Ladies and gentlemen, thank you for standing by and welcome to today's program entitled Brookfield Asset Management 2019 Year End Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded.I would now like to introduce your host for today's program, Suzanne Fleming, Managing Partner, Brookfield Asset Management. Please go ahead.

Thank you, operator and good morning. Welcome to Brookfield's 2019 year-end conference call. On the call today are Bruce Flatt, our Chief Executive Officer; Brian Lawson, our Vice Chairman, Nick Goodman, our Chief Financial Officer; as well as Craig Noble, Managing Partner and CEO of our Alternative Investment Strategies.Bruce will first give an update on our business, followed by Brian, then Nick, who will discuss the highlights of our financial and operating results for the year. And finally, Craig will talk about our growing Alternative Investments 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 responding to questions and in talking about 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 laws. These statements reflect predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risks and future events 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.Thank you. And with that, I'll turn it over to Bruce.

Thank you, Suzanne and good morning everyone. Thank you for joining. 2019 for Brookfield was a strong year for the business. And while we are also pleased with the market performance of Brookfield shares, I would note that our primary focus will always remain on growing the intrinsic value of Brookfield over the longer term.Over the past year, we achieved many important milestones in that regard. A few highlights. First, we now own 61% of Oaktree, the premier credit franchise globally that deepens our capabilities we offer our clients and positions us even better across market cycles. It also means we have one of the most diversified offerings in alternative investments, offering clients a full suite of products.Second, just last week, we announced the final close of our flagship infrastructure fund. The fund size totaled $20 billion and together with co-investment, this round of flagship funds raised $50 billion of capital.Today, these funds are about 45% deployed in aggregate, which means if we are successful in deploying the finding the remainder of the capital, we expect to be in the market depending on pace with our next round of flagships potentially starting later this year and into 2021.With these funds, we continue to diversify and stabilize our cash flows. Today, approximately 40% of our fee revenues come from perpetual vehicles, 45% of fee revenues from long-term locked up committed capital, and together, they provide very growing and substantial stable streams of cash flow to Brookfield Asset Management.Despite not being in the market now raising capital for any of our large flagship funds, we do expect very active raising capital for our other specialized core and perpetual strategies. Today, we have Craig Noble, our CEO of Alternative Investments, joining us on the call to discuss how we're growing our offering and…

Great. Well, thanks, Bruce, and thanks for those comments. Good morning, everybody. So, I do have the pleasure of handing the call over to Nick very shortly as our new CFO. Many of you already know, Nick and I'm sure you'll agree that he is perfect for the role.For those of you who may not, Nick been at Brookfield for around a decade. And it's held the numbers of senior finance roles across the organization during that time, including CFO of Brookfield Renewable Energy. And more recently, Nick and I have spent the past couple of years working closely together in all areas of BAM's finance group, including Corporate Finance, Treasury Operations, and Financial Risk Management.As for me, as Bruce noted, it's been 18 years since my first earnings call as CFO. That's 72 calls for those of you who are accounting. And while it might be tempted to make it an even 2020, it was also clear that Nick was fully ready to take on the role.I would like to say that I've really enjoyed my time as CFO. It's been a great experience, and much of that has come from the opportunity to work with many of you on the line, and I sincerely thank you for your support along the way. I'm looking forward to continuing with Brookfield, as Bruce noted, supporting Nick and the team and helping out the business wherever I gain.So, with that, I will hand it over to Nick.

Thanks Brian and good morning everyone. So, I'm going to start off by saying that we're very pleased with the 2019 results. The underlying growth of both our asset management business and our invested capital drove strong operating performance.Net income for 2019 was $5.4 billion or $2.60 per share, and funds from operations, or FFO, totaled $4.2 billion for the year or $4.07 a share. The decrease in net income for prior year is as a result of higher fair value gains and one-time recoveries recorded in 2018.Turning to our asset management results. First, fee-related earnings before performance fees increased by 41% to $1.2 billion during 2019 or 39% per share. Growth in our fee-related earnings is largely driven by what we see as a significant step change in the business over the past year with catalysts, including a successful round of fledged fundraising, as Bruce touched on, growth in our distribution channels, and expanding private fund offerings, as well as the strong performance of our listed partnerships. We also benefited from one quarter of contribution from Oaktree's fee-related earnings.Today, we have combined fee-bearing capital of $290 billion and annual fee revenues at our share stand at $2.7 billion. During the year, we generated $1 billion of unrealized carried interest before costs and that reflects continued favorable investment performance across our fund strategies and accumulated unrealized carried interest now stands at $3.6 billion before costs.We also realized $600 million of carried interest and recorded in our FFO at his past as risk of collect. This realized carried interest is more than double that of what we realized in the prior year and is the largest amount that we have ever realized in a single year and is expected to grow as our fund vintages mature.Now, turning to invested capital. Excluding…

