Brookfield Asset Management Inc

NYSE:BAM

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Brookfield Asset Management 2020 First Quarter Results Call and Webcast. [Operator Instructions].

I would now like to introduce your host for today's conference call, Ms. Suzanne Fleming, Managing Partner, Brookfield. You may begin.

[Suzanne Fleming, Managing Partner, Branding & Communications]

Thank you, operator, and good morning, everyone. Welcome to Brookfield's First Quarter 2020 Conference Call. On the call today are Bruce Flatt, our Chief Executive Officer; Nick Goodman, our Chief Financial Officer; as well as Brian Kingston, CEO of our Real Estate business. Bruce will start off by giving a business update, followed by Nick, who will discuss our financial and operating results for the quarter. And finally, Brian will give an update on our retail business. After our formal comments, we'll turn the call over to the operator and take analyst questions.

I'd like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and our financial and operating performance, we may make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and U.S. Securities law. These statements reflect the predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U.S. and the information available on our website.

And with that, I'll turn the call over to Bruce.

[James Flatt, Managing Partner, CEO & Director]

Thank you, Suzanne, and good morning to everyone on the call. I will start today by expressing on behalf of myself and all of my partners at Brookfield that we hope you, your families and your colleagues are all staying safe and healthy.

The world looks very different today than when we last updated you 3 months ago. Many of our businesses have remained open and operational throughout this environment, and we are proud of the countless employees and stakeholders across our business and portfolio companies who remain working every day, providing essential services and products around the world to aid those in need. In addition to the relief efforts that we're supporting financially across our organization, our people are contributing in many ways, which have included our hospitals being provided as beds -- providing beds to the governments, requiring them -- hotels that were providing rooms to frontline medical staff and some of our real estate properties being used as relief centers.

Before I get into the quarter, I thought I would just give a quick update on what we are seeing across our business in terms of reopening and how we are approaching it. Across our global operations, we are very encouraged by the accounts from our regions such as Asia that have begun reopening their economies and places of business. And we are leveraging their experiences today as we plan for our broader workforce to return to work. For regions that have already opened up, we are seeing trends of cautious but steadily increasing consumer confidence.

Right now, our plans for reopening are guided by our ongoing discussions with local governments and in accordance with each region's plans for reopening. For example, within our real estate business as of today, and Brian may touch on this later, about 1/3 of our retail centers in the U.S. have reopened and significant more coming in the short while.

Within our actual offices for Brookfield Asset Management, we've opened numerous of them, including our Shanghai office, and our Dubai office recently reopened. And starting a few weeks ago, most of our senior leadership have now returned to our offices, and we're preparing our spaces for the return of our people to it but with the respecting social distancing protocols. And so the rest of the people can return to the office when the governments give the go ahead.

Our long history of owning and operating assets including the changes we went through after 9/11, have prepared us well to successfully handle business continuity planning and the adoption of new normals for our tenants, employees and all other stakeholders. While no one could have predicted the catalyst for the environment that we currently find ourselves in, if you have been following us for the past few years, you know that we had been expecting and preparing for some kind of market turn for quite some time now. That preparation has meant that our business performed well in the quarter, and we believe the outlook for our businesses and our asset management franchise is very strong. The critical nature of many of our assets has ensured that they stayed open, providing essential services to the communities, which -- within which they operate, and they continue to earn strong cash flows with most of it being contractual in nature.

Our financial assets were and continue to be largely protected as we had indexed hedged those assets in the first quarter, and our asset management fee income, which has grown significantly because of very strong fundraising over the last 12 months is perpetual or long-term in nature, and largely not impacted by the market volatility.

Our fundraising outlook for the remainder of 2020 is stronger than we would have initially inspected, having just wrapped up the fundraising for our latest flagship funds in January. Already today, our Oaktree business is in the market to raise its next flagship distressed debt fund, which we previously had planned would not be raised until 2021 at the earliest. We also anticipate that our special investment activities, which are focused on noncontrolling equity investments and not bound by asset class or geography restrictions will attract greater amounts of interest, both from clients and from the greater needs that businesses will have with their recapitalization efforts which we expect to come in the second half of 2020.

We also believe that many of our other fund offerings will also see increasing demand coming out of this current environment, such as our funds focused around contracted infrastructure-like assets that are proving to provide stability of return across these market cycles. Lost in much of the news of the last few months, it seems to have been forgotten that interest rates virtually everywhere in the world are 0. That is a simplification, but they are essentially 0. As a result, real assets are therefore, highly attractive in this environment.

While ensuring our business was prepared for an inevitable market downturn, we remained disciplined in our underwriting and investing over the last number of years. As you might have seen in some more publicized transactions, and I can assure you that there were many not publicized, this resulted in us losing out on a number of transactions over that period, despite that discipline we stuck to then is now paying off today.

