Brookfield Corporation (BN) Q4 2013 Earnings Report, Transcript and Summary

Welcome to the Brookfield Asset Management 2013 Fourth Quarter Results Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Amar Dhotar, Investor Relations for Brookfield Asset Management. Please go ahead.

Thank you, and good morning, ladies and gentlemen. Thank you for joining us for our fourth quarter webcast and conference call. On the call with me today are Bruce Flatt, our Chief Executive Officer; and Brian Lawson, our Chief Financial Officer. Brian will start this afternoon discussing the highlights of our financial and operating results. Bruce will then discuss our views on the current investment and market environment, as well as a number of our major growth initiatives in the quarter. At the end of our formal comments, we will turn the call over to the operator to open the call up for questions. [Operator Instructions] I would, at this time, remind you that in responding to questions and in talking about our new initiative and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information for investors, I would encourage you to review our annual information form or our annual report, both of which are available on our website. Thank you, and I'd like to call -- I'd like to turn the call over to Brian.

Thanks, Amar, and good morning, everybody. So FFO for 2013 was $3.4 billion. This compares to $1.4 billion in 2012. The full year results included $1 billion for the fourth quarter, which was also more than double the 2012 result. Consolidated net income was $3.8 billion, and these are records for the company. FFO for the year included $1.3 billion of disposition gains, arising from a number of monetizations. This includes the sale of Timberland and private equity assets. FFO also included the realization in the fourth quarter of a $558 million carried interest. This represents our share of our clients' multibillion dollar gain on their consortium investment in GGP. But just as importantly, FFO, excluding these items, totaled $1.5 billion for the year, and that's up nearly 50% on a comparable basis over 2012. And this reflects strong operating results across our businesses. Turning to our asset management and services businesses. FFO was more than $1 billion, which compares to $353 million in 2012. This includes $300 million of fee-related earnings, $565 million of carried interest and $157 million from our construction and property services businesses. For the fourth quarter, FFO was $678 million. Fee-related earnings were up nearly 70% over 2012 on a full year basis and continued to demonstrate strong growth in the fourth quarter. These fees were significantly higher, reflecting the growth in fee-bearing capital, and we also benefited from increases in distributions and strong performance in our public securities portfolios. Gross margin was 43% for the quarter. The carried interests of more than $0.5 billion is a good illustration of how this part of our business works. As a reminder, we participate in the investment returns of our private funds on a percentage basis. This is commonly referred to as a carried interest. We do not, however, include carried interest in our financial statements even if we receive it in cash until it is no longer subject to any clawback or downward revision as a result of future performance. So what you see in our fourth quarter results is the recognition of carry that have built up over previous periods and then was crystallized and booked once we finalized how much we would receive from our clients. To help you better understand how carried interests impact our business on an ongoing basis, we provide you with 2 other measures. First, we track how our participation evolves each quarter based on actual investment performance, and we report this to you in our MD&A. For 2013, we -- for example, we generated $237 million of carry based on the actual investment performance, although 80% of that gets deferred into future years for financial statement recognition. And we also tell you how much the carry that we have the potential to earn on the assumption that we achieve the target return for each private fund, which stood at $350 million at the end of 2013. We ended the year with fee-bearing assets of $79 billion, an increase of 32%. This growth comes from the successful launch of Brookfield Property Partners, our flagship-listed property entity, along with new commitments of $8 billion to our private funds and $7 billion of inflows into our public securities portfolios. Annualized fees and target carry now stands at approximately $1 billion and includes base management and investment and incentive fees of nearly $600 million and an annualized target carry, as I mentioned before, of $350 million. There are several components of growth in our fee base. First of all, of course, is the increase in fee-bearing capital. But in addition, the incentive distributions that we earned as we increased the cash paid to unitholders from our flagship-listed entities increased to $48 million over the course of last year. This is up from $30 million in 2012 as we begin to earn incentive distributions for our renewable business. And of course, as we continue to increase the FFO and the distributions in each of those entities, these incentive distributions will increase over time. Uncalled commitments to our private funds now stand at roughly $9 billion, which, together with the $6 billion of core liquidity between us and our major affiliates, gives us $15 billion of liquidity to pursue the many attractive investment opportunities that we are seeing. This should provide additional momentum to the growth in our asset management activities. I'll now review the results from our investments in property, power, renewable and infrastructure and private equity and talk about how the underlying operations performed. Our property investments are virtually all held through Brookfield Property Partners, which, as I mentioned, we launched in April 2013. We reported FFO of $117 million from our investment in BPY during the quarter. For