Brookfield Corporation: From Canadian Roots to Global Infrastructure Giant

↑ Back to Top

I. Introduction & Episode Roadmap

Brookfield Corporation is a Canadian multinational company that is one of the world's largest alternative investment management companies with over US$1 trillion of assets under management, much of which is workers' deferred income from global public pension funds. It focuses on direct control investments in real estate, renewable power, infrastructure, credit and private equity.

The central question: How did a 1899 Brazilian tramway company transform into today's infrastructure investing powerhouse? The company was founded in 1899 as the São Paulo Tramway, Light and Power Company by William Mackenzie and Frederick Stark Pearson, operating in the construction and management of electricity and transport infrastructure in Brazil.

The company invests in distressed securities through Oaktree Capital, which it bought in 2019. Episode structure: From the Bronfman era through Bruce Flatt's transformation, to becoming the backbone investor of the AI revolution.

Key themes: Contrarian value investing, permanent capital advantage, and the power of operational expertise.

↑ Back to Top

II. Origins: The Brascan Story

William Mackenzie, a Canadian who'd already conquered railways back home, partnered with Frederick Stark Pearson, an American engineer fresh from electrifying Boston. Their pitch was simple: Let us wire your Brazilian boom town from our offices in Toronto. The São Paulo Tramway, Light and Power Company Limited was born.

What Mackenzie and Pearson understood was timing. São Paulo's population had exploded from 65,000 to 250,000 in a single decade. Coffee exports were minting millionaires faster than the city could build mansions for them. Every factory needed power. Every street needed light. Every neighbourhood needed transit. Control the infrastructure, control the future.

By 1912, reorganised as Brazilian Traction, Light and Power Company, they'd become something unprecedented: a foreign corporation so essential to Brazil that it employed 50,000 people and generated two-thirds of the nation's electricity. Back in Canada, only the Canadian Pacific Railway was bigger.

In 1959, Edper Investments, founded by brothers Peter and Edward Bronfman, acquired Brazilian Traction, Light and Power Company for $15 million. The Edper empire would grow into something vast and complex. At its peak in the 1980s, and early 1990s, Edper was one of the largest corporate conglomerates in Canada, controlling more than 500 private and publicly traded companies in a complex structure that was estimated to be worth $100 billion, employed more than 100,000 Canadians, and comprised 15% of the total capitalization of the Toronto Stock Exchange.

Edward and Peter Bronfman had money to burn, or rather, money they'd been forced to take. Their Montreal cousins had pushed them out of the family's Seagram liquor empire, leaving them with CAD $15 million and something to prove. Where others saw Brazilian Traction as a boring utility facing nationalisation threats, the Bronfman brothers smelled opportunity.

The complexity trap emerged gradually. During the 1980s, through an intricate and secretive web of cross-ownership, the enterprise controlled a diverse number of companies in diverse sectors, including oil, mining, beer, real estate, forest products, insurance and power companies. It went by a number of names, some including the moniker Edper, based on the first names of the Bronfman nephews.

The current Brookfield Corporation is the creation of the 1997 merger of Edper and Brascan. By this point, the empire had become unwieldy. After its peak in 1989, several factors combined to cause a near-collapse of Edper's empire in the early 1990s: a major economic recession, the Olympia and York collapse, a meltdown in commercial real estate that affected both revenue and valuation of key assets, increased scrutiny of leveraged financing and complex ownership structures.

↑ Back to Top

III. The Bruce Flatt Era Begins

Flatt joined Brookfield in 1990 and became CEO in 2002. The journey to the top included a crucial test of leadership. As CEO of Brookfield Properties during the September 11, 2001 attacks, Flatt led Brookfield's response to damage caused in Lower Manhattan, where the company had significant holdings including portions of the World Financial Center.

J. Bruce Flatt: The defining figure of Brookfield in the 21st century, Bruce Flatt has served as CEO since 2002. Often dubbed "Canada's Warren Buffett" in the media for his value-investing approach, Flatt transformed Brookfield from a somewhat opaque conglomerate into a focused, global asset manager. Under his leadership, assets under management soared from around $5 billion in the early 2000s to roughly $1 trillion by 2024.