We have approximately $60 billion of capital available currently to deploy across our business. And from our experience over the past month, the capital markets continue to remain open for companies with strong balance sheet such as ours. We have been receiving both fund commitments for equity capital, but also debt markets since April -- in the debt market since April, and Nick will talk about this a little bit. We added over $3 billion of liquidity by accessing the investment-grade debt markets increasing -- and increasing the size of our bank lines to bolster our liquidity.

As I mentioned in the update we sent out in March, our immediate focus for deployment was in the listed stock markets. Since the market turned in late February, we have deployed $2 billion of capital into these markets. A large portion of this deployment was into high-quality businesses that are trading at a significant discount to our view of intrinsic value. Over time, these positions could lead to privatizations or controlling positions. But today, at the very least, we expect they will provide excellent returns with large margins of safety as markets normalize. We also repurchased approximately $300 million of our own securities across the business within the parameters of our share repurchase programs, and we will continue to buy back shares as we see appropriate while also balancing liquidity requirements of all of our companies.

And lastly, to be expected in the current environment, the team at Oaktree accelerated its pace of deployment in the public markets. During the quarter, they invested -- during the quarter and since then, they've invested approximately $8.5 billion across their funds. Today, their flagship distressed debt fund is over 80% invested, and they have already started to line up capital, as mentioned, for their successor fund. We expect that fund will have hold its first close within the next few months, and we anticipate that it will be larger than its predecessor upon close.

So while there has been lots of opportunity in the public market, on the private side, for the most part, we have been just getting ready for more active times. One of these places we're already seeing opportunity to use our knowledge of the operating businesses is our retail business. And Brian Kingston is on the call with us today, and he'll provide some background on our plans for the revitalization program that we announced last week.

Lastly, before I turn the call over to Nick to speak about financial results, included in our circular filed last night, as always, is a description of the partnership of ours as individuals and its ownership of our 20% stake in Brookfield and the Class B shares. You may have noticed some new details about these arrangements, and I thought I'd make a few comments about those.

First, nothing has changed for Brookfield. These were changes to refine how the partnership manages its ownership of the Class B shares. They are included in the Brookfield circular as part of the disclosure around the ownership of the company's voting securities. Second, there has been no fundamental change in the control of the shares. It is the same group as before. What we merely did is simplify and clarify the ownership structure. Third, while the partnership is very important to ensuring the long-term stability of Brookfield, in our view, it does not play an active role in the day-to-day operations of the business. It does, however, allow us to operate in an -- Brookfield to operate in an environment that facilitates long-term decision making, and we believe is very helpful in maintaining our culture, and none of that has changed.

With those comments, I will turn the call over to Nick Goodman.

[Nicholas Goodman, Managing Partner & CFO]

Thank you, Bruce, and good morning, everyone. Our business performed very well in the first quarter, even as the economy and markets faltered towards the end of March. Our asset management franchise and invested capital continue to generate significant amounts of free cash flow, highlighting the resiliency of our business. We generated $751 million of cash available for distribution and/or reinvestment or what we call CAFDAR during the first quarter, a 43% increase from the first quarter of 2019. And we consider CAFDAR to be the best indicator of the long-term earnings power of our business as it combines our stable fee-related earnings with the long-term sustainable distributions from our listed affiliates, which largely own contracted income streams.

Notwithstanding the strong cash performance, the market turbulence at the end of March resulted in unrealized noncash adjustments, including mark-to-market movements on liquid securities, which had a negative impact on net income. This resulted in a net loss for the first quarter of $157 million or $0.20 per share on a post-split basis. It's worth noting that we expect these unrealized marks to recover over time as markets stabilize. Our funds from operations or FFO, was $884 million for the quarter or $0.55 per share on a post-split basis.

Starting with our asset management results. Fee-related earnings before performance fees increased by 35% to $321 million for the 3-month period and totaled $1.3 billion over the last 12 months, an increase of 44% from the same period in 2019. The majority of our fee revenues are not impacted by market volatility, as evidenced in the stability and growth of our FRE period-over-period and the growth in our fee-related earnings as a reflection of the significant step change in business over the past year, including the successful round of flagship fundraising that we completed in January, the growth in our distribution channels and our expanding private fund offerings along with our partnership with Oaktree. To date, our fee-bearing capital totals $264 billion, and our annual fee revenue stand at $2.8 billion.

Our unrealized carried interest balance stands at $3.2 billion as the investments in our funds are largely critical assets or assets that have long-term contracted cash flows and have largely not been impacted by recent events. We also benefit from having minimal exposure to public securities or energy investments.

During the quarter, our unrealized carried interest decreased by $298 million before costs and the impact of foreign exchange. We realized $132 million of carried interest during the quarter and $613 million over the last 12 months as we continue to sell mature assets. We have realized approximately $1 billion of proceeds from asset sales during the quarter and $12 billion over the last 12 months. Looking forward, while the pace of asset realizations during 2020 is likely to be slower than we thought when we last spoke at the end of Q4, the long-term nature of our funds ensure that we can be patient when seeking to excise -- exit investments in order to maximize the value creation.