the year, property FFO was $492 million. Our office property business leased 3.9 million square feet in the quarter, double the 5-year average. New leases are being done at 7% above the expiring rents. Occupancy rates in our office portfolio are 88%, which came down as expected with the expiry of a major lease in New York City and this had an impact on FFO, but we also received a $14 million distribution from our investment in Canary Wharf during the quarter, so overall, FFO from the office business came down, as I mentioned, by $10 million on a net basis. Our in-place leases are at 15% discount to market rents and we are seeing good leasing activity, which bodes well for the future. Our retail property business reported strong performance, with FFO increasing 11% to $95 million in the fourth quarter. Our shopping malls are 96% occupied, and new releases are being signed at 12% above the expiring rents. We have a $2 billion renovation and development pipeline in our -- in this portfolio with a new shopping mall planned in Connecticut and a major expansion underway at our Ala Moana mall in Hawaii. Like our office portfolio, in-place rents are at a 15% discount to market. The funds from operations from our renewable power business increased by $32 million to $59 million in the quarter as we benefited from improved hydrology along with solid contributions from recent acquisitions of hydroelectric and wind facilities and increased power prices for our uncontracted power. For the year, Renewable Power FFO was $447 million compared to $313 million in 2012. We recently announced plans to make our first renewable power investment in Europe as part of the consortium that is purchasing a government-owned wind energy company with approximately 630 megawatts of wind farm development sites in Ireland. Generation returned to long-term averages after a particularly dry year in 2012, which led to a 17% increase in generation from existing facilities. We've seen a persistent and significant increase in both power and gas prices in the Northeast since early December. This is due to a combination of cold weather and gas transportation constraints. As a result, power prices have ranged from between $100 and $1,700 per megawatt hour over this period and spot gas pricing has been much higher as well. While there are obviously seasonal elements to this, it has led to a great start to the year for our power operations and is consistent with our view that prices will need to rise in order to incent the new investments necessary to replace aging infrastructure and retiring coal assets, in particular, in increasing demand for renewable sources of energy. And as many of you know, our view has been that the levels of pricing that we've seen over the past year or so have been sustainable [ph] in the longer term and have positioned our power business -- and we've positioned our power business for this and as well as some of our operations, and in particular, has been -- enable us to undertake some very -- investments in the sector on very favorable terms. Our infrastructure segment, the FFO there was $88 million for the quarter and that was up -- nicely up from the $74 million in the same quarter last year. And over the year, it was more than double at $472 million compared to $224 million. The increase came from solid contributions from our Brazilian toll road network and our Australian railway, which is now fully operational after a substantial expansion project finished earlier in the year. In the quarter, we agreed to acquire 2 container terminals in California and invested $850 million in a port and rail logistics business in Brazil where our partner is one of the world's largest mining companies. FFO from our private equity operations was $67 million. Now that's down from $126 million in 2012, but it's important to note that the decrease reflects the fact that we sold a number of businesses at excellent valuations over the last 12 months. And accordingly, we're no longer receiving our share of the earnings from those businesses. For the year, private equity FFO overall was $658 million and that includes several large disposition gains on those transactions that I mentioned. They include the sale of a packaging company and the businesses that have benefited from the recovery in the U.S. housing sector. Our private equity team invested nearly $800 million over the course of the year in oil and gas companies, a palladium mine and a cold storage business, so we're continuing to put the money to work there. In our North American residential property business, which we hold in our private equity portfolio, that achieved excellent results, FFOs of $61 million compared to $50 million in 2012. And importantly, the business started 2014 with a $450 million backlog of new homeowners, which is up substantially over the beginning of the year. Our consolidated net income was $850 million in the quarter, and $770 million of that was attributed to shareholders. It's a significant increase over the $0.5 billion of net income attributable to shareholders in the same quarter 2012, does include the carried interests along with the impact of increased power generation. Now just with a comment -- quick comment on the common share dividend. And as we'd mentioned at the time of our last call, we are not declaring a common share dividend at this time because we recently changed the payment schedule to a calendar basis. And so last November, the board declared a quarterly dividend of $0.20 that's payable at the end of February, at February 28 of this year. And that dividend covers the 4-month period, running until March 31 of this year. By way of comparison, the previous dividend, which was -- covered the 3-month period up to last November, was $0.15 a share. And so what we expect and anticipate is that the next quarterly dividend will be considered by the board at the meeting to be held on May 7, 2014, and will be paid June 30, 2014. But that's obviously -- it will be determined at the next board meeting. So with that, I will turn the call over to Bruce. Thank you.