Thank you, Nick and good morning everyone. Today, our business has over $540 billion of assets under management, including $290 billion of fee-earning capital. The ways in which our clients can choose to invest with us are numerous and growing, and fall into four broad categories; our perpetual listed public vehicles, our private funds, our public securities offerings, and Oaktree's investment offerings.Today I'm going to spend some time talking about one of our four ways in which we work with clients, our private funds business, focusing on how the business has evolved over the last 10 years and then looking at the growth potential for the next decade.10 years ago, our private fund fee-bearing capital totaled $15 billion across 42 clients, and we were just out to embark on the fundraising for our first infrastructure fund that ended up being $2.7 billion. Over the last 10 years, we've grown our private fund fee-bearing capital to over $90 billion, and we just completed the latest round of fundraising for our largest flagship funds across real estate, private equity, and infrastructure. The most recent of these being our infrastructure fund, which as Bruce mentioned, had its final close last week, exceeding its initial target to reach $20 billion. This is an increase of more than 40% from its predecessor infrastructure fund. And our real estate and private equity funds have experienced similar growth rates.Today, we now have 1,800 clients across the world's major pension plans, sovereign wealth funds, and insurance companies and we've built a private wealth distribution network that now accounts for about 10% of our annual fundraising. We've grown the number of client-facing relationship manager from seven to 58, and we've built our fund infrastructure to ensure that we're able to cater to our clients' needs and deliver first class…

Certainly. [Operator Instructions]Our first question comes from the line of Cherilyn Radbourne from TD Securities.

Thanks very and good morning. In your letter, you spent some time talking about sustainability in your carbon footprint, which is certainly top of mind lately. So, I wondered if you could speak a little bit about how you incorporate ESG in your investment process. And whether an increasing emphasis on ESG by LP investors makes some assets potentially un-investable for you?

Yes. So, maybe I'll just start off. And I think I'll try to answer the question by saying this. I guess we've always had a focus on sustainability, merely because it's good for business. And if you can build sustainable businesses over the longer term, it usually means you're doing good things within the business.So, I'd say the first thing is, it's been a big focus just because it's good for business. We -- second, we focus specifically on renewables, 25 years ago or more. And we've had a big emphasis on that. And that's -- I guess, it has informed us about a lot of things within the rest of our business as well as we've been able to build the largest renewables business in the world. So that informs us about a lot of things.And because of that, many of the things that we do when we make other investments. And when we look at investments across the Board, we've always considered sustainability in that just because we were probably more aware of it because of the big renewables business we have. Increasingly, that's going to be more important every day because globally, investors and individuals are more focused on it. So I think it will be -- we're well set up for it. Obviously, we have to keep growing and learning more, but I think we're in a good place as we sit today.

And then maybe on a related note. At least in the public market, we're starting to see certain businesses attract a bit of a sustainability premium. And I'm curious whether you're seeing that in the private market currently or expect to in the future?

Well, we'd like to get a premium for that, if we could have one. But look, I think that as more and more focus is on this there will be a split between those that are sustainable, that many more people will be interested investing in. And those that are seen as not and that capital will shy away from those investments.And therefore, the returns on those investments is someone will buy them for are going to be a lot less. And they just be merely because there's less capital available. And I don't think the private market is any different than the public market. I think people across the investment spectrum are all looking or seeing the same things.

Thank you. That's my two.

Thank you. Next question comes from the line of Bill Katz from Citi. Your question please.

Okay. Thank you very much for taking the questions. And Brian, Nick best of luck for forward to continue respective relationships. Maybe just coming back to the opportunity in terms of the next fundraising cycle, it does have a little more optimistic maybe for where we were last quarter at this time. Can you speak to two parts of the question? The first one being so where like the sequencing of what you see in terms of that opportunity within $100 billion?And then secondly, you mentioned that so a pickup in co-investments, how might the economics of the next $100 billion compared to the $50 billion that you brought on previously?

Hi Bill, it's Nick. So, I'm happy to start and Greg guidance and if you want, on the fundraising side. I think on the sequencing of the funds, Bill, as you know, we've just completed the latest round of flagship fundraising to first flagship funds to complete the fundraising was the real estate vehicle.So, likely, that should be the first one back market. But I think we said that, today, we're about 40%, 45% invested across the funds. So, all depends on the pace of deployment across the funds, but maybe starting 2021, early 2021, it could be back in the market late 2020, early 1021. You might see back in the market for those funds. It really depends on when we get that threshold for being able to go back out and raise new capital.In terms of the fees for the next $100 billion for those flagship funds. Based on what we see in the market today, I would say, we don't expect to see a massive change. For those flagship funds, we didn't see any extra pressure on fees through the round of fundraising, we managed to sustain our through that period. And so I would expect to be able to achieve similar rates as we look at the next round of flagship.

