I'm Bruce Flatt, and I'd just like to thank everyone for coming today and welcome you to the Brookfield Investor Day. We know it's a lot of time out of people's schedules, so we appreciate it even more that you come and do this with us. We tried to simplify the presentations this year, and we just have three of us are going to talk about the corporate overview of the company, which is Brian Lawson, Kim Redding, and myself. Then we have four presentations on the operations, and we're going to try to focus just on the asset management business in each of the operations we run, a little bit about the business and where we're going, and talk about our listed and our private funds, so in each of the different businesses. That's more or less what we'll focus on.
After each of the presentations, as we've done in past years, people will take questions if there are any from people, and please feel free to ask any question. At the conclusion of mine, I won't take questions merely because I'm going to come back at the end and just summarize and take any other questions that do come up. We should be done in less than 3 hours, which would put us at four o'clock. We're not taking a break during, so anyone needs a break time during, you can just slip out during the presentations. We found in the past that disrupted our rhythm. We'll just run straight through. I guess the only thing I'd start before I get into the slides is I just reflect on the last 5 years in the business.
I was looking at this time of year, often we compare the stock prices and different things, and we're around where we were 5 years ago, which probably doesn't say a lot for a management team in a corporation. Having said that's been a long 5 years in the capital markets. Probably most importantly, I think, and we think that the business that we have today is tremendously more valuable than it was 5 years ago. There's various reasons for that. Some of it is because we're at an inflection point, and we'll try to describe that as we go through the presentations in our asset management business, and 5 years further along as we were before.
As many of you know, in asset management, track record on a long-term basis is extremely important, and the track record has gotten better over that 5-year period of time. Maybe most importantly, when you look at it relative to other competitors, the track record even looks better. I think that's probably extremely important thing for us within the business. The only thing I'd end on, and then I'll get into the slides, is I just say that that's not to say that business or our business is ever easy. In fact, it's extremely difficult, as all of you know, every day, running the businesses you run. I just say that we keep charging away.
We're never without our mistakes, we continue to build this business over a very long period of time and think there's a good ramp room looking forward, that's what we're going to try to describe to you today. Our goal, just starting off, as most of you know, but it's on this slide, I'll be very specific about it, is to build a leading real asset manager in the world. What we try to use is our global operations that we've built to invest money for our clients at very good returns while protecting their capital. I think those two things are extremely important. One of them in itself is not as important, the two of them together are extremely important. After 20 years of doing what we've been doing, we are very global.
In fact, the business is about 100 offices, about 600 investment people around the world, about 24,000 operating employees. We're very focused as to where we invest around the world. We view it as a global platform, there aren't that many people that have the scale of business and the size of capital that we have, we view that as a tremendous competitive advantage. On page seven in the presentations, I guess bottom line is we view our business model as very simple. The first thing we do is we take client capital, we try to invest it to earn a decent return for the risk we take. We use the 24,000 operating people to try to optimize the assets within each of the businesses and earn an extra return.
Lastly, from time to time, we monetize assets within the portfolio. It's as simple as that. Our objective in doing that is really just to earn a strong investment return for clients. In return for that, often, as you know, they give us more money to invest for them in the future. It's a continuous process compounding upon itself, that's very valuable to a franchise as it's being built. Alongside of that, on the next slide, we've been spending a significant amount of time over the past 10 years in realigning the business, our four-pillar multi-fund strategy is essentially now in place but continuing to mature, we'll talk about that today in each of the businesses.
Our private funds and our listed entities are set up today such that we can access the capital markets in more ways than most institutions can. We believe, again, that gives us a competitive advantage when we're operating within our business. This is allowing us, probably for the first time in a long time, to have significant amounts of excess resources to be able to devote to places, either to expand the business, so to continue to broaden out the asset management business we have, or secondly, to repurchase shares and shrink the denominator in the company. We won't always do it, when we see significant value within the share base, we'll continue to try to shrink the denominator down over time.
We toy back and forth between all the opportunities that we see out there and doing that, but I think for the first time in a while, just because of the structure that we've now set up, there will be excess capital going forward to be able to do it. I guess we believe that we're positioned quite well, and I guess we try to crystallize that into 4 points for people when we describe what Brookfield is and why we think there's a good strategy going forward. Number 1 is, if you look across the world at managers that can take capital from institutional and other clients, there are not very many with the scale and broad business that we have. We'd be one of the largest global asset managers of real assets.
There are few people with the track record, the global platform, and the size that we have. Our fundraising capability and the relationships that we have been getting better. We'll talk about that as we go through here, the presentations. We've made significant progress on setting up our listed funds. All that together we think brings a pretty broad value proposition for shareholders. This slide, I think, probably crystallizes the past in as good a fashion as you can do, which essentially shows what our listed funds have returned for investors since they've been in the market. It shows the amalgam of all of the private opportunistic funds we've raised and our core and value-add funds. If you compare these to most other funds out there will be some that are better.
By and large, we've done very well with institutional clients and others in the marketplace, and that's a benefit for us. Turning now on page 12, just looking at how we think about the acquisition world. I guess we think of things as in two broad patterns, and I guess we think of strategically where should we put capital, and we try to be broad across a spectrum and look at themes of investing. Then we try to be very opportunistic from time to time within those broad themes. Over the past five years, we've had really three investment themes which we followed. Those, I think, have served us well. Not everyone worked out perfectly, but generally they've worked out well.
The first one was the over-leveraged developed markets, the U.S., Europe, Australia, and some of the big developed markets had too much debt within it, and corporations that got in trouble in 2008 and 2009. As many of you know, we capitalized on many situations, but two specific ones were TGP and Babcock & Brown, just to give you an example of those acquisitions. Number 2, we spent a lot of time focusing on U.S. housing, and we put significant money into two OSB producers, and also our residential business in North America. Those have been paying dividends, and we think will continue to pay dividends over the next three to five years. Lastly, we focused a lot on natural gas, and I'd say this one still has time to play out.
I think everyone would agree that the first two are in their fifth or sixth inning of playing out. Natural gas still has a story to play, but we've capitalized a lot on buying hydro plants and made a number of private equity investments related to the natural gas sector. Sachin and Cyrus will talk about those as we go through here. Thinking about that more broadly for the next three to five years, I guess on page 16, we're now focused on three different themes, which we expect to continue to be dominant over the next 36 months. Those are Europe, number one. I'd say that we don't believe that Europe is going to be a high-growth economy in the future, maybe never. That doesn't mean that for people like us, there aren't tremendous opportunities.
We've put a lot of money to work with European companies and in European situations over the past 24 months, and we think that's only started because there has to be a lot of deleveraging to still continue to go on in Europe. As we state on the slide, the markets have calmed, but there still has to be an asset sale process and a deleveraging to occur. The second one is emerging markets, and there is no doubt if you looked at I'll just pick three specific countries, China, India, and Brazil. Five years ago, there was an enormous amount of money pouring into those countries, and it did two things. It forced currencies up, other than China where it's pegged, which brought on inflation in China as opposed to currency going up. Secondly, it took valuations in those markets up very significantly.
What's happened now is that a lot of money is flowing out of those countries. That's done two things in reverse. Currencies are down very substantially in every country. Secondly, the opportunities that we're starting to see and have been seeing are very significant. That's what we like to see, which is to have a business where we have people continuously invest in those countries, run the businesses we have, and have capital available when there is capital fleeing markets. I guess we think the second area is the emerging market economies and putting money to work in those. Lastly, I'd say our theme would be commodities-related investments. As you know, the same thing occurred within commodity companies five years ago, where they couldn't do anything wrong, and the amount of money pouring into commodity companies was very significant.
Again, that's reversed very substantially. What that means for us is that there's a lot of investments around the commodity sector, whether it be oil and gas, mining, or other type of commodities in either infrastructure or power. They have a number of these companies, and businesses have enormous amounts of infrastructure within them, and we can often help to separate those type of assets from those companies. The combination of, I guess, what we believe and what we've always tried to do with the business is have very substantial amounts of capital, have the operating presence with our people and the relationships that we have to pursue opportunities when they come.
I guess we think today, given the 600 people we have, a very substantial pipeline of opportunities that we can put the many tens of billions of dollars to work that we need to put to work to expand our business. We think the opportunities are there. Before I turn it over to Kim Redding, who is going to talk specifically about real assets, I would just say, we think we are well-positioned at Brookfield for the future, and I crystallize it in five points. One, strong access to capital with our fund platforms. Two, the fundraising capabilities we have, and we have built over the past 6 years, which I can tell you, and many of you were here six or seven years ago, it is not been easy, but we have made some great progress in that.
Three, part of that is due to the track record we have in the different funds. We do believe there is many significant opportunities to invest capital. Lastly, often the clients we get are because we have interests aligned with our clients and our investors all throughout the system of our business, and we think that is extremely important for the franchise. With that, I will turn it over to Kim, who many of you may not have met. Kim is our Chief Investment Strategist, and he is going to talk about real assets and how they fit in. I think probably most importantly today, there is a lot of questions about interest rates and real assets and how they respond to it, and he is going to specifically try to address that.
Thanks, Bruce, and good afternoon. Institutional investors are increasing their allocation to real assets, we, in a couple of weeks, will release a paper where we have looked more closely at that trend, we think that this will continue going forward.
Other way, Kim.
Other way. Sorry. It goes upside down. There we go. Thank you. We find ourselves in an environment where we've got yields that are very low. Interest rates are rising, have come off their bottoms, and there's concern about continuing increases in interest rates. Inflation potential and the concern for it in the future exist. Growth is pretty moderate around the world and subdued, and the liabilities of investors are increasing as their retirees get older and need more income. Investors are really seeking a new alternative. It's our belief that as investors move past the new normal, we expect real assets to become what we're calling the new essential. Not that real assets are new in institutional portfolios, but historically, the allocations to real assets have been relatively modest.
As an example, at the end of 1999, the top 1,000 pension funds in North America together had 3.5% of their portfolios invested in real estate, one portion of real assets. Today, that number is 7.5%, so you can see it's doubled. We think it's got lots of room to grow even further given the particular environment that we find today. First, real assets provide a very stable cash flow stream, dependable, much like their fixed income portfolios, predictable income streams that can grow over time. Secondly, those yields on real assets are typically higher than fixed income and other more traditional investments. The income streams are a couple of hundred basis points, perhaps higher than their bond portfolios.
Thirdly, unlike fixed income in an expanding economic environment, in a rising interest rate environment, real asset portfolios stand to increase both their cash flows and asset values over time. They've got the equity upside. It's a little bit getting the best of both worlds. You get the stability of a portfolio of income that's predictable and rising. Yet, in growing economic times, unlike fixed income, the asset appreciation potential is there, as well as income growth. This has led to a pretty compelling return pattern of real assets over time. This chart shows 10 years of absolute and relative returns of real assets compared to both stocks and bonds. The two blue bars represent bonds and equities. You see all four of the subclasses of real assets, timberlands, property, infrastructure, and ag, have outperformed over a 10-year period of time.
The only period in which they really haven't outperformed bonds is the last five years. If you think back, this week is the five-year anniversary of the rescue of AIG. We've been in the global financial crisis where bonds have performed exceptionally well. In almost all environments, real assets perform well relative to both bonds and equities. Real assets also have low volatility, which is a good characteristic in the portfolio. Here we've looked at the various asset classes and their Sharpe ratios. It's not just the return that it generates, but what kind of risk are you taking to generate that return. The higher the Sharpe ratio, the better return per unit of risk. Again, all four of the subclasses of real assets, timberlands, property, infrastructure, and ag, have higher Sharpe ratios than both bonds and equities.
In terms of diversification, this chart shows the correlation to other asset classes. You see real assets have very low and sometimes negative correlations to the bond and equity portfolios of institutional investors. Finally, as an inflation hedge, if you look at the various asset classes and run a correlation to CPI, a measure of inflation, the two largest real asset classes, property and infrastructure, have a positive correlation to CPI, where bonds and equities have either negative or no correlation at all. Real assets do provide a hedge in an institutional portfolio to protect against future inflation. This I think is a very interesting slide. Oftentimes we're asked the question, and Bruce alluded to, how will real assets perform in a rising interest rate environment? We think they will perform well. Initially at the transition point, sometimes there's a little bit of a lag.
This chart shows cap rates over time, so roughly the last 14 years. The blue line is the average cap rate of publicly traded real estate companies in North America. Now let me just remind you, it's the average of all property types and includes all qualities. At the current time, it's approximately a 6% cap rate. Higher quality, better located properties would trade at much lower cap rates than that, perhaps 4%-5%. It's a good representation of cap rates across time. The red and the gray lines represent the 10-year treasury yields and the yield to worst in the investment-grade corporate markets. You see that spread between cap rates and interest rates today is at its widest point. This chart starts at the beginning of 2000.
At the time, the 10-year treasury was about 7.5%. The spread was approximately 250 basis points. Today, we have a 10-year treasury that's traded between 275 and 300, let's call it. The spread is 350 basis points. This wide spread, we think when rates rise, will help to absorb that turn in transition and increase in interest rates, and give time for real assets for the income stream to increase and the asset values to increase over time. We think there's a buffer built into the cap rates today because they've lagged behind the fall in interest rates. We believe real assets are uniquely positioned today, and are ideal for institutional portfolios to generate attractive returns across different market cycles, and will become the new essential component of institutional portfolios moving forward. Some of the other benefits real assets are the place to be.