Thank you, Brian, and good morning, everyone. As Brian mentioned, our results were strong in 2013. And from everything we see at a grassroots operating perspective, 2014 has started off well. In addition to the strong results in '13 on an operating perspective, some of the investments made, in particular during the financial crisis, were harvested during the year, leading to both realization of performance fees and gains on our capital. We've continue to believe that real assets will generate excellent risk-adjusted returns for our clients. As these investments gain in popularity, we believe that investors will continue to increase their portfolio allocation to real assets. And as one of the few asset management franchises that is global and can put large-scale amounts of capital to work, we are well positioned to continue to grow the assets under management that we have. In this regard, our assets under management, as Brian mentioned, are $187 million, despite the significant returns of capital that we did for clients during the year. The increase though was largely due to market appreciation, as well as strong inflows. We continue to increase the scale and presence with net inflows of $19 billion in 2013, which included our $7 billion infrastructure fund and just under $4.5 billion strategic real estate fund. The standout in fundraising for our public securities funds continues to be our long-only listed infrastructure strategy where we increased assets to just under $5 billion. In addition, we closed a large timber fund for our global investing, a timber fund in Brazil and won [ph] a $600 million pooled investment fund for real estate. As Brian mentioned, combined all of these with the bases and other distributions, the estimated run rate of -- including with carry, is approximately $1 billion and we see that continuing to grow rapidly as we expand the business. This is partly because the performance of our funds has been strong due to both our operational improvements in businesses and monetizations at attractive values. This has resulted in attractive returns in our private funds and continued FFO growth and distribution increases in our listed infrastructure Renewable Power and our just-listed property fund. In our public securities group, the real estate and infrastructure funds have today excellent track records and top decile performance over the past 5 and 10 years, and this led to significant performance fees as well in 2013. For example, our long-only infrastructure fund earned 24% last year while most of our long -- short funds in securities achieved even better returns than that. With respect to Brookfield Asset Management, our overall return based on stock market prices was 11% in 2013. This included the stock price gain, the regular dividend and a special dividend which we distributed to shareholders in the form of partial share of Brookfield Property Partners. More importantly, we believe that compound returns looking forward should exceed this and we believe the company's positioned to be able to do that. With respect to the market environment, the equity markets in most developed countries performed well in '13 -- 2013, with most other risk-oriented assets following suit. Although the sell-offs in January of this year took some steam out of those gains but not significant compared to the increases in 2013. On the other hand, emerging market stocks were down significantly in their local currencies, and even more, in U.S. dollars when you factor in the currencies. Bonds, as expected, did very poorly during 2013, which would be expected at this point in the cycle. And at these yields, we still see no great upside to owning fixed income securities if one has discretion to allocate capital elsewhere. Our efforts for the last 4 years have been concentrated on investing in our core developed markets. However, as a result of this shift of capital in the world, our focus has moved towards emerging markets over the last 18 months. And that's largely because valuations have been more attractive and the currencies are weak versus the U.S. dollars, so odds favor better performance in the future. The ability of our platform to allocate capital across regions like this where it becomes scarce, we believe, represents a true competitive advantage for our clients, and as in past, should contribute to higher returns over the longer term. Over the next 10 years, our view is that interest rates will remain at levels that are supportive of this continued shift from traditional bond investments towards higher-yielding alternatives such as real assets. The type of assets that we invest in generate strong cash flows, have equity-like features that grow and have inflation protection, should that ever be important. As a result, we continue to see institutional investors shifting capital into real assets, particularly towards platforms that are flexible enough to move capital around the world. As a result of the markets, we have been investing a greater portion of investment dollars outside United States, even though we're very positive on the United States for a number of reasons we tried to articulate in our shareholder letter. For us, the attraction of these other markets is simply that on a relative basis, they are currently offering greater investment opportunities. And this is largely the result of the U.S. recovery taking hold and continuing the capital availability that has confirmed that, and therefore, significant competition coming back. As a result, the price now being paid for assets in the United States and the terms we want to receive are far different than years ago. This compares to emerging markets today where capital is less available, and therefore, relatively speaking, values are attractive, the terms of acquisition are better or both of these characteristics. With those comments, operator, we'll turn the call back to you and see if there are any questions from anyone on the line.

