Brookfield Asset Management CEO Bruce Flatt Talks More Data Center Capacity Needed

Summary

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Podcast Summary: Bloomberg Talks

Episode: Brookfield Asset Management CEO Bruce Flatt Talks More Data Center Capacity Needed
Date: February 26, 2025
Host: Francie (Bloomberg)
Guest: Bruce Flatt (CEO, Brookfield Asset Management)

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Overview

In this episode, Bruce Flatt, CEO of Brookfield Asset Management, discusses long-term investment theses amid global turbulence, the accelerated demand for data center and compute capacity, the evolving landscape of private credit, and the ongoing transformative trends of decarbonization, digitalization, and de-globalization. Flatt brings an optimistic yet practical perspective on capital deployment, the rise of AI, and key global opportunities, emphasizing Brookfield’s role as the backbone of the economy.

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Key Discussion Points and Insights

1. Brookfield’s Investment Philosophy & Global Trends

Timestamps: 01:00 – 03:58

• Staying Focused on Long-Term Trends:
  Flatt stresses that market fluctuations haven’t changed Brookfield’s core thesis: "We’re still going to digitalize the world... We’re still going to deglobalize... and we still are going to transition to renewables. Maybe not because of renewables, but because we just need more power." (Bruce Flatt, 01:12)
• Impact of Policy and Borders:
  Brookfield invests "in great businesses or assets, own the backbone of the global economy... we don’t trade over borders." U.S. policy shifts have "pretty small" impact due to their localized business model. (Bruce Flatt, 02:20)
• Regional Opportunities:
  The U.S. remains the primary destination for capital in the next 18 months due to market size and opportunity. Europe offers value with lower multiples, while the Middle East continues to be attractive but is limited by scale compared to the U.S. (Bruce Flatt, 03:07, 04:00)

2. Explosion in Data Center & Compute Capacity

Timestamps: 04:49 – 07:23

• Unprecedented Growth:
  Following the "ChatGPT moment," the world now requires "trillions and trillions" invested in data centers to meet the computational demands of AI.

  “A 1000 megawatt, 1 gigawatt data center site... is $50 billion. These are almost unprecedented investments ever seen in, in the last... in hundreds of years.” (Bruce Flatt, 05:46)

• Underestimating AI’s Pace of Adoption:
  While hype exists, Flatt predicts, “In the next 10 years, we will look back and be extremely surprised at the progress that have been made... productivity advances are going to be very significant.” (Bruce Flatt, 06:22)
• Reshoring Supported by AI:
  Increased productivity could make U.S.-based manufacturing competitive again, leading to reshoring of capacity previously offshored.

3. Technological Progress and the Evolving Backbone

Timestamps: 07:23 – 08:28

• Service to AI Ecosystem, Not Competition:
  Advances like Deep Sea (interpreted as an AI breakthrough) reinforce the need for foundational infrastructure.

  “We’re providing the green power, we’re providing the data center, we’re providing the compute capacity. We’re funding all of that.” (Bruce Flatt, 07:49)

• Cost Reduction & Use Cases:
  Lower costs via technological progress will unlock new applications, necessitating even more infrastructure.

4. Europe, De-Globalization & Localized Investment

Timestamps: 08:28 – 09:25

• Expansive European Build-Out:
  "We have the largest builder of data centers in Europe... just announced a big deal in France for $20 billion." (Bruce Flatt, 08:44)
• Europe’s Upside:
  Reduced capital and positivity can mean better opportunities for discerning investors.

5. Private Credit’s Expansion

Timestamps: 10:25 – 13:26

• Bank Disintermediation:
  As capital moves off bank balance sheets, private credit grows.

  “This business is going to get bigger... because this is just capital being pushed off of banks' balance sheets.” (Bruce Flatt, 10:30)

• Brookfield’s Strengths:
  Top sectors: real estate, infrastructure, and direct corporate lending. Recent move: acquisition of asset-backed lender Castlelake.
• Potential Scale:
  "We're $300 billion today. I think it can be much, much larger... It can double, it can triple, it can quadruple over the longer term." (Bruce Flatt, 11:47, 11:56)
• Industry Structure:
  Prediction of consolidation with very large players like Brookfield and niche specialists, while mid-sized firms struggle to raise capital.

6. M&A and the Oaktree Relationship

Timestamps: 13:26 – 15:17

• M&A Mindset:
  Always seeking “complementary things” for client benefit but not willing to compromise on investment skills.
• Partner-Manager Model:
  Oaktree operates as an autonomous unit within Brookfield; culture is respected and entrepreneurial spirit maintained.