The simplification strategy was paramount. From the tangled web of 550 companies inherited from the Edper-Brascan era, Flatt methodically streamlined operations into focused platforms. He diversified Brookfield away from non-core cyclical holdings and centered the company around Asset Management, Real Estate, Renewable Power, Infrastructure and Private Equity.

But Flatt's genius wasn't just buying low. He recognised something everyone else had missed: buried under all that financial engineering were world-class assets. Power plants. Office towers. Bridges. The same kinds of essential infrastructure that had made Brazilian Traction indispensable a century earlier.

↑ Back to Top

IV. Building the Asset Management Machine (2005-2015)

In September 2005, after 37 years, Brascan Corp. was renamed to Brookfield Asset Management Inc. This rebranding signaled a new era focused on asset management rather than conglomerate ownership.

Bruce created a structure of entities with essentially permanent capital. Unlike traditional private equity funds that must return capital to investors after a set period, Brookfield's listed partnerships could hold assets indefinitely, allowing for patient, long-term value creation.

The contrarian playbook became Brookfield's signature approach. In 2002, the company acquired "a 1.2 million square foot divided interest in Three World Financial Center… at a substantial discount to replacement value," due to lingering fear from the September 2001 attacks. This set the template for future contrarian bets.

Having maintained a strong balance sheet, Brookfield went on a shopping spree for $4.1 billion of equity investment during 2008 and 2009, when others were retreating from markets. This aggressive deployment during the financial crisis would generate exceptional returns as markets recovered.

Infrastructure as an asset class was still nascent when Brookfield began building its platform. While pension funds and sovereign wealth funds would later pile into infrastructure, Brookfield was among the first to recognize its potential as a distinct investment category offering stable, inflation-protected returns.

The "herd off the cliff" philosophy permeated the organization. Brookfield offices all contain a picture of a herd running off a cliff, serving as a reminder to employees of the contrarian mindset necessary to execute a value strategy. This visual metaphor reinforces the importance of independent thinking when others succumb to market euphoria or panic.

↑ Back to Top

V. Major Acquisitions: GGP - The Mall Gamble (2018)

The retail apocalypse narrative dominated headlines in the late 2010s. E-commerce was supposedly rendering physical retail obsolete, and malls were painted as relics of a bygone era. Mall valuations plummeted as investors fled the sector.

In February 2010, Brookfield Asset Management made a $2.625 billion equity investment in General Growth Properties during bankruptcy proceedings. This initial stake would prove prescient as the company nursed GGP back to health over the following years.

On August 28, 2018, GGP was acquired by Brookfield Property Partners and management of its former portfolio was transferred to its Brookfield Properties subsidiary for $9 billion in cash. Brookfield Property Partners announced it finally reached a deal to buy mall operator General Growth Properties for $9.25 billion in cash, with Brookfield already owning roughly one third of GGP at the time.

The thesis centered on premier assets in prime locations with operational transformation opportunities. Brookfield believed that while secondary malls might struggle, top-tier properties in major metropolitan areas would thrive if properly repositioned. The focus would shift toward luxury retail, experiential offerings, and mixed-use development incorporating residential and office components.

Results validated the contrarian bet. By focusing on luxury malls and leveraging urban density advantages, Brookfield transformed many GGP properties into vibrant mixed-use destinations that commanded premium rents despite broader retail headwinds.

↑ Back to Top

VI. Major Acquisitions: Oaktree - The Credit Platform (2019)

In March 2019, Brookfield announced its takeover of Oaktree. Brookfield Asset Management Inc. and Oaktree Capital Group, LLC completed the transaction with Brookfield's acquisition of approximately 61.2% of Oaktree's business. In connection with the transaction, Brookfield acquired all of the outstanding Oaktree class A units and approximately 20% of the units of Oaktree Capital Group Holdings, L.P.

The Howard Marks partnership represented more than just an acquisition - it was a meeting of minds between two value investing legends. Marks, renowned for his investment memos and expertise in distressed debt, brought complementary skills to Brookfield's real asset focus.

The acquisition allows Brookfield to offer a larger range of credit strategies. Simultaneously it represents the joining of forces of two titans in the value investing world. The strategic rationale extended beyond credit into building comprehensive wealth solutions capabilities, positioning Brookfield to serve institutional clients across the full spectrum of alternative investments.

