How Brookfield Private Wealth sees the Canadian market
Despite a growing interest in alternative strategies, Sweeney says that there is a degree of investment inertia in Canada that his firm wants to overcome. Canadian investors, he says, are still heavily allocated to a 60/40 asset mix with a big overweight to the TSX, which means an overweight to financials, energy, and materials.
In the context of strong Canadian equity performance in recent years, Brookfield Private Wealth have framed their offerings as diversifying rather than just return enhancing. Sweeney explains that the alternative strategies that Brookfield Private Wealth offers in Canada are more aimed at diversifying the source and nature of a client’s returns with assets that behave differently in different market cycles and tend to be domiciled in other countries. While return enhancement is part of their offering, Sweeney notes that stability and diversification now appear to be more in demand among the clients and advisors they work with.
In distributing those strategies, Sweeney explains that the Canadian competitive landscape and the dominance of the big banks and bank-owned brokerages has been advantageous for Brookfield Private Wealth. Existing relationships are strong and Sweeney believes that the banks understand the way Brookfield acquires and operates assets. “They get us,” he says.
What Canadian clients want from Brookfield
Globally over the past year Sweeney says that Brookfield’s infrastructure strategies have had the greatest uptake among private wealth clients. The appeal of income generation and non-correlation has prompted a global rotation into infrastructure that Sweeney says has lasted for the past two and a half years. Real estate has benefitted from a similar rise in popularity. In Canada, however, Brookfield Private Wealth’s evergreen infrastructure strategy has yet to be made available. As a result, Sweeney says that the Canadian investor appetite has largely been for their private credit and private equity strategies.
Private credit has been a challenged space this year, but Sweeney notes that the strategies in that space operated by Brookfield subsidiary Oaktree Capital Management are “a bit different.” Most of their lending has not been in the mid-market sponsor-backed space. Loans to software companies have been some of the hardest hit parts of the private credit market this past year, and Sweeney says that Oaktree has been both “lucky and good” around the software space. The were “lucky” in that they didn’t have a lot of software exposure to begin with, and “good” in that the software they did own tended to perform well.