  “Entrepreneurialism in alternative managers is really important, and therefore we've had this partner manager model, and it’s worked so far.” (Bruce Flatt, 14:54)

7. The 3 Ds: Decarbonization, Digitalization, Deglobalization

Timestamps: 15:17 – 16:56

• Energy Transition:
  The fervor for net-zero has tempered but demand for reliable, green power continues, largely because it's cheaper.
• Accelerated Digitalization:
  AI is pushing digital infrastructure investment to "way different levels."
• Deglobalization & Reshoring:
  AI and tariffs are enabling a return of manufacturing to developed markets.

8. Evolving Real Assets & Investment Returns

Timestamps: 16:56 – End

• Evolving Asset Landscape:
  Half of Brookfield’s current assets "didn't exist as an asset class" 10-15 years ago. If investors don't evolve, they're "left in the dust." (Bruce Flatt, 17:05)
• AI’s Financial Impact:
  Early AI application in service/industrial sectors is generating "cash on cash investment returns" of 50–100%.

  “If it all works out, we're in an investment-led era for the next 20 years... and if that occurs, we're going to have a very strong economy.” (Bruce Flatt, 18:18)

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Notable Quotes & Memorable Moments

• On Long-Term Investment Focus:

  “We don’t get too wrapped up in the day to day effects of what’s going on on rates or economy or different things like that.” (Bruce Flatt, 01:40)

• On AI and Data Centers:

  “The final step of all of that is providing compute capacity.” (Bruce Flatt, 05:37) “These are almost unprecedented investments ever seen in hundreds of years.” (Bruce Flatt, 06:08)

• On the Role of Private Credit:

  “We're here for our clients, we're here just to service them. And if they can earn an extra hundred basis points over what they'd get somewhere else, this is a very exciting place…” (Bruce Flatt, 11:31)

• On Adaptability:

  “If you don’t evolve your thinking as to what’s going on in the world and try to see forward… you get left in the dust.” (Bruce Flatt, 17:37)

• On Future Productivity:

  “We’re talking 50 to 100% cash on cash investment returns... which may mean if it all works out that we’re in an investment-led era for the next 20 years.” (Bruce Flatt, 18:18)

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Timestamps for Important Segments

• Long-term investment strategy & trends: 01:12–03:58
• Regional outlook (US, Europe, Middle East): 03:07–04:49
• Data center and AI infrastructure boom: 04:49–07:23
• Europe and deglobalization: 08:28–09:25
• Private credit expansion & industry outlook: 10:25–13:26
• Brookfield’s acquisition philosophy & Oaktree: 13:26–15:17
• Decarbonization, digitalization, deglobalization ("3 Ds"): 15:17–16:56
• Evolving asset classes & future returns: 16:56–19:33

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Tone & Style

• Flatt’s tone remains methodical, pragmatic, and quietly optimistic, emphasizing adaptability, disciplined growth, and the necessity of evolving alongside global megatrends.
• The conversation maintains a forward-looking outlook, while referencing Brookfield’s immense scale, risk discipline, and focus on foundational infrastructure.

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This episode is a must-listen for anyone interested in infrastructure investing, private credit, the impact of AI on the real economy, and the nuanced strategies behind mega-asset managers like Brookfield.

Transcript

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[Bruce Flatt]

Studios Podcasts Radio News Bruce Flatt thank.

[Interviewer (Francie)]

You so much for speaking to Bloomberg. Now a lot has happened in the last 12 months. When you look at your investment thesis has anything changed and where you see value and where you see our economies going.

[Bruce Flatt]

The short story is not much has changed now as you know every day the news changes and but what we try to focus are on are our long term trends and focus on the long ball and within that there are going to be fluctuations all the time. I'd say everything that has happened over the last year is all positive to the long term thesis we have we're still going to digitalize the world and we're going to do it faster and we're going to have more. We're still going to de globalize and we're going to do it faster and we're going to have more and we still are going to transition to renewables. Maybe not because of renewables but because we just need more power. So I think all those three trends are maybe more important today than they were before so we don't get too wrapped up in the day to day effects of what's going on on rates or economy or different things like that.

[Interviewer (Francie)]

Has your US Business been impacted at all with some of the Trump policies?

[Bruce Flatt]

What we do is in go to great countries, invest in great businesses or assets, own the backbone of the global economy with great people and we don't trade over borders. So in the United states we have $500 billion worth of assets. They're all local assets. We sell the goods to local companies and people and we're a local company as we are in every other country of the world. So there's no doubt there's always some ramifications on everyone, good or bad but for us, it's pretty small because we just invest in places and we don't trade over borders.

[Interviewer (Francie)]

When you look at regions around the world, where do you see the big next opportunity?

[Bruce Flatt]

The we're in 30 countries. And therefore. And the success of our investment strategy for many decades has been to have global business and to be able to pick the spots where value and price don't intersect. Where markets are up a lot, we probably were selling things. And where markets are down a lot, we're probably buying things. And so I would say it always differs. In Europe, for example, it's a value market. Multiples are lower in the United States. The trends behind what's going on in the United States are very large. So they're just different opportunities. But I would say if I had to pick a spot where more capital will go over the next 18 months, it's probably in the United States.

