time yields will grow, because buying assets that generally depreciate in value is not what we're looking for. 3rd, usually inflation adds extra value over time. 4th, we try to look at things that will give us higher risk adjusted returns and make sure that we look at the downside in the assets. And generally, we're looking for lower volatility type things, especially in our infrastructure and renewable power business. Generally, on top of that, what we try to overlay on it is the macro environment. And while I would say we have no specific view on the macro environment and we don't believe our self economists and we generally don't have any view of the future other than for investing. What we try to do is take the information that we have and either quick enough or slow our pace of investing based on the macro environment we see out there. And just looking at the last 10 years, I'd say we had 4 specific periods. 2005 to 2017, there's no doubt we were more careful with our investments and more worried about the environment because transactions were very strongly bid in the market. 2,007 and 2,008, we believe because of the credit markets starting to change in the summer of 2,007 that we should be raising cash and protecting the franchise. We made these words up the other day, but I'll just put it in those terms. We were trying to protect the franchise and make sure that we could see through the bottom of the market. In 2009 to 2011, I characterize it in saying there's no doubt looking back. And at the time, we were A, worried to still protect the franchise because no one was sure when it would turn or turn back. I'll remember that. But secondly, anything that you could buy, we knew would be a good investment. And so we are trying to select as much capital as we could within the business to be able to put it to work, which leads us to this period of time from 2012 to I'd say 2015 or 2016 in our view is probably what we've been doing is a, liquidating assets some of them that came along in 2009 to 2011, 2 selectively investing and doing organic investments within the franchise. When I say selectively investing, we've been moving our capital in most of our funds and most of our businesses to markets, which don't have a lot of excess capital. And that's really been Europe, Brazil, China, India. And as you know, the United States is a robust market today. So you'd have seen there wouldn't we haven't done that much in the United States other than some select things. And we're out raising cash and funds for on the expectation that in the next 5 years, there will be leaner times in 17,000 on the stock markets. And that's not to say that we don't think they'll go higher, they probably will. But it's a good time to be raising money in funds and loading up the balance sheet funds on the expectation that there will be some event in the world at some point in time. And that's generally the, I'd say, the thrust of our business today. On this investing side specifically, we're focused organically on really three themes. The first one is still Europe. And I would say there's no doubt that the market has changed. There's more capital in Europe. We've seen that in a number of transactions that we tried to do in Spain on a substantial basis. But maybe the most important point is we've done a number of things in Europe within our different businesses. They've all been highly attractive. There is enormous amount of bank deleveraging that still has to occur. And while the, I'll call it the death watches off the European institutions, which was there for a while, we think there's which was there for a while. We think there's a significant amount of deleveraging that has to occur, which will just bring streams of transactions for our different businesses. 2nd, we still think there are a lot of opportunities in the emerging markets. We used the last 2 years to continue to put money to work in those markets. And what it has done for us is now established ourselves with assets in all the markets and the platform and people. And now we should be able to organically grow out of those operations. And the most important investments are your first ones, because when you make a big mistake, you lose confidence and you lack the ability to continue to invest. So it we think this was a great period of time for us to establish those operations in those markets. And lastly, the commodities based companies produce opportunities for power and infrastructure specifically and also private equity. The commodity volatility is still significant. Iron ore is now in the $80 range. It just produces opportunities that people look at their balance sheets and want to generate cash from assets they have in their balance sheets versus times when they're it's robust. So we continue to see opportunities in those areas. Generally that this strategy and all the things I just talked about has produced a pretty solid return for a Brookfield Asset Management shareholder. I'd say equally as important or maybe more important for the health of the franchise is that the returns in all of our funds have been very good over the past 10 years. And that just means that people come back to us and continue to invest in with us. And that's extremely important to the long term health of the franchise, which really comes down to I guess 6 things that we've tried to do within all the businesses. And for those of you that are familiar with us, these are you've seen before, but for those of you not, we generally in all the businesses try to buy great assets. We'll pay more if we have to get them for quality. We invest generally assuming we're going to own them forever, while often we don't, but it just gives you the ability to have downside protection. We try to buy less than replacement costs. We try to finance prudently and knowing that no one ever loses an asset. None of these assets over time will lose value generally other than if you're very wrong on your underwriting, but just never lose them at the bottom of the market. So make sure they're prudently financed. We generally try to buy when capital is scarce because that indicates the right time and that's why we try to move places where money is less freely available. And execution is extremely important to this franchise. The last part of our plan or of this presentation for me is just what we're doing next in the plan. And I guess we're the as we sit today, we built the business out. We have the operation set around the world. We have our fund structures all set up. And now what we're trying to do is leverage the franchise really and we're doing that in 3 ways. 1, we're doing larger funds 2, we're expanding the range of products and 3, we're selectively widening our fund focus by region and we'll do that over time and I'll talk about each of those. On the larger fund size, generally this is just a compendium of how a private equity or a private fund size would scale out. And so you can just see the sizes of funds and generally this is how the fund sizes will increase over time. And you can just see how the how you can scale up a fund and get larger as you bring in more institutional clients into your funds. Secondly, we're continuing to expand the things we do with our business and we do for two reasons. One, obviously there if we can offer more products, we get paid more fees and that's good for the bottom line of the organization. More importantly, some of these things are important to us because they actually are an offering that we can give to our clients that ensures that even if their fund A, institution number A is not interested in a private equity fund, we can have a relationship with them because we have one of these other products. And if we have that relationship with them, the next time we come out with a fund, they may invest in that fund. So what we're trying to do is expand the range of products we have to attract more institutions to the franchise, get to know them and have them as a multi client fund in the business. And there's a number of things on this slide, which shows you and I won't touch on any of them specifically, but a number of them we've launched in the last year. And lastly, and we haven't done this yet, but over time what depending on our fundings our funds and how large they get, what we may do is selectively widen regional funds from our large flagship funds. And so far we haven't had to do that because we've had enough capital and we could move it around. But we may choose to have European funds. Probably even more importantly, we may as the business in Asia scales up, some institutional clients in North America may not want to have that much capital invested in Asia. So we may have a sleeve for Asian funds. And we will we are looking at a listed Asian business, which could again continue to just widen the businesses that we offer for our clients. And I'll end on this slide, which just gives you and then turn it over to Leo. But it just gives you the four priorities that we have for the business, which is firstly to continue to consolidate the franchise and do better with what we have. 2nd, we're doing continuing to invest the capital we have in each of our funds, despite the market being more competitive today than it was 3 years ago. If I look at the investments we've made over the last 18 months, all of them have been excellent. And I think it just owes to the fact that we can choose to put our money in places that where money is less robust. 