↑ Back to Top

VII. The 2022 Reorganization: Creating BN and BAM

In December 2022, the company renamed itself Brookfield Corporation (traded as BN) and spun off its asset management business as Brookfield Asset Management (traded as BAM). On December 9, 2022, the company's name was changed from Brookfield Asset Management Inc. to Brookfield Corporation. Brookfield Corporation then spun-off 25% interest in their asset management business into the new publicly listed Brookfield Asset Management Ltd.

The structure created clarity: BN as parent company holding the firm's invested capital and owned assets, BAM as pure-play asset manager earning fees on assets under management. BN holds a 73% ownership interest in BAM, which is held 69% directly in BAM and 4% through Brookfield Wealth Solutions.

Why it matters: The separation provided clarity for investors who could now choose between exposure to Brookfield's asset management fees (BAM) or its principal investments (BN). This also opened opportunities for index inclusion, particularly for BAM as a pure-play asset manager.

Recent simplification efforts continued this theme. Brookfield Asset Management has completed an arrangement acquiring 73% of Brookfield's asset management business, enhancing its corporate structure and shareholder ownership. In this arrangement, BAM acquired approximately 73% of its asset management business's common shares from Brookfield Corporation in exchange for newly issued Class A Limited Voting Shares.

↑ Back to Top

VIII. The AI Infrastructure Boom (2020s-Present)

Recognizing the megatrend early, Brookfield identified three powerful forces reshaping the global economy: Digitalization, Decarbonization, and Deglobalization. Each creates massive infrastructure investment opportunities.

Brookfield projects that total spending on AI infrastructure will surpass $1 trillion this decade and $7 trillion over the next 10 years. This represents one of the largest infrastructure buildouts in human history, dwarfing previous waves of investment in railroads, highways, or telecommunications.

Power infrastructure plays have become central to the AI thesis. Brookfield Asset Management will develop over 10.5 GW of new renewable energy capacity globally over the next 5 years to meet global energy demands. Microsoft Corp. has joined Brookfield in this initiative, recognizing that AI's computational requirements demand massive, reliable, clean power sources.

The company currently controls over 46 GW of power-generation capacity, spanning hydro, wind, solar, and battery storage. Additionally, the company has about 230 GW of renewable energy development projects in its pipeline, including 74 GW that are already in advanced stages.

The Bloom Energy partnership exemplifies Brookfield's approach to the AI opportunity. As part of this collaboration, Brookfield will invest up to $5 billion to deploy Bloom Energy's advanced fuel cell technology in AI data centers. Together, the companies will design and deliver AI factories on a global scale, with their first site expected to be in Europe.

Data center investments have accelerated dramatically. Brookfield, its institutional partners, and another sibling, Brookfield Infrastructure, are building a global data center platform, investing in two U.S.-based semiconductor fabrication facilities, and investing in related data infrastructure such as fiber networks. Brookfield and its partners have invested over $100 billion into digital infrastructure around the world.

↑ Back to Top

IX. Financial Performance & Capital Allocation

Track record speaks volumes: "We have a track record of delivering 15%+ annualized returns to shareholders for over 30 years." Brookfield currently has AUM in excess of $500 billion and over the last twenty years has achieved a CAGR of 17% per annum versus 6% for the S&P 500 over the same period.

Capital deployment scale has reached unprecedented levels. In total, the company deployed $55 billion of capital into some of the largest and most attractive investment opportunities globally across a variety of sectors. At the same time, monetizations totaled over $30 billion, generating strong returns for investors.

Balance sheet strength provides competitive advantage: "We have maintained nearly $120 billion of deployable capital while investing $55 billion." This war chest enables Brookfield to act decisively when opportunities arise, without relying on external financing or partner approvals.

The permanent capital advantage versus traditional PE cannot be overstated. While competitors must exit investments within fund life constraints, Brookfield can hold assets for decades, implementing operational improvements and capturing long-term value creation that others must forgo.

↑ Back to Top

X. Strategic Analysis: Porter's 5 Forces

Threat of New Entrants (Low)

Scale requirements create formidable barriers. New entrants need massive capital bases to compete for large infrastructure assets. Building the operational expertise to manage power plants, toll roads, and data centers takes decades. Institutional trust, earned through consistent performance across market cycles, cannot be purchased or quickly developed.

