FINANCIAL RESULTS AND FUNDRAISING

We raised capital across all five of our flagships, as well as a number of complementary strategies that were in the market in 2023. We held several large fund closes since we last wrote to you, which raised $33 billion of capital.

The most significant fundraising updates and deal activity since the beginning of the fourth quarter are:

Infrastructure—In December, we held the final close for the fifth vintage of our flagship infrastructure fund, bringing the total for the strategy to $30 billion. With approximately 200 investors committed to the fund, this fifth vintage is 40% larger than the predecessor vehicle. We are now approximately 40% deployed across six large-scale assets and the momentum on the capital deployment front is very strong. During the fourth quarter we held the final close of the third vintage of our infrastructure debt fund, bringing the total for the strategy to over $6 billion. Over 60% of the investors in this fund are new to the strategy, showcasing Brookfield’s leadership position in the infrastructure debt space.

Renewable Power and Transition—Subsequent to the end of the quarter, we finalized the first close of the second vintage of our flagship global transition fund strategy at $10 billion. In the fourth quarter alone, we raised over $6 billion, including an aggregate $3 billion commitment to our transition strategies received from ALTÉRRA, a sovereign fund and longtime partner, which was announced during COP28.

Real Estate—We are completing the first close of the fifth vintage of our flagship real estate opportunistic fund strategy at $8 billion. This positions the fund to achieve its targeted raise, with a final close expected in 2024. In early December, we sold our majority interest in 150 Champs Elysees, a landmark mixed-use asset in Paris, for a sales price of approximately $1 billion and an excellent return. Also in December, we disposed of an office asset in São Paulo, Brazil for a sale price of $300 million, representing a 17% IRR. These transactions highlight our belief that high quality office and retail in great locations continue to see significant demand and, while transaction volumes have been reduced, values remain strong.

Private Equity—The second vintage of our special investments fund, which provides structured solutions to counterparties, is in the market with an expected rolling first close during the first half of 2024. In conjunction with our recent acquisition of Network International, we were pleased to welcome Sir Ron Kalifa to Brookfield this past fall as Vice Chair and Head of Financial Infrastructure investments within our Private Equity business. Ron will lead a new financial infrastructure group focused on opportunities in digital infrastructure, an area which we believe contains significant growth opportunities supporting the digitalization of the global economy.

Credit—Oaktree raised $30 billion across its franchise in 2023, including $9 billion in the fourth quarter. This included an additional $2 billion in the fourth quarter for the twelfth vintage of our opportunistic credit fund and $1 billion for our strategic lending partners fund, bringing the funds to $8 billion and $4 billion at year-end. Oaktree has a robust pipeline for additional private credit fundraising, and we expect to complete the fundraise for these funds later in 2024.

2024 SHOULD BE A GOOD YEAR BUT WILL REQUIRE MORE HARD WORK

The free money era of 2020-2022 favored high growth businesses and investors who were aggressive with capital. We chose to pass on many of the transactions during that period as valuations were high. In hindsight, we are very pleased that we stuck to our investing mantra.

Fast forward to 2023—as capital became less available, the managers that were prudent during the free money periods, and specifically those with extensive track records of performance and long-term relationships with partners, have excelled. Early last year, we decided that odds favored that rates were going to crest in 2023. While most were struggling with liquidity challenges, we invested over $55 billion. We were able to do this due to our relationships and access to capital. Today, as we start 2024 with interest rates looking like they will decline, we feel very good about the investments we made in 2023 and the ones we will make in 2024.

Our confidence also comes from the way we invest. Most of our return comes from operational excellence in the businesses we run, rather than financial engineering. Our vast operating team of hundreds of thousands of employees gives us a special edge in building value in businesses. Most small, mid-size or merely financially focused firms do not have access to these resources. In an environment where “roll up your sleeves investing” is back in favor, this differentiator should continue to set our franchise apart.

OUR PRODUCT SCALE AND DIVERSITY SUPPORTS CONSISTENT FUNDRAISING

As we scale our business, our ability to raise larger funds and meet ambitious fundraising targets has grown. Equally important is our continuous effort to diversify fundraising sources and innovate with new products. This strategy ensures our capability to consistently raise capital across various economic conditions. Across our overall franchise we manage over 100 funds, many of which are actively fundraising at any given moment. Our breadth of products, asset classes and fundraising channels enables us to raise +/- $75 billion annually, separate and apart from our flagship funds, which are raised every few years.