3rd, we've been harvesting investments to both generate cash and lock in returns in funds, which should bode well for the future. And we're launching major new funds to be ready for, call less robust times. But if that doesn't come, we'll just keep investing the way that we have been with these funds we have right now. So that was my presentation. Leo will be up next. I think I'll take a few questions if there are any. If not, we'll just go on to Leo's presentation. So the question is on the slide of widening our franchise, we have we had the words distressed hedge fund. And our private equity business is a private business, which buys control positions in distressed situations. We found over the years that many things came to us that weren't appropriate for our private equity fund because we could we would likely not be able to convert it into control. So we did a lot of work on a name and we had a view that it was a good investment, but we didn't think it could be controlled. So it didn't fit our private equity fund. So we've now started a hedge fund with our own capital. It's 100% Brookfield Capital today. It's credit event driven hedge fund. Eventually, we'll bring clients into it. And its mandate will be to participate in those kind of capital structures, which would not fit into our private equity business, but are things that we like and can just make money on a call it trade and not be addressed to stress for control. It's a private fund and it will be offered. It's 100% our money today and it will be offered Andrew Kuske, Credit Suisse. Just in the context of past years, you've mentioned Kinder Morgan as something you'd like to emulate and you've held it up as a comp in the past for real asset owners. So just in the context of a little bit more than a month ago, they announced the consolidation of their enterprise and really bringing in the underlying partnerships. There's some clear distinctions on they had 50 takes on some of their MLPs. You have 25, but do you foresee a point in time well into the future or even in the near term where you might have to restructure the IDRs or you wind up in the similar problem that Kinder had? Yes. Just for everyone's benefit, if they don't know Kinder Morgan had 3 limited partnerships underneath them. They had similar structures to ours. It was very similar organization to what Brookfield is. And they announced a merger, which I guess ends up with the whole things merging into one company, which is about $100,000,000,000 business. I firstly, I know it would be if we ever had to think of doing it, it would be a long time from now. I hope I think we're different. And the reason I think we're different is that the pipeline business was one business and they had 3 partnerships in one business. And they I would say that they if you're in just one business, it's just like if we were only in the property business in New York City. There's only so many things you can do in New York City prudently and then you run out of things to do. And our business is much broader. It's global. It's in 4 different areas. And therefore, I think the structure we have is ideal for the next 10 years. Who knows what happens in 10 years from now? But there's no we believe it's the perfect structure for today and we'll have to see what comes in 10 years from now. You were talking about the advantage of the global funds and you can move money to different places where the values are. So when you look at the, I guess, creating these regional funds and Asian funds, How does that fit into the overall competitive advantage of moving capital where the values are? Wouldn't there be pressure within like an Asian fund to put the money to work? And if there's no values, you still have to put the money to work because clients don't want you to just have cash? That's an excellent question. And I would say the reason why we haven't done it today is that we wanted the flexibility to be able to move our money globally. The funds at some point in time, a fund gets to be a size, which probably can't go any bigger, like there isn't a bigger fund than $18,000,000,000 in the world that was ever raised. When our funds get to $10,000,000,000 to $15,000,000,000 there may be investors that want to have bigger allocations to some markets. And Asia is the one that's very our business isn't there today, so this isn't something for tomorrow morning anyway. But Asia is a specific one that a lot of North American investors don't want more than a 20% allocation therefore, what we may do is augment it with funds besides the big fund that we have. It's not for today, but it would only be done if that was the case. But then maybe something down the road. Bruce, so you have the 3 flagship listed vehicles now and they outside of private equity are kind of BAM's investment in their given strategies. Do you feel like from a Brookfield perspective, its cost of capital is now tied somewhat to the U. S. Equity markets to the extent that you need to have an attractive cost of those vehicles need to have an attractive cost of capital to be able to take advantage of global opportunities that are out there. And if the U. S. Equity markets aren't cooperative, that's going to limit Brookfield's ability to invest in those given strategies? Very good question. We think about it a lot. I would respond by saying the reason why we built out and invested in LEO's business with enormous amount of money to attract institutional clients is because we wanted the flexibility and know that there are times when the capital markets won't afford the ability for us to issue shares in an entity like one of the 3 that are 3 flagship entities. Secondly, the businesses are now at the scale and where each one of them is a very large enterprise in itself. They produce they generate significant amounts of free cash within the business. Secondly, they have enormous flexibility with the assets they have such that we can within relatively short periods of time find cash within assets either by up financing them or by drawing on bank lines or by issuing debt financing or by selling assets within the business. So if those shares don't trade at the proper valuation in the market and we shouldn't sell shares, then we will have a maybe when we're still investing a less amount will be invested by those entities, greater amounts will be taken by institutional clients and they will source money from their own balance sheets through one way or the other, one of those four ways. And so I would say if the great thing is we got the businesses up to the scale that they are and they are self funding with the business that we've set out other than with major transactions. And therefore, it's always good to have them trading at proper price, but if they don't, I think we're still in okay shape. One more question and then Leo's on. Bill Van Hornen, Principal Global Investors. You recently sold part of your fixed income asset management business to Conning. Just wondering what your competitive advantage is on your remaining public fixed income business and equity business? Well, firstly, we felt we didn't have a competitive advantage in what we sold, just to be very specific. We had it. It came with acquisition years ago. And the reason we got in the listed business was because we wanted to we thought it would help us with attracting clients and institutionalizing our company and that was 10, 12, 14 years ago. The listed business today we think is tremendously valuable to us and we think there is a great growth going forward and we've centered it really around three things now and that's why we disposed of that specific fixed income business. First is real estate long only and long short funds. 2nd is infrastructure long only and long short funds. And third is credit and distress event driven investments in securities as I mentioned earlier in the question before. And we think that our competitive advantages and knowledge in those spaces from the private businesses gives us an advantage in earning decent returns for clients in the listed space. And often, second reason for having them is that often when we go to a smaller institutional client, they don't have that many private investments in infrastructure or real estate. And for us to get in the door, it's much easier to offer them a listed security fund in infrastructure and real estate. By doing that, they get exposed to Brookfield and they get exposed to real estate and infrastructure. Once they've done that for a few years, often we can upsell them to a private fund and introduce them that way into the business. So we think it's both a business in itself, but we think it's very integral to continuing to expand the client base and real assets within institutional clients around the world. So that's why we've got out of the things we weren't competitively advantaged with and we're continuing to focus the business in that area. So with that and talking about LEO's business, I'll introduce LEO Vanentillert who's been with us 7, 8 years and we'll talk about our private funds business. Thank you, Bruce. I guess the appropriate question to ask is that you can probably hear me, but can you see me by this podium? I feel like I'm at my commencement. Well, it really is my pleasure to give you an update on our fundraising activities and the market environment. We continue to make significant progress in our fundraising, both our private funds and our public securities group that Bruce mentioned. And as an asset manager, we really have distinct competitive advantages in the real asset space. As Bruce also mentioned, we are continuing to expand our product offering and this is all really supported by the increased allocation to alternatives and real assets. Our global fundraising capacity and relationships with a global scale, but we are touching investors in most of the key markets. As an asset manager, we have many competitive advantages, but in the real asset space, I would define us as a dominant player, again offering investors a variety of investments across the real asset spectrum. To support the growth of our business, we are continuing to invest in our fundraising team. And this past 12 months, we've raised $6,000,000,000 of third party capital in our private funds. And in the next 6 months, we plan to launch a series of funds seeking up to $12,000,000,000 of capital commitments. And not only have we had our hand out, but we've been giving back capital to investors over $5,000,000,000 Our dedicated fundraising group is critical to the organization and it's something that as Bruce mentioned, we've made a heavy investment over the past 5 years and it's really paying off. Today, we have a team of 20 sales professionals focused on private funds. We also