Brookfield Corporation (TSX:BN) is one of Canada’s greatest success stories in the world of investing. This alternative asset management powerhouse has delivered market-beating returns for decades, transforming early investors into millionaires.
In this article, we explore the meteoric rise of Brookfield Corporation, its investment thesis, exceptional leadership, and reasons why it could continue its incredible growth trajectory.
Overview of Brookfield Corporation
Brookfield Asset Management was founded in 1899 in Toronto as Brascan Corporation. It operated as a traditional conglomerate with holdings in forestry, electricity generation, real estate and more.
In 2005, the company rebranded as Brookfield Asset Management to focus on alternative investments like real estate, infrastructure, renewable power and private equity. This proved to be a masterstroke, catalyzing phenomenal growth over the next decade.
Today, Brookfield Corporation oversees a portfolio of iconic assets valued at over $850 billion. It has a global footprint across real estate, infrastructure, renewable power, private equity and credit.
Some of its crown jewel assets include:
- Canary Wharf in London
- Brookfield Properties retail malls in the U.S.
- Over 21 gigawatts of hydroelectric, wind and solar facilities
- A 9 million square feet office portfolio in New York
- 170,000 multi-family units and student housing projects
- Stakes in publicly traded companies like Oaktree Capital and GrafTech
In 2022, Brookfield conducted a reorganization to separate its asset management business from its investments. This enabled shareholders to invest directly in either passive holdings or active management.
Brookfield Corporation (TSX:BN) now holds the company’s asset management and operating businesses. Meanwhile, Brookfield Asset Management (NYSE:BAM) acts as a holding company for its investments.
Steady Growth and Strong Fundamentals
Brookfield Corporation has rewarded its shareholders handsomely over the long run. If you had invested $10,000 in Brookfield at the start of 2000, it would be worth over $160,000 today assuming dividends were reinvested.
The company has compounded shareholder equity by 16% annually since 2000. Assets under management have grown 19% annually from $15 billion to over $750 billion during this period.
This steady growth stems from Brookfield’s strong economic moat and stellar reputation. It enjoys numerous competitive advantages:
- Global scale and presence – With operations worldwide, Brookfield can acquire assets and raise capital anywhere. This enables it to spot opportunities globally and act decisively.
- Investment expertise – The company has cultivated specialized expertise across real assets like real estate, infrastructure, energy and agriculture. This allows it to uncover hidden value in complex assets.
- Operational excellence – Brookfield has considerable in-house operating expertise to enhance the profitability of acquired businesses. This facilitates smoother integrations and better performance.
- Strong relationships – Over 120 years in business has allowed Brookfield to foster relationships with governments, partners, creditors and regulators worldwide. This helps secure lucrative contracts and financing.
- Alignment with shareholders – Insiders own about 40% of Brookfield’s shares, ensuring their incentives are aligned with regular shareholders.
The company targets 12-15% returns on investments. With its operational expertise and scale, many assets end up substantially outperforming targets.
For instance, Brookfield purchased a Brazilian electricity transmission network out of bankruptcy in 2018. Thanks to operational improvements, earnings doubled within a year. The $5 billion acquisition is now estimated to be worth over $10 billion.
Such value creation is why Brookfield trades at a premium to asset managers like Blackstone. Investors rightly expect far superior returns from its active management model.
Visionary Leadership of Bruce Flatt
A huge factor behind Brookfield’s success is its CEO Bruce Flatt. He became CEO in 2002 and has skillfully stewarded the company since.
Flatt was an early mover into alternative investments starting in the 1990s. He foresaw their superior economics compared to traditional stocks and bonds.
Under his leadership, Brookfield pivoted into areas like real estate and infrastructure years before rivals. First mover advantage allowed it to cherry pick the best assets.
Flatt has also nurtured a performance-oriented entrepreneurial culture at Brookfield. The company attracts ambitious talent interested in building businesses, not just managing financial assets.
Brookfield’s decentralized partnership model empowers its operating teams to run their businesses independently. This allows ideas to flourish from the ground up.
Flatt has built tremendous trust with institutional investors like pension funds and sovereign wealth funds. This provides Brookfield invaluable access to large capital pools for acquisitions and growth financing.
As long as Flatt remains at the helm, investors can feel confident Brookfield is in excellent hands.
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Reasons to Remain Bullish
Despite its meteoric rise, Brookfield still has substantial room left to run. Here are some key reasons to remain bullish:
- Strong tailwinds – Trillions are expected to be invested into renewables, infrastructure and real estate in coming years. This directly benefits Brookfield’s target sectors.
- Abundant dry powder – Brookfield has over $100 billion ready to deploy across its funds. This dry powder creates ample opportunities for new acquisitions and follow-on investments.
- Public market expansion – Brookfield is expanding its public securities capabilities. With its alternative expertise and distribution scale, this could become a sizable driver of growth.
- LP stitching – Brookfield can cross-sell multiple products to the same large institutional client. For instance, an initial real estate investment can lead to infrastructure and private equity allocations down the road.
- Succession planning – Flatt is only 62 years old and unlikely to retire soon. Regardless, Brookfield has already initiated succession planning to ensure continuity.
- Geographic expansion – Penetrating new markets like India with growing infrastructure needs represent a long runway for growth.
Conclusion
Brookfield Corporation represents a rare breed – a market-beating blue chip with an established track record, yet still early in its growth lifecycle.
The company is the undisputed leader in alternative investments, operating on a global scale unmatched by competitors. Bruce Flatt’s brilliant leadership has created a magnet for top talent focused on operational excellence.
With abundant tailwinds and dry powder, Brookfield seems poised to continue its incredible growth trajectory. Savvy investors would do well to dollar cost average into this Canadian powerhouse and hold it for the long run.