Bringing Brookfield’s second giant climate impact fund to market just three years after launching its first – and before the first has realised any returns – is perhaps an “unusual dynamic”, president Connor Teskey said in the firm’s fourth quarter 2023 results last week. But Brookfield Asset Management is confident that the scale of LP demand for transition opportunities will ensure this fundraise is a success.
Brookfield Global Transition Fund II announced a first close at $10 billion earlier this month. Its target size is more than $15 billion, the size of its predecessor BGTF I, which closed in 2022.
“The number of LPs in BGTF II will dramatically, meaningfully exceed the number of LPs in BGTF I,” said Teskey. In the three years since bringing BGTF I to market, two trends have unfolded “at a very accelerated pace”. One, said Teskey, is that many institutional investors have been creating allocations or dedicated pools of capital for transition investments. “Therefore, we are seeing a much broader opportunity set in terms of LPs wanting to deploy to these types of strategies.
“The second one is entirely commercial, which is the last two or three years have demonstrated to market participants that investing in transition is a very, very attractive risk-adjusted return and a very large and growing attractive commercial strategy and therefore we are seeing not only bigger allocations but more investors allocating to this space.”
What is drawing investors to Brookfield’s transition strategy specifically? “We got out in front of and some of the very attractive value entry points we secured in that BGTF I fund, and therefore while there aren’t realised marks that people can rely on, the value entry points that we were able to secure using our scale and using our operating capabilities are very obvious to investors, and I would say are quite supportive of our fundraising for BGTF II,” said Teskey.
Nevertheless, BGTF I’s deployment has not been entirely plain sailing: two attempts to delist and decarbonise sizeable Australian energy businesses – Origin Energy and AGL Energy – were both ultimately unsuccessful.