Revenue streams are impacted positively as business increases. If we get rising interest rates due to recovering economy, typically that flows through to increasing rents, increasing asset values. One thing often overlooked is the value of the liabilities in a real asset company. If you've got long-term fixed rate liabilities and rates rise, you're actually generating value as the value of that low coupon debt increases over time. In an inflationary environment with the economy growing, rents grow faster than expenses, in part because expenses are a smaller part of the income stream. You get the impact on the revenue side in a much greater way. Then, as we talked about earlier, cap rates did not decrease as much as interest rates.
As we get the turn, that buffer built in by the spread will help to offset any negative impacts of rising interest rates. With that, I'm going to turn over to questions, but I'd ask that there are people around the room who have microphones. This is being webcast, so if you would wait till you have a microphone to ask a question that you might have, then people will be able to hear. Yes, there's one question right there.
Andrew Kusky, Credit Suisse. Just give us some color and context on where the pension fund consultants are today on an allocation basis into real asset classes, and maybe get a little bit granular on real estate versus infrastructure and in timberlands, if that's possible. Then where you think that goes three to five years from now.
Yeah. Well, I think it's across the board, depending on size of the institutional investor and the consultants. In some areas of the world, like the Canadian pension market, have a much higher allocation to real assets. It's roughly 8%-9%, is the allocation that if you look at it globally in terms of a consultant allocation. You see much higher allocations, in some cases as high as 20%, 25%. We think there's room, and when you run efficient frontiers injecting real estate into the analysis, you can actually support 30%-60% allocation of real assets. Historically, they have not been that high, in part because of the investable universe. Now we've got an investable universe that's growing. We think it can support much greater allocations to real assets going forward.
We think over the next couple decades, you could see allocations as high as 30%-50% in certain portfolios. Okay. Well, seeing no other questions, I'll turn it over to Brian.
Good afternoon. Thanks. I am going to cover three things in my remarks here. First of all, I just want to talk about the GP, the fee-generating part of the business. I think Bruce used the term inflection point. I think just to highlight the stage that we have gotten to in terms of actually posting the kinds of results that support what we have been trying to build, albeit still at a preliminary stage, in terms of the results over the past while. Talk a bit about what we have been doing, in terms of how we have the business organized, the multi-fund strategy, what that means in terms of visibility in our balance sheet, and the type of flexibility and liquidity that provides us with. Then, of course, this being Brookfield Investor Day, to share some of our thoughts on share values and potential.
First of all, just to set the stage. We do think of the business, and I will talk about it during this part of the presentation, in its two components. One being the general partner, us as an asset manager with around $80 billion of capital in our managed funds and roughly $1 billion in terms of our annualized fee base. I will talk a bit more about what that means. The second part, of course, is the capital that we have off of our balance sheet, roughly $28 billion that is invested, not just into those managed entities alongside our clients, but also, on occasion, us as principal. That generates slightly in excess of $2 billion of FFO on an LTM basis. Just over the last six months, we have increased our fee-bearing capital by more than 30%, roughly a third and across the board. Really two principal things.
One was the launch of Brookfield Property Partners. The second was you have seen us raise a tremendous amount of capital into our private funds, and that obviously bodes extremely well for the future. With that, our fee-related earnings, fee-related earnings being management fees, IDRs, transaction advisory fees, not carried interest, have doubled on an LTM basis since last June or even higher if you look at it on an annualized basis at the end of the last quarter of 2013. That is taking the capital we have in place and the associated contractual arrangements and the fees that we are entitled to or have the potential to earn from that capital. The fee-related earnings net of direct expenses has increased substantially.
Also what you have seen is our margins have approached that 50% level that we talked about over the past few years as an initial target. I mentioned that does not include carried interest that we earn in our private funds. We have now accumulated roughly three-quarters of a billion dollars of carried interest, a little bit shy of that after deducting some of the associated direct expenses. We are in the stage of harvesting and crystallizing that carry through some of the transactions you have seen us close over the past little while and what we hope to achieve over the next period of time. All of that gives us tremendous momentum as an asset manager. We have raised $14 billion of private fund capital over the past 12 months into our private funds.
We now have our listed issuer strategy fully implemented. We have a number of competitive advantages moving forward. I wanted to touch on a few of those compelling attributes that are listed on this page particularly as it relates not just to the listed issuers, but in particular to the private funds and our private fund clients. The first four really go to reinforce what Bruce was talking about. I think what you'll see throughout the rest of the presentations from my colleagues is that we have the ability to invest across a very wide range of opportunities, and with our operating platforms, gives us tremendous conviction in being able to put capital to work for us and for our clients at very attractive returns.
The last two really speak to some things that are very important to us in terms of alignment of interest and the strong corporate governance across the organization, that again, in terms of building that trust with our clients, that we are a very good steward of their capital. It goes a long way in that regard. Again, focusing on the private fund side of it, we've built a dedicated fundraising group. There's roughly, I'll call them, 20 client-facing professionals in the group, and there's probably another 40 or 50 people supporting all of our client activities. Given the breadth and the range of capital and clients that we're now working with, this is a very critical part of the business.
It's been very successful over the past period of time, and we think is a strong advantage for us moving forward in our ability to continue to raise private fund capital. With that, one of the things that's been very notable over just the past little while is the increase in the diversification of our client base. We now have roughly 200 investors in the base. That's up, say, from 40 in 2008. 30% of them across multiple funds. A big part of this is the component of our capital that are represented by smaller allocations, has grown from a pretty small sliver in 2008 to quite a meaningful chunk, both in terms of a percentage, but also just magnitude of capital in 2013. This tends to be higher margin and great repeat business.
We're building fantastic relationships with a number of institutions that have very compelling reasons to invest with us, and we hope to have them with us for many, many years to come. Moving forward, obviously, our goal is to substantially increase the amount of fee-bearing capital over the next five years, really across the board. We've just factored in similar assumptions we would've talked about last year. We've obviously exceeded them over the past period of time. It translates into about a 10% annual growth rate in terms of the amount of capital. That has the result of more than tripling our fee-related earnings. In part, that's the growth of the base manager fees from the listed issues as well as the private funds, but also the IDRs coming into play as well.
Here you can see how they roll over the period of the next five years. What that does is it does increase the potential for us to earn carry interest. What we have on the slide here is for 2013 LTM. That is the increase in the carry that's accumulated to date. The middle column is what we are entitled to on an annualized basis based on the fee-bearing capital that we have in place, assuming we achieve our target returns. How we would see that growing out to 2018 based on that compounding I referenced on the last slide. This leads to substantial increases in the value of the GP portion of our business, roughly a 20% growth rate. To keep it simple, we apply a 20 times multiple to the fee-related earnings, 10 times multiple to the carry interest.
There is a buildup of accumulated carry as well. It's pretty attractive growth, and that's obviously why we are focused on building this part of the business. Turning to the listed issuer strategy, I've characterized a bit of an update on the four platforms here. There's a couple of points really to emphasize. First of all, infrastructure, which I'll say has been in the building this out for the longest period of time, is really pretty well positioned exactly at what we hope to achieve in terms of having a very well-capitalized, well-trading listed issuer in Brookfield Infrastructure Partners. Having the ability to raise substantial amounts of private fund capital as well. Its ownership level is probably in the sweet spot from a Brookfield perspective as well, at 28%. We've often talked about 25%-30%.
Power, great listed entity out there in Brookfield Renewable Energy Partners, great access to private fund capital. The ownership level is higher than it needs to be. I guess that's an area that we could potentially see working our way down, either through secondary distributions as we've done from time to time. That brings liquidity on our balance sheet, but also through issuance down the road as well. Property, Brookfield Property Partners, we just launched. We'll talk more about that. You've seen us be very successful in raising private funds in that regard with the Strategic Real Estate Partners. Obviously, the ownership interest is very high relative to where we see it being over time. This strategy, of course, also gives us tremendous access to capital. In terms of the listed issuers, it's perpetual capital.
It's perfect for the kind of assets that we love to own for extended periods of time. We also have great access to the public capital markets and great execution in that regard. On the private funds, we get access to institutional capital, and also we have capital in the form of where it's investable over a committed period of, say, three years, where we have the ability to identify the acquisition, then go back and draw the capital. It's really attractive in that regard. What it's also meant, this slide here is a condensed version of our deconsolidated balance sheet. We've got the invested capital, this is on slide 52, of $24 billion invested from Brookfield's balance sheet into those various categories. Less around $7 billion of corporate leverage in the form of long-term corporate debt and perpetual preferred shares.
This is on an IFRS basis, so the general partner really gets valued at nothing. What we've done here is taken that $24 billion of invested capital and put it into two categories, listed and unlisted. I just want to touch on that because this is something that's been, I'll say, quite a development over the past short while. That $20.7 billion, if you look at it based on market prices and appraised values, our base case value for that invested capital is about $28 billion, and that represents 85% of our invested capital is in the form of listed securities. In other words, very high visibility. This is a very simple balance sheet to understand. The listed holdings are really, most of it is in the three listed issuers, Brookfield Property Partners, Renewable Energy Partners, and BIP.
The other, if you look into that, and we have the ability and do disclose this in our supplemental information, it's really a handful of public companies, such as Brookfield Residential Properties, Norbord, Western Forest Products, the preferred shares in Brookfield Property Partners. Again, some of that should be pretty easy for people to get their minds around. If you think about the unlisted capital, there's about $4 billion there. It really breaks down into a couple of buckets here. In terms of appraised value, roughly a third, a third, a third. Commercial properties that are carried on our balance sheet appraisals and reappraised quarterly. Same thing with Sustainable Resources. Our private equity investments, those that aren't listed. We prepare appraisal-based financial statements, provide those to our private investors on a quarterly basis, and they're audited annually.
Those are easy to get your minds around. In terms of the other businesses, a couple billion dollars of that is the power contracts. We have our construction property services businesses in there as well. There's a bit of non-recourse financing. We think that makes the Brookfield balance sheet, from a corporate perspective, a lot easier to get your minds around. Really, it just breaks down into that GP and the LP. The other thing about it, and I referenced this earlier, and we talked about this last year as well, is if you think about what a target hold or a required hold, and this is just based on our thinking around the strategy.
If you assumed it was a 25% of the listed issuers, and let's just say 50% of the other public entities, that frees up about $14 billion of capital that we have available over time for other purposes. Now when we look at that together from those values that we've put up here, you look at that at the recent share price, we're still trading at a 20% discount. You can still get the franchise at a nice discount. We think those base values represent a pretty conservative approach, and we think that there is a lot of potential upside to those values. I'll point to really three things that, in our mind, bear that out. One would be a more rapid expansion of the fee-bearing capital. We talked about a 10% growth rate.
Obviously, if we're successful in exceeding that, the values grow significantly. We do think in this environment, with economic growth, and our ability to improve returns through operations, we can enhance the value in our invested capital, and also the ability to redeploy that surplus capital we talked about. Just quickly, if you thought about different scenarios for the general partner, and this is just to give you some idea of, I'll call it the leverage in the business model. We did our base case on 10% growth and 50% margin. If we expanded our margins to 60%, which should be very achievable over time as the franchise continues to grow, particularly given the nature of a couple of those fee streams.
If we exceed that growth rate and also get a more attractive margin, then we get substantial increases in the value of the general partner on a look-through basis per Brookfield share, up to $40 a share. As I mentioned, the invested capital, we think that that has a lot more growth potential than perhaps it's given credit for. These are just five of the key thoughts we have in that regard across the various platforms. Also the ability, and Bruce referenced this upfront, to reallocate our capital and access that liquidity that will continue to be generated on our balance sheet to either expand the business, to grow the asset management side of the business in particular.
Also, if we are seeing the stock traded at a meaningful discount to pretty tangible and identifiable values, then we can buy it back, which we've done some of over the past little while. Maybe just to round out the story and just put some numbers out there on the LP side of it, and this is really pretty straightforward. All we're doing is taking the existing invested capital and compounding it up at 10.5, 12.5, 15, 17.5. We've generally targeted 12%-15%, and we've generally tended to exceed that in the past. We're hopeful that we can exceed that in the future. This just, I'll say, rounds out the analysis so that we can put that together with the general partner values. That's what this slide shows, is the potential 2018 values based on those assumptions.
You'll see that they arrive at some pretty attractive returns for Brookfield shareholders, ranging from 14%-22%. With that, I wanted to conclude my remarks and open it up to any questions or comments. Yes, Michael.
Brian, last night, BIP told us that they're increasing their objective for distribution growth from 3%-7%, to 5%-9% annually.
Right.
What does that translate into in terms of increased value of their fee tail at the BAM level?
I'm not going to give you a specific quantified answer because I actually don't know it offhand. I'll say there's really two components to that. One, obviously, as the distributions, as the FFO increases and the distributions increase, not only should that support a stronger unit price, which should support an increase in our base management fees. Secondly, we are into the stage where we earn incentive distributions, we participate in 25% of the increases in distribution. It's quite meaningful to Brookfield, particularly when you put that in the context of an $8 billion capital base. Andrew, yes.
Andrew Kusky, Credit Suisse. I guess it's a three-part question, and the first part is, do you believe there's a holding company discount sort of drifting into the BAM shares, in part because you have such big interest in the public LPs and the reference prices that people can calculate. It sort of takes us back to where we were 10 years ago with. I guess the second part is, and we've heard this from all the speakers so far on the share buybacks, does that drive your share buyback decisions? We've heard that more today than we have in the previous years. The third part of it is, if you buy back actively, how big of an interest should the partners group have within the stock? If you look at the management team today being around 20%-ish, how much should that go up?
Are you accepting it to go up?
Right. Okay. On the first two, so starting off with the holding company discount. That's obviously a possibility, and I guess it depends on how the people look at the company in totality. What would mitigate from that would be the existence of a general partner that you simply can't buy anywhere else. I think that's a big part of it. We always will have the ability with the franchise to be able to put capital to work, we think at very attractive returns. I think a lot of that should hopefully mitigate that issue. I'd say, going the other way, I think having a simple and transparent balance sheet should give people a lot of conviction about the quality of the balance sheet. I think that will be helpful.