have a team in the public securities group and we have a large group of professional support and client which we think is essential not only raising capital, but making sure your client service is exceptional. This gives us a tremendous ability to not only raise capital, but be in touch with leading investors around the world and really understand what's going on in the market, both from a capital flows perspective, but also from a geopolitical perspective, what's going on in their local market, what are the economic drivers, what are some of the political considerations and others. We are very fortunate that many of our investors allow us to sit with them and we share ideas and just have an open and frank discussion. With the increase in capital raising, we've been able to diversify our investor base both by type and by geographic region. Today, we have public pension plans, sovereign insurance companies, corporate and private pension plans. And we've also made inroads into the family office and high net worth and consultant space. Today and still a lot of our capital, in fact, the majority of our capital still comes from the U. S. And Canada, but the Middle East has been increasing in the last few years as has Asia and Australia. We continue to see strong demand in these markets. And within Asia, we're starting to see Japanese investors allocating to infrastructure, which we think will be a major growth for us going forward. However, fundraising in Europe has been slower, but we hope it will pick up in the years to come. While we have dramatically increased number of investors and capital raised, we're also benefiting by the fact that 30% of our investors are investing across multiple funds. And that's really points to what Bruce described as we are building a trusted relationship with investors and they're quite confident to invest in other areas and other products and other funds within the real asset space and also in other investments. We expect that in the next 12 months to 18 months as we begin another fundraising cycle for our private funds, that we'll actually add additional 200 to 300 institutional investors. In the past 12 months, we've raised upwards of $8,000,000,000 And this has been a combination of closing our flagship funds, but also a series of smaller sector regional funds that we've raised. A couple of highlighted here is our U. S. Real estate finance fund, a U. S. Multifamily fund. We also had a couple of timber funds in the market. And this really demonstrates that even though we may not have a flagship fund in the market, we have other products that we can raise capital around as well. If I were to comment on the growth of our private fund business, I would say that not only is it accelerating, but really we're in a position today where it's sustainable and we see that this growth to continue. With 3 flagship funds, property, infrastructure, private equity and a number of sector and regional funds, We are continually raising third party capital. We expect this growth to continue. And as I mentioned, we are connecting with a wider and a broader base of investors and we're offering a broader and more deep and diversified product range. In the next 12 months, we expect to raise an additional $12,000,000,000 across a number of offerings. And in fact, in the next 24 months, we think that number will jump up to $20,000,000,000 I thought I'd give a snapshot just demonstrating that our range of fees and returns for private funds are quite attractive. If you look at the core, core plus and value add space, the average fees are around 100 bps to 150 bps, carried in just around 20% and we've been achieving our target returns over a long term period. In the opportunistic space, again, we have quite attractive base management fees on average around 150 bps with 20% performance fees. And again, our target returns are 20% plus and we've been achieving those returns. As most of you know, one of the benefits of private funds is that indeed the capital is sticky because we tend to have 10 to 12 year terms on locked up capital. I'm going to talk a little bit about the trends that we see in the real asset space. We don't see it abating at all. In fact, we see it accelerating. Different economists and different sources predict that in the next 10 years, it will reach 15,000,000,000,000 dollars will be allocated to real assets. And this really is demonstrating that investors have been hold of this asset class and are truly committed to it and are allocating significant portions of their allocation to this asset class that really starts to move the dial for them. In fact, we're seeing today on average around 5% to 10% a typical institution might have allocated towards real assets, but we think over the next 10 years that will probably jump anywhere from 15% to 25% depending on the institution and their liquidity. This slide as well demonstrates just again the shift towards real assets. In fact, in the last 12 months, over $420,000,000,000 have been raised in private equity funds of which real assets were 130,000,000,000 dollars What this slide doesn't really show you is that while today there are 2,200 funds in the market competing for that capital, really it's a small group of dominant players that are raising majority of that capital. In fact, probably 20 managers are raising upwards of 60% of that capital. We're very fortunate that we are and have undoubtedly broken through to be one of those dominant players. Just talking a little bit about our public securities group. In fact, we've been in this space for quite some time and do have expertise. And today we run about $16,000,000,000 of assets under management. And that again is in areas around real estate long, long short as Bruce mentioned and infrastructure and credit. We're seeing accelerated growth because again investors are looking both to invest in this asset class on a private basis and on a liquid basis. And if you look at the assets under management and the growth in the last year, we raised an additional $5,000,000,000 half of which has been has come from inflows in our mainly our infrastructure long space, but also through our investment performance, which has contributed another $2,500,000,000 of AUM growth. I just thought I would highlight for you at least from my perspective taking different words that Bruce has used to describe why the Brookfield story resonates with investors. And as we're out in the market place, we have an opportunity to pitch to investors and really understand what is it about Brookfield that differentiates us? Why are they investing with us? And I would say, 1st and foremost, we've been able to demonstrate over a long period of time, not only to generate attractive returns, but to be able to preserve capital. And we also have been able to demonstrate that in times where we need to be cautious and slow down the investment pace, we're not afraid to do so. Also in times where it takes somewhat of a contrarian view, we're prepared to make long term investments. We also have a lot of experience in being able to do and execute what we call multifaceted transactions and do that on a global basis and buy for value. This allows us to have the right entry point to again protect the downside and give us the patience and time to create real wealth over a longer period of time. I would say that our operations oriented approach, our ability to add value to the assets we buy is clearly a differentiator that we have, as well our ability to leverage our operating platforms. This differentiator is something that is unique to Brookfield and very hard to replicate by other asset managers and I think really puts us in a dominant and privileged position. And finally, the fact that Brookfield is a significant investor alongside our investors really adds comfort to them. And I think all these things together is really if you as we're out in the marketplace, this is really why investors are looking to grow their allocation with us and to invest across different product ranges with us. With that, I'll open up to some questions. Cherilyn Radbourne from TD Securities. Just thinking about your investor base, clearly the diversity has improved substantially from when you first started to build this platform. Could you just speak to how your investor base by geography and investor type would compare with those of your larger peers in the real asset space? Sure. I would think it actually mirrors very similar to what they have. Quite often we're calling on the same doors and talking to the same investors. And what we've deliberately done is look to those regions where we have probably not had a lot of investors. So we paid a lot of attention to Asia, the Middle East and we're seeing growth in that marketplace. We're shoring up our team in Asia. In fact, we've recently added someone in Korea. We're about to add someone in China and someone in Japan. And we're also working in the smaller investor base as well, family offices, registered broker dealers, etcetera in the wealth channels. But overall, I would say it would pretty much mirror what our competitors are doing. Funds are how much funds are likely to get redeemed or wind up over the next 12 months? I think you mentioned $12,000,000,000 of capital raising over the next 12 months. What's sort of the net impact to Brookfield's AUM of funds managed from what you're likely to wind up? Sure. So in order to raise a successor fund, you have to fully invest the previous fund, which were close on a couple of the flagship funds. So while the invested capital has been fully invested, we still have a trail on invested fees to which we get management fees, then we're going back and replenishing that capital. So again, the figures I'm showing you are net increases in capital inflows. I'll let Brian, I believe he's going to speak to that in his presentation. But again, as we harvest capital and harvest investments and we at that time often will generate our performance fees. Hi, Mario Serra from Scotiabank. You mentioned that the alignment of interest with the book field resonates with your LP