Turning to our balance sheet investments. Excluding disposition gains, FFO for the quarter was $397 million. The decrease compared to the prior year was a result of lower mark-to-market gains on our financial asset portfolio, lower earnings on our energy contracts and the impacts on portfolio companies of the recent measures taken to combat COVID-19. We expect these impacts to continue into the second quarter, but we believe earnings will return to normalized levels as the economy gradually opens up and begins in the path to recovery.

Finally, we sold several investments within our private equity, infrastructure and real estate groups during the first quarter. These monetizations contributed towards approximately $107 million of realized disposition gains recorded in FFO.

Today, our liquidity and capitalization remain very strong. In addition to $45 billion of uncalled fund commitments, we have $15 billion of core liquidity across the group, including $6 billion directly at BAM. Our balance sheet remains conservatively capitalized, with an implied corporate debt to market capitalization ratio of 14% at the end of the quarter, and an average remaining term on our corporate debt of 11 years and no individual piece of debt maturing before 2023. And we're seeing the credit markets continue to remain open today to credit where the companies with strong balance sheets. In April, we completed the issuance of $750 million of medium-term notes and increased the size of both the BAM and BIP credit facilities bolstering liquidity by a further $2 billion. Finally, I am pleased to confirm that our Board of Directors has declared a $0.12 per share dividend payable at the end of June. On a post-split basis, the dividend is consistent with the previous quarter.

With that, I will turn the call over to Brian Kingston, the CEO of our Real Estate group, who will be providing us with an update on our retail operations as well as our recently-announced Retail Revitalization Program. Brian?

[Brian Kingston, Managing Partner & CEO, Real Estate]

Thank you, Nick, and good morning, everyone. Today, I'm going to talk about our retail real estate portfolio as well as offering some observations on what we're seeing on the ground and our outlook for the future.

Retail makes up about 1/3 of our real estate assets under management. And while our business is global, the vast majority of our retail holdings are here in the United States. We currently have 170 properties, comprising almost 150 million square feet of high-quality retail real estate located in 43 states, making us 1 of the largest owner operators of enclosed shopping centers in the United States.

Our properties are some of the most highly trafficked retail properties in the world, centers like Ala Moana shopping center in Honolulu, that welcomes more than 50 million guests each year and Fashion Show in Las Vegas located in the heart of the Las Vegas Strip. This unique portfolio of properties would be impossible to replicate and provides us with a unique ability to leverage our scale and market presence. While today, these properties are 100% owned by Brookfield Property Partners, they were acquired through a series of transactions, starting with the recapitalization of General Growth Properties back in 2011. By taking advantage of past market dislocations, we've managed to acquire this unique portfolio at a substantial discount to the value of the underlying assets.

Over the past 5 years, we've witnessed tremendous change in the retail operating environment. Retailers with weak balance sheets and/or business models that haven't kept pace with changes in customer taste and buying patterns are seeing their businesses steadily decline. At the same time, exciting, new, digitally native businesses have emerged and some old line retailers have reinvented their businesses to meet these new realities. And they've seen their sales and market share expanding dramatically as a result.

While they come from a wide range of retail sectors, and have managed to be successful for a variety of reasons, these retailers of the future all have 1 thing in common. They've been expanding their physical store count to help them interact with customers directly, and is a way to fulfill online orders more efficiently by locating their inventory closer to where customers live and work. When deciding on the location for their physical storefront, these retailers want to be in densely populated high-growth markets. For owners of the best retail properties in the United States like Brookfield, this has meant there was a waiting line of new tenants to take the place of old line retailers when they vacate our malls. We had initially expected this process to play out over an extended number of years, however, the sudden impact of the COVID-19 crisis has accelerated the demise of the weaker balance sheets and poor business models.

We've also been investing in repositioning and densifying these high-quality locations into mixed-use entertainment destinations by adding residential, hotel and entertainment uses to our 40-plus acre urban sites. These retail shopping centers often serve as the commercial hub for trade areas that they serve. And by adding these additional uses on site, we're turning them into mini cities, offering residents and tenants a dynamic live-work-play environment across the country. Much of the excess density to complete these redevelopments has come through the recapture and redevelopment of anchor department store boxes, attached to or adjacent to our malls. And we expect our ability to recapture those boxes at good value will only accelerate in the future.

While the impact of the COVID lockdown has been felt acutely in our retail portfolio due to the government-mandated closure of all of our malls last month, our places have always provided a safe and clean environment for people to shop and entertain themselves. We're now in the midst of reopening our centers with new measures that will enable them to be the safest place for people to send their families and meet their friends.

