Brookfield Asset Management has announced a mega fundraise of $15 billion for its latest real estate fund.
The firm announced Thursday that the fundraise surpasses its initial target of $10 billion. It is Brookfield’s largest fund, but it could be quickly dethroned by a pair of infrastructure funds the firm is raising that are each targeting $20 billion, a Preqin report showed.
These massive fundraises are becoming more common in the asset management industry, with total private capital dry power hitting $2.1 trillion in 2018, Preqin data show. Whether all this dry powder can be put to work effectively remains a question.
“I suspect it’s just math that at some point size and scale becomes a challenge or potentially becomes a detriment to returns,” said Neil Downey, an RBC Capital Markets analyst who covers Brookfield. “I don’t know when that is. I think the way things work is that we may find out with hindsight.”
More than 150 limited partners contributed to the fundraise, including all manner of institutional investors, from public pension funds to family offices, according to Brookfield’s announcement.
The news that Brookfield’s fund was oversubscribed was not a surprise to Downey, he said.
“Brookfield and some others are having great success in their private fundraising endeavors,” Downey added. “There’s probably some element of concentration that’s occurring within these alternative managers with the big getting bigger and the big seemingly raising successor funds that are getting larger.”
These investors included the Retirement System Investment Commission of South Carolina, which contributed $100 million to the real estate fund, meeting minutes show. The firm also contributed $150 million to Brookfield’s flagship Capital Partners V fund, the minutes show.
Brookfield’s real estate fund is targeting a 20 percent gross internal rate of return, or a 16 percent net IRR, the meeting minutes from South Carolina’s investment commission show. The firm is charging a 1.5 percent management fee, as well as a 20 percent carry with an 8 percent preferred return, the meeting minutes show.
The fund will invest in “high-quality real estate assets on a value basis,” according to its announcement. The fund has already made ten investments totaling more than $5 billion so far, its announcement said.
According to South Carolina’s meeting minutes, the fund will be split 50/50 between investments in the United States and outside of the country.
[II Deep Dive: Preqin: Infrastructure Fundraising Is on a Tear After a Record 2018]
“We continue to utilize our core strengths — global reach, access to large-scale capital and operational expertise — that have served us well throughout our investment history,” said Brian Kingston, chief executive officer at the firm, in the statement. “We plan to remain patient in deploying capital but will be ready to invest when we see the right opportunities emerge.”
The firm manages a total of $330 billion, its announcement said. A spokesperson for Brookfield did not respond to requests for comment.