partners. Given the strong track record of your funds, how important is that 20% to 50% co investment in the funds today versus 5 years ago? Years ago, it really helped establish our business. Years ago it really helped establish our business. And what really helps with investors as we grow our fund size significantly, it gives them comfort. The fact that we're continuing to invest a significant portion of our capital alongside the funds. So really I think it helps in that respect. The capital is meaningful therefore we're not just generating fees, we're looking for compounded growth on our capital as well. With 70% of your capital still coming from North American clients, if you think about whether it's Middle East, Asia ex Japan, thinking out 5 plus years, which of those seems like the most fertile area for you to increase your capital raising ability? Sure. I'd actually say all three fronts. We're clearly seeing demand from Middle East investors. They're looking for large trusted partners. And so I think we're benefiting by that. We've taken a lot of time and effort to develop those relationships. They're comfortable in what we're doing. They've seen through the fund investments that we have made. We've demonstrated what we said we're going to do for them. In Asia, I would say the sheer growth of that market is we're preparing for now. We're developing those relationships. We're seeing tremendous assets flowing into insurance companies. They have tremendous liquidity and they have to export that liquidity and looking for partners to invest. We're spending a lot of time in China. But also Japan we're seeing particularly in infrastructure a lot of demand. The characteristics that Bruce described really appeals to Japanese investors and we expect major inflows in the next 3 to 5 years. We're spending a lot of time educating investors about the asset class. And in the U. S, what the slides didn't show is that we've made a lot of gains with the leading consultants, which are ranking us and approving us. And therefore, we enjoy a nice inflow of capital from their client base. We're also making great strides are not only the large state pension plans, but the corporate and smaller pension plans. And we see that particularly fertile ground going forward as we do in Canada. Thank you. Okay. Good morning. Today, I'll give you an overview of our Private Equity Group. I thought I'd touch on a number of characteristics that differentiate us from other private equity organizations and position us well for the future. These include things like the information and resources we garner from being part of Brookfield and we get from the other Brookfield platforms, our in house operating capability and global reach. Investment team of sufficient scale to pursue and manage a variety of transactions both mid market and larger scale. Our dedicated private equity offices are now in Canada, the U. S, Brazil, UK and Australia and are staffed with very experienced professionals and we work together on an integrated basis. We're also piggybacking on Brookfield's India platform and to establish a dedicated PE capability there in due course. Most of our investment team have worked together for at least 10 years, which enables us to maintain a consistent culture and a consistent approach to investment management. And as I have discussed in the past, we have a dedicated of operations focused professionals that manage our portfolio companies. And I'll give you an example, more specific example of what that really means. We've been investing through multiple economic cycles and we've made great investments during periods of both growth and instability. And as the size of our platform and access to capital has grown, so too has our investment pace. Over the past 5 years, we've invested a total of $9,000,000,000 Just over half of this was during the credit crisis when we partnered with our real estate and infrastructure teams when many other groups were struggling to raise money. Today, our portfolio in private equity comprises 22 companies, which generate $9,000,000,000 of aggregate revenue and have more than 15,000 employees. And since the launch of our first fund in 2,001, we have generated really strong results with overall gross returns of 27% and a 3 times multiple of capital on realized investments. Each of our funds has achieved top quartile performance as compared to other North American private equity funds of the same vintage year. This puts us amongst a very small group of consistently outperforming managers, which has enabled us to raise larger funds over time for fund and co investment mandates. And in the future, the primary source of capital for our Private Equity Group's activities will come from private equity funds. We are currently investing BCP III or Brookfield Capital Partners Fund III, which will imminently be committed to the point where we will launch our next fund. And we plan to have sufficient scale in these future funds to pursue both mid market and large scale opportunities. Our overall objective is to be a value investor, which means investing at a discount to intrinsic value. And there is no better way for us to ensure a margin of safety and ultimately realize great returns. We do this in a number of ways, but primarily by looking for out of favor sectors and understanding the cash flow generation potential of the businesses that we're investing in. We try to buy high quality assets with barriers to entry and for us that means businesses with very low operating costs or a great market position. And we have a very heavy emphasis repositioning of the companies we buy, including operational enhancements. And again, we can take this approach because we have deep operating skills across Brookfield and specifically within our PE platform. And over time, many of our companies have become industry leaders. So one of the key differentiators of our private equity group is that we get tremendous knowledge from Brookfield's other operating platforms, which shapes the way we make our decisions on a day to day basis. For example, our infrastructure group owns a global ports operation that ships commodities around the world. So we have a very good sense of what's going on with the demand and supply of various commodities across markets. And this helps shape our views when we invest in natural resource companies. Our real estate experience comes to bear in many ways. For example, we own large operations in land development and housing. So we have a good sense for what's going on with housing demand by region. And that drives our thinking in what we do with building product companies. Recently, we've been studying the agribusiness supply chain as a potential opportunity. We became attracted to this after speaking to our Agro Lens group in Brazil, believe there may be an interesting opportunity for us here. Beyond the ground knowledge available to us is very valuable and our culture of cooperation drives synergies across Brookfield's businesses. We focus on industry sectors where we've developed expertise over many years. These include things like packaging, manufacturing, natural resources, business services and a variety of other industries. But in order to grow, we need to enhance our access to attractive opportunities. So we have expanded our universe of investable sectors over time, focusing on those that we believe have stronger long term fundamentals. More recently, this includes storage and logistics, where we made an investment we found that operating capability can make a big difference. Potential new sectors might include chemicals, the agriculture supply chain and possibly specialized parts in the aerospace sector. And we've also shifted our investment style over years from that of a pure distressed investor to be able to pursue a broader range of transactions including buyouts, corporate carve outs and platform investments. And as a result, we're able to put money to work in any type of market environment, but simply by shifting our investment style and focus. One such example of a platform investment is Amber Resources, a natural gas producer focused on CBM or coalbed methane natural gas. We privatized Embra in 2011 when natural gas was at a multi decade low. Our investment thesis was simple that these were high quality assets with very long life reserves and they also had strong elements of downside protection given very low operating costs and low capital cost requirements. In addition, we were buying at a great value. The company's gathering system was fully developed and we were paying less than the replacement cost of the gathering system alone. And based on the work done by Brookfield's Energy Group, Power Generation Group and Economic Analysis teams, we believe that natural gas had to increase given the full cycle costs required to balance North American supply and demand. We also saw an opportunity to roll up complementary CVM assets at attractive values. To most E and P companies, CVM assets were non core during this natural gas during the depressed natural gas environment. And since our initial investment, we've acquired 3 other contiguous CVM plays and Embra's production has grown by 6 times to 120 1,000,000 cubic feet per day. We also executed on a number of operational enhancements, including rationalizing the various gathering systems we had acquired and including rationalizing the various gathering systems we had acquired. And as a result, our operating costs has declined from $1.65 per Mcf to $1.40 per Mcf today so far. And now that the natural gas environment has improved, we're focused on increasing production through low cost recompletions and new wells. Based on trading values of comparable companies today, we think we've created about $300,000,000 of value in Embra on our investment of $275,000,000 and we think we have room to continue enhancing value. We continue to look for additional platform opportunities and we believe in the relatively near Embra will be the largest CBM producer in Canada. And at the right time, we plan to IPO this company. But not all of our investments go that