As of today, around 75 of our retail centers have reopened under restricted capacity, and we expect the balance of them to open in the coming weeks. We're supporting these reopenings by concurrently launching curbside pickup programs at our properties, designed to seamlessly integrate online shopping with the inventory held in stores in our malls, effectively turning those stores into fulfillment centers located where our tenants' customers live and work.

The feedback so far from our tenants has been very positive, with many of them reporting a significant proportion of their online sales being fulfilled through this channel. We believe this is more than a short-term stop gap measure during the retail shutdown and expect this to become a permanent feature in our tenant supply chain in the future. And this will further underpin the value of our premium assets, which are located in these densely populated urban areas throughout the country. Our 170 retail properties are located within a 1-hour drive of 60% of the U.S. population.

In the coming months, as our tenants continue the process of restarting their businesses, we will work closely with them to assist them getting back up and running as quickly as possible. At our properties, we are implementing comprehensive health and safety mitigation measures, including: PPE worn by all employees and available for guests upon request; hand sanitizing stations at high-touch locations; sanitizing wipes available in food courts; frequent signage with health and hygiene reminders; and strict enforcement of social distancing and density protocols.

We're also working with our smaller regional tenants to provide them with financial accommodation, recognizing their ability to fund short-term operating losses is not the same as the larger national and international brands. We expect this will have some impact on our earnings over the balance of the year, however, it's expected to rebound quickly as the industry recovers. In addition to assistance to smaller retailers, we plan to utilize the position we have to make investments in retail companies as this industry consolidates.

As we announced last week, Brookfield has established a $5 billion Retail Revitalization Program to bring much needed capital and operational assistance to support the stabilization and growth of retail businesses in all of the markets in which we operate. The program aligns with our approach as value-oriented investors, investing in high-quality businesses at favorable valuations at a time when capital is scarce, in sectors that we know well, and the program will enable us to both support retail companies and deliver attractive returns to our investors. As you can imagine, since announcing this last week, our phone has been ringing off the hook with investment opportunities.

We've also been active participants in supporting the industry's efforts to work with the U.S. Federal government on its economic stimulus packages, specifically the Cares Act. We are taking a proactive role in working with our retail tenants to ensure that those who qualify for stimulus receive the subsidies that they're entitled to. Our dedicated tenant resource page and webinar devoted to the Cares Act has attracted over 23,000 visitors, providing valuable information on how to understand and determine the potential options available for our tenants. These subsidies, if applied and distributed correctly, could play an important role in easing the financial burden that retailers and restaurant operators are faced with. The hundreds of billions of dollars earmarked for small businesses to pay for their employees' wages, as well as cover operating expenses including rent, should mitigate some of the financial and emotional hardship that they're facing.

So in conclusion, while the retail operating environment was already highly dynamic prior to the onset of the COVID-19 crisis, the impact of the lockdown will be to accelerate many of the super trends that we already saw underway. While this may cause us some short-term pain, we own the highest quality portfolio of retail assets in the world, and will ultimately be the beneficiaries of consolidation when this is finished. Physical retail real estate will change and evolve over the next decade as it has for many years prior. However, the highest quality, best located real estate always increases in value over time. And we have no reason to believe otherwise in this case.

So with that as my comment, I'll turn the call back over to the operator to see if there are any questions. Operator?

[Operator]

[Operator Instructions]. Our first question comes from Cherilyn Radbourne with TD Securities.

[Cherilyn Radbourne, TD Securities]

Starting with a question on the fundraising environment. I appreciate the comments that you made in a holistic sense. Was wondering if you could drill down and talk about how that looks for real estate more specifically?

[James Flatt, Managing Partner, CEO & Director]

So it's Bruce. And I'll make a high level comment, and Brian may wish to add something afterwards. I'd just say, first, is that the fundraising environment, if you hadn't -- it's kind of like everything that's going on in business today. If you had an action -- if something wasn't in action before all of this occurred, not very many people have been doing a lot of new things over the past 2 months. There have been some and selectively, there are some. But if you don't know your manager or if you didn't already have a relationship, you probably didn't start one. So I'd say that's a good news and bad news story. The bad news is, if we were looking to close things or get new things, they're -- not much has started over the last couple of months. The good news is we have many things in the pipeline, and our relationships are very deep. So people will put money with managers they know. And I would just say, in general though, I think there's still money coming into all of the businesses we have, including real estate. And Brian, I don't know if you want to specifically take that, go further on that.

[Brian Kingston, Managing Partner & CEO, Real Estate]

Yes. No, I don't think there's any difference for real estate versus the other asset classes where we're typically raising money. I think we spent a lot of time and have spent a lot of time in the last couple of months speaking to LPs. A lot of them have capital that they're seeing, as Bruce mentioned earlier, earning 0% in their fixed income portfolios and are looking at this as an opportunity to potentially put some of that money to work in high-quality cash flow generating assets and real estate is part of that. So I think there's a lot of appetite out there. And when things do free up, I do think you'll see a lot of capital coming into real estate, but it's the same as all the asset classes.