Okay. And then just as my follow-up, just related to that, perhaps if you look at your asset management margin that's still among best-in-class around 57%, I think, in the fourth quarter. How do you sort of see that playing through over the next year or two counterbalancing a lot of the growth opportunities in front of you versus maybe scaling of the platform?

Yes. So, yes. I think, Bill, you saw over the last 12 months that the cost did increase in our business, and we talked about that really being the cost attributed to us scaling up the business ahead of the next round of flagships, A, from a fundraising perspective, and B, from a deployment perspective. And then in Q3, Q4, you started to see the revenues come through as the flagship starts to close, and we ended the fee holiday with the BP via transaction. And we're at a good state, as you see from an industry perspective for margins.And I think as we look about going forward, you can expect more investment into the platforms and not just in being ready for the next trend of flagships, but I think as we diversify the channels from raising capital and maybe as we shift product mix a bit and start to build out some of the strategies that Craig talked about, you'll see more investment in the business. But I think our -- historically, we've kind of guided to 55% to 65% being the range for the margin of the business. And I think we expect to continue to be in the midpoint of that range.

Thank you.

Thank you. Our next question comes from the line of Mario Saric from Scotiabank.

Hi good morning. Just sticking to the fundraising theme in the $100 billion target. I think, Craig, you laid out well enough kind of the drivers behind the confidence in terms of achieving that goal, including expanded capital deployment capabilities strengthen the organization and whatnot. When you sit back and you look at the broader environment, what do you consider to be kind of the bigger risks to achieving that goal over the next couple of years?

It's Bruce. And maybe I'll take at that is just to start. I think the biggest risk to alternative managers broadly, is that the environment that we have -- the environment we've enjoyed over the past 10 years has been -- interest rates came down, now they're at the bottom and they're low. They could be higher. They could probably be 50% higher, but if interest rates went to -- if the 10 years today 1.5% or just above 1.5%.If it went to 6%, I think that changes the outlook of investors and what they need to do with their portfolios. We don't expect that to occur for the next three, five, seven, 10 years, maybe ever. But I think that's the one risk that we can't control, that changes the outlook on the business. And all it means is that it will be different. We'll just figure something else out, but it would change the outlook of many institutions pushing into alternatives.

And how would you -- I guess, how would you assess the risk of a significant global contraction in economic activity towards the appetite of realized investors to allocate incremental capital to the mandates?

Yes. So, here's what I would say. In past, what we've seen is there's all investors if an economic decline comes, all investors they slow in all investments into something for a very short period of time. But then the opportunities are significant. And I think at that point in time, our private equity funds will have very positive investments into opportunities. Our -- the Oaktree franchise will have very significant opportunities.And I think the track, if we can position ourselves to come out and what we're working for today is underwrite every investment we make, like we're going to hit a recession. And if we can come out of the bottom of market, having our reputations intact and our investments intact and grow out of that recession, we'll be able to take very, very significant amount of money from people with caveat that if interest rates happen to, in that recession go to 8%, which I suspect is not going to happen, then that might change that. But if it doesn't, then I think more -- probably more greater amounts of money will be allocated at that point in time.

Great. Thank you for the color. My second question just relates to the alternative solutions that Craig was discussing, while its early days with the Oaktree transaction. Can you just maybe talk about what penetration rates look like today? And what target penetration rates may look like over the next three, five, 10 years?

I would say, so it is early days, and there are several examples of us working together with clients, and I described a few of them. The overlap of our clients is pretty modest. So, it leaves a lot of opportunity and a lot of space for us to work together on things. Just given that we're just several months into it. There's not any statistics in terms of penetration that are trackable. But there's a lot of white space and opportunity for us in terms of collaborating on different investment strategies, but also maybe even more so of working more holistically with some of our larger clients, in particular.

Okay. Thank you.

Thank you. Our next question comes from the line of Andrew Kuske from Credit Suisse. Your question please.

Thank you. Good morning. I think it's a question for Craig to start off with. And I think you mentioned the 1,800 client relationships. If you could provide maybe a bit of color, just pre-Oaktree close on so Brookfield relationships out of the 1,800 versus the Oak ones? And then what was the overlap? And where are we now?

Yes. Sure. The -- so that 1,800 is our institutional relationships across Brookfield and Oaktree. The -- if we segment that into the two different components, I think Nick has the specific numbers in terms of--

Yes. And I would just add that, so pre the transaction, we had about 750 institutional clients on the Brookfield site, and the balance would come from all three there. And as Craig said, there was a small amount of crossover, not significant, but the incremental and there was no crossover between from 750 up to the 1,800.

Okay. That's very helpful. And then just maybe a follow-up to Craig also. It's just on the co-investment capital, and this has been a long-term hallmark of the entire Brookfield franchise. But as you grow the size and scale of the offerings you have? Does that consent capital effectively help certain clients build up the capability to eventually internalize some of the strategies themselves, does that create a bit of attention.