well and sometimes we run into unforeseen circumstances like the housing crisis we all live through. In very difficult circumstances, our operations team becomes very involved. Western Forest Products was such a situation that needed additional attention. Western is a a significant coastal lumber company and the largest North American producer of cedar lumber. We made our initial investment in 2002 by acquiring a distressed lumber business with a high quality timber resource. We then acquired 2 other very substantial producers with contiguous properties and that enabled us to generate $70,000,000 a year in synergies. Just as we were preparing to sell this company, the housing prices hit us. Revenue declined from $900,000,000 to $600,000,000 and EBITDA declined from $138,000,000 to negative 35,000,000 dollars The company was losing cash very quickly and unfortunately the management team that led the industry consolidation for us wasn't able to react quickly enough to the changing market conditions. So our operations team stepped in to run this business and they did a number of things. They rationalized production by shutting 3 out of 10 sawmills. This allowed them to reduce working capital by $100,000,000 They reduced G and A by 25% and over a period of time ultimately sold $190,000,000 of non core assets. They then focused on export markets including China and Japan given the anemic demand in the U. S. And over a 2 year period, Western's earning rebounded sharply and balance sheet was vastly improved. We've been selling down our interest in Western for the last couple of years. And last week, we sold our last remaining position in company and we generated net proceeds, an additional net proceeds of $280,000,000 through secondary offering. All in all, we earned a 14% IRR. This is not our target return, but we were pretty happy with the outcome given the circumstances. Finally, I'd like to comment on the investment environment for our business. As you've heard today, the North American economy continues to improve. GDP growth is steadily improving. Unemployment has dropped to the 6% range, housing markets are steadily getting stronger, consumer balance sheets and compared to historical norms. And as a result, equity markets are at record highs and M and A activity has been strong, particularly for corporates, but also in private equity. This is a great environment for us to be selling our companies into and I hope to tell you a year from now that we've sold 2 or 3 of our portfolio companies. The flip side of this is that LVO valuations have moved up to record multiples. Now the risk for any acquirer is that multiples compress when it's time to sell in 5 to 7 years. And that could be a major headwind against otherwise good returns. When we look at investments, we generally look at acquisitions on an unleveraged basis and we target reasonable unlevered free cash flow yields. And where we can be competitive is when we have real conviction on our ability to enhance the company's cash flows and enhance performance. But this is an environment where we are being cautious. Having said that, we're seeing some interesting opportunities in our other markets. In Brazil, and as you've heard, capital has become scarce as their economy has slowed, but the long term fundamentals remain excellent. And we've been in discussions with companies about giving them capital to either deleverage or to grow. In Europe, the recovery is more mixed and the ECB is continuing to add stimulus. Lending remains restrictive as a number of banks are being recapitalized. But in this background, we were able to make $100,000,000 investment as part of a broader recapitalization of Eurobank, one of Greece's systemic banks at a discount to tangible book value. In Australia, commodity prices have softened significantly, in particular iron ore, putting pressure on certain parts of that economy and the entire mining supply chain. And that is a sector we're very comfortable with and we continue to pursue. And in India with a new banking regulator and a new government, banks are being pressed to deal with problem loans and this is creating a variety of opportunities for private equity. In summary, against that backdrop, we're feeling pretty confident and comfortable that our group is well positioned to continuing to put capital to work and earn good returns for our investors and our shareholders. With that, I'm happy to take any questions. Andrew Kuske, Credit Suisse. Cyrus, just in the context of looking at the legacy history of Brookfield, you've done a lot of recapitalizations, buying distressed debt to start off with and it's been very North American centric. So as you look at this model more globally and we look at the debt markets and really the lack thereof in places like Europe where it's not as well developed and a lot of things sit on bank balance sheets. Does that bode better for Brookfield on a longer term basis because you get into the bank effectively do negotiated deals to try to have them take the marks, take that book of business and then recapitalize a company versus here where it's much more in the public markets where we can see prices debt are trading at and it becomes more active in that kind of context. Yes. I think for our business anything we can do to broaden the universe of the investable opportunities is good for our business. And more specifically in Europe, we've had a team there now for several years. And I would say it's only just now that banks are now starting to sell things and deal with their balance sheets at least from what we're seeing in private equity. And so that should be a great source of opportunities for us. And as the banks get recapitalized and next month in fact there are ECB has AQR test, asset quality review test going on. So I suspect a lot of banks are they are cleaning up their balance sheets and they're going to have to recognize the issues they have on their balance sheets and that should create opportunity for private equity. Thanks, Bert. Paul BMO. Cyrus, will the new strategies or transaction types, will they get their own funds or will existing guys just get the expanded suite of offerings? There are the it's the latter and I would say they're already getting that because we have shifted our business over years so much. So our preference is to have one global fund where we can do everything out of and maximize our flexibility. And we're really well positioned to do it. Thank you very much. Thanks, Iris. Good morning. So I'm going to talk about just pull together some of the themes and points that my colleagues have made over the preceding presentations and tie those back into some of the key financial metrics that we look at in terms of how the business is progressing and the profitability of it. And particularly focusing on the what we call the asset management of the general partner or GP side of the business. And then as is our custom bring that back into how we see that moving out in terms of hypothetical numbers over the next 5 years and the share value potential. And again, a couple of you were asking me yesterday about whether we'd be providing a number and things like that. And there's obviously as stewards of your capital, one of the most important metrics overall is the value per share that we can create going forward. So just thinking about the asset management side of the business, there really has been a tremendous momentum and increase in the profitability of that business over the past year or so. And it stands to reason given how successful we've been in expanding the fee bearing capital over the past couple of years. And that's evidenced in this chart here. And particularly the last couple of years, you see how it stepped up. And a lot of that is, last year we talked about raising $14,000,000,000 of capital on the private side and having $7,000,000,000 infrastructure fund and $5,000,000,000 property fund and a number of other on the private equity side stepping up the funds there. But then over the past year as well, getting Brookfield Property Partners successfully launched, merged in with Brookfield Office Properties really sets the stage for growth there and then has been and has also a significant impact on the fee bearing capital under management, which in turn leads to the ability to generate increased fee revenues. And you'll see there's a little bit of a multiplier effect, certain amount of capital leads to an even greater growth rate on the fee revenues. I'll come back and talk about that in a few slides. And that growth is increases even more when you think about it on a fee related earnings. And that's one of the big metrics we look at, which is in essence the base fees and the incentive distributions and other fees that we earn on an annualized basis. Less the costs that are directly attributable to those activities. And you'll see it's grown over 40% over the past couple of years. And a lot of it is we've talked about the ability we've invested a lot in the platform in the early years. And now what we're doing is reaping the benefits of that investment in our ability to scale up our operations without necessarily having to increase the costs on a comparable basis. So that's led to significant growth on that and that's a very important metric for us. And just to kind of tie it back to what we talked about last year, what we show on this slide is for the 2013 Investor Day, we suggested that by 2018, hypothetically, the growth rate would be up to that number. And if you just interpolate in between, we should have in theory been around $275,000,000 worth $341,000,000 in terms of our fee related earnings. So with some of the great progress we've made over the past period of time, we've actually moved ourselves in essence a bit faster towards those potential targets than we would have if we've just been on a straight line basis. So we're quite encouraged about that and that obviously gives you a better point to be growing from today going forward. And part of that, if you think about the amount of fee bearing capital that we have and how that translates into