What it means for stock buybacks, I think that is going to be part driven by where we see the discount relative to other investment opportunities and the ability to grow the business by putting capital to work. As that liquidity generates on our balance sheet, we'll really be lining the two up and making those decisions as we go forward. As regard to your third question, I think it'll just kind of roll out as it occurs in terms of, obviously, we buy back stock, that interest might increase, but again, that's based on personal decisions as well. Yes, there's a gentleman over there on the far wall.
Thanks for taking the question. I've got two questions. The first is your $14 billion of surplus. Should we think of that as what Berkshire Hathaway would call float? Perhaps better than float in the sense you don't have to take insurance underwriting risk? That's maybe I'll ask the second question afterwards.
Okay, sorry. On the first one, I'm not sure I'd call it straight float, in the sense that it is our invested capital. We have to look at those returns as being a direct return on capital. This certainly gives us a tremendous amount of financial strength and liquidity and flexibility going forward.
You would expect to ultimately get a return on that surplus. It's not just-
Oh, absolutely.
It's not just a moat, if you will.
No, we get good return on that capital. It does, again, give us the ability to reconsider that down the road as well.
The second question, thanks for taking it, is the last page of the so-called potential share value.
Right.
Which is a very helpful page. What is the interest rate sensitivity to those values, discount rates, or maybe even bigger picture way of asking the question is, let's assume we're at 5% long rates. What does that do to value? How does one think about that from the very big picture?
Okay. That 5% interest rate is actually a great place to be for Brookfield and for real assets, and it's obviously more consistent with what might have seen over the past period of time. We're assuming that a 5% interest rate is because what we've got is stronger nominal GDP growth and a bit of a term premium in there. That is the benefit of the real assets. That's really what Kim was talking about in his remarks, in that, sure, interest rates will go up. Perhaps that's created a slightly higher discount rate that you would use in present value in your cash flows, but your cash flow streams have also gone up as well. Instead of, say, building at one or 2%, they're going back to the types of growth rates that you would've seen in an environment that supported a 5% interest rate.
We think that real assets provides tremendous protection against increases in interest rates, particularly when measured over a longer period of time. Can we alternate to somebody else and come back to you? Thanks. Maybe I'll take one or two more. How are we doing for time? Yeah. Okay.
Just quickly, what in your view would be the drivers of that increase in margins of 50%-60% at the GP level? What are the possible drivers, what are the possible scenarios that are headwinds to that?
Sure. Couple things. We've invested pretty heavily in our, call it infrastructure, to be able to provide these types of services to our clients. I'll say we probably, I'll call it over-invested or pre-invested relative to the scale of capital that we had in place. Some of that's just natural growing into. We think we've got tremendous leverage to that as well in the sense that we can grow the fee base and the capital at a faster clip than the, I shouldn't call it G&A, but the associated operating costs would grow at. Second is some of the fees are very high margin. You think about an incentive distribution return of the increasing FFO and distributions from the listed issuers, those are very full margin. We think there's lots of latitude to increase margins through 60%, for that matter.
Did you say a little more? Yeah.
No, thank you. Just to clarify, I understand loud and clear what you're saying, that higher rates means higher growth. From the perspective of valuing BAM, what is the relationship between higher rates and growth required to offset the higher discount rate, if you will? In other words, let's say if interest rates go up 100 basis points, do you need 1% of GDP growth to keep the values the same? That's what I'm big picture trying to understand.
Yeah. That's probably fair. In fact, that's even probably positive to us because of the existence of fixed rate debt on the balance sheet. We probably actually get a little bit of a premium to that. Okay. Thank you. I'll now hand it over to Ric.
Good afternoon, everyone. Last year when we met, we shared our plans for the forthcoming year, for Brookfield's Property Group. At that time, we laid out two main objectives for the year. The first was the listing of Brookfield's flagship real estate entity, Brookfield Property Partners or BPY, and was the completion of the fundraising of our global real estate opportunity fund, Brookfield Strategic Real Estate Partners or BSREP. Accomplishing these two goals would complete our reorganization, giving us the ability to deploy capital, more efficiently and productively like our sister companies. I'm pleased to say as I start our presentation today, that we've been able to accomplish these two goals over the last several months.
Over the course of the next 15 minutes or so, in addition to outlining our objectives for the upcoming year, our presentation will provide an overview of Brookfield's Property Group, our investment holdings, and performance, the investment landscape in which we are operating, as well as a brief overview of some of our recent initiatives. Before I get started, I'd like to just kind of break from format today and just make a brief introduction of my partner in the real estate group, Brian Kingston, who joined us after a five-year stint in Australia, sitting over in the corner there. Brian is the President and Chief Investment Officer of the real estate group, responsible for our growth going forward, which is a big part of what our agenda is for the next coming year or so. I wanted to introduce you to Brian.
Starting out, I'd say Brookfield's Property Group is somewhat unique. Unique's an often-used word, but I think in the case of our property group, it's probably pretty fitting. With $105 billion of assets under management and 300 million sq ft of cash flowing assets, primarily high-quality office, retail, apartment, and industrial properties. We're certainly one of the world's largest and leading global real estate managers. With a track record that shows a 16% compounded levered IRR since 1989, we have also been one of the industry's most consistent and leading performers.
Our holdings are diverse both by asset type and geography, and are concentrated principally in the world's most dynamic, resilient, and established property markets. Our holdings include $80 billion of assets in the United States, $8 billion in Canada, nine in Australia, and four in Europe, where we have a growing presence and growing focus. We're also focused on the most promising emerging markets, such as Brazil, where we've been a very long time investor and currently have interests in around $4 billion of property assets. We've been spending time in India and China as well. Markets where we're very much in the R&D phase and expect at some point sort of slowly to make some investments in those markets also. When meeting with investors, we're often asked what differentiates us and drives our performance. And when thinking about that question, I'd say a few things come to mind.
For those of you who have met with us in the past, any of us, I'm sure you've heard us say repeatedly how Brookfield, as an organization, has a healthy respect for the cyclical nature of real estate and capital markets. And that, of course, is true. Adding value to our investments through operating initiatives is also, of course, important. One of the first things that we do when we make an investment is to work to de-risk it through proactive management and risk mitigation strategies. Helping us identify opportunities where and when to invest, when to pull back and batten down the hatches, and how to drive performance and de-risk our investment is Brookfield's experienced workforce in operating platforms, including 16,000 people involved in our various operating initiatives and platforms. In total, we have currently 164 office properties, a little over 170 high-quality malls.
We have a growing presence in the multifamily sector, which I'll talk a little bit about in the future. We have 20,000 apartments at this point, growing an industrial business with 221 properties and about 7,600 hotels. Similar to the infrastructure in renewable energy groups, Brookfield's property investments are held through our recently listed flagship public entity, BPY, or through one of our several private real estate fund offerings, all of which are managed by the Brookfield Property Group. Within Brookfield Property Partners, we have $14 billion of fee-bearing capital. And I'd say that Brookfield Property Partners owns basically assets in one of three ways. Directly on-balance sheet. We also own interests in Brookfield's operating affiliates, and is also the cornerstone LP investor in Brookfield sponsored funds, where BPY holds anywhere between a 25% or 50% interest in those funds.
Within our private real estate fund offerings, we have 13 active funds, five with an active investment period, and $15 billion of fee-bearing capital. Our property group has been active with consistent growth throughout market cycles. In the last 24 years, we've seen our assets under management grow at a 13% cumulative annual growth rate from $6 billion in 1989 to over $105 billion of asset investments today. We've had many milestones as this chart shows along the way, including the two new ones since we met last year, as I mentioned at the beginning of the property group presentation. On a look-back basis, BPY has invested $17 billion of equity in the last 24 years, and it's experienced very solid investment returns. Within our private funds business overall, we've raised $18 billion in 13 funds since 2004.
We've invested $13 billion of that equity and have achieved or are targeting to achieve 17% gross IRR from these activities. We've invested $6 billion in core plus value add strategies, generating a 12% IRR, and $7 billion in opportunistic strategies since 2006, achieving a 25% gross IRR. Between the existing dry powder of $4.4 billion and our targeted remaining fundraising on the active funds that we're out raising capital on today, we have $7.1 billion of capacity for new deals within our private real estate funds platform. Our active funds strategies are varied, including core plus, a value add multifamily initiative, mezzanine debt funds, as well as the global opportunity fund that I mentioned earlier. Although we still have some work to do, we view 2013 as a transformative year for Brookfield's Property Group.
The initial launch of BPY and the successful fundraising of our opportunity fund should lead to significant future growth in fee-bearing capital coming from our real estate platform. Base management fees on an annualized basis have approached around $200 million. Again, if annualized in 2013, which represents about a 26% cumulative annual growth rate since 2008. The success in raising capital for BSREP underscores the stature within the industry of Brookfield's real estate platform. The fund closed at $4.4 billion, which was $900 million ahead of our target when we first launched it a year and a half ago. Supported by a sponsoring investment of $1.3 billion by BPY, we raised an additional $3.1 billion from 65 investors, many of which were repeat Brookfield and Brookfield Real Estate investors.
BSREP was the second largest fund raised this year and was the fourth largest raised in the real estate industry since 2007. All transactions that we pursue in the opportunistic space targeting 20% returns will be done through BSREP. The successful deployment of capital will help to contribute to our future growth. I'd say, just speaking for a minute about BPY and our view on BPY, this chart attempts to capture or explain our excitement for its future. Through internal organic growth opportunities and the successful deployment of recycled and new capital, we feel there is meaningful growth ahead. If you just start with a $26 per share IFRS value, we've identified about $7 per share of growth through working our owned assets in accordance with their business plans, either through occupancy improvements or capturing mark-to-market lease spreads by new leasing.
All of that adds, as I said, $7 per share. Executing on our development plans, converting idle land into cash flowing properties should yield another $3 per share, and recycling capital from mature or non-strategic assets should add another $2 per share. Factoring in a scale acquisition, aspirational, and other investments coming off recurring equity issues should yield another $6 a share over time. The total of these things are about $44 a share. Again, just indicative of why we're excited about the future of BPY. If you look for a minute at where BPY is trading at about a 6.5% cap rate, and assume that's a high cap rate relative to where this quality assets are trading in the industry, and took another 50 basis points off the cap rate, that would add very meaningful value to BPY as well.
Not that we expect cap rates to go down, I think our assumption is that a 6.5 cap rate, given the relative quality of the assets, is a bit high. In summary, I'd say 2013 has been a transformative year and a good year for the property group. A successful year for private fundraising. At this point, we've raised about $6.4 billion versus a $7.8 billion target. Our fundraising included a single-purpose transaction vehicle of $1.1 billion to approach an investment in downtown L.A. office assets. 2013 has also been a successful year on the investing front for us. We have invested or committed about $3.2 billion of capital so far, including a billion and a half of the $4.4 billion within BSREP. One of the highlights for the year has been three acquisitions that we've made within the industrial property sector.
Through the acquisition of Verde Realty, Gazeley, and Industrial Developments International, we now have an industrial platform which includes 221 properties with a gross value of $2.6 billion, comprising 62 million sq ft. We're becoming one of the world's larger players in the industrial sector. It's also been a good year for capital recycling. Obviously, as many who preceded me today have mentioned, it's a good time for institutional investors who are looking to deploy capital into hard assets. We have sold so far this year $1.4 billion of assets that are either non-strategic or have matured or out of older funds that have matured and have targeted another $1.6 billion of sales for the balance of the year, so $3 billion total of gross properties. Just a minute on the investment landscape and what we're seeing out there. I'll just start with Canada and Australia. They're pretty similar markets.
Both have a commodities-based element to them. Both have very sound banks and financial systems. Frankly, we haven't seen a whole lot of opportunities. We have seen some opportunities to do some development. Beyond that, there's very little distress or opportunities for opportunistic investment. Brazil, obviously a developing market fueled by growth in the middle class. There are points in time in the cycle where we have found it interesting to invest in Brazil, frankly, we feel like we're getting to that point now, where there is some concerns over slowing growth and inflation and foreign capital fleeing home, that typically creates windows of opportunity for us. We're spending more time in Brazil at the moment. The two markets that I think we're most excited about are United States and Europe. The U.S., where we've been very active over the last couple of years.
We're seeing fundamentals continuing to improve. The improvement is sort of spotty. Obviously not a lot of distress. We are given that a number of assets were capitalized about a decade ago and are at the end of their loans. A lot of entities still need recapitalization, and although the financial markets are there and banks are lending again, they don't lend to everyone, and we've seen lots of opportunities in the U.S., and we expect to continue to be active in the U.S. as well. Europe is probably the market where we've been most excited. We've been spending a lot of time there over the last several years. As Bruce Flatt and I think Kim Redding mentioned, we do expect to see slow growth in Europe. Really, there's lots of opportunities, we think, for recapitalization of entities there.
I think the pace of our discussions, the level of our discussions, have been picking up there. We expect to be doing much more in Europe. Just ending the report on the property group. I outline our objectives for the coming year. Principally, the main thing for us is to manage our funds and our assets to maximize value for all shareholders and to ensure strong investment performance to drive our returns on equity, incentive distributions, and performance fees. Within BPY, we still have some work to do. It only initially launched. Frankly, we don't think it's been trading that great, not unsurprisingly.