[Operator Instructions] The first question is from Bert Powell of BMO Capital Markets.

Bruce, you have $2.7 billion of corporate liquidity and prospects to extract capital out of other parts of the business. I'm just wondering what you're thinking on share buybacks. If I go back, I can't remember how many quarters ago, it was a bigger focus for you. I'm just wondering if you could give us your thinking on that to date.

So I'd just say we continue to generate both cash on our own corporate balance sheet and from time to time are raising funds, so we have a lot of capital to deploy into opportunities. We continue to see opportunities. The cash in our corporate balance sheet from time to time is used to support the businesses we have and -- or it's used to put money back into -- to go back to shareholders in the form of either distributions or share repurchases. We're like every other investor, I guess. We think about the stock as an investment. And when there are opportunities, we are more aggressive at doing it. So I guess, we've believe that one very -- one of the great investments we can make is repurchasing shares. And from time to time, we do it, but we try to pick our spots, I guess, is the only way I'd characterize it.

Okay. And then just a second question if I may. In terms of the private equity business, is there an opportunity there to take the strategy scope broader than maybe historically what it's been, a distressed strategy, and raise more third-party capital for that business or to put the work in that business? And then, just any updated thoughts in terms of is that a candidate for another listed issuer.

So on the last point, I would say, we don't think that the private equity business accords itself to a public issuer in itself. And the reason for that is that the investments are mostly where you put $100 in, you lose money for 3 years and you sell the investment for a lot of money at the end. So it's a remake business, and it just doesn't accord itself to the public market in a structure where you're -- people are really looking for dividends and growth. So I don't think there'll be listed issuer for our private equity business. I guess, it's possible sometime in the future that we did, but I -- we don't have any intention to do it. And it's not -- we don't -- at the current time, we don't think that it makes sense. Having said that, we think -- or one of the major strategic pushes for us as an organization is to take our private equity business to the scale and level that we have of our other 3 businesses, which means that we need to put a lot of energy and effort into that over the next 3 to 5 years. And we'll always be value-based investors, but I think the business, to your point, can be much broader and that'll -- and our fundraising will be larger. So I won't make any comments specific to fundraising of a specific fund, but just in general, I think it will be a much bigger effort for us.

Next question is from Cherilyn Radbourne of TD Securities.

First question I wanted to ask relates to a new schedule you've got on Page 18 of the supplemental, which provides FFO, and then a new metric distributed cash flow. So I was just wondering if you could give us some color on what you're trying to communicate with that exhibit and just clarify what the difference is between FFO and distributed cash flow?