the annualized base fees, one of the things we are very focused on is not just the quantum of the fee bearing capital, but the quality of it. And when I talk when I say quality, really talking about whether it's the stickiness of it, the terms, but also importantly the fees. The fixed income business that we sold last year, dollars 7,000,000,000 generated about $7,000,000 on an annualized basis, 10 basis points. That obviously wasn't adding a lot to the profitability of the manager. And that was aside from the fact from in terms of competitive advantage and things like that, it was just lower margin business. And so by selling that and then with the capital that we added to which earns higher fees and higher margins obviously increases the profitability of the business. So if you pull that together, where we stand today and again this is another important thing we look at is on an annualized basis, what does that fee bearing capital we have in place potentially generate for us? And so Leo mentioned the stickiness of these fees and then the funds either they're perpetual in the sense of it's the listed partnerships or they have 10 or 12 year lives in terms of the private funds. So they're very sticky fees and they're contractual based terms. So what we really like to see is just a sequential increase in the level of annualized base fees. And generally that's attributed to quite a high multiple in the marketplace as well. The incentive distributions, I'll come back and talk about this. There's still not a huge number, but they've grown nicely. And the way that with the distribution increases at the listed partnerships, those will continue to increase. I've got a slide on that later on just to give you some sense of it. You'll notice that the target carried interest actually hasn't really moved year over year. And that is an important thing for us in the sense that we want to grow that. But what you will have noticed as well is that we harvested quite a lot of carry capital that generated carry last year, in particular with the monetization of the GGP fund. And we returned about $5,000,000,000 of capital, a lot of which earned carry, but we've replaced that. So that's I guess the good news of it. And with the our ability to go out and raise larger funds, we believe we can step up that level of carry eligible capital significantly over the coming years. 1 thing we haven't really talked about a whole lot in prior years is we've increased the diversification of the fee revenues, both in terms of the asset sector and the product mix. And so there's a nice balance between the private funds and listed partnerships in terms of where we're generating the fees from, which they're very complementary attributes of the two forms of capital, but it's also very nice to have that diversification as well. So just pulling that back to a number, as I mentioned, the fee related earnings tend to be very stable, predictable and that's why generally they attract quite a high multiple in the marketplace. So if you a 20 times fee related earnings multiple on that, you'll see that we've increased the what we think the value that is attributable to our GP activities quite substantially over the prior year. And that's without much increase on the carry side. So we think we've got a lot of potential to add further value there. So just to talk a bit about the progress that we've made on the last over the last little while. Big part of it was expanding the capitalization of listed partnerships that now stands around $40,000,000,000 between Brookfield Infrastructure, Brookfield Renewable and Brookfield Property Partners. A big part of that is the launch of Brookfield Property Partners and the merger with BPO. But we really shouldn't overlook the tremendous performance of Brookville Renewable Energy and Brookville Infrastructure over the past while. And both these companies had presentations yesterday. So I'm not going to belabor any of it other than just to point out to folks that both from the total return on the unit price and the ability to grow the distributions and the confidence in our ability to continue a very attractive distribution growth rate over the coming years, I think bodes very well both for investors in those entities as well as Brookfield as the manager of the entities. And while Brookfield Property Partners doesn't have the same track record as yet as a public issuer, it's quite new, there are a number of major steps and of course you all heard about that more this morning, so I won't go over this. But the company is clearly positioned and with its ability to rotate capital, add operating excellence to the returns and the larger public flow, we think bodes extremely well for Brookfield Property Partners. And again, John mentioned the confidence in our confidence in the ability to grow the cash flows and hence to increase the distributions on that front. Leo has talked a bit about the substantial momentum in the private fund activities and just a few metrics over the past 12 months. So we did return about $5,400,000,000 of capital investors. That's the initial capital. On top of that was the gains. And so represented about 38% gross return on GGP, for example. And so as a result, we talked about carry, we actually collected $565,000,000 of carried interest. A lot of that was in respect of GGP, but we replaced that, in fact, increased a little bit with 5 $8,000,000,000 of new commitments. And as you'll see from this slide, we are in very good position to continue to raise large funds just focusing on the 3 flagship private funds that we have. They are all well invested. And as Leo mentioned, once you get to a certain and Cyrus, once you get to a certain level of investing, then you're out in launching marketing to raise funds. And if you look at just about any successful asset manager and given our track record and Bruce had a slide on this in his deck, there is almost invariably an exponential increase in the size of the successor funds related to the previous funds. Certainly, while you're in the growth phase of the development and we believe we are still very much in the growth phase and that we have not in any way approached the large size funds that we can launch and operate and manage effectively. And then on the public market side, talked a little bit about that, but really good progress on the base fees there and also very successful on the performance fees that they earned on an LTM basis. And a lot of that is due to the type of returns that they've got under their belt in the market over the past little while. So all of that, while it's been quite an exceptional 12 months to 18 months in building out this business, looking forward, we see continued momentum and really the ability to take this business, it's been as I said, it's been very significant progress, but really take it to another level. And a lot of that comes back to the fact that the listed partnerships continue to have access to low cost capital. They can issue equity to fund investments through the funds and directly on their balance sheet on an accretive basis. And that's very important to us as we build out the redistributions to the unitholders. Lastly, as Leo mentions or secondly, as Leo mentioned, dollars 20,000,000,000 of new private funds within, let's say, the next 12 to 18 months, dollars 12,000,000,000 to $12,000,000,000 in the near term. And then continued expansion of the public markets business. And again, just given the track record and the market profile of those of that group, we think that's eminently achievable. So what that comes back to is continued growth on the fee bearing capital side of things. This is around a 10% growth rate. Frankly, it's not hard to look past that to see outperformance on it, particularly if you think about the types of funds that we're going to be looking to raise over the next period of time. And also with that level of distribution growth within the listed partnerships, the degree to which the unit price should accrue up and hence the market capitalization of the partnerships again should lead to increased fee bearing capital in that regard. And again, that leads to higher fee related earnings. And as I mentioned before, there's a bit of a multiplier effect on that. But we do see that growing at plus 20% hypothetically over the next 5 years. And the reason why we see this accelerated rate on the growth in fee related earnings is first of all comes back to that quality of the earnings on the funds. So thinking about the private funds, we're tending to shift the M and A more towards value add and opportunistic type return funds, which create better returns, higher returns for investors and also provides for higher fees to the managers. So that's a big part of it. And then you've seen we generally stepped up the average rate across the board on the private funds by 10 to 15 basis points a year, if you went and looked through the numbers over past couple of years. And so we see a continued increase in the average level of fees. And Leo talked a bit about that in his presentation. Also the listed partnerships grow at a faster clip because if you recall, Brookville Renewable and Brookville Property Partners were launched with a flat fee, which was pretty low on a basis point average basis point. But earn 125 basis points on all of the capital growth in those funds. So that's another reason why we get an enhanced growth rate on that. And then lastly, the IDRs, the Incentra distributions, there's a slide later on demonstrates that more clearly, tend to have a bit of a back end, but again very much of an accelerated growth curve on it. The other point is that with these new funds, they generally have higher carry potential. Very important. As mentioned, we generated $500,000,000 plus on the GGP consortium alone. So being having this ability to generate the carried interest can lead to very strong profitability for the firm. And again, all of that in our view leads to the potential for meaningful increase in the value of the general partner. And again, it's 20 times the fee related earnings that we saw