[Cherilyn Radbourne, TD Securities]

Okay. In terms of your investment posture, do you think that the amount of dry powder that's been raised by BAM and others diminishes the opportunity set versus prior downturns? Or would you see that as proportionate relative to the scale of opportunities that may emerge here as other shoes start to drop?

[James Flatt, Managing Partner, CEO & Director]

Look, I'd just make the comment that our general view -- and no one knows what the future brings, but our general view is that the economic ramifications on businesses that don't have substantial liquidity once this fully plays out, meaning the second quarter and the third quarter come, and we may not open up exactly as fast as one might have hoped, will bring up -- bring to us significant opportunities. And when I say, us, just those with capital. So I think there are going to be lots of opportunities for us to put money to work, would be the short answer.

[Operator]

Our next question comes from Bill Katz with Citigroup.

[William Katz, Citigroup]

Okay. Thank you very much for the extra discussion today as well. So maybe I could start there on the real estate side, Brian. So you mentioned the strategy of sort of being within an hour's drive and the densification and multiuse, et cetera. Does anything change post COVID-19, just given the potential for any kind of structural shifts in commutation or work from home type patterns that might otherwise dilute that strategy?

[Brian Kingston, Managing Partner & CEO, Real Estate]

No. I think in the short term, clearly, the way we operate in our office buildings and in our shopping centers is going to be altered until we really get to a place where we have a vaccine and people are feeling more comfortable. But those trends that I was talking about have been playing out over 20 years, right, which is increasing urbanization, businesses, large businesses using their office premises as a way to build and grow and expand their culture and the importance of having that collaboration and people close by. And so I think it's interrupted at the moment because of the shutdown, and people are finding ways to use Zoom calls and some other things to get by. But the reality is, on a long-term basis, these office premises are an important part of business strategies, and we don't really see that changing.

So I think operationally, like with many things, you're going to see hand sanitizer and those sorts of things becoming a permanent fixture in the buildings. But I don't think the use of the more -- or frankly, the demand changes over the long term.

[William Katz, Citigroup]

Okay. And then maybe just a two part for Nick, a little unrelated. Nick, just in terms of thinking about the FRE margin from here, how should we think about that? Was there anything sort of unique in this particular quarter that we need to be aware of? And as you think about hedging some of the invested capital exposure, where I think you had a nice benefit this -- in the first quarter, how do we think about that for the markets rebounding in any way?

[Nicholas Goodman, Managing Partner & CFO]

Yes. Bill, listen, I don't think there was anything unique this quarter in terms of margins. The fee-related earnings continue to grow. They continue to be stable, and they're reflecting kind of the resiliency of our business model and the free cash flow generation of BAM. And we retain a positive outlook as we look forward. So we're going to continue to invest in the business so we can service our clients over the long-term as the business grows. So I don't think you should read anything into like the margins were fairly consistent this quarter, and they'll continue to be in those ranges. As we diversify our product offering, as we do more of the core products, as we maybe raise more of the market-based strategies in Oaktree and the product mix growth, then maybe the margins change a bit. But I think overall, you shouldn't -- the results were fairly consistent this quarter with prior and what you should expect going forward.

And on the hedges, I think this is more about protecting BAM's liquidity. We have a large balance sheet. We have assets that we own that are in the public markets, and we have a large portfolio, which is a huge benefit and allows us a lot of flexibility. And we just took the opportunity to hedge some of that and lay off some of the risk and effectively lock in values and hedge against volatility. So you might find as things recover, we don't benefit in the full recovery, but we locked in attractive values in prior quarters. So it might just remove some of the volatility from earnings going forward.

[Operator]

Our next question comes from Mark Rothschild with Canaccord.

[Mark Rothschild, Canaccord Genuity]

Bruce, when you completed the Oaktree transaction acquisition, you spoke about how this acquisition would really shine during some times of distress, when they can take advantage of that. And it appears that we're getting some of that at the very least right now. How do you see it playing out as far as the cash flow that you get from Oaktree over the next year? And is this something that, while it's a good opportunity for Oaktree to make money, it will just take a number of years for it to actually show in your results?

[James Flatt, Managing Partner, CEO & Director]

Look, I think the -- all businesses are created over many, many years and nothing ever plays out tomorrow morning. So the short answer is, our earnings will not be affected by anything that Oaktree does immediately. Having said that, the outlook for the Oaktree franchise for the next 3 to 5 years -- 2, 3, 4, 5 years is much better today than it looked 18 months ago than when we acquired the business. And that's why, as you know, and you stated it, that's why we acquired the business and partnered with the team there. And I think their -- they will be able to put very -- they'll be able to raise lots of money, and they'll be able to put very significant amounts of money to work through this period, and it is a very exciting time for them and us.