Some of the things that we need to do is enhance our shareholder base and analyst coverage, seek a transformative transaction or transactions to really launch BPY and get it going, and reduce over time the significance of our reliance on public company investments, which is currently about 80%. Within our private funds group, our goals are to continue to monetize stabilized investments within mature funds and to continue to deploy the dry powder that we have within our fund vehicles. With that as background, I'd be pleased to answer any questions that anybody has. Dan?
Thanks. In this rising rate environment and with accelerating economic growth in the U.S., what asset classes are you most excited about?
Well, we've been, I'd say, spending a lot of time within the industrial office and multifamily sectors. Frankly, we haven't seen a lot of opportunities that have been interesting for us within the retail sector, but more within the others. We don't really set out at the beginning of the year any desired allocations of capital. Rather, we're chasing opportunities as we find them or they arise. I think over the course of the next year or two, we probably will do transactions in all three of those sectors.
Andrew Kusky, Credit Suisse. Ric, just give us a sense on what you think about the size of a transformative transaction, and maybe with reference to the BIP case studies. If we look at BIP and when they did the Babcock deal, BIP was roughly about a $1 billion market cap, and I believe that the first tranche was $1 billion. The total market cap at that point was $2 billion. You've got a $12 billion market cap, obviously small float. How do you think about transformative transactions just in that context?
I answer that in the context of the kinds of things that we've been looking at. It sort of range in anywhere from $1 billion-$5 billion of equity. I think at some point in time, when the right opportunity comes along, those are the kind of transactions that we might do. That would be meaningful enough given the capital base. Any other questions? Nope. Okay. Thank you all.
Good afternoon, everyone. My name is Sam Pollock, and I work in the infrastructure group. I'm pleased to report that the infrastructure business continues to enhance its reputation as one of the leading infrastructure managers in the world. Today, I'm going to talk a bit about some of our recent accomplishments, give you a bit of update on how Brookfield Infrastructure Partners, our flagship public vehicle, is doing, go through the asset management performance from a fee perspective, and just some of the priorities for the year ahead. As I mentioned, we are recognized, particularly amongst the private institutions who invest in our private funds, as one of the leading managers in the world for infrastructure. The reasons for that are probably fourfold. First of all, we've got a business that has tremendous scale and diversity. We operate not only in North and South America, but in Europe and Australasia.
We've got exposure to many asset classes, including transportation, utilities, energy, and sustainable resources. In addition to that, we've got a great track record of performance. Frankly, our ability to raise capital has been fantastic over the last couple of years. Obviously people like to invest with managers that have that track record of attracting other people's capital. Our investor group today has the opportunity to invest in various vehicles. We have lots of flexibility to offer them publicly listed vehicles to invest in, such as BIP and Acadian Timber. We also have some global flagship private infrastructure and timberland vehicles as well. We offer a few select regional investment strategies. Our focus for the future, as has been for the last number of years, has been on our global flagship strategies.
We think that having the flexibility to invest in many markets and go where the returns are is a better way to approach the asset class as opposed to being focused in one particular area or sector where valuations might get a little overheated. One of the things that our investors also like is the fact that we've got great alignment with them. As you can see, Brookfield is an anchor investment in all these strategies, which is consistent with our general approach across all the platforms. One of the things we generally do is we often just focus on the assets. From an asset management perspective, the real value of our platform is in our people. I thought I would touch a bit on how we're organized and just describe that a bit to you.
Today, the infrastructure business is run by 2 senior managing partners, as well as 9 managing partners. We operate the business really as a matrix organization. We have a group that's largely based in North America that are the chief investment officer groups of a chief investment officer for transportation, utilities, energy, and sustainable resources. We have a number of regional heads that run what I would describe as hubs, where they're largely responsible for business development and asset management activities. Basically, these 2 groups of teams work together to execute transactions and make sure that we have best of breed investment underwriting and follow-up operations-oriented approach to asset management. One of the most important considerations for our investors is the performance of our funds. We've listed some of the strategies that we undertake from a public perspective.
Our performance over the last 5 years has been very strong. On the infrastructure side, we tend to target returns in the 12%-15% range. We've managed to outperform that, particularly with Brookfield Infrastructure Partners. In our timberland strategies, our target returns are in the 10%-12% range. We've been slightly less of that on the private side. That's primarily due to the vintage of our funds. In comparison to funds of that era, we have generally outperformed them all. One of the things that also goes to the success of our platform is the fact, and I think Andrew might have mentioned a little bit earlier in his question, Brookfield Infrastructure Partners is a business that we started back in 2008. When we launched it back at that time, we barely had a market cap of $500 million.
Since that time, we've been able to grow the business, obviously profitable by generating great unit returns, but the scale of the business has also grown to almost $8 billion market cap. We've listed out a number of our recent accomplishments in the business. I really want to focus on two in particular. The first one is our execution of recycling capital. This past year, we sold about $4.7 billion of assets. Typically, we talk about all the great investments we've done in a year, but as an asset manager, we think it's just as important to be a good seller as it is a good buyer. From a realization perspective, one of the big assets we sold this year was Longview Timber. It was an asset that we sold for $2.7 billion, and we think we sold it at great value.
It's probably the highest price on a per acre basis that's been seen in the Pacific Northwest almost ever, but definitely in the last five to 10 years. In addition to that, we sold five interests in several infrastructure assets. Our average return on those investments was about just shy of $2 billion of proceeds with a 25% IRR. Again, tremendous value for our investors. The second thing I wanted to touch on was the debt financings. We continued our strategy of refinancing debt in this low interest rate environment and tried to push out our maturities. Two great examples of what we were able to do. We bought a business last year in the U.K., a regulated distribution business called Inexus. We merged it with our own business in the same sector. The business we bought was actually a recapitalization opportunity, so we bought it for tremendous value.
We put some new equity into the combined business. We took that debt that we had financed with the banks, it was GBP 600 million. When we put a three-year bond to bridge takeout, we were able to refinance that debt within six months at a rate of just over 4% with an average maturity of 13 years. It's just a fantastic opportunity for us to push out maturities at very low interest rate. In addition, in our district energy business, we bought a system in Toronto last year called Enwave. It was relatively undercapitalized with about $80 million of debt. We had lots of opportunity to put in investment-grade debt into the business. We ended up financing it with $215 million of debt. We pushed out maturities to 25 years, and the interest rate on that is sub 5%.
Again, positions that asset for great success for a long period of time. I'll touch on some of the more fun stuff, the acquisitions. We did four large investments in the last 12 months that I wanted to touch on. The first one is our rail expansion project. This was a $600 million investment that we made probably over an 18-month period in our rail operations in Australia. We assisted five customers in bringing on new mines and expansions. From our perspective, the joy here was these were returns that were exceptionally high. Our probably average equity IRR on these investments was over 25%. The additional cash flow to Brookfield Infrastructure Partners from this $600 million is about $150 million annually. Just a great investment. We also made a sizable investment with our partners, Abertis Infraestructuras , to buy toll roads in Brazil.
We bought a business that has about 3,200 kilometers of toll roads. It's been about a year since we made that investment. It's performed exceptionally well. Revenues are up 10% year-over-year basis, and we think this is a business we'll be able to grow as the government continues to privatize additional roads in that country. I already talked about our U.K. regulation distribution business. That was a business that was a tuck-in acquisition for us, and again, the combined business is performing exceptionally well. On the district energy side, I just want to touch on this quickly. This was a business that we had not been invested in previously. Last year, we bought a system in Toronto. We followed up by buying two more systems, more recently in Houston and New Orleans. Today, we have about $620 million invested in the sector.
It's a sector we like a lot because there's tremendous opportunities to grow it organically. There's about 1,000 systems in Canada and the U.S. combined, mostly owned by municipalities, universities, and a few utility companies. This is the type of business that, for us, we see tremendous value. Because it's relatively unknown and not aggressively sought after by others, we think we can buy for good value, and the underlying contractual framework of the business suits us well. It's all inflation-linked contracts, good counterparties, and long-term contracts. I'm just going to touch briefly on how we see the infrastructure sector today from an investment perspective. I think one of the common views we hear is that the infrastructure sector is getting a bit crowded with a lot of new entrants coming in to compete against us. We still see tremendous value in this sector.
Despite the fact that there are new entrants, I'd say most of those new entrants, and a lot of them are pension funds, are focused on investing in a different way than we do. I know Bruce talked earlier about our approach to investing, where we try to take a contrarian approach or look for sectors that are capital constrained. In the infrastructure sector, we see that in several areas. Two areas in particular where we see it today, one is in the mining sector, the other one is in the shipping sector. Both were areas where there was lots of capital, lots of excess capacity built up, and the companies that were the strategic investors in those sectors tended to own all their infrastructure assets themselves, and they tended not to bring in others to own infrastructure.
Today, as they need to become more capital disciplined, and in fact, because they're trading at such low prices, they find it very attractive to sell off this infrastructure to people like ourselves. The necessity to be a buyer of those types of assets is you need to understand how they think and prepare to take a partnership approach to constructing an offtake contract with them so that they feel that they're partners in the business with you. In addition to that, we see lots of opportunities in emerging markets. We talked a little bit about Brazil, but Japan is a market where a number of participants use what was relatively easy capital in that country to go abroad and make investments. Today, with capital being more constrained in Japan as the currency has devalued, they're now looking to sell off assets.
We spend a lot of time in that market trying to make relationships and seeing if there's opportunities to buy assets from them, much like we did with the European construction companies over the last couple of years. Lastly, the whole trend towards government privatization of assets continues. We see lots of opportunities in Australia, Canada, and South America to buy assets from governments looking to generate cash flow. I guess the last point on this slide is probably the most important. With what we've been able to do this year on the fundraising side, we actually have almost $7 billion of capital to deploy in the sector. I'm just going to touch briefly on Brookfield Infrastructure Partners. This is our flagship public vehicle we talked about earlier. I apologize for those in the crowd who were there last night.
We had an Investor Day for BIP, so some of you will have heard these slides already. For the rest of you, hopefully you find it interesting. The value proposition for Brookfield Infrastructure Partners is the fact that you have a business with very low risk that generates an attractive yield for investors of approximately 5%, with very strong, steady growth that we think is achievable given the business we have in place. Just starting with the security distribution, we have a very low payout ratio, about 55%, a rock-solid capital structure that's BBB+ rated by S&P, and we've got high-quality cash flows that underpin the business that are about 90% regulated or contracted, 70% indexed to inflation, and 60% that have no volume risk. In addition to that, the business itself has lots of growth from an organic perspective and from new investments.
I'll touch on that in a second. For investors, and a number of them have invested in Brookfield Infrastructure and been very supportive the last couple of years, they've been rewarded with very good growth. We've been able to grow over the last four years our FFO by about 34% on a cumulative average growth basis. This has led to growth in our distributions of about 13%. The growth of the business has really been as a result of a number of things that we've done. Obviously, we had a great acquisition a number of years ago where we took over Prime Infrastructure. Last year, we had a number of great investments. We invested about $1.4 billion into new opportunities. We undertook the rail expansion, which delivered a lot of accretive returns.
Every single year, we deploy a significant amount of capital back into our utilities rate base that's very predictable and a capital backlog that we can demonstrate to people is going to exist on a sustainable basis. This slide here really is what we spent most of last night talking about, which was explaining the growth trajectory of the business. We think it's very attractive to have a very predictable low-risk business that you can provide someone this 5% return and continue to grow it on a 10% annual basis. How we do that, as I mentioned, 3%-4% of that growth comes from just inflation indexation in our contracts in place in the company. Within our business, we have about 35% of the EBITDA that is exposed to GDP.
This is where we have networks, whether it be toll roads or ports, where we have lots of capacity to take on new customers. With GDP growth, we tend to have just higher growth rates in each single year. About 35% of our business is exposed to that, and that drives another 1%-2% growth. Every single year, we retain cash flow in the business that we redeploy back into the company. In the case of Brookfield Infrastructure Partners, it's about 20% of our cash flow, or just over $100 million. That drives a further 2%-3%, and that tends to be capital that we deploy in our utilities rate base. Finally, we generate another 2-plus percent growth from new investments that we make every single year in new opportunities.
2% generally is if we assume we make a $500 million investment. To the extent that we can deploy more capital, like $1 billion, such as we've been doing the last couple of years, then that growth rate can be higher. Just turning back to our asset management business. We've got great momentum going into 2014. In the first nine months of this year, we have raised almost $6 billion of capital for our various strategies. Again, just I think demonstrating the value proposition that we bring to our institutional clients. I can't talk a lot about our fundraising activities, particularly for funds that haven't closed, but we did close two funds this year, both of them in the timber space. One was a global timber fund, which is our fifth fund.
We raised $1 billion for that strategy, $750 million of which was third-party capital, and now it's about 25% larger than what we set out to do. We also raised a $280 million Brazil timber fund. That's our second fund in that strategy, and again, that was probably 20%-30% higher than what we set out to raise. Our strategies are being very popular with our investors, and we're very confident on the infrastructure side that we'll do even better than that. What this all means from the perspective of our revenues is that we've just got tremendous growth in what we've been able to achieve. Over the last five years, we've grown our fees from about $50 million-$200 million, a growth rate of about 45%. These fees are extremely sticky.
About 80% of our fees to date are from perpetual base fees from companies like BIP and Acadian Timber, as well as very long-dated closed-end funds, such as our infrastructure funds that are over 12 years in length. What probably isn't shown here is the opportunity if we continue to deploy capital well and achieve our return targets, we're going to have fantastic and meaningful increases to these fees from incentive distributions and from performance fees. This is just in conclusion. I guess the main priorities for us is really continuing to do what we've been doing for the last couple of years. It's worked well, and we don't want to make too many changes. I think one of the things we think we can add to our business is a flagship public sustainable resources vehicle.