stepping up to $800 and some odd $1,000,000 by 2019. And then similarly on the carried interest, we think we can double that over the period with the launch of new funds. I did want to touch a bit on the invested capital. I'm not going to say a whole lot about it because so much of it is you've already heard about through the presentations on Brookfield Property Partners and Brookfield Renewable and Brookfield Infrastructure. And as you know, a lot of our balance sheet is invested in those entities. But the capital on our balance sheet, it's around $28,000,000,000 based on just taking the just the stock market prices, as we've mentioned, about 85% of the balance sheet is actually in listed Antiducens. All you do is just put the stock price on it and then say IFRS values for the rest, unless it's independently valued. And it generates over $1,000,000,000 of cash distributions, not FFO, actual cash that hits our bank account. So as the distributions increase, we are finding an increased level of cash coming into Brookfield from this source alone. We think that there is again a lot of potential for further growth in the values and the cash flows and the FFO in these businesses for the reasons on this page that I'm not going to go through because that's what they've been dealt with thoroughly in the previous presentations. But again, one of the things that we've talked about over the previous couple of years is we have because of the liquidity of the balance sheet, we do have the opportunity to rotate capital around and achieve higher returns than we might otherwise either because we're reallocating it on a direct investment basis or we are looking to expand our business or we're looking to buy back stock. And we talked a fair bit about that last year and we've had a number of conversations with folks over the course of the year. And we still are very much focused on buying back our stock over time. And there are a few decision factors that are very important to us in making that decision. But at the end of the day, we're focused on is that long term per share value creation. And if we see there are better opportunities within the business that are consistent with the long term growth strategy and will get us to a higher number at the end of the day, that's where we're going to put our money. And so that may mean like last year, we didn't buy back that much stock. We bought back 4,000,000 shares, dollars 150,000,000 So not a whole lot. But we also did a number of other things and we were very focused on being there to support those initiatives and take advantage of those capital opportunities. So it's not something that we've lost sight of. It's still very important to us. And I'm sure you'll see us do a lot of that down the road. And I guess with that as a backdrop and we do see that there's a lot of growth potential in the business. So we laid out some hypothetical growth trajectories for the asset management business. And I just wanted to touch on a few of those in terms of how it might come together in terms of where we see potential share values over the next 5 years. So first of all, we showed this slide last year as well. Basically, we assume 10% growth in fee bearing capital and we get a 50% margin on fee related earnings. We think that there is a pretty reasonable case to be made that we can outperform that either because we will generate a higher growth rate on the fee bearing capital just because of the success we're having with our private fund investors and because of the potential with the listed partnerships and also to achieve a higher margin. And a lot of that comes with the refocusing on the higher margin business because some of the business we have today, the IDRs, there's not really any cost associated with it. So as they grow, it really contributes to the margin. So it's not so we do think there's good potential. We're at 49% over the last 12 months in terms of our margin. We think we can pretty easily see getting through that over the next period of time. I've mentioned the IDRs a couple of times, but this is how they look. So if it's around $50,000,000 today, 5 years' time, increases 5 fold. That's just based on the hitting the average distribution growth range. Obviously, if we surpass that, the numbers will increase significantly. If we hit the low end, it'll be lower. The other thing that we've talked about is that potential for getting outsized returns on the carry. We certainly saw that with GGP and you get your returns up into the 30% on a fund or an initiative, you can generate very substantial carry. So this is again another area where we think if we outperform on the investing side where that can lead itself to really significant share values. And then even on the invested capital side, which again, we haven't really talked a whole lot about, but typically we've been pretty good at hitting 12% to 15%. That's just kind of the I'll say the typical rate of return across the board that we look for. And if you go back over the years, we've generally exceeded that. So while we've dialed in 12% here, there's definitely the potential to surpass that based on our ability to reallocate capital and the opportunities that we see within the business across the globe. So if you pull all that together and sorry for all the numbers on this one particular slide, but in essence, I'll call it the base case, let's say, which is that first column, that's that 10% fee bearing capital growth rate, 50% gross margin, which we're hitting already and a 12% return on our limited partnership capital. If you just compound up the simple math on that, you end up with around $100 a share, which would be a 17% total return, which we think is pretty good. Obviously, if we outperform on those things, whether it be hit a higher fee bearing capital growth rate on the 10% to 15% increase or expand margins or increase the LP returns then obviously the share values would potentially be that much higher as well. So look, this isn't really to tell you what the share price is going to be obviously, but what we do want to do is give you some idea of how we think about the business and where we see the value being created and the kind of levers or metrics, levers that we have to pull on and the metrics that we look at that we think are important in valuing the business to give you some sense of how we're thinking about the future over the past 5 years. So with that, I would be delighted to take any questions on this part of the presentation and I think Bruce is going to come up and handle questions on behalf of all of us, I guess. So, yes, Robert? Brian, you mentioned buying back shares. Would you consider Brookfield Asset Management itself buying back shares of some of its public funds, the infrastructure, renewable power or property as opposed to those outfits themselves doing it because maybe they don't have excess capital like you apparently have or can generate. Right. So that's certainly a possibility. I think that latter point you made is very important. If they have the capital to do that, then generally our bias has been to allow the entity to buy back its own stock and benefit all of its unitholders or shareholders first. Having said that, if that's not its priority, then we certainly have the opportunity to do that. We've done it over the years with various of our investee companies, primarily in support of their business and to help them achieve games. And so it's certainly open up to us in the future. Yes, Brendan. If you look at the AUM goals that are out there, and you achieve all of that, what does that mean for how much capital gets invested on an annual basis going forward? And how does that compare to what you've done in the past? And do you feel like you have the organizational breadth to be able to handle that level of investment if it's a significant increase from what Brookfield has done historically? I guess the short answer to it is yes, we are very confident in our ability to handle that growth. As I mentioned, we spend a lot of time building out the resources around the globe and in the various asset classes. And generally our approach has been with especially with the new regions is probably to over invest in the resources a bit. You saw that in India and in China. We've had people there for quite some time. So we have that capacity in those markets. At the end of the day, we'll have to increase it somewhat, because what we're talking about here is close to a doubling, which would have suggested there's close to a doubling in terms of the investment capacity. I guess our observation, it's always tough to do that. But Bruce and Cyrus and others have laid out a number of the reasons why we think we have the necessary attributes to be able to invest substantial amounts of capital year in, year out generally on an attractive basis. So I think we're in good shape in that regard. Andrew Kaskey, Credit Suisse. Just a question on the context of the funds growing and all the private funds growing. Do you get to a point in time when the general principle that you've had of investing Brookfield money into those funds that comes into question just because the funds become so large that it starts to strain out of the BAM balance sheet or it strains some of the underlying balance sheets. Because if you're raising say let's say for argument say $15,000,000,000 and you choose to have 20%, 30% of Brookfield money in that fund, does that become too taxing at a certain point that that actually constrains your growth in the private world? Yes. I suppose at some level hypothetically it could and it's an important dynamic day. I guess we really get to reset the bar every time we launch one of these new funds. And the kind of thinking that would go into it would be okay from the BAM or the listed partnership entity, how much capital or I guess it really starts with how much what do we think the investment set is for that fund over the next 3 years period, because we really shouldn't be going out and raising more funds than we think we can put to work properly. And then you factor that back into what does the