Nik Priebe: Okay. Thanks. Wanted to ask a question about fundraising dynamics and your experience with the second iteration of the transition fund. I think you’ve suggested that you’re anticipating an expansion in the number of LPs in fund two. But considering that the vast majority of assets in the first fund are still unrealized as you seek to broaden the investor base, does that create an impediment for a subset of investors? And in that context, not to put the cart before the horse, but would you expect more success or momentum on that front for the third vintage, specifically considering that the inaugural fund at that time would be a bit more mature in its lifecycle?
Connor Teskey: Thanks, Nik. Perhaps a few things to unpack there. The first, I would say is a, let me start by saying yes, we have a very strong belief that the number of LPs in BGTF II will dramatically, meaningfully exceed the numbers of LPs in BGTF I. The first reason is a macro reason, which is, although we’re only call it three years between fundraising for successive vintages. Two things have happened in the market on a very accelerated pace over those three years. One is many institutional investors around the world either now have a transition allocation or they have at least determined where within their business transition investments sit, and they have a dedicated pool of capital towards those types of strategies.
That dynamic has increased meaningfully versus 2021, and therefore we are seeing a much broader opportunity set in terms of LPs looking to deploy in these types of strategies. The second one is entirely commercial, which is the last two or three years have demonstrated to market participants that investing in transition is a very, very attractive risk adjusted return and a very large and growing attractive commercial strategy. And therefore, we are seeing not only bigger allocations, but more investors allocating to the space. If those are the macro dynamics, the comment I would make more specific to our cadence of coming back to the market is yes, we don’t have realized marks in BGTF I yet, as a result of the fund only being largely invested over the last couple of years.
But what we’re seeing from LP partners, both existing and new potential partners is it’s very clear some of the key macro trends that we got out in front of, and some of the very attractive value entry points we secured in that BGTF I fund. And therefore, while there aren’t realized marks that people can rely on, the value entry points that we were able to secure using our scale and using our operating capabilities are very obvious to investors and I would say quite supportive of our fundraising for BGTF II. So is it an unusual dynamic? Perhaps. Do we view it as an impediment to fundraising? No, we do not.
Nik Priebe: Okay. That’s good color. And then just shifting gears, I understand the way that carried interest is shared between the manager and the corporation. It won’t be a meaningful contributor to the distributable earnings in the immediate future. But I was wondering if you could talk a little bit about how much carry you’ve accrued so far, and just how big you envision that component of the earnings profile becoming in the longer run, say five years from now?
Connor Teskey: Certainly. And maybe just as a reminder to everyone, at the time of the spinout, accrued carry was left at BN. So we were starting from a clean slate. And then on go-forward carry, one-third goes to BN and two-thirds remains with BAM. So exactly as was just mentioned, we do not expect realized carry to be a meaningful part of our DE for the first five years post spinout. To-date, our accrued carry has reached about $200 million. But we expect that to continue to grow very, very meaningfully going forward. And by the end of the decade, I think in our Investor Day forecast, we suggested that by 2029, we expect to see realized carry in approximately the $2 billion range with that more than tripling in the three to four years following that. So while it is a bit deferred in the future, this becomes a very meaningful driver of our economics come the latter portion of the decade.
Operator: Thank you. Our next question will come from the line of Kenneth Worthington with J.P. Morgan.
Kenneth Worthington: Hi, good morning, almost, good afternoon. Thanks for taking the questions. We’re seeing renewed concerns about the commercial real estate market in the U.S., I would say punctuated by some comments by Janet Yellen, highlighting some risks here. How do you see the investment in realization environment sort of developing in 2024 in your real estate business broadly, as the year continues to roll on?
Connor Teskey: Certainly. Thanks, Ken. Maybe just a couple of points here is the — there is no doubt that there is a little bit of stress in certain portions of the real estate market. But while that stress — that temporary stress is a reality for some, it’s also an opportunity for others. And with the breadth of our real estate franchise and how we fund our businesses, we’re in a great position to ride through this environment, continue to keep refinancing our businesses. And the one thing that’s often being overlooked in the real estate market right now is high quality underlying assets are performing exceptionally well. The issue is on funding and liquidity, as opposed to underlying operating performance, and that’s certainly what we’re seeing in our portfolio.
So you combine that strong operating performance with how we fund our businesses, we see a path to riding through this. But this is where the opportunity is created. And we mentioned that we’re seeing great traction for our BSREP franchise that’s in the market. It is well-positioned to take advantage in this market environment and secure some very, very attractive value entry points. And that’s why I think we’re seeing such strong fundraising success there. The second part of your question went to asset liquidity. And perhaps I’d make a comment that applies to real estate, but perhaps applies to all of our asset classes. Throughout 2023, interest rates were increasing, but more important than them increasing was their trajectory was uncertain.
And that uncertainty did not make for a robust environment for capital recycling and for monetizations. What we saw across real estate, as well as our other class — asset classes, like renewable and infrastructure, is high quality assets of small to medium size could still receive very, very attractive bids and we monetized assets across all of our platforms in that way. But what was more difficult in that environment was large scale monetizations. With increasing stability and interest rates, we do see that market coming back in 2024. It’ll take time. It will, we think, accelerate throughout the year. But the good news for us is we were able to use our scale to invest in 2023 when there were very few bidders. And we made the conscious decision to not force ourselves to realize assets in that market and more appropriately, wait for better times.
So, all in all, we do see liquidity accelerating throughout 2024, not only in real estate, but across our asset classes. And that’s simply a function of the uncertainty in the market increasingly being removed as interest rates stabilize.
Kenneth Worthington: Okay. Brilliant. Thank you. Maybe for Bahir, I think this is more of a clarification. Credit had a substantial pickup in inflows and outflows this quarter, 25 — Page 25 of the supplement and it looks like the insurance piece was a big driver of that on Page 7 of the supplement. Is there anything seasonal about the fourth quarter, or was it Argo that really impacted the fourth quarter inflows and outflows. And as we think about the insurance contribution to your fundraising target, the $15 billion to $20 billion guide over time, is that a gross number or is that sort of a net number, net of the outflows that the insurance piece kind of sees? So just trying to figure out how to think about that in the context of the longer-term fundraising guidance.
Bahir Manios: Hey Ken, you’re absolutely correct. The fourth quarter insurance inflows benefited quite substantially from the Argo transaction that we spoke about. With respect to the outflows within credit, we may — I may just want to clarify that with you after the call, but it may have been some funds that reached the end of its cycle, if I remember correctly. And then with respect to the last point, the $15 billion to $20 billion is a net number that we’re using based on the forecast of the various platforms that we have built in our insurance business. Aside from the annuities business that gets sort of all the — that gets all the headlines, Brookfield Reinsurance has also built up, or is in the process of building up a sizable pension risk transfer business in the U.S., where it started to bid on mandates at the latter part of 2023.
And there’s going to be considerable growth coming from that channel in 2024, and also are in the process of building a similar business in the UK, where that market is also quite significant.
Operator: Thank you. Our next question will come from the line of Mario Saric with Scotiabank.
Mario Saric: Hi, good afternoon. Just two quick ones on my end. Bahir, your comment on expected outsized growth in FRE in 2024. Is that expectation or the definition of outsized kind of is that relative to 2023 actual growth or your target kind of FRE growth of 15% to 20% over time that you outlined at the Investor Day. I just want to clarify kind of what you thought about when you said outsized.