It's something we've been thinking about. We'll see if we can come up with an opportunity that will give us the scale to launch that. In addition to that, as an asset manager, one of the most important things for us to do is to continue to add to our investment footprint and put new teams in markets where we see opportunities. We continue to add to our teams and add to the talent. That's really important from a business perspective. We'll continue to raise capital in the coming year and hopefully close a fund in the not-too-distant future. Probably the most important thing is spend our time and energies to deploying the significant amount of dry powder that we currently have, which today sits around $7 billion. Thank you. I'm happy to take any questions.
Hi, Robert Zackhauser, shareholder. Sam, I've been reading that the coal mining business isn't too good. Production is going down. I wondered if you could give us some insight or comments on what's happening with the planning for the expansion of the Dalrymple coal terminal.
Sure. The question was in relation to the expansion at Dudgeon Point , which is adjacent to the existing facility we have in Australia. The coal markets, as you mentioned, are relatively depressed. Mining companies have slowed down their capital spend. We've seen that even in the Bowen Basin, which is generally one of the most prolific coal resources in the world. The capital budgets have pulled back. What it's meant for our facility is that we've had to also slow down our plans to develop it. We continue to work with the port authority to do the necessary environmental permitting so that we're ready to go when markets return. I'd say, today, things are progressing quite slowly.
Frederic Bastien with Raymond James. Sam, you mentioned that pension funds are investing in different ways than you do. Can you expand on that?
Sure. I probably touched a bit on this last night as well. The big difference with our approach, and I'd say pension funds, is the pension fund community is very much focused on achieving allocations within a certain timeframe. They've got a certain amount of capital rate to be deployed in a year. They want to make sure they get it deployed. They also have a lot of limitations on incurring broken deal costs. The worst thing for them would be to spend a lot of money and not have a shot at actually making an investment. They actually like the certainty of auctions where they know that a company's going to transact. Our strategy actually is a lot different.
We try to avoid auctions because we think that it creates an environment where you tend to overpay, and obviously it can become much more of a cost of capital shootout. Our time and energy is actually spent on transactions that might take a year, two years, or even three years before they happen. We identify a sector where we think there could be good value, where it's been overheated, and people are now looking for capital. We go out and a number of us, Bruce often comes with us on many of these outreach programs, and we try and develop relationships so that when they're thinking of doing something, they either come to us first or at that time we'll present an idea to them to hopefully get some thinking and they just start working with us.
We find the best value opportunities are the ones where we create the transaction, or we create a dynamic where we're working as partners towards a goal. I think that's the big difference to the way we do it and the way pension funds approach transactions.
Thanks. It's Cherilyn Radbourne from TD Securities. Sam, I wonder if you could just talk a little bit more around the opportunities to acquire infrastructure assets from mining companies. I guess the particular issue that I'd be interested if you'd address it is just historically, the port and the rail assets in particular have been viewed very strategically by some of the larger companies. I just wonder if you think there's enough pressure out there now that they're willing to cede the control to you that you normally like to have, and the contractual underpinnings to mitigate the risks that you usually like to have.
Well, you summed up the issues pretty well there, Cherilyn. It's not easy. The natural inclination for mining companies is to control all their toys. They don't like to give anything up, and there's usually people who are in operations who exaggerate the risks that come with allowing someone else to operate an asset. We've been very successful over the years, in particular in renewable power side, where we bought inside the fence power plants. Really infrastructure, rail, port, is no different than operating a hydro facility. You have to have certain standards that you have to live by, and you have to be prepared to invest the capital to maintain the equipment. These are all things you can contractually set out. The big issue for us with these companies is establishing trust.
I think, we generally, because of the scale of the business, the fact that we've been around for a long period of time, and the fact that we're reputable, we start off in a good place. It is a challenge. It's not a slam dunk.
Andrew Kusky, Credit Suisse. Sam, just what drives the outreach program? I guess there's a dichotomy of, you take a view that you believe a company will become distressed because of being overlevered and maybe poor investment decisions on their part. Is it really just taking a look at, there's assets you like and have characteristics that you think are very interesting that you would like to own over a period of time?
Well, you generally need both characteristics. You have to like the asset that you're talking to someone about, and you have to find someone that you think may be motivated. Often, when you start meeting people, it's not that they're at that point in time looking for capital or need capital, but you just recognize it's in a sector that consumes lots of capital, and as a result, maybe someone who doesn't need to own their infrastructure as well as their core business. Really, we've got a very broad team located around the world. Each one of those groups is tasked with coming up with a list of people that we think would be good partners or people where we think we could buy for value.
We actually probably knock on 10 doors for maybe one that responds and tries to talk to us about something.
Thanks, Tracy. Michael Goldberg, Desjardins. A couple of questions, Sam. Do you still have assets that you'd consider non-core? What are they? Can you elaborate on what you mean by establishing a flagship public sustainable resources vehicle?
Sure. Mike, on your first question, we've just completed an extensive 12-18-month program of selling off some assets. I think for the time being, we have done what we set out to do. We always look at our assets every single year and decide whether or not, we think that someone pays more value or values it at a higher rate than what we think it's worth, or we think we have maxed out the asset to its potential. We always do that every single year. That's part of our business planning process. I'd say today, we don't have any intentions of selling anything else, but that could change in a year's time. With respect to the sustainable resources business, for us today, that includes timberlands and farmlands. We think that this is an asset class that has increasing interest, particularly for our private investors.
We think the public won't be far behind in being attracted to the combination of those two. They're obviously sectors that we have lots of capabilities in. That's what we describe as sustainable resources.
Would that be along the lines of when you say a public vehicle, would that be along the lines of another BIP, BEP or BPY?
Yeah. It's a little early to say what the actual structure would be. We think that structure works extremely well, that's probably where we'd start. This is still very much in the incubator stage. Really, I think the first thing we need to do is find a scale transaction that would provide the impetus for creating this. One last question, if there's anyone has another question. If not, that's great. I will now turn it over to Sachin Shah, who's going to talk about power.
Thanks, Sam, and good afternoon. I'm Sachin Shah. I'm with the Renewable Power Group. I'm here with Richard Legault, who heads up our group. We're obviously both available to answer questions. Today, I'm going to walk you through our strategy going forward, really our track record that we've had for approximately 15 years in this business, growing it from a very small base to one of the largest global platforms in the world. Our investment performance over those last 15 years, what we've been able to accomplish, and obviously what we intend to strive to accomplish going forward.
Really spend a bit of time on the market in front of us, our growth prospects, where we think we can deploy capital, and what all of that means from an asset manager perspective and the amount of capital that we can both deploy and the fees that we can raise, obviously, as part of that. Today, we have $20 billion of assets under management in the business. We have operations that span Canada, the U.S., and Brazil. There's 1,200 people on the ground who manage these assets every day. On all accounts, we'd be one of the largest global renewable power managers. Clearly, a large differentiator for us has been that our focus has largely been on hydroelectric assets over the last 15 years.
Our strategy, like the other companies you heard, is really predicated on a global listed issuer with perpetual equity that has access to the capital markets. That's Brookfield Renewable Energy Partners. Private equity capital that sits alongside us to be able to deploy. Brookfield Renewable Energy Partners has a $7 billion market cap today, and it would be, by market cap, the largest renewable power company in the world. As I mentioned, our business is 84% hydro and just under 6,000 megawatts of installed capacity. Our strategy, which really has not changed in the last 15 years, is to generate 12%-15% total returns on invested capital. It's built off of three primary areas of focus.
One is continue to find opportunities in hydro and wind to deploy capital where we can leverage our operating platform and bring expertise on growing those streams of cash flows over a very long period of time. Our access to capital and our publicly listed issuer allows us to have tremendous strength in terms of the types of transactions we can do. We can obviously do single asset transactions, large portfolios, but we can now access the capital markets and look at more capital markets types transactions, and even look at other public companies. We've had a development pipeline in the business that we've built over the years, that we continue to deploy capital into, and it's a pretty important part of our organic growth strategy going forward. Hydro assets, the reason we like them, it allows us to earn very strong margins through the cycle.
This is a business that generates 70% margins, and earns very positive, strong cash flows, irrespective of the economic cycle. As economies start to improve, as rates start to rise because growth improves, our expectation is we'll be able to enhance the margins in these business and then continue to compound cash flow growth over a very long period of time. Lastly, we've always maintained a strong focus on an investment-grade balance sheet, sizing our non-recourse debt to investment-grade parameters, having first mortgages on all the properties or all the power plants that we invest in, and maintaining very strong liquidity levels. Today, and I'll speak about it in a little bit, we have access to a capital pool of over $3 billion to deploy into the opportunities that we see in front of us. I'll start with our track record, though.
Although the listed issuer that we have was launched in 2011, we really started investing in this space towards the end of the 1990s. In 1999, we launched a Canadian-listed entity called Great Lakes Hydro Income Fund, which invested primarily in our Canadian opportunities, and we bought assets along the way in Brazil and the United States, directly on our balance sheet, on BAM's balance sheet. If you were a shareholder in that fund, you received 14 years of rising distributions. We never cut a distribution. We never decreased the distributions. We were able to grow our margins over that period consistently, and we grew from three assets to today having over 210 assets spread across three countries. In addition, your total return during that period would've been approximately 16%. Shareholders have done fairly well.
It's our job now to carry that forward for the next decade, and we can talk a little bit about the investable universe we see and the investment attributes that we see in front of us that will allow us to carry that track record on. As I mentioned, the ownership structure historically was through a listed entity in Canada and direct holdings. You can see our track record in that regard, 16% total returns for our Canadian-listed vehicle. BREP, which we launched at the end of 2011, has delivered 15% total returns to shareholders in the just under two years that it's been operating. We've been able to grow our distributions by 7% annually in that business. Our direct holdings obviously did quite well for BAM shareholders, and were really the impetus for us to be able to create this global listed vehicle.
In terms of fees, in just under two years of really investing in a managed structure, and under an asset management model, we've been able to triple our fees. That's the fees that we earn in both the public listed issuer, but also the private equity capital that we manage, that's dedicated to renewable strategies. Today, we have $72 million of base fees. Some of our other entities, BIF, BPY, if you're familiar with them, we all have investment distribution hurdles, IDRs, as we call them. We haven't yet surpassed any of them, we have strong momentum in front of us as our cash flows grow, as distributions grow, to not only increase base management fees, but to start to bring IDRs into the business and grow the level of fee-bearing capital alongside that.
What do we like about renewables, and why do we believe this is a very compelling place for us to put both our own equity, and put our partners' equity into? If you think about the U.S. and most of the developed world, we've been living off of a legacy of aging infrastructure, in particular on electricity, that's allowed us to have very affordable electrical costs, for largely the last 50 years. In many of the markets we operate, if you take NEPOOL and PJM, the average age of coal facilities in those markets is 47 or just under 50 years old. You hear it constantly that the electrical grid, the transmission sector, needs significant investment to be able to accommodate new wind and new sources of electricity that will be connected over the coming decade.
Diversification of fuel risk is the other broad theme that we're seeing in the sector. Today, 40% of the U.S. electricity market is serviced by coal. Another 30% is serviced by gas. That's approximately 70% that's tied up into two commodities. Although we would acknowledge that shale gas is real, it's going to be abundant, and it's going to provide low-cost fuel. If you're a system operator, it's very difficult to displace much of that coal with one commodity, and, in particular, one commodity that's already pretty heavily used. Renewables, although they provide a very good source of non-carbon generating electricity, primarily why we see them being an important part of the supply stack is that they provide diversity to system operators.
They allow the system operators, who understand that the world in front of them has nuclear, coal, oil, gas, and some renewables, and you have a large sector of that coming out over the next decade. It allows them to build diversity into the supply stack and not be beholden to one particular commodity, because if you build your entire system around one commodity and you're wrong, the catastrophic implications in terms of costs and reliability would decimate your economy. We think the two best renewables to be in, clearly hydro has been our preferred investment or asset class over the last decade. We think hydro and wind are the two best to be in today, mostly because they actually provide a bulk level of power that you can provide meaningfully to the grid. They have low costs, no fuel costs, obviously.
Hydro certainly requires no subsidies, and wind, over time, the technology has gotten better, the level of subsidies have decreased, and more and more wind is actually an asset class that competes from a cost perspective relative to the other technologies. In addition, the other compelling part about renewables is that there's an increasing awareness globally of, obviously, carbon emissions and the impact to society more broadly. Today, every EU country has renewable targets. 37 states and nine provinces have renewable power standards or targets. All of that policy momentum is leading to continued investment in the sector and is allowing us to look at the sector with a growth view and a view that more capital will flow into this as we get further on in the decade.
If you think about the investable universe today, 1,400 gigawatts of global installed capacity exists in renewables, and that's across hydro, wind, geothermal, and solar. To put that number in perspective, that's about one and a half times the size of the entire U.S. electrical sector, which is installed today globally. The big countries, obviously, the U.S., China, Canada, Brazil, much of the European market. Even if you took China out of the equation, as we're not looking there today to invest in renewables, your number would still exceed the entire installed capacity of the United States. In addition, $200 billion of new investment is flowing into this sector annually. We think the universe of investable opportunities for us in hydro and wind, and over time, some of the other asset classes, will continue to grow.
It's a good place over the next decade where we feel we'll be able to buy for deep value and have enough investment opportunities to deploy a significant amount of capital. What does the market look like in terms of the places that we intend to invest in the near term? In North America, we've been in the midst, I'd say, of three to four years of a historically low commodity price environment. What we're really excited about in North America is that you've had five years of a deep recessionary backdrop. You've had shale gas. People have become conditioned to a view that energy will be cheap here for a very long time.