capitalization liquidity profile look like for, let's say, one of the listed partnerships in terms of how they're thinking about harvesting assets and their own initiatives in terms of accessing capital through the capital markets. So all of those factors will get weighed in to that decision and it but it does get we have the opportunity to reset that every 2 or 3 years as we launch a new fund. Okay. So I think at this stage, seeing no other questions for me, I'm going to hand it back to Bruce. Thank you very much. So I take any other questions if there are any. Other than that, I'll just make a couple of final comments. But if there is anything else that I can ask that hasn't been asked, I'd be pleased to answer it. I'm Cherilyn Radbourne from TD Securities. As you introduce increased products, obviously, the opportunity for conflicts between the various mandates increases. So I wonder if you could just address the issue of whether your current, I'll call it compliance infrastructure is robust enough to handle that today? So the simple answer is yes. The more long answer is we've invested as we have in operating platforms and people around the world we've invested even though we're likely as an asset manager in multiple products, revolves around, as an asset manager in multiple products revolves around conflicts and ensuring that you're not mixing between funds or anything like that. And all I can tell you is we're hypersensitive to it, because as with anything, people think like that you've taken advantage of them or done something, even if it was legal, we go beyond legal to make sure that there isn't even people thinking about that. And so far, we've not we've really had no issues because we've been tried to be very thoughtful about what we put in funds and what the mandate of each fund is. And therefore, if you think a lot about it upfront, you usually don't have any issues. That's not to say we don't have discussions with some, but we try to be very thoughtful about it. Can you talk a little bit about the risk of higher interest rates? Is it simply cost of financing and the competition for capital from your institutional partners? Or is it more than that? Is there anything not so obvious that you can talk about? Or and anything you can do to kind of prepare for that if you see that coming? So with respect to interest rates, I would say at the on the cost of our shareholders, we've been preparing for 5 years. And it's cost us a lot of money on behalf of every one of you. We think it was a prudent investment. We think it was financings we have at the asset level and all of the businesses are fixed rate. And when you had fixed rate financings, we're paying 5% for money or 4% for money, we could have been paying 1.5%. Percent. And if you do the math, that's many, many, many 1,000,000,000 of dollars we've cost our investors in our different funds and on our balance sheets. So I'd say we've paid the price. We're not relenting. And many of our assets are fixed at the asset level. Many of our financings are fixed and therefore 50% of the risk is taken out of it. On the equity portion of the balance sheet, we've layered in some hedges and that's cost us significantly over time because we've been waiting for the increase in interest rates, meaning we've been pre financing liabilities that were coming up in the short term. And that's cost us money, but we're continuing to do it. Therefore, we're prepared more than what we generally would have on the asset level. 3rd, these real assets we have actually do very well in an increased interest rate environment, because generally what it means is inflation is higher and revenue streams actually increase. In the short term, there's a and I'm talking a large increase, not a small increase. There's a disruption in the market when that occurs. Over time, these type of assets are exactly what you want to own. Therefore, you will get it all back. In fact, you're going to do very well. And what we can do and I'd say increased interest rates to some extent because we're well capitalized and because we did all the things that you did and because we have access to cash and because we have access to funds, maybe more beneficial for this organization in the longer term because what it's going to do is disrupt the market for those that aren't prepared. And we actually excel in our organization and make greater amounts of money over the longer term when events occur that people aren't prepared for, I. E, they didn't fix their interest rates, their costs went up, they couldn't afford their mortgage, therefore we could buy the property or the infrastructure asset or the renewable power plant. So I actually think in a perverse way interest rates on a significant interest in increase in interest rates will be additive to this business over the longer term. I don't think it's going to occur. We think that interest rates are going to go up slowly over the next 3 years as the economy grows in America And the rest of the world, they'll slowly go up, but they can't go up at the same pace and Europe can't go up any. So you're prepared to be one of the people, one of the groups that are advantaged by that environment versus disadvantaged. And it's cost us something to be prepared and it will continue to cost us something to be prepared, but we'd rather be on the prudent end of that versus being aggressive during these times. So I hope that maybe is more expensive than you asked for, but I hope that answers the question. Bruce, in terms of the amount of carried interest that gets turned into as those numbers get bigger and bigger and bigger, is there an opportunity there? And do you actually put in your forecast that some greater percentage of carried interest over time comes to shareholders as opposed to turn into comp? Or do you have the opposite problem in that as infrastructure gets bigger and more popular, you've got private groups that are willing to pick your people off by paying ever larger amounts of their carried interest into comp, which I'd just be curious how you see that equation working over the next 5 to 10 years? So as to the model that Brian showed, just to be very specific, I think we show compensation within there and he takes account of what he thinks is going to be the compensation shared with our management teams to pay our people. So just like we take other expenses, we've factored that into the calculations. As to the actual how that affects our business, over time we've had a philosophy of compensation, which was that people could, should and will and could earn a lot of money at our organization if the shareholders or the constituents they manage money for make a lot of money, full stop. That's the number that's really the thesis of what we have. Nobody's going to earn very much if they don't if everyone else doesn't do fine. But if we'll offer you the opportunity to make a significant amount of money relative to what you could do in other places if you do well on the capital you have and others make it. And so I don't we've never had a real problem attracting people. I don't think we will going forward. As we scale up the funds, we ensure that we bring back the percentages because we do it on an invested capital amount versus just a piece of percentage of the fund. And if it gets bigger, you have the same percentage. So we've tried to be very thoughtful about that in setting the stage of these funds for the next 20 years knowing that they will scale up, so you don't have those problems. But it's always possible, I guess, that there will be an organization that can be successful that will offer more to someone. We don't generally have that problem. We've had it on occasion, but not too much largely because people like to work for our organization and we offer a lot of the benefits that you've seen in our organization. So it's a very important point and probably one of the most important things in any organization to deal with. And we've tried to continue to be judicious about it and thoughtful setting the stage for the longer term. Thanks, Bruce. You said you're raising cash funds for leaner times, yet you're out in the market raising funds, you're making pitches to prospective LPs. Is that the pitch give us the capital? We're there. You get the optionality around when there's a down market. We'll put that capital to work in a smarter way than anybody else. Like is that how you're positioning the funds when you're talking to investors? And just to reconcile your macro comments with your fundraising initiatives and how that's working with the pitch that you're giving to the prospective LPs? Yes. Our pitch is that we can invest organically and because of our franchise through any environment. And we've seen that many of you that have watched us over the years have seen that that we can put money to work almost in any environment. It's really because of the sheer scale of the organization. Things just come to us because of our name, our franchise, our operations, our people and the business. And therefore, we really can invest a lot of money over time in almost any market. We'd like to have more money available at times when it's leaner. And right now, it's pretty the markets are pretty good. North America, they weren't in 2,009. I'll contrast those 2. And so I'd just say our pitch is really when you put your money to work anytime. But we're we do really well and can make a lot of money when there's more distress. And therefore, our money today is mostly going towards economies that aren't as robust as the United States. There may be times which are less robust in the U. S. And we'll switch the money back and forth. And that's the advantage we have with large global funds. Seeing no other questions, I would just say we're grateful that you took the time to be here or listen on the phone. We thank you for everything and we thank you for investing in Brookfield and anything that we can ever be helpful to any of you on please contact any of us and if not before we'll see you next year at this time. Thank you.

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