Bargaining Power of Suppliers (Medium)

Asset sellers have options but face limited buyers at scale for multi-billion dollar infrastructure portfolios. Brookfield's reputation as a reliable closer who can navigate complex regulatory approvals gives it preferred buyer status. Sellers know Brookfield can execute quickly and certainly, commanding better terms.

Bargaining Power of Customers (Low-Medium)

Limited partners have alternatives but few match Brookfield's breadth across asset classes and geographies. Sticky institutional relationships, often spanning decades, create switching costs beyond mere financial considerations. Performance track record and operational expertise create differentiation difficult to replicate.

Threat of Substitutes (Medium)

Public markets offer liquidity but lack the control and operational improvement potential of direct infrastructure ownership. Direct investing by institutions requires massive internal teams and expertise. Other alternatives like hedge funds or venture capital serve different risk-return profiles. Real assets offer unique inflation protection characteristics that financial assets cannot match.

Competitive Rivalry (Medium-High)

Blackstone, KKR, and Apollo compete aggressively for deals, driving up valuations. However, Brookfield's operational focus differentiates it from peers focused primarily on financial engineering. The firm's permanent capital vehicles and contrarian philosophy enable it to pursue opportunities others cannot or will not.

↑ Back to Top

XI. Strategic Analysis: Hamilton's 7 Powers

Scale Economies

Spreading costs across $1 trillion AUM creates enormous efficiency advantages. Global sourcing networks identify opportunities competitors miss. Centralized operational expertise can be deployed across multiple portfolio companies simultaneously. Technology investments and data analytics capabilities become economical at scale.

Network Effects

While limited direct network effects exist in asset management, ecosystem benefits between platforms create value. Infrastructure assets complement renewable power investments. Real estate holdings benefit from infrastructure improvements. Credit platforms provide financing to operating businesses.

Counter-Positioning

Contrarian investing when others retreat has become Brookfield's signature move. Focus on operational value-add versus financial engineering appeals to different seller motivations. Long-term ownership mentality attracts assets requiring patient capital. ESG leadership positions the firm advantageously for transition opportunities.

Switching Costs

High switching costs for LPs given long fund commitments spanning 10-12 years. Embedded relationships with portfolio companies create operational dependencies. Customized reporting and governance structures tailored to institutional requirements. Knowledge transfer costs as new managers learn asset intricacies.

Branding

The "Brookfield" name carries significant weight globally in infrastructure circles. Bruce Flatt's personal brand rivals Warren Buffett's in alternative investments. Reputation for operational excellence attracts premium assets. Track record creates presumption of success in new ventures.

Cornered Resource

Permanent capital vehicles provide unique competitive advantage few can replicate. Deep operational expertise in infrastructure accumulated over decades. Relationships with governments and regulators worldwide. Proprietary deal flow from reputation and scale.

Process Power

Disciplined investment process refined over 30+ years. Value investing culture embedded throughout organization via visual reminders and compensation structures. Operational playbooks for improving asset performance. Risk management frameworks tested across multiple cycles.

↑ Back to Top

XII. Bear Case vs Bull Case

Bear Case:

Interest rate sensitivity poses risks as real assets typically carry significant leverage. Rising rates increase financing costs and reduce asset valuations. Retail/office exposure concerns persist despite portfolio repositioning. Office utilization remains below pre-pandemic levels in many markets.

In April 2023, it was reported by Bloomberg that Brookfield Corporation had defaulted on $161.4 million worth of office building mortgages, mostly in the Washington D.C. area, due to high office vacancy and interest rates. Two months before, Brookfield defaulted on $784 million in mortgages for two Los Angeles office towers.

Complexity despite simplification efforts remains an issue. Multiple listed vehicles and cross-holdings create analytical challenges. Key person risk with Bruce Flatt looms large given his centrality to strategy and culture.

Bull Case:

AI infrastructure mega-trend positioning places Brookfield at the center of a multi-trillion dollar buildout. Inflation protection through real assets becomes increasingly valuable in current environment. Permanent capital competitive advantages enable opportunistic investing others cannot match.

Proven contrarian track record demonstrates ability to generate alpha through cycles. Multiple growth vectors across platforms provide diversified upside exposure. Succession planning has progressed with next generation of leaders identified and empowered.