[Mark Rothschild, Canaccord Genuity]

Okay. And in regards to the transactions you're doing now, it's -- there might be some distress. But as far as doing big acquisitions in the near term, this probably -- it's going to take some time whereas in the public markets, as you've stated and shown, there's opportunities you could take advantage of quicker. To what extent do the funds you raise, whether it's in the private equity side or the property side, are you able to use those private funds to invest in public securities in a material way where there might be more dislocation today there than in the larger transactions?

[James Flatt, Managing Partner, CEO & Director]

So just to be clear, all of our opportunistic funds are in -- we have entire discretion-- total discretion to invest in public securities as long as they're a means to an end. And so most of the positions that we purchased are within the funds we have with clients, private funds we have with clients.

[Operator]

Our next question comes from Andrew Kuske with Crédit Suisse.

[Andrew Kuske, Crédit Suisse]

Question is either for Bruce for Nick, and it just relates to the USD 2 billion of capital that you've invested. I think from the public disclosures that we've gotten was, BBU is around $500 million, BIP around $450 million, Brookfield Renewable bought back some in [indiscernible], the $300 million of buybacks across the group. Is there any more granularity you can provide on really what's left of that $2 billion, on what buckets it was allocated towards?

[Nicholas Goodman, Managing Partner & CFO]

Yes. It's really just, Andrew, across the other groups. I think all of the groups in our business have been active. So it's -- you'd referenced, it's in infrastructure, it's in private equity disclosure, renewable and in real estate. We have just been executing the same strategy, which is identifying high-quality businesses that we've seen traded at a discount to intrinsic value where we think over the long term, it could potentially be a catalyst for a broader transaction. So it's fairly broad-based across the groups.

[Andrew Kuske, Crédit Suisse]

Okay. That's helpful. And then just I think this comes from Page 12 in the supplemental on the expiry profile. So I think the number is about $6.5 billion of funds is really skewed out of real estate and infrastructure as being the biggest areas for uncalled commitments expiring. So is the natural conclusion to draw, we're going to see greater activity for value in the current market environment from those business groups?

[Nicholas Goodman, Managing Partner & CFO]

Well, I think the dry powder you're referencing would be on the funds and we're onto the next vintage of the fund. So new transactions would come from the latest vintage, that dry powder that has been left in those funds would be made available because we believe we would have follow-on opportunities, deployment opportunities in those funds where we have businesses with development pipeline or tuck-in and roll up strategies. So their dry powder is really there, that's being left available for follow-on transactions.

[Operator]

Our next question comes from Brian Bedell with Deutsche Bank.

[Brian Bedell, Deutsche Bank]

Just one, maybe back on the retail side for Brian, on the real estate side. Just maybe -- more of a short-term question here, but if there is, I guess, a more problematic second wave in the pandemic, especially in the dense populations in the U.S., just what your thought would be on potential impact to FFO at BPY, say, if that happened over the next, say, 2 to 3 quarters into 2021? I don't know if there's any way to frame the risk of that or not?

[James Flatt, Managing Partner, CEO & Director]

Well, look, the primary risk from all of this really is with respect to bankruptcies. In the absence of a tenant going bankrupt, we have leases, long-term leases in place with them and rents are due, and we continue to collect the -- collect their rent as part of that. So I think to the extent that shopping centers remain closed or close again or the potential office building usage is lower, neither of those on their own actually impact our FFO in the short term. It really is just sort of on the -- in the scenario where you have tenants going bankrupt and not being able to pay. So to answer your question, I think we have a second wave. Obviously, that's going to have further reaching economic impacts for the economy and putting us maybe deeper into a recession, but it's not a direct impact on FFO. And I don't think you're going to see a huge impact on our FFO over the course of this year anyway as a result.

[Brian Bedell, Deutsche Bank]

Okay. That's great color. And then back to the deployment. Maybe just if you guys can sort of frame -- and again, this may be difficult to answer, but with the lens, if there are more opportunities over the next 6 to 12 months, given valuations prove even more attractive, maybe if you could sort of frame the pace of that $60 billion deployment in a time frame sort of a range? And then if I can throw in the question on Oaktree. It sounds like their -- a lot of their waste to the [indiscernible] ups $11 billion -- or up $10 billion, rather. And the -- any sense of the size of the next distressed fund? I know it's early, but could that actually be larger than the prior 1 at Oaktree?

[James Flatt, Managing Partner, CEO & Director]

So it's Bruce. I'll answer the last question first. Because of fundraising constraints, we can't talk about fundraising. So they're in the markets today, and I -- we can't get into details on that so I apologize for that. But look, I can -- what I can say is this is one of the great environments possibly to buy distressed debt that's ever -- that may have ever been in existence. And I think clients understand that. And I think, therefore, there will be a lot -- there is and there will be a lot of interest in the Oaktree strategy. So we hope it will be a very significant fund.