We don't disagree there's an abundance of gas in the ground, whatever your view of future energy prices is, most people would acknowledge that at $40 a megawatt hour for power, nothing new is getting built in the system, and no new investment is going to occur, which will incent the replacement of coal that's coming offline eventually. In our view, this is a great time to be investing because we're able to buy renewables at the bottom of the cycle, and we're able to buy them in a manner where we can earn reasonable cash yields while we wait for both the economy to recover, gas prices to normalize, and obviously power prices to grow at a level that will incent new investment. Brazil is another market. As an organization, we've been in Brazil for over 50 years on the power side.
We started to build our portfolio of small hydros in 2003. Today, we're the largest owner of small hydros in Brazil. We have 400 people on the ground there. Brazil is a market where, today, I think Bruce mentioned it early on, there's a significant amount of capital that poured into Brazil five years ago, inflated values, and made it very difficult for us to grow our business in a way where we could be competitive on investment opportunities. Much of our growth in the last five years came from our own internal development pipeline because values have been going up as capital flowed in. What we've seen, and very markedly in the last six months, is that significant capital is now pulling out of the country. There's less competition, the currency has declined, and people have fears about inflation.
Our take on it is this is a country that's had 30 years of 4%-5% demand growth on electricity. To put Brazil in perspective, today, the average Brazilian uses one eighth of the electricity of the average American, and it's got 200 million people there and a growing middle class. This is a market with 100,000 megawatts of installed capacity versus the U.S. with a million megawatts of installed capacity. It's a great place from a long-term fundamental perspective. In particular, if you're trying to grow productivity and you're trying to incent economic growth, the place that you start from a fundamental perspective is infrastructure. We provide critical infrastructure on the electricity side, and we think our investments there long term will be very valuable to increasing productivity but will be very valuable from a rising price environment perspective. Just lastly on Brazil.
One phenomenon we have seen play out over the last year is that with supply bottlenecks, with energy bottlenecks, energy pricing has gone up there by almost one and a half to two times. If I was just standing here last year, pricing in that marketplace today is one and a half to two times higher in a year-over-year basis, simply because we've seen supply shortages and implementation of new thermal-fired facilities, which have really risen the cost structure in that marketplace. We think it's a great place to be, and we think as people leave the country and the currency declines in value, investing capital there becomes cheaper and gives us a better return profile. Today, we have no renewable investments in Europe. It's a market that we'd love to be for obvious reasons. We talk about it a lot in terms of the distress.
One of the benefits of being part of the broader BAM Group is, if we were running a standalone power business and thinking about moving out to Europe, we'd have to invest in office, we'd have to invest in people, we'd have to invest in relationships. I think one of the really great attributes of Brookfield and our broad platforms is that we have an office in Europe. We have people on the ground. We can leverage off of the other investment teams in infrastructure and properties. We have relationships that we can bring to bear to help us as we understand a particular geography or investment landscape. Clearly, the obvious themes in Europe are distress and capital constraint. We think it's a market that's really well-suited for us because they've had a wide acceptance of renewables for over a decade now.
We think that if you look 10 years from now, we'd love to be in a position in Europe where we've got a business that looks and feels a lot like our North American business. A large operating platform, the ability to buy single assets and tuck them in, abilities to buy large portfolios and do capital markets transactions. We'll obviously go slow. We want to be careful, but we think that the time today and for the next few years, as capital continues to get more scarce, will be pretty important over the next 10 years of us building out a strong platform there. What do we bring to all of this, in addition to strong operations as a manager? Clearly, everybody talks about M&A. We think we have a very strong M&A expertise.
Our ability to go through transactions, our ability to review transactions, our discipline to transact only at returns that we would find acceptable and ultimately also walk away from deals, I think sets us apart from others. Sam pointed out that pension funds who are on a program to allocate often have an embedded pressure to put money to work. I think one of the great things about us is that we can be patient, we can bring a very patient long-term view to investing. This year alone, we've reviewed over $20 billion of transactions globally, much of that in our core markets, and we've executed on two. We would view that as a very strong year.
We wished we could execute on more, ultimately, returns are paramount, we recognize that we're investing not only our own capital, but capital for our partners, have a long-term track record that we're trying to achieve. Strong balance sheet and liquidity. Those are the two, I'd say, areas where we spend a lot of time, that speaks to discipline as well. Investment-grade financings, non-recourse mortgages, non-cross collateralized. The way we finance our business, it gives us the liquidity and the financial flexibility to transact on opportunities when we find returns are compelling, and in particular, when we find that capital is scarce. As I mentioned earlier, today, we have approximately $3 billion if you combine our private equity capital and the liquidity in our public-listed issuer, $3 billion to use to deploy into opportunities globally in the markets that we're targeting.
Our investment returns, consistent with the strategy earlier on, are 12%-15% returns. On the development side, we have an 1,800-megawatt development pipeline. Although we've grown from three plants to over 200 in 15 years, and much of that growth has come from M&A, we do pride ourselves on being able to deploy investment into development-type returns. We've built approximately 25 facilities in the last 15 years. We target 15%-20% returns on that activity, and we think it's a great way of generating self-sourced, high-return opportunities that we can manage and that can build long-term cash flows. A good example of that today would be we are building a 45-megawatt hydro project in British Columbia. It's going to cost just over $200 million to build.
It has a 40-year contract with the BC government, and we put 40-year financing in place to match the PPAs there at an all-in interest rate of 4.5%. Those types of opportunities, when we can execute on them, are really compelling to shareholders and really allow us to earn 20%-plus type returns, and in particular, are most valuable when too much capital is chasing opportunities. We think that if we look out over the next 5 years, the pipeline that we've built will give us the option to deploy approximately $500 million over the next 5 years. It's about $100 million a year into these types of opportunities.
If I was to summarize these last two pages in terms of M&A, the growth environment in front of us, the markets that we're targeting, and development, we think that it's realistic to be able to deploy $500 million-$700 million in M&A opportunities in the next few years looking forward, and $100 million annually into greenfield development. Based on the returns that we target, 12%-15% on M&A, 15%-20% in greenfield, we feel quite comfortable that the next 5 years for us will be able to deliver on total returns of 12%-15%, deploying a meaningful amount of capital.
If you just did the math for fun on that, if you're able to deploy $700 million-$800 million per year over the next 5 years, that's about $3 billion-$4 billion of capital that we think we can deploy in this sector, and it would effectively double the size of the business that we have today. We're already the largest in the world in terms of a global renewable platform. So maybe just to describe the listed issuer for a second, Brookfield Renewable Energy Partners. We have today a 5.4% distribution yield, a very stable cash flow profile, 92% protected by contracts. We have a BBB+ rating by S&P. We pride ourselves on our investment-grade balance sheet, low levels of debt. We generate approximately $575 million of FFO in that business annually. We pay out 65% as a payout ratio.
I think one of the things that we are trying to do today, and we've been trying for the last few years, is position that business not just for the growth that we talked about, but for very strong organic growth. We've been pretty successful in the last 12 to 24 months in acquiring, in this very low commodity environment, assets that we think will provide very strong upside in the future. What I mean by that is we've been able to buy hydros in North America today, underwriting them for 10 to 20-year price curves that start at $40 and grow with inflation, so over 20 years, average close to $50 a megawatt hour.
Regardless of what your view of future pricing is, we think that if we can buy in this environment, earn 8%-10% cash on cash returns. While we wait for prices to rise, we're setting up this business not just for M&A growth and deployment of capital, but very strong organic cash flow growth. Today, we have 2 terawatt hours of power that's subject to that type of cash flow growth. To put that in perspective, it's a 20-terawatt hour business. 10% of our volume right now has been acquired at the bottom of the cycle, and every $10 of price increases will lead to $20 million of FFO growth in this business.
If I put some math around that in terms of where we think we can do organically with the business, not just in addition to maintaining strong margins, we think that with our development pipeline deploying $100 million per year, we can do that without accessing any public equity market capital or using private institutional capital. We can do that simply with the cash flow that we retain behind by only paying out 65% of our FFO. If we can deploy that at 12%-15% returns, then Brookfield Renewable Energy Partners' cash flows on an FFO basis should grow by 2%-3% annually.
If we take the 2 terawatt hours that I just described that we've been able to acquire in this price environment in the U.S., and in particular, certain parts of the U.S., every $10 as I said will be by $20, and that's a 3.5% increase just for a 10 increase in power price. Finally, we have a 14-year track record of growing our margins and beating inflation on our cost structure, which we think. In a business, you can't always control everything, but the one thing you can control is costs. I think we pride ourselves on being able to beat inflation on our costs over the last 14 years very consistently. Where do we go from here?
Clearly, the investment program in terms of putting money to work, we think the big three themes are, can we invest in North America at the bottom of the cycle? Hopefully this period is longer for a little while longer before we see a recovery. If we can keep allocating capital in the U.S. and in Canada in this price environment, we think we'll position our business very strongly going forward. Brazil is a great place. We have a competitive position. We're the largest owner of small hydro. We think that it's a great time to invest in particular as capital. Obviously, Europe is a longer-term strategy, and if we can build our business out there for the next decade, have something that resembles what we have in North America, that would be outstanding.
Internally, we want to continue to find strong pricing signals and contract down our price exposures through PPAs. Raising capital. We don't want to be beholden to capitals, obviously, as they've continued to be volatile. Pulling assets. We've identified about $400 million-$600 million of opportunities in the near term that we can pull out of this business. I think as we recycle capital, put money to work, and ultimately re-contract assets for opportunities to raise debt levels while maintaining our investment-grade ratings. Obviously, liquidity and our credit ratings are paramount to making sure all that's successful long term. Any questions?
Yeah. Bert Powell, BMO. Europe, can you build that? Is that really you've got to buy a platform there to get critical mass?
I think a little bit of both. I think you start small. You can find a business there with people on the ground, development expertise, operating expertise. You can build from there. It's no different than what we had in North America. I joined in 2002, a few years after we started with three facilities. We had 40 people doing this. Today, we have 1,200. I think you start small, you build the internal expertise. I think we have a huge advantage in that we already have the expertise here, and we can take people from here and put them over there and actually have a head start relative to somebody. We don't need a big splashy transaction and a platform on day one. We can find a small business and then grow from there.
Obviously, if we can put significant capital to work internally, that would be ideal.
Are there opportunities to do that? Are there large-scale platforms that you see on your event horizon potentially that at the right price, obviously, you'd pull the trigger? Are they just few and far between a build-it strategy?
I think we've seen opportunities that are a little bit more on the medium-size, high-scale opportunities. If you own the larger asset pools, it's the utilities, it's governments. Some of the construction companies in Europe have large assets. Many of them have announced divestiture programs for their own capital-raising reasons, obviously. Like anybody, if you own a lot of stuff, you kick the can as long as you can. What we've seen is there's some need for new capital. There's some need for new investment, but they'll take their time. Our job in the next few years is to find those opportunities, create relationships with those people, and when capital is for a transaction, be a partner that's preferred, and somebody who can work productively with the sellers of those assets. Andrew?
Andrew Kusky, Credit Suisse. How do you think of three to five years from now, wind versus hydro? You obviously have a very small wind portfolio, but that could grow rapidly. Related to that question is, how do you think about the economics of the various assets? If you think hydro, 20 years plus if properly maintained. Wind seems to be about 20 to 25. Just your thoughts on that.
Sure. Let's start with asset mix. Five years ago, we had business. Today, we have 1,000 in wind. Small relative to our hydro business, but it's not small on an absolute basis. We're a large producer of wind or a large owner of wind assets. I think asset classes that we'll look to in the future are solar, potentially biomass. We've looked at geothermal. Let me start with solar. We have a development project in our pipeline today or in our portfolio today. This is one that we brought our acquisition of a public company last year. It's in Puerto Rico. We didn't ascribe any value to it when we underwrote it's a bit of a free option for us. It's an opportunity for us to learn internally. I think when it comes to new technologies, like to build the internal expertise.
We did that with wind. We like to run operations and maintenance in-house. We like to have the internal expertise. We like to know what we're underwriting. We want to make sure that, if we're going to underwrite returns, that we feel that there's a path there for both to produce at the level underwrote, and for our ability to maintain those assets in the real assets over a long period of time. It's a class that we're going to learn. We think it will be a part of our supply going forward in the future. I wouldn't say in the next couple of years, but five years out, that could be a pretty important area where we start capital, in particular as panel costs come down, balance sheets of some of the manufacturers get stronger.
Hopefully, as a buy for value, maybe as a second or third stuff that's been built and potentially bring some distress. Wind will continue to be built out in our business. We see wind as a great asset class if you underwrite it properly. It is 20-25 years of life. That being said, if you build in areas where there's strong scarcity value, if secure land and land underneath it with the view to rebuilding after 20-25 years, we feel it's a place where you can have optionality on the back end to rebuild a great site where you already own the road access systems, the substation. You own much of the infrastructure that comes with it, and you're the preferred incumbent owner and operator that has the rebuild right in front of you.
We think of wind beyond sort of the one cycle of cash flows, we don't pay for that second cycle. We view it as free upside to it. Wind, you have to be careful, and I think being careful has served us well. A lot of people have been hit with lower wind speeds, and pricing maybe that wasn't contracted away from those two things. Andy, just right there.
Just tell us over the 14 years where you've had a compounded return of 6%. Can you tell us what power prices just broadly have done over that period of time so we can get a sense how much have been priced in the marketplace versus value that you've brought?