No, what we found is that the co-investment capital is a great way for us to have access to larger pools of capital, which is very helpful for some of our transactions, in particular, the largest transactions that we pursue. It also gives an opportunity for our large LPs to deploy more capital alongside of us. And I wouldn't say that we've seen a trend of that moving towards the internal capabilities. It's been more the larger access to large pools of capital, which is helpful and also deploying more from our LPs.

And then the follow-up to that would be, as the flagship funds get larger, and you're already at the $20 billion on before. But as they get larger, does the co-investment capability also get larger for some of your core clients?

Yes. So, I would say -- maybe just to add to Craig's comments, two things. The first is some of our most sophisticated and largest clients in the world, do a lot of investing themselves but also invest with us. And that's because we do different types of transactions and what they invest directly on their own. And therefore, we're additive to them.And one of our -- I think, one of our great strength and offerings that we've been able to bring to our clients is to offer them co-investments. We're going to continue to do that. And as the transactions scale up having capital available, but also those partners with us is extremely important from many different perspectives.

Okay. That's great. Thank you.

Welcome.

Thank you. Our next question comes from the line of Zachary McDermott from KBW. Your question please.

Hi, thanks for taking my question. I just have a quick question about capital management. I think you had previously talked about stock buybacks and cash generation increases a few years ago. So, now that you've incorporated Oaktree, how should we feel about capital priorities moving forward, any possibility of future stock buybacks?

Yes. Hi Zachary, it's Nick. I don't think you'll see a significant change to what we've communicated in the past. I think the themes were remain the same. We are generating $2.7 billion of cash available for distribution or reinvestment now, and we'll continue to pay the distribution renew maybe past about roughly 30% of that.And then the remainder of the cash, we have a priority for that to reinvest back into the business to support our asset management franchise to seed new strategies to support the listed issuers and their growth. And then after that, we look at opportunistic use of that capital based on rail capital allocation and values.And if you look at last year, and most of that residual cash we invested into the Oaktree transaction. And going forward, we would look to obviously maintain cash, maintain liquidity to be opportunistic to weather any eventual dislocation in the capital markets. And then once we feel that we have no use internally, then we would look to return capital to shareholders via buybacks. And that will start-up, and especially as you see a ramp-up in our cash flow over the next five years as carry really starts to step up. But I don't think you'll see any change in strategy now that Oaktree is part of the family.

Thank you.

Thank you. [Operator Instructions]Our next question comes from the line of Sohrab Movahedi from BMO Capital Markets. Your question please.

Thank you. A lot of the questions have been asked and answered. I just wanted to clarify a couple of things. Around the next kind of phase of fundraising Nick, you said that it doesn't look like you have to make any concessions around the fee rates, are you seeing any need to adjust hurdle rates or target return rate target returns?

No, I think, Sohrab, we're not having to adjust target returns. And I think as we've discussed in the past, the great thing we get is when we go out and fundraise and we've just raised fund raising for these, you do get that opportunity every time you go out to potentially reset the target returns, but we, in this climate, we haven't felt the need to change it. And for the flagships, and we'll reassess when we come to the next round.

Okay. And then, I mean, maybe it's a bit of a naive question, but is are the larger sizes of funds necessitating you pursuing larger transactions? Is this becoming a bit of a kind of a self-fulfilling thing or they're independent of each other?

Yes, I would say that there's no doubt are -- as our fund sizes got bigger, our transaction sizes are bigger. And we don't do a lot of things today, where it's a $50 million investment. The point I would make, and I think we've tried to make this point before is what we found is that it's not we actually lower the risk as we buy larger things because what we generally get are better businesses when we acquire them.They're more professional, they're later stage, they're more mature and we're buying it at a different age in their formation. And generally, when you do a carve-out from a Fortune 500 company, it had really great systems. It was run by an SEC compliant business. And that is a highly attractive thing for us. So, I'd say the risk inverse to what 1 might think is the risk as size gets bigger, actually goes down.

And Bruce, just to clarify, just as, I guess, from a mechanical perspective, are there are there single name limits on a per fund basis? In other words, how large can it particular investment be in any given fund?

Yes. So generally don't -- we have some limits in some funds as to concentration. But generally, I would say, we would never expose one fund more than 10% or 15% of any one specific type of investment. And the way that we can accomplish that, and this is going back to Craig's comments on partners, our partners and our -- and co-investments, is that the way that we can diversify the risk for each fund we have is to allocate portions of that capital as transactions get bigger to our either our partnerships as a co-investor or our clients as a co-investor and those are extremely important to us as we scale up the investment decision.

That's very helpful. Thank you.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Suzanne Fleming for any further remarks.

Thank you, operator and thank you everyone for joining us today. And with that, we will conclude the call.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.