[Interviewer (Francie)]

What about the Middle East?

[Bruce Flatt]

We've had a business there investing in the Middle east, unlike many others. We've been there for 25 years. We have many big businesses, from payments to schools to real estate to pipelines. And it's been a great place to invest. So yes, we're still doing more there. We're the largest foreign investor in the UAE, for example. I think we have $12 billion of assets. So it's just, it's fantastic. It's just not. We can put 12 billion at a crack into investments in the United States. Just the size of the economy is. Are just different. The United States is the largest, deepest and most robust economy in the world. And that's not changing anytime soon.

[Interviewer (Francie)]

The prospects for AI are also infrastructure and therefore some of the data centers. How much of an increase will we see from the Brookfield?

[Bruce Flatt]

The thing that I guess that hasn't really been factored in yet is that data center build out really only started 10 years ago. And it was just getting started for cloud. And then the ChatGPT moment happened. And the amount of increase in requirement to train models and for learning is very, very significant. And we're talking trillions and trillions. So the opportunity for us, we've always tried to move our backbone of the global economy along with what's changing in the world. And increasingly today the world is digitalizing. And the final step of all of that is providing compute capacity. And so we continue to work on opportunities like that. But these are large, large sums of money. Some of these sites, like a 1000 megawatt, 1 gigawatt data center site, is with compute capacity, power to compute Capacity all the way through is $50 billion. These are almost unprecedented investments ever seen in, in the last. In hundreds of years.

[Interviewer (Francie)]

Are we overestimating or underestimating the pace of change that this needs to get done?

[Bruce Flatt]

You know, I. I would say you never know at the moment in time, but if I had to guess, we will. Everyone gets excited sometimes, but in the next 10 years, we will look back and be extremely surprised at the progress that have been made. And probably the most important thing is that really what's happening is it's the application of artificial intelligence into service businesses and industrial businesses and the compression of the component of labor. And because of that, the productivity advances are going to be very significant. But that's going to be good for America because it means you can reshore capacity that you couldn't have made in the United States before. And that's going to continue to happen over the next 10 years.

[Interviewer (Francie)]

Has deep Sea changed anything for you?

[Bruce Flatt]

I think all it does is show that when advances get made, they continue to get made and progress. Smart entrepreneurs figure out another way. And it just. I'd say it makes the point we are going to have better technology every day. We're all learning and. And I'd say for us, what's really important is we provide the backbone of all of that. So we're providing the green power, we're providing the data center, we're providing the compute capacity. We're funding all of that. And that's different than we don't own a competitor to Deep Seq. If you did, you might worry about whether you had that. What it does mean probably, is that there's more capacity required, which means they need more of our backbone. And as you bring costs down with anything, more use cases come about. And that's what's going to happen in the next 10 years as we evolve this business.

[Interviewer (Francie)]

If you're sitting in Europe, there's concern that actually you're being left out because China's going one way. The US Is America first. You worry about inflationary pressures and trade wars. What does that mean for Brookfield? Are there opportunities to be had again?

[Bruce Flatt]

We're a local investor in countries. We're building out data centers all through Europe. We have the largest builder of data centers in Europe. We just announced a big deal in France for $20 billion. In all of our businesses, we continue to invest across the backbone. We're local players in local countries. We sell local things. And sometimes less money being available and less positivity means greater opportunity because there's less money available and therefore the opportunities are better. And so we're always selective with what we do, but I think there are still significant opportunities.

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[Interviewer (Francie)]

Private credit. You're a big player in private credit. Where do you go from here?

[Bruce Flatt]

This business is going to get bigger. Our business and the industry in total is going to get bigger and bigger because this is just capital being pushed off of banks balance sheets. It's less regulatory friendly on their balance sheets. They don't really want it on their balance sheets. It's being pushed to sponsor groups who are usually lending in the area where they have a lot of expertise. And our two biggest businesses today, or I guess three biggest business are real estate infrastructure and direct lending in corporates because we have a lot of expertise in those things. We just bought an asset backed lender called Castle Lake and we're going to continue to build out the business merely because I think the scale opportunity is there and our clients can earn extra return in private credit than they can just buying bonds in the market. And that's really the we're here for our clients, we're here just to service them. And if they can earn an extra hundred basis points over what they'd get somewhere else, this is a very exciting place for them to put money.

[Interviewer (Francie)]

How much bigger do you think this market again if you're good it seems like you're doing really well. But if you're in that mid level.

[Bruce Flatt]

Yeah, we're 300 billion today. I think it can be much, much larger.

[Interviewer (Francie)]

In what kind of time frame?