Sure. Thanks, Cherilyn, it's Brian. So the -- so that -- what Cherilyn is referring to is a schedule that shows our invested capital. And it's done more on an entity basis, meaning, how the capital's held in terms of through what entity as opposed to how we've traditionally shown it, which is by business segment more in line with how we have it in our financial statements. And this is really a bit of a link back to what we presented at Investor Day last year. And we felt it was important for us to take the opportunity to provide people updates on some of that information on a regular basis. And in particular, given the launch of Brookfield Property Partners of last year, our balance sheet and the invested capital is, I would suggest, a lot more simple and transparent and straightforward to understand in the sense that a significant chunk of, in fact, roughly 85% of it or more, is held through to a relatively small number of listed entities. So I think for somebody that's really trying to get their mind around what our corporate balance sheet looks like, it's now pretty straightforward. And what we're just trying to do with Slide 18 is just clarify that point to people and to give them the information they need to assess it on that basis. With respect to your question on distributed cash flow, what that is, is the amount of cash that we would expect to receive from each of these investments on an annualized basis based on the distribution or the dividend policy for each of those entities as at the end of December -- of 2013. So to that point, we would expect to receive over $1 billion of cash on to our corporate balance sheet on an annual basis just from our investments in these various listed entities. That obviously does not include any of the asset management revenues -- fees that we earned as well, that would be in addition to that. And then we earn a certain amount on our unlisted assets and we've simply put that in there as last year's FFO. So hopefully that helps.

Yes, that's great color. My next question is a little shorter, I think. Just in terms of your investing activities, I was interested to note that the real estate funds you raised just last summer's already about 50% invested. So I'm just curious as to how long you think it will be before you're in the market with the successor fund.

We have a 3-year investment period for that, and we've been successful in making a number of investments. When we get to probably 75% to 80% invested, we'll launch another fund. So you never know how long it takes to invest money and we're not in any rush, in particular, given that we've put 50% of the money to work already, but we do see a very significant pipeline of investments that we have, just given the size of our franchise. And that's really, I guess, the point. So it's -- certainly, I'm sure within a couple of years, we'll be out with another fund.

The next question is from Mario Saric with Scotiabank.

Maybe coming back to the private equity business and the anticipated acceleration in the platform. From a capital deployment standpoint, how does the pace of growth in that platform correlate with where the underlying share prices are for your publicly traded vehicles and some of your other asset classes in terms of funding seed capital and kind of funding that platform growth going forward?

It's Brian. So I'm going to take a shot at it. I think I understand what -- the question, which is to -- I'm going to say -- so as Bruce mentioned, we would like to expand our operations on the private equity side. And I think perhaps what you're getting at is where would we source the capital from our other -- from our existing capital and to what extent will we time our expansion based on our ability to monetize that existing capital at attractive returns, is that fair?

Yes, that's good.

Okay. So what I would say to that is we've got a lot of liquidity and so one of the important things -- one of the reasons why we keep high levels of liquidity is so that we have the ability to pursue an initiative like this without being overly reliant on the bid for some of our other capital. Having said that, we do expect that we will have the ability to continue to monetize that capital just based on where we see trends moving. But I think the point being that we can -- we think we can expand that business pretty significantly without being overly reliant on monetizing -- on the pricing for monetizing existing capital.

Okay. And then, maybe more of a philosophical question and sticking to Slide 18 and sticking to this whole private equity business. Brian, you made great strides in terms of simplifying the balance sheet, and I think that's what you're trying to show us on Slide 18 here. Accelerating the private equity business, assuming that it doesn't become a listed issuer, as Bruce indicated, an additional portion of your capital is going towards those funds. Arguably, the balance sheet may not be as simple going forward depending on the magnitude of the growth in that platform. So I'm just wondering how you kind of reconcile the 2 objectives going forward.

Sure. Well, I guess -- well, put it this way. I think the balance sheet will still be simple although that particular portion of our capital, the valuation of it might not be as quite as straightforward as being able to look at a share price or take all the publicly available information for that listed issuer and consider research analysts and to come up with a view of value on it because it will be in the form LP investments into private equity funds. Having said that, we do prepare valuations for all of our investors on a quarterly basis. They're audited annually, just like every other private equity operation. And so I'm sure we would be able to provide investors with a pretty good sense of how we see the value evolving there. You just might not be able to look it up on a stock price.

