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.

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.

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…

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…

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…

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

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.

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.

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?

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.

Our next question comes from Bill Katz with 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?

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.

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?

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.

Our next question comes from Mark Rothschild with Canaccord.

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?

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.

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?

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.

Our next question comes from Andrew Kuske with 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?

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.

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?

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.

Our next question comes from Brian Bedell with 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?

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.

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?

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.

Our next question comes from Zachary McDermott with 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?

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.

Our next question comes from Sohrab Movahedi with 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?

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.

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?

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.

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?

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.

Our next question comes from Mario Saric with 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?

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.

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.

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.

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 Instructions]. Our next question comes from Bill 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?

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

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

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