[Bruce Flatt]

Look, it will grow with us. We always try to grow methodically. Once in a while we buy something but we grow methodically. It can grow, it can double, it can triple, it can quadruple over the longer term, and we'll just keep building it out. But I'd say the thing we want to make sure, with every business we have, we're super responsible. The foremost thing we have to do is make our clients the returns we promise them. And if we can do that, this business will be very, very large 25 years from now.

[Interviewer (Francie)]

Do you expect consolidation in that space? In your space?

[Bruce Flatt]

Look, the asset management industry started from nothing 30 years ago. Circa 30 years ago, there are five or seven big players today. Some of us have done acquisitions to add in other sources of skills into the businesses we've done some, others have done some. I think there's going to be a. It's never one size, never fits all, but there's going to be some very large players. We're one of those. And then there's going to be some niche players that fit a certain area. What's happening in the middle is it. So far, in the last 18, 24 rounds, it hasn't been easy for them to raise Money. We raised $135 billion last year in our asset management business. Not many others can raise that type of capital.

[Interviewer (Francie)]

Are you looking to buy anything?

[Bruce Flatt]

We're always on the lookout for complementary things that can add to the business and that we can deliver to our clients in a seamless way that don't conflict or compromise the investing skills that we have as an overall business. We need to be able to say to our clients, we're pleased to offer you an Oaktree Fund because the team at Oaktree, Bruce, Howard, Arman, are the best in the world and that they do great in opportunistic investing. And when we can do that, we're proud to have them as part of the team.

[Interviewer (Francie)]

Bruce, can you talk about Oak Tree? So you have 70% of oak tree. Will you haver become one?

[Bruce Flatt]

We're sort of one, but we've had a different attitude towards the acquisitions we've made. We like to partner with management teams. Today the management has been transitioned to Armin Panozian and Bob and o', Leary, and the two of them are running the business and it's run as a separate unit and they own a part of the business. And I think it's good. Each asset management organization has a special culture and ours is right for us, but it may not be right for that group or whatever other group we work with. So I think it's a fine line. Entrepreneurialism in alternative managers is really important, and therefore we've had this partner manager model and it's worked so far, and so we're pretty happy with it.

[Interviewer (Francie)]

Bruce, if we talk about your three Ds, so decarbonization, digitization and de globalization, how do you think that's changed in the last 12 months? Is there one that will be accelerated compared to where you thought it would do 12 months ago?

[Bruce Flatt]

Everyone out in the world thought the decarbonization was going to be the big thing, and we're going to net. Everything's going to net zero. That wasn't exactly the case when it was. Today, the news story is less that, but I think it's the same. We need power. Preferably. Most companies want green power. And the good news is green power is largely the lowest cost energy anywhere in the world. Most countries of the world, therefore, that one just continues. I'd say the two that have ramped up very substantially on the amounts of money they're going in is the digitalization of the world, largely because of artificial intelligence and what's required to build out the backbone for it, which had been coming, but it's now at way different levels. And because of that, there will be reshoring of industrial capacity back to other countries, assisted in some places by tariffs, I might add. But even the tariffs might not have worked if you didn't have what's going on with artificial intelligence.

[Interviewer (Francie)]

When you look at real assets and this is what you like and this is what Brookfield buys, what can we expect from you in the next 12 months?

[Bruce Flatt]

For my whole career, I've just said the same thing we did before, but we always change. And 50% of the assets we own today didn't exist as an asset class to invest into 15 years ago. 10, 15 years ago. I find it amazing how the world changes, and it doesn't change overnight. But in investing, if you don't evolve your investing skills, maybe you do the same things. We're value investors through and through. We like to buy cash flows, we discount them back. We like proven technologies. But if you don't evolve your thinking as to what's going on in the world and try to see forward to where we're going, you get left in the dust. So we're just always trying to see out in the future where we're going, and that's increasingly what a few of us at Brookfield are spending our time on, just understanding where the world's going and how we can add value to our clients by just being ahead of the game.

[Interviewer (Francie)]

Can you tell me one thing that you've seen that you think is new.

[Bruce Flatt]

I think the application early days, the application of artificial intelligence in our service and industrial businesses is seeing productivity advances and investment returns of numbers almost never seen before. We're talking 50 to 100% cash on cash investment returns and that's very significant to productivity which, which may mean if it all works out that we're in a investment led era for the next 20 years which is highly productive and can be deployed into a highly, highly productive and drop big and significant amounts of cash flow to the bottom line and if that occurs, we're going to have a very strong economy. Of course cycles have not been repealed, but we should have a pretty good period of time for the next 20 years as that deploys within business. But it takes a lot of capital and you have to be smart to deploy it with the right people.

[Interviewer (Francie)]

Bruce, thank you so much for joining us.

[Bruce Flatt]

Thank you for having me, Francie.

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