Brookfield to enter growing ranks of long-duration investors

As part of an expansion of its private equity franchise, Brookfield Asset Management is getting ready to enter the fast-evolving long-term fund space.

Brookfield announced the initiative in its third-quarter letter to shareholders. It said it has “begun raising” a long-dated strategy that will leverage the firm’s experience “as long-term owners and operators of businesses.”

The goal, Brookfield said, is to provide for stable and predictable cash flows and market leadership positions that result in “compounding returns over a longer timeframe.”

Further details are sketchy, as the strategy is still being developed, sources told Buyouts. It is not clear when fundraising will get underway.

Long-term funds are popular with general partners and limited partners alike. They allow PE firms to invest in assets flexibly and beyond the usual three-to-five-year hold period, creating the potential for higher returns on committed capital over time. For investors with long horizons, the proposition is an attractive one.

As perhaps a measure of their popularity, long-term funds have raised nearly $50 billion since 2016, according to Private Equity International. Sponsors include PE giants like Blackstone, which last year secured $8.2 billion for a second vehicle. Joe Baratta, global head of private equity, then told Buyouts that long-duration investing “is now an asset class.”

Other proponents include BlackRock, which this year raised an initial $3.4 billion for an inaugural offering, and Cove Hill Partners, which in 2020 brought in $1.5 billion for a sophomore fund. Silver Lake also recently entered the space through a partnership with sovereign wealth fund Mubadala to invest $2 billion over a 25-year span.

In addition, Altas Partners, a pioneer of long-term investing, is targeting up to $5 billion for a third offering, Buyouts reported in March.

For Brookfield, a long-dated strategy will help broaden its $91 billion PE platform, the third-quarter letter said. The firm’s flagship buyout funds have already been joined by Brookfield Growth Partners, a tech-focused growth strategy, and Brookfield Special Investments, a large-scale non-control strategy.

The expectation is the new strategy will generate returns “below those of our buyout funds,” Brookfield said. On the other hand, “the multiples of capital employed are higher.”

Brookfield in September began fundraising for a sixth flagship PE vehicle, the predecessor for which closed in 2019 at $9 billion. A debut special investments fund is also in the market, earlier this year collecting $2.4 billion against a $5 billion target, while a second growth fund just wrapped up at $500 million-plus.