Insurance Solutions Channel
One of the important capital raising channels we have been building is our insurance solutions business. The pending acquisition of AEL will make Brookfield Reinsurance one of the largest writers of annuities in the U.S., and since we are the beneficiary of the management of these assets, will increase our insurance assets under management by $50 billion. By employing the same operational enhancements that were utilized in the acquisition of American National to meaningfully grow its pace of annuity writing, we believe that over time we will raise $15 to $20 billion of insurance capital annually, independent of acquisitions.

Private Wealth Channel
Another growing fundraising source is our private wealth business, Brookfield Oaktree Wealth Solutions (BOWS). We have been steadily investing in our private wealth platform, which currently has 150 dedicated employees. We have partnered with more than 50 wealth groups worldwide in delivering institutional quality investment strategies to clients and we currently have five dedicated funds being distributed in this channel, including our infrastructure wealth product launched in early 2023 that has enjoyed strong early investor demand. With the team in place, we should be able to raise $12 to $15 billion of capital annually.

Newly Formed Credit Group
Our credit capabilities are larger and broader than they have ever been. With the growing importance that private credit will continue to play in capital markets, we expect our private credit funds to raise and deploy increasingly larger sums of capital. After the successful close of our largest infrastructure debt fund at $6 billion in November, we are already approximately 60% deployed and expect to launch the next vintage of that fund later this year at an even larger scale. In addition, we have launched the second vintage of our private equity special investments fund and, later this year, expect to launch the seventh vintage of our real estate credit fund. Our partner, LCM, a European-based alternative credit manager, is continuing to build and raise capital for its successful asset-backed specialty finance strategy.

In order to manage our growing credit capabilities across Brookfield, Oaktree, LCM, and insurance investment strategies, we are aggregating all of our credit strategies under a new Credit group. We believe this important step will allow us to work effectively across our credit investment teams, provide excellent returns, and maximize our ability to create value for our clients. We are confident that credit will be a meaningful driver of BAM’s growth over the next decade given the industry tailwinds and our collective focus. This will help us achieve that.

Open End Funds
In 2023, we observed a slowing in demand for our core infrastructure and real estate open-ended funds, likely due to the uncertain and rising interest rate environment's impact on investor preferences. These funds comprise high-quality, stable assets with consistent cash flows, appealing to yield-focused investors. With interest rates now stabilized and anticipated to decrease, we expect renewed interest in these funds. Furthermore, as our funds are medium sized and have no legacy issues with asset values or redemption lines, we should be among the first beneficiaries of fund flows as the market turns.

PRODUCT INNOVATION ENABLES US TO GROW

Core to our success has been our focus on anticipating changes in the market as we create new products and solutions. Over the past several years, we built a multi-disciplinary product development team that works across our businesses and investor segments to develop products that leverage our investment expertise and global presence. Notably, since 2020, we leveraged our existing business to launch leading platforms in direct corporate lending, global energy transition, and structured product solutions, among other products.

While product development has already played an integral role in our success over the past several years, we expect this to be an even bigger driver for us going forward for several key reasons:

This allowed us in 2023 to launch several new products and strategies. Some notable examples include our Catalytic Transition Fund, which we announced at COP28 in Dubai. The fund was anchored by UAE’s ALTÉRRA, who made a commitment of up to $1 billion alongside its $2 billion commitment to our second flagship transition fund. We are actively engaged with other large institutional partners who have expressed interest in this new fund. The new strategy will deploy capital exclusively into emerging and developing markets, with a dedicated focus on supporting energy transition, industrial decarbonization, sustainable living, and climate technologies.

Leveraging our established on-the-ground capabilities and relationships in the Middle East, we recently launched and are currently fundraising for a new fund strategy targeting private equity opportunities in the region. This region is growing fast, and we believe we are the most established sponsor in the market.

In recent years we have made over $5 billion of investments within the technology-enabled payment infrastructure area, including our recent acquisitions of Network International and Magnati. Our strategy seeks mature, high-quality companies that are an integral component of the financial ecosystem and leverages our expertise in growing businesses through operational value creation.

We are also working on new products in infrastructure, asset-backed credit, and renewable power. As we turn to 2024 and beyond, we expect to launch several new products as we continue to scale different parts of our business.

CLOSING

We remain committed to being a world-class asset manager and strive to invest our capital in high-quality assets that earn solid returns, while emphasizing downside protection. The primary objective of the company continues to be to generate increasing cash flows on a per-share basis, and to distribute that cash to you by dividend or share repurchases.

Thank you for your interest in Brookfield, and please do not hesitate to contact any of us should you have suggestions, questions, comments, or ideas you wish to share.

Sincerely,

— Bruce Flatt, Chief Executive Officer & Connor Teskey, President