With respect to deployment of actual capital within all our other funds, it always depends. We never know what happens. Our general view, though, is there'll be more opportunities in 3 months from now, and there'll be a greater number in 6 months from now. And that's merely because our expectation is that the economic recovery will be slightly less than everyone hopes, because everyone hopes it goes back to exactly what it was. And it will take just a little more time. And therefore, there will be more -- as time goes on, the capital needs of companies will be greater, and we will be able to assist companies during those situations. So I think it will happen, but you never know what the total numbers are.

[Operator]

Our next question comes from Zachary McDermott with KBW.

[Zachary McDermott, KBW]

So if I could just ask a more capital management based question. I saw that, about like a year ago or so, you had mentioned that as cash available for distribution rises, you may look to repurchase stock. So given the current environment and like how the stock has performed recently, do you feel differently about that sort of viewpoint?

[Nicholas Goodman, Managing Partner & CFO]

It's Nick. Listen, I don't think it's changed at all. I think we said over the long term, our view of cash coming into the business, our priority is to look to reinvest that into the business for internal growth opportunities, to be able to see that cash continuing to compound and deliver long-term compounded returns. And we invest that by supporting the asset management business, taking, participating in equity issuances and listed issuers and other forms. And then when we work through those and we think about returning capital to shareholders, buybacks would be the best. And I don't think that's changed today. Obviously, share price, where it's trading now is more attractive than where it was a few months ago, and we have been buying under NCIB, but we balance that with wanting to make sure we retain liquidity and to be able to be opportunistic in this environment and just to be conservative through this period of time and have liquidity to support the franchise. So I think it's still a balanced approach. It's still a long-term strategy. So nothing in that regard has really changed.

[Operator]

Our next question comes from Sohrab Movahedi with BMO Capital Markets.

[Sohrab Movahedi, BMO Capital Markets]

Bruce, maybe a bit of a strategic or philosophical type question. Obviously, this being an unparalleled type scenario the world is faced with, is it fair to say the only thing -- well, maybe it's not -- I don't know about the only thing, but is 1 thing that you're doing differently, philosophically, is looking at the public markets for investment opportunities? Or what else are you doing differently, I guess, as a by-product of this in the first instance? And then secondarily, can you just talk a little bit about what's the philosophy -- what's the decision-making framework, basically, pursuing the public investment opportunities?

[James Flatt, Managing Partner, CEO & Director]

Yes. Look, I would just say during other periods of time, when environments like this existed, during the first three months of what -- when that occurred, there were many opportunities privately to assist corporations deal with assets or buy businesses from them or provide capital to them. The difference today is that those opportunities aren't really in existence because no one can do diligence. And -- but the 1 opportunity that has been available is that if you knew a business well and because -- remember, the things that we're buying in our funds for our clients and for ourselves are only things that we have extreme confidence in, that we know very well, and that we have a big margin of safety in doing it because we're buying public securities and large, large parts of -- these are very concentrated positions in the companies.

So that is available. And there's nothing else been available over the last while -- that's a simplistic statement, but there's been nothing else available to do over the last while. So that's where we have been investing our money, and we think it's been an excellent place. Those will either be sold if the markets come back or they will lead to stage 2 of this financial situation that we're in -- or economic or health situation that we're in. But stage 2 is going to be corporations reorganizing their balance sheets and other things being done. And some of those may lead to transactions with the companies to be able to assist them, in addition to other things that we do out there. So I would just say, it's not a strategy in itself. It's just an adaptation of how we do our business.

[Sohrab Movahedi, BMO Capital Markets]

Okay. That's very helpful. And so that adaptation doesn't necessarily mean you are thinking about returns differently. You're still pursuing the same sorts of hurdle returns and target returns that you were pursuing?

[James Flatt, Managing Partner, CEO & Director]

Yes. Correct, correct. I would hope -- I would be -- we would be unhappy if the returns weren't at the very high end of our return numbers because we're taking greater risk today than you might take in other periods of time.

[Sohrab Movahedi, BMO Capital Markets]

Perfect. And if I can just sneak in 1 more. When you talk about -- and I'm not specifically talking about Oaktree here because I know you're in the fundraising boat. But when you think about the next round of fundraising, and in the -- against the backdrop of -- or in the context of the 0 rate world, do you think you will have to modify the promised returns or the targeted returns or the fee rates or anything like that, materially from where you have been targeting and operating at previously?

[James Flatt, Managing Partner, CEO & Director]

Look, on the target returns, I -- of our businesses. We haven't changed them for a long time, and I don't think this environment makes it change. And that sounds counter to what you would think but the type of things we do are not available to most investors. And therefore, the returns should be -- we target the same returns, and we don't think we're going to have to change those.