The only other comment I might add to that is that we've traditionally had a lot of private equity investments on our own balance sheet. And in the future, the whole private equity business we have will probably be conducted through a private equity fund. So what our intention is, is to roll all our private equity, in distress and private equity, into a large global fund. And I think, therefore, when that's fully accomplished, that will make the balance sheet much more simple for you because you'll just have one fund as opposed to a bunch of investments that might have otherwise be on our balance sheet as that goes over the years.

Next question is from Michael Goldberg of Desjardins Securities.

If I look back over the past dozen years or so, your net asset value, leaving aside the value of your asset management franchise, has grown at a compound rate in double digits annually. This past year, it looks like the increase was very modest, but at the same time, you're really starting to get takeoff in the value of the asset management franchise. So what I'm wondering, is that the way that I should think about continuing growth in the value going forward? Namely, that growth in the NAV, leaving aside the asset management franchise, may be more modest, the bulk of the growth will be coming in the value of the asset management franchise?

I might -- it's Bruce, Michael. I might try to take a shot at that. I just think that over the longer term, we believe capital we have in the various businesses we have can compound between 12% and 15% on a net basis, possibly greater than that. And we've done it in the past and we think we can do it in the future. It's never arithmetic, meaning it doesn't do 12% or 15% every year. Sometimes it's -- often the -- when the investments are made, it takes 3 years to -- for the market to turn and then we make a lot of money all in one year or it looks like it's all made in 1 year but it actually was made over that 4-year period. So I just think it's an arithmetic amount. So first comment is -- it's not arithmetic. So the first comment is that saying that this year wasn't very much probably isn't correct. It's just reflective of what I just indicated. There's no doubt that the asset management business is a high growth business and is at a point where, given the scale of it and if we can continue to be successful raising larger funds and we're continue -- and if we can earn those type of returns on the money, it will be a very high-growth business and significant amount of value of the business will continue to be generated by that area. So I think your assessment is right in that that'll be a much more -- a more -- a greater important business in the future, a much more important business.

Okay. And I have one other question. Assuming that BPY acquires 100% of BPO, do you think that there are office assets that could be used to seed new private funds?

So of course, anything is possible, and from time to time, we have taken assets of ours and put them in funds. There will definitely be a reshuffling of assets once BPO is merged into BPY, partly to pay back some of the acquisition debt that's taken on in the transaction. Whether it's done in outright sales of assets or partnerships with clients, we'll have to see, but it's possible.

The next question is from Andrew Kuske of Crédit Suisse.

I guess, maybe the first question is for Bruce. And in the last 6 months or so, we've seen a lot of realizations from your competitors in the alternative space, and really, LBO realizations. And so just tactically, do you see yourself with this aspiration to grow the PE business a bit more moving more in their direction? And then, I guess there was a flip side to that. Do you see some of the other players trying to set up permanent capital structures much as what you already have?

Yes, I'd say our private equity returns in our 3 funds or 4 funds that are related to private equity plus our own private equity business we've had on our balance sheet for the last 20 years has matched the returns that you'd find in the industry or better. So our returns are excellent, and I think we can use that to make it a bigger business over time, so I think that's important for us. With respect to competitors, we always watch what they're doing and try to emulate the great things they do. I'm sure some of them look at some of the public market things. I don't know if any of them will set up exact structures that we have, but they're not easy to start and we had a great benefit of sort of the operational organization we had to do it, but it's certainly possible.

Okay. And then just to sort of follow up. On the scale of your business, if you divided your business really into, say, 2 categories of manufacturing and operations and then the other category really being distribution or sales, are you happy with the scale in both of those buckets?

Yes, I'd say the weakest area we had years ago was sales, as you called it, which was our fundraising capability, because we've been doing that for 10 years, not 30, where some of our competitors have been doing it for 30 years. We've made great strides in the last 5, 7 years. And I think, we're extremely pleased with the team we have in place now and so I think that we've made some great progress. Obviously, we can do better, and we will and we're still working at it.