Sure. I'll break it down into the periods. If you take the early part of the 2000s, you saw a mild recessionary environment that dot-com sector was blowing up. The capital markets were not doing well. Gas was $2 in the early part of the decade. There was this, the gas was going to be cheap for our prices were going to stay low. Then you had a bit of deregulation that was going on many of the Northeast markets. That was really where we started to invest in the sector in a meaningful way. We did that. We built out our New York business. We built out our New England business. We bought assets from the Ontario government. We started to build in Brazil. That really went on until about 2006. 2006, a lot of capital started to flow into this sector.
Gas went up to $8 to $9 in MMBtu. The world was getting very hot and facing opportunity. If you look at our history, we dialed back our investments and really started to focus on integration of our operations, building out our development pipeline, where we could control the return, control the risks that we were taking. We did that for about 3 years. We started to build, we built significantly more in Brazil, we picked the capital, or at least we knew the returns we were taking and the risk-adjusted returns we were taking. You had the global credit crisis, we're in the stage today where there is an embedded view, again, that power will be cheap forever. Capital is scarce. We're off one of the deepest recessions we've had in 50 years.
It's the reason why we actually are the most deployed in this sector because we think that it has a lot of the same themes, maybe even better from an investment perspective, that we saw in the early part of the decade, where we deployed significant amounts of capital and made significant returns for shareholders from our hold period back then. That's why we like this environment. Like I said, if it persists for a few more years, we may be able to meaningfully grow this business. I think that's it. Thank you. I'll pass it over to Cyrus.
Good afternoon. Today, I'll give you an overview of our private equity group, investment strategy, performance, and investment themes. Brookfield's private equity business is on making value investments on an opportunistic. We have a strong strategy of private equity investments in industries we understand, and distressed investments with an objective of the underlying investment. We aren't dependent on distressed environments, and nor do we need stable capital markets to execute our strategy. A key differentiator of our business is we have deep operating skills within our group on any situation. Our private equity group has almost $8 billion of assets under management, of which $2.5 billion is through funds, and just $4 billion is directly owned investments. Over time, a greater proportion of assets will be through funds.
As we sell down our interest in our direct investments, we'll cycle that capital into our share commitments for future funds. This will allow us to increase our assets under management and also help to increase Brookfield's returns on its invested capital. Our first two funds are here, and we've invested about half of Brookfield Capital Partners III, our most recent fund. Our senior investment team is experienced, and most of us have worked together for 10 years at least. Dedicated team has grown over time, which positions us to raise and manage significantly more capital in the future. We now have dedicated private equity in Canada, U.S., Brazil, London, and soon to be Australia. Since the launch of Fund 1 years ago, we've invested $2 billion of capital through funds. Investments have returned three times for our investors.
On an overall basis, putting all our investments for 12 years, we've generated an IRR of 27%, 28% net fees to our limited partners. This is a very significant performance compared to the S&P index over the same frame, and bodes very well for our future fundraising activities. I would add that we now have independent confirmation that our funds are in the top quartile among North American private equity funds of similar risk. We expect the performance of unrealized investments to continue improving as operating enhancements are implemented in the business market position for our companies continues to improve. Investment approach has been consistent for a long period of time. Our overall objective is to invest at a discount to intrinsic. We do this in a number of ways, primarily by understanding the cash flow generation potential of the businesses we're acquiring should they be managed appropriately.
When pursuing distressed investments, we look for mispriced securities. When making private equity investments, we look for businesses that are under-managed. Distressed securities, once restored to a normalized balance sheet, tend to trade stronger values. Businesses with assets that are under-managed become very attractive to strategic acquirers once they're fixed. Finally, we are highly focused on downside protection in all our investment activities, and as a result, our portfolios generally have a lower level of volatility than many others. We may miss out on very high return opportunities with this approach, but we should seldom have a horrible out where our entire capital investment is wiped out. In sourcing transactions, we've proven our ability over a long period of time to create proprietary ideas which turn into great investments. This comes with experience, scale, and reputation.
During the last 12 months or so, the private equity considered about 50 transaction investment opportunities. Three of these became investments. Two of them will close shortly. Our knowledge insight benefits from Brookfield's global businesses and perspective, which few other private equity groups would have access to. We focus on certain industry sectors where we've developed expertise over many years. Today, our portfolio comprises about 20 companies which generate $9 billion in aggregate revenue with 14 employees. We have successfully implemented business improvements in all of our companies. Each one of our companies today is a low-cost producer in its industry, has a very strong market position in its particular niche. Repositioning efforts continue to be reflected in our operating companies, as you can see on this slide. The fees generated in our private equity business are growing.
Base management fees, $32 million annually, cumulative performance fees in excess of $300 million over the last five years. These fees should continue growing in the future as we raise larger funds. Over the last year, we focused on four opportunistic investment themes. First, distressed sellers with strained balance sheets have enabled us to assemble the second-largest coal bed methane natural gas company in Canada, with reserves of 750 billion cubic feet. Second, corporations often sell poorly performing non-core divisions, which enabled us to acquire a cold storage and logistics business at what we believe to be about 50% of replacement costs. We see potential for an industry roll-up in this sector. Third, we continue to look for opportunities in the mining sector, which remains significantly out of favor. Early in the summer, we made a senior secured loan of $100 million to North American Palladium.
We expect to double our money on this investment over a four-year period. Finally, from time to time, as industries fall out of favor, we find opportunities to increase existing investments at discounts and values. During the last 12 months, we privatized two oil and gas companies that were trading very poorly in the capital markets. While staying active in our investment activities, we've taken advantage of recovering housing and capital markets to monetize investments and lock in great returns. We monetized several investments this year as markets, through a combination of secondary offerings, participating in share buybacks, and company sales to strategic acquirers. I just wanted to highlight two of these to you.
Longview Fibre, which I have discussed in the past, but to remind you, this is a 1 million ton kraft paper mill that was underperforming when we acquired it essentially for its working capital value. We completely repositioned this, first by management, then by optimizing its product mix and focusing on high-value products. In fact, we reduced the number of product SKUs in this company from 200 to just 70. This enabled us to shut down four out of nine paper machines and run the remaining machines at very high operating rates. Longview's EBITDA increased $40 million to $160 million and attracted interest from industry participants. This year, we sold the business to KapStone Paper and Packaging for just over $1 billion. All in all, we earned 10 times our investment. I just want to acknowledge the incredible efforts of Hugh Sutcliffe.
He's one of our very senior operating executives who did a terrific job on this turnaround. Sometimes our investments are much more challenging than we anticipated, and they don't go as smoothly as we had hoped. Ainsworth Lumber is such an example. We acquired Ainsworth through a restructuring transaction in 2006, during what we believe was a soft patch in housing. We had conviction about the asset quality, but we clearly misread the severity and extent of the ensuing credit and housing collapse. Ainsworth's revenue dropped from a peak of about $800 million to $300 million at the bottom. Its EBITDA dropped from $250 million to $5 million. What did we do? We took several steps to reposition the business, including shutting competitive mills, enhancing product development, focusing on high-margin products.
Ainsworth's remaining mills ran at very high operating levels and rates and generated enough EBITDA through the downturn to service the company debt. Ainsworth acquired a 50% interest in an 800 million board foot mill from its bank joint venture partner. It bought it at less than 20% of replacement. We acquired additional equity and debt in the company throughout the downturn at fantastic values. As the housing market has recovered, Ainsworth's trailing EBITDA has grown to $190 million and is now restarting its 800 million board foot mill. These achievements gave us the ability to attract offer from Nashville-based Louisiana-Pacific Corporation at a value that's acceptable to us and should be highly accretive to their business. Ainsworth shareholders will receive about half the consideration in cash, half the consideration in stock of LP. Brookfield, through its Capital Partners, for about 9% of Louisiana-Pacific going forward.
Based on today's trading values of Ainsworth, we've earned an overall IRR of 18% on this investment. We have the opportunity to enhance this return through our continuing position in Louisiana-Pacific. We believe the current markets provide an interesting opportunity for our business. The U.S. economy continues to improve. Equity markets and debt markets are strong. That will assist us to continue exiting investments and to finance our businesses on very attractive terms. In this environment, we prefer corporate carve-outs to take privates. Continuing housing correction is a backdrop for us to pursue underperforming building products companies. While debt continues to be abundant and relatively inexpensive, certain issuers will certainly struggle as interest costs move up. We continue to look for mining companies with delayed development projects, which have limited access to capital given declining commodity prices.
Exceptional low natural gas prices have pressured many natural gas producers, as well as merchant power generation businesses, which cannot generate cash flow in the current environment. As you have heard, our private equity group is well positioned to continue growing our business and enhancing fee growth for Brookfield. As our private equity group does not have a public listed issuer, I'll hand it right to the Q&A.
Thank you. Cherilyn Radbourne, Securities. It sounds like you see an opportunity to grow your private equity platform, both through geographic expansion and larger funds. I just wondered if you could address how much of the $14 billion of excess capital that Brian referred to go into that expansion.
Well, I have to arm wrestle all of these guys to see who can get some of it. Look, I think what we try to do, scale the business up based on the opportunities and our ability to execute that value of transactions and platform in the future. Our view is our private equity business is by far our smallest business, but our returns have been excellent. Our reputation is excellent. We think fundraising in the future should be a much more significant scale going forward. As to a target, how much of the capital will come from Brookfield? Maybe a third, something of that nature. Just to let our limited partners know we have significant skin in the game, and to help us grow the business.
How big the future funds will be, we'll have to see, but we certainly expect it to be much, much larger than our current business.
Cyrus, just on the mining, metals, natural gas, how competitive is it in that environment for you? I can't imagine, given that space, that really competitive, but I'm wrong. I'm wondering, is that where you're looking to buy businesses or is this really a balance sheet investment in those kinds of assets?
It's two great questions. It's always competitive. There's always someone else out there. There are very few instances I can recall where nobody else showed up. There are other like-minded investors like ourselves who like these out-of-favor opportunities. Having said that, we have a lot of expertise in mining, a lot of history in mining, a lot of expertise in natural gas, and in power generation platforms. I think we have as good a shot at these as any other investor in the world. Your second question was? Right. What are we doing? Our view, if we're going to control something, we'll buy the equity and have equity exposure, and we'll control it. In that instance, we need to buy very cheaply in order to turn the sorts of 20% plus returns we're targeting.
Sometimes we can make a loan to a company, do little to no work, and earn a fantastic return, and that's fine with us, too.
Andrew Kusky, Credit Suisse. Cyrus, think about the opportunities in Europe. I ask the question in part because if you think about the banks and the recapitalization efforts of the banks, there's still a way to go. There's a lot of capital raising from the banks themselves, but there's also their loan books. A largely corporate lending market should evolve into more capital market kind of activity for up there. How do you see your opportunity from Brookfield's perspective in it?
It's going to be similar to what we've been doing here over the last few years in the North American. We're targeting out-of-favor industries, companies that have operational problems. That's really what we're looking at. Today, we're spending a lot of time on building products in Europe. We have history in that sector in North America. In identical sectors that we've been in, and some of them slightly different, but that would be a natural evolution for us.
What are you looking for in oil and gas? Do you deal with the various negative free cash flow of the business on average? Do you share a macro view at the top? In other words, the previous presenter talked about the trough of the electricity cycle. Obviously, higher gas prices would do wonders for that, but they would obviously do wonders for the CBM business as well. I'm just curious, is it an overall game plan that you share, or can you have a separate macro view than your partners?
We certainly share the same view. We're actually long-term very bullish on natural gas for a variety of short-term reasons and longer-term reasons, structural reasons. In the interim, what we are buying very high-quality natural gas assets. Our operating costs are subdued [inaudible]. We are buying amongst the very lowest cost, highest quality reserves that are out there. Even at very bottom of the market, we are generating a little bit. Not a lot, but a little bit. That's really our strategy. Very long life reserves, play out the optionality. If I could just add, a lot of people ask us about the natural gas curve going, and they're fixated on it. What I remind them is that curve is made up of very few contracts. If you go out one year, the total value of the contract is $80 billion.
The second year is $7 billion. The third year is less than a billion. There is no forward curve. Thank you very much.
It's now 25. Do we have plenty, so I don't have some questions at the end? We do have 25 minutes. We said we'd end by 4:00 P.M. If it was to take any time, people can leave if we've exhausted all the time. I'd be happy to take questions on any of the things. Maybe the only comment that I'd make just out of all the presentations Is that a lot of time, and with all investments like we make, people, and for good reasons, don't get me wrong. For good reasons, they unduly focus on the going-in cap rate that exists today that someone Our business is really about, on an internal rate of return basis, compounding over a long period of time, can we put money to work at 12%-15%?
If we can, and we can get lucky a few times, you're going to earn a little more than that and a bit less. If we're near that, our business does really well. The LPs will do well. Our private fund people will be very happy. Generally, it's not about whether interest rates go up 100 basis points or they go down 100 basis points. Probably there's one thing that we are really worried about, that interest rates go to 9, 10, 12% on the long end. If you believe that, then there will be in our business as well other businesses in the world. We as a group don't believe that. What we do believe is that interest should have been and would have been 5% to 6% on the long end. It's in various similar rates across the world.
They've been unduly low, and they're finally coming back. In fact, 125 basis points on the long end in the last little while is very good. Commentate because it means almost nothing to our business, whether it's 100 basis points more or less that you finance at. What's good for in fact, open capital market availability, for us and less so for others, where we want to put money to work. Our global business is extremely important because we like to invest that money to work in those places. You can't do that if you're in one place. If all you do is invest money in New York City when everyone's in New York City, the opportunities just aren't available to invest on a value basis.
That's basically what I guess I would say in light of the fact that there will be disruptions along the way as fixed income investments get hurt with interest rates going up. The types that we make don't necessarily get harmed that much. Just I would make that comment on just because a few of the questions were related to that, and some of Kim's slides talked about that. With that, I take any questions if there are any from the crowd.