Now if we earn a little bit less for our clients, if we don't earn 20%, and we are 19% or 18%, they're probably going to be happy. So -- but I would say we haven't really changed our returns. And with respect to what our clients pay us for what we're doing, they seem to be very happy with what we're doing, and I don't think we expect any changes in those arrangements.

[Operator]

Our next question comes from Mario Saric with Scotiabank.

[Mario Saric, Scotiabank]

Just on the fundraising side, it was noted in your prepared remarks that the outlook for 2020 remains pretty positive. Was that specifically referencing the earlier-than-anticipated launch of the next Oaktree distressed fund? And I guess, the follow-on question to that would be, is it too early in the crisis to be able to confidently reiterate your $100 billion flagship fund raising target you identified at your Investor Day last year?

[James Flatt, Managing Partner, CEO & Director]

Yes. Look, I'll leave Nick to the second one because I'm not sure I have the specifics for you. But what I would say is the returns that we target within our funds, once we clear through the first part of these issues are highly attractive to our clients, and they're more attractive than they were before. And therefore, I guess, even on our open-ended strategies, which are fixed income supplements, I think they're going to be more attractive for our clients than they were before. And therefore, that plus our Oaktree franchise, plus the fact that we think money will go to work quicker than we might otherwise have expected, and we'll be back out fundraising quicker than we would have otherwise thought. All of those things taken in mean we have a much more positive backdrop to fundraising and deployment than we had 12 months ago.

[Nicholas Goodman, Managing Partner & CFO]

Yes. Mario, I think that's right. I think so -- I think to Bruce's point on the -- your question is right, the Oaktree fundraising is probably happening sooner than we would have expected. So that's just a timing shift in $100 billion we would have presented. And then for the balance, I think we remain very optimistic that it's achievable over the time line we laid out at Investor Day last year.

[Mario Saric, Scotiabank]

Perfect. Okay. And my second question, just in -- with respect to the recovery, there's been a lot of discussion in the media about BBU's socials and kind of characterizing the recovery. And there's also been some articles about a potential kind of inflationary environment coming out of this. So I'd just be interested to hear Brookfield's base case thoughts on what a recovery could look like coming out of here and kind of the structural implications for long-term global employment and inflation.

[James Flatt, Managing Partner, CEO & Director]

Look, it's Bruce. And I'd just say, we don't -- as you know, we don't profess to have any great insights on economic developments globally. What we do is buy assets which are contracted in nature or will be -- can be turned into contracted-in-nature assets and earn cash flow returns over the long term. We try to buy them with a margin of safety, as simple as I can state it. And we think those are highly attractive in whatever environment we're in. There's no doubt the environment, we're going to be in it for a while, and we've been saying this for a long time, but it is more evident today is we're going to be in a low interest rate environment for a while. It's possible at some point in time that in the future -- way out in the future, that interest rates go up because of inflationary things. And -- but I think our -- the type of assets we have for the next 5 to 10 years are a very attractive asset class to be in.

[Operator]

[Operator Instructions]. Our next question comes from Bill Katz Citigroup.

[William Katz, Citigroup]

Okay. Just for the follow up. Just big picture, Bruce, perhaps for yourself, going back to your Investor Day as well. The other interesting data point you sort of offered was allocations rising to about 60-some-odd percent in certain cases. Perhaps too fluid, just given the immediacy of what's been happening with the COVID-19, but how do you sort of see that -- the slope of that? Is that something that gets pushed out a little bit? Is that something that gets accelerated somewhat? I appreciate that the asset rotation from fixed income to real assets makes a lot of sense. But more structurally, would you be a net beneficiary of these changes? Or is it a push?

[James Flatt, Managing Partner, CEO & Director]

Look, I think what the question is -- and if I don't answer it correctly, please ask again. But I think that our view has been -- and based off of our discussions with clients and our interactions with them, is that institutions have been and will be pushing towards alternatives very significantly. They have been doing it for 10, 15 years, and they will be doing it for the next 10 years. And allocations push from 0 to 5 to 10 to 15 to 20. They were originally, we said going to 40, and then we said they'd eventually get to 60. I think today, where interest rates are, it's possible they're -- they get to that 60 quicker. It's possible that some institutions take them far higher than 60. Remember, you can't -- if you're trying to earn 8%, you can't do it owning a Treasury bill at 0. And all Treasury bills in the United States out to 20 or 30 years are 0 in every country in the world other than a few emerging economies. So it's not it's not possible to earn your returns that you need without these type of products within the fund. And therefore, increasingly, that will be happening. And I -- what I would say is, leave aside the short-term effects of what's going on right now, if we stay in this low interest rate environment, which I think we will, the allocations are going higher.

[Operator]

[Operator Instructions]. And I'm not showing any further questions at this time. I'd like to turn the call back over to Suzanne.

[Suzanne Fleming, Managing Partner, Branding & Communications]

Thank you, Operator. And with that, we will end today's call. Thank you, everyone, for joining.

[Operator]

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.