The next question is from Blaine Heck of Wells Fargo Securities.

So in the renewable energy segment, it seems as if you're continuing to allocate cash to merchant power sales as can be seen in your energy marketing line, which was negative $30 million during the quarter. So I appreciate the commentary on energy pricing increasing thus far this year, but what's your kind of view on when pricing can increase to the point that this line item can become flat or even turn positive in the future?

So Brendan, (sic) [Blaine] it's Bryan. I'm going to answer that question, I guess, in part just with how we set our pricing assumptions when we do our valuations and the like. And on that basis, we do look to the forward markets for electricity over the next 3 years and they're not -- well, recently, there's been a lot of strength. But I'll say, up until recently, they've been pretty camped down for the next couple of years. I'll come back to some really interesting changes in that. But -- then you can look out a little bit further and what you see is that classic situation where if you think about the generating capacity in any of the markets that we're in and you look at what the expected utilization is and you look at the capacity requirements and then you layer on top of that the mandated requirements for renewables, then what you see pretty easily or clearly is a significant demand for additional renewable capacity, I mean, capacity in general. And all of that based on economics required put in place new capacity suggests that the price has to increase a lot. Now that's out 3 or 4 years or so. What we see quite recently is some really strong bids for things like capacity going out a couple of years. And of course, we've seen, as I mentioned in my remarks, some significant increases in pricing, arguably, some of that based on seasonal elements. But it does point to the fact that these things often manifest themselves or materialize a lot faster than what you might otherwise think. So while we have a, what I'd say, a relatively conservative view that it could take a few years, 3 or 4 years, there is also a decent potential that happens many times as it shows up a lot sooner.

[Operator Instructions] Next question is from Mark Rothschild of Canaccord Genuity.

Bruce, you talked about potentially eventually starting the next real estate fund and you have [ph] to do some other asset classes eventually as well. I'm curious if you'd do some of the funds differently going forward, considering the goal is, in general, to own many of the assets indefinitely and these funds typically have a finite lifespan. So how do you think about that?

So the private equity business is -- in infrastructure real estate are -- basically revolve around a fund business and has a 10 plus 2-year life, so it's a 12-year life. And I guess, the only point I'd make is we have such a scale of the business today that on the opportunistic side, assets that fit into those funds. Some we'll buy. If at the end of 10 years we have to sell them, I guess that will be life. We're -- it's okay because we have such a scale of a business today that it doesn't really matter if some assets come and go. And -- but generally, the business we have and we keep indefinitely is the people and the franchise and the ability to fund other assets, so that doesn't go. And buildings from time to time will go, but even a 12-year duration's a pretty long period of time. For assets that are more -- that we think longer term can compound and we have some investors that want to -- have one opinion and others that have a different one. For example, with the windup of the GGP fund, that's a very good example of where we found a solution for our clients that wanted to exit after a period of time with, I'll call it, a short-term very significant gain. And we and some of our other clients wanted to continue to compound with a very good gain going forward, we think. And so I think we'll -- given the structures we have and the size we have, we can -- the added benefit we can give our clients is that we can accommodate some where they want to be there longer term and accommodate others that want to leave early. And that, we think, is a great benefit to some people. But from time to time, we'll just sell as well.

Great. And with regard to your comments about shifting and growing in emerging markets, how material would you expect that to be over the next couple of years, and are there markets in particular that you see to carrier opportunity?

So we have, as you know, a very large business. And when we say we're putting capital into some of the emerging markets, when you look at it on a total scope of our business, it's not meaningful in the short term. I do think that longer term, countries like Brazil and China and some of the other major emerging markets will -- are going to be, as they industrialize and as they become markets where everyone can come -- get comfortable in investing. Much more of our capital will be invested in those markets. These are going to be major, major markets globally and as we get more comfortable and build up our business, I think there will be very significant for us. But that may take 5, 10, 15 years.

There are no more questions at this time. I will now hand the call back over to Mr. Dhotar.

That concludes our fourth quarter webcast and conference call. We look forward to updating you next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.