Bruce, Brookfield now has close to $200 billion of management, you seem to be accelerating in that area. How much over the next years do you think you could take in and reasonably invest? Could you grow to $300 or $400 billion under management without reducing your rates of return?
Brian, so much, they're always right. I can't do six slides. I think the returns in there show a five-year managed assets going from $80 billion to $150 billion or circle that number, which is adding $60 or $70 billion of it's doable and we can achieve it with the platform we have. In fact, I think we can have that many people within the organization. You scale up a business, and it will take more people and more time and more effort. We have an enormous fixed cost of this that we've been investing in for the past 10 years or more. The returns will come as that buildup comes.
No doubt we have to be careful because there are situations where you can raise too much money, and it causes you to do things which aren't appropriate. You put money to reasons other than return. I guess the only thing we've tried to do throughout the organization, this goes all the way from all of our members of management who invest enormous amount of their capital in the company, all the way down to the fund we have. We have a significant investment on behalf of the Brookfield shareholders. What that does is it's more than just a simple alignment of interest. It makes us about the funds. Whereas you didn't have to cap a fund, and you could have raised more money maybe.
What it does is we need to think about it, and we need to work and can we get it to work properly? I think it helps the whole organization be very aligned. I promise that we won't make mistakes. I'm sure we will along the way in various places, but hopefully not again. I think we can. The direct answer is we can scale it up, and we'll scale up at an appropriate pace without taking undue risk.
Bruce, two questions. Number one is, as BAM takes on the nature of looking like an asset manager and is more investment fees and less about FFO and on sale, are you comfortable and confident that that arbitrage in terms of how market will perceive cash flows and your earnings is going to give positive value to your shareholders over a period of time? I'm just thinking there's a lot more volatility in terms of how people about asset managers and the ups and downs of a market sometimes think about infrastructure companies. I'd love your thoughts on that.
The second question is, if you have an extraordinarily volatile market where you have minority interest in all your vehicles, how do you prevent a Bill Ackman or somebody else from coming in a crash environment where BI is at $30 a share, and he convinces everybody, "Let's liquidate this $34 a share." He gets people conditioned to do that, and all of a sudden, you're out of business in terms of running BIP.
The first question is on asset managers and how will Brookfield Asset Management trade in the environment going forward. I don't think we can promise anything. What we tell you is, this is an incredible business. It should be able to compound at, for the one takes, should be able to compound at [excess] returns over time. Whether that will translate into stock market value at various points in time, I can't guarantee it. What I think we can say is that 10 years from now, we will look back, and if we do what's right, we will earn a very solid return for the investors in the company. At points in time during that 10 years, this will be recognized in the stock, I'm quite sure. I don't think it will be volatile.
You probably know more about how assets trade than I do in the market. What I can tell you is what we have are purposely perpetual or very long life vehicles, and hence fees off of them are almost better than the underlying asset values. The volatility should be less than what you otherwise have in an infrastructure asset because you're getting a fee off the top, if you want to call it, or aside. Whether that
Take it to the second question.
I'm going to come to that one. Whether that can be translated into stock value at one point in time, I don't know. Whether we can explain it properly. Any advice on explaining the business after you've seen 136 slides today would be helpful because we try to explain the business, and we try to simplify it all the time, and people are changing the slides, and I understand why. It's only because we're trying to explain the business a little better. On your second point, we could have made a very simple change over the years to the business and simplified it and done things which would have probably short-term that meant more for the shareholders and would have harmed the values longer term. Secondly, put where we take to being in a situation where someone has control over our destiny.
We didn't make those decisions, and we have potential control of the company today and all of the units that we have being the limited partnerships that trade, Brookfield Asset Management all over those entities, so no one can do what you just did. Unless we choose to. The fact that it trades, it's an undervaluation, and we believe that's the best thing for the business and everyone's treated equally, we might decide to do that. It is in our power. We believe in almost every situation we have. We try not to ever get into a situation where we ever put ourselves at that risk. I don't think there are almost any situations. We dealt with one of those, and we're able to be in a situation we were happy with, if at all.
We try not to, and I don't think it will occur, but you can never foretell the future.
You have and will maintain voting.
To the extent we create those entities and have created them, we have voting control over them. To the extent we buy into a business and the bargain was at the start that we only own 20%, 25% or 40% of it, that would be, and that was part of the bargain. That's fair with it. To the extent we create them, we would never put ourselves in that situation.
Bruce, Brian's presentation contained a lot of numbers that relate to what you've called net asset value and intrinsic value via the past. Recently, you, I guess, had some issues in being able to provide those numbers. Can you talk about the regulatory or other pushback on providing this score on a regular basis?
I'm going to try this. To answer it, if I don't do very well, Brian Lawson is going to. I guess what I would say is, over time, what we've tried to do is very transparent with our investors and treat them like they're our partners. We've tried to give information out which we as shareholders ourselves would want if we were in your shoes. Sometimes that information is difficult in a public company to provide to investors because the securities commissions deem it to be not something that other investors should receive. Whether we agree with that or not, there are securities regulations, and you live within them. We now provide whatever information we can. I'd say, Michael, we'd rather give all the information we used to give. It's just not possible.
Even though if I was privately or any of you privately, that's what we'd probably share. We just can't do it.
Can we
Not on my behalf. They know Brian Lawson's name, but they don't know my name. Brian, would you answer that differently or say anything, add something?
The only thing I'd add to that, Michael, is as we moved into the IFRS world, I guess initially we thought that IFRS was going to be this, I'll call it almost like a silver, where so much value would be on our balance sheet and in our IFRS book value per share. We quickly learned that that was not the case. We started a few, I'll say, fairly simple rudimentary adjustments to try and get people transparency and visibility on what the values were. As the next one, two or three years rolled out, and we moved from that initial transition value to coming onto our books at values other than a fair value. We ended up going from, let's say, two or three fairly simple adjustments to we're adding seven things here and taking three things away there.
Just kind of the whole simplicity thing, I'd say, frankly, it got a little bit more convoluted and complex to provide those numbers. As we even walked through explanations with people, we were just thinking, "You know what? This is getting really complicated." I think my view is one of the things that with the evolution of the corporate structure is it really is simpler to think about it in the context of the listed entities. Now, you still need to understand what those entities are really worth, and Sam and Ric will give you some of their thoughts on that here today. It's not just about what they trade at. Anyway, we just think it is policy. It's just a lot, and presumably that's a value. That was a lot of the thinking as well.
Andy?
You mentioned rates going to the long end, 9%, 10% as a potential disruptor to the model. As you think over the next 10, 15 years in building this global real asset management platform, what else keeps you up at night? What else do you think about in terms of not just macro risks, but management risks and risks that could be disruptors to this platform that BAM has built?
I sleep every night because I hear about so many things I can't keep them all track of them. I'd say two other things that are difficult in the business, and this is not rocket science, and it's not specific to our business. I think it's almost evident in every single business. Number one is people. We have a great group of people, but as we expand, the biggest question is keeping the culture of the organization in place and hiring and building the people along in the business. That's number one. Number two is, and it's related, but as we grow the business, being in new places is important. We don't have to be everywhere, but we have a small business in India today. We have people there. We have 20 investment people. The business will be much bigger 10 years from now from today.
That comes with inherent risks in how you invest, all of the rules that go along with it, and hiring people. I'd say new countries, if you're in a global asset management business, is probably the second thing that we worry about a lot because it just has many other risks. It's not that we haven't before. We used to be a small Canadian company. We're now in 30 countries, and we've done it. We have the experience, but it's probably the most difficult thing in the business. The power group buys. When you buy a hydro plant, we bought two. They're identical. They may be a little shorter or fatter, wider river or shorter river, or flow may be 60% or 70%, but they produce cash. You're going to write them on a 10- to 15-year basis.
You know what the power price is, whether it's locked in or rent that's coming to you for the power. They're pretty simple to buy. Whether you buy one in Colombia or China, there's inherent risks. I'd say that's probably the second thing we worry a lot as an organization, and management above.
Thanks for taking the question. When you think about your targets that you've put out in terms of growth rates and assets under management and values, and perhaps even further than that, will real estate always be the large contributor to the business that it is? In order to sustain the growth, this is somewhat related to the previous gentleman's question. Do you need to substantially bulk up some of your other business when you think beyond just a few years, five years, but whatever?
The good news is, Clark, who's the head of our group, he's left. I'm going to answer that question very specifically, but not my answer to this way. I would hazard to bet, none of this, it's all just guess the future. Our infrastructure business has the potential to be larger than the real estate business 10 today. That's given just the scale of what's going on in the world and the infrastructure that has to come off of corporate. More specifically, government balance. There are a few players that, A, have contacts with institutional capital, and B, know how to put the money to work. We're one of them. We're not the only one, but we're one of them, or we have an advantage over a lot of others that want to get in the infrastructure area.
I think it's possible the infrastructure could be bigger. Real estate, it's not that real estate won't grow and we won't be putting money to work. It's just it's a big business today. In fact, there's lots of people who invest in real estate in the world. We're not the only one. There's some good ones out there. We just happen to have a unique industrial roots in infrastructure, we start our business, and it converted over into infrastructure. Secondly, to Cyrus's point, which I think you're referring to on our private equity business. We spent a lot of time building our real estate business. We went to power. We went to infrastructure. I think the next business for us to build have all the inherent advantages, is our equity business.
We just haven't had a focus on it in the past, we will scale that business up in the next number of years. I think we can do it probably with less capital in it today, because most of the capital in the business today is [inaudible] asked earlier, most of the capital in the business money. It will be built out through our sort of capital partners fund.
Can you clarify your thoughts on us right now? You sound bullish. You've got good assets. You look like you're looking to invest there. The uncertainty around the commodities and the emerging markets seems pretty high.
Yeah. In the short, there's no doubt emerging markets are having their difficulties. If we were an investor for one to two years, you probably wouldn't put money in those countries. You're not going to see balances within a short period of time in any of the commodity sovereign emerging countries. Despite that, Australia is one of the greatest in the world. It has an unbelievable resource base. It's English-speaking. It has a great rule of law, the infrastructure opportunities are vast. The real estate opportunities are vast. I said this here before. Very few people get on a plane and fly 24 hours to go there. The competition is less. There's the locals, but they don't have access to the global money that we have, and there's a few locals that do, but not that many, and therefore, the opportunities are significant.
I'd make the same comment to the other emerging markets, but specifically Brazil, but also India and China. There's no doubt money's coming, getting out countries. If you have a short-term view, you probably shouldn't be investing in them. If they're setting the base, all of these economies are going to be unbelievable places to invest for the next 20 years if you pick and you do your diligence. We don't take short-term views. We invest more money based on short-term views. These long-term, when we talk about it, we're talking about a medium to long-term view because in what we do, it's great if you get in right at the bottom, but it really doesn't matter that much in the fullness of time.
More often it's being able to take advantage of the opportunity and getting your money to work and getting into the opportunity than it is picking the exact point in time when you put your money to work.
Hi. When you're talking real estate in Europe and going into Europe, can you be specific about what parts of Europe you are interested in developing real estate? Secondly, can you comment on what excites you about the development, your role in developing [inaudible] Downtown New York?
On Europe, thank you for clarifying that because Europe's a very big place. We have a business in what would have been referred to as Eastern Europe before, and don't really know that much. I'd say we are not really there. It doesn't refer to Russia or any of its affiliates that used to be part of Russia because we just haven't done business there before and don't for the time being. It generally refers to the U.K., Northern Europe, and parts of Southern Europe where we think there are recapitalization opportunities, either because the country is in trouble or there are companies related to that situation that are having those issues. That relates to all of our business. Specific real estate, I'd say it's generally Western Europe, Germany, France, possibly. We have a big business in the U.K., and that relates to both acquisitions and development.
Respect to Downtown New York, we have been there a long time with [towns]. We think the next two years will be the final, I'll call it renaissance [on town]. The residential city in Lower Manhattan is becoming very significant. That's pushing a lot of the young telecom and other media companies into Lower Manhattan. We are just in the midst of redeveloping the World Financial Center now called Brookfield Place. Which couldn't be done until the end of the expiry of their lease, which is I think at the end of this month, actually, which was a Merrill Lynch lease that they have been paying full rent to then. We are just in the midst of redeveloping in that center. I think five to seven years from now, it will be a totally different story in Lower Manhattan. We are excited about it longer term.
Bruce, you have raised $40 billion in private funds in the last year. You want to be purposeful in capital. Should we expect to see a little bit of a lull in the private fundraising side after such an active period? Are you going to continue as the slide, like another kind of march per year above this?
The funds are lumpy. We happen to have two closings within a short period of time. I suspect 2014 will probably be less than 2013. Inevitably, we're [inaudible] capital for various strategies we have within the business. We'll continue to see. We should, in the future, as the business gets broader and we're raising more capital, it should become a consistent strategy. The good part of that is every day talking 300 institutions on the private about things we can do with and for them. Having a constant product put in front of them to talk to them is an advantage to an [origin] and builds a brand and a franchise, as opposed to somebody that market it's the private equity fund, and they have one fund when 2013, they go back in 2017.
What our overall brand allows is much more repetitive work an institution, that allows us to build brand recognition.
Thanks.
It is 4:00 P.M. No putting their hand up. As a management team, we really appreciate you taking the time for this. We know it's a lot of time. Second, I would just end by saying that if there is anything that you can provide us in useful feedback, we would love it. The type of presentation, the slides, materials are what we appreciate. At 4:00 P.M. or right now, I think if anyone can stay, there's drinks upstairs for an hour to mingle with them that are here and others, and we'd be pleased to have you. Thank you.