↑ Back to Top

XIII. Playbook: Key Lessons

Be Contrarian: Bruce emphasizes the importance of "purchas[ing] assets at a discount to their replacement cost, building a margin of safety into our acquisitions." Obtaining such opportunities necessitates going against the crowd. The herd running off a cliff imagery serves as a daily reminder of this principle.

Patient Capital Wins: Long-term perspective enables better deals as sellers value certainty over speed. Operational improvements require years to implement fully. Compound returns accelerate over decades, not quarters.

Operational Excellence: Don't just financially engineer, actually improve assets through hands-on management. Deep sector expertise enables value creation competitors cannot replicate. Operating capabilities attract premium valuations upon exit.

Scale Matters: Size creates competitive advantages in alternatives through preferential deal access. Institutional credibility comes with scale and track record. Diversification across geographies and asset classes reduces risk.

Simplicity from Complexity: Focus platforms while maintaining optionality for opportunistic investments. Clear reporting and governance despite complex structures. Aligned incentives throughout organization via co-investment requirements.

Partner Selection: Marks and Flatt represent complementary skills creating synergistic value. Surround yourself with legends who enhance institutional credibility. Cultural fit matters as much as financial metrics.

↑ Back to Top

XIV. Looking Forward & Predictions

AI infrastructure buildout represents a multi-trillion dollar opportunity over the coming decade. Data centers, power generation, and connectivity infrastructure will require unprecedented capital deployment. Brookfield's positioning at the intersection of renewable power and digital infrastructure creates unique advantages.

Energy transition acceleration will drive demand for renewable power platforms. Grid modernization, battery storage, and green hydrogen create new investment verticals. Carbon transition investments in hard-to-abate sectors offer contrarian opportunities.

Credit expansion through the growing wealth solutions business addresses institutional demand for yield. Private credit markets continue taking share from traditional banking. Distressed opportunities will emerge as higher rates pressure leveraged companies.

Geographic expansion into emerging markets addresses infrastructure gaps. India, Southeast Asia, and Latin America require massive infrastructure investment. Local partnerships and operational expertise enable successful execution.

Succession planning for the post-Flatt era has begun with next generation leaders assuming greater responsibilities. Cultural continuity remains paramount to preserving contrarian investment philosophy. Institutional framework ensures strategy survives leadership transitions.

Index inclusion benefits for BAM could drive significant passive flows. MSCI and FTSE Russell index eligibility expands investor base. Simplified structure appeals to quantitative and passive strategies.

KPIs to Track: - Fee-bearing capital growth targeting double-digit annual increases - Distributable earnings per share growth in mid-teens annually - Capital deployment versus realization ratio maintaining balance - Fund performance versus benchmarks with focus on long-term alpha - New fund raises and flagship fund sizes indicating institutional confidence

↑ Back to Top

XV. Closing Thoughts

From Brazilian tramways to AI data centers represents the ultimate transformation story in global finance. This was Brookfield's first DNA strand, patient capital building essential services. Not quick profits, but generational wealth through things people couldn't live without. This principle, established in 1899 São Paulo, remains the core investment philosophy 125 years later.

The power of patient, contrarian, operational investing has been proven across multiple cycles. When others flee, Brookfield advances. When markets panic, Brookfield deploys capital. When industries face disruption, Brookfield sees transformation opportunities.

Why Brookfield represents the evolution of alternative asset management: from financial engineering to operational excellence, from short-term trading to permanent ownership, from narrow expertise to platform breadth. The firm has redefined what alternative investing can achieve.

The next decade promises unprecedented opportunities in powering the digital and energy transformation. Pension funds, sovereign wealth funds, insurance companies all face the same problem: they need steady returns for decades to come. Brookfield offers them exactly what Mackenzie and Pearson offered São Paulo in 1899: ownership of the essential.

Final reflection: Sometimes the best investments are in the backbone of the economy, not its shiny objects. Infrastructure may lack the glamour of technology startups or the excitement of cryptocurrency, but it offers something more valuable: the steady compounding of returns from assets society cannot function without. In an increasingly complex and volatile world, Brookfield's focus on essential infrastructure provides both stability and growth - a combination as rare today as electric streetcars were in 1899 São Paulo.