One Asset Manager's Approach to Courting Individual Investors and Advisors
Brookfield Oaktree Wealth Solutions CEO John Sweeney Investment>Alternative Investments One Asset Manager's Approach to Courting Individual Investors and Advisors Brookfield Oaktree Wealth Solutions was an early mover in developing alternatives for individual investors. Here’s where it stands today. After Brookfield Asset Management bought a controlling stake in Oaktree Capital Management in 2019 and formally launched Brookfield Oaktree Wealth Solutions in April 2021, the firm became one of the first alternative asset managers with a distribution program focused on the private wealth channel. Among the first semi-liquid offerings it brought to market was the non-listed Brookfield REIT. With further rollouts, it's menu for individual investors includes access to real estate, private equity, private credit, infrastructure, equities and renewables. The vehicles Brookfield Oaktree has used to distribute those opportunities to individual investors have ranged from mutual funds and interval funds to non-traded REITs, BDCs and tender offer funds. Last year, for example, it brought to market Brookfield Infrastructure Income Fund, a TOF targeting infrastructure debt, equity and public securities worldwide.
From the beginning, the firm also built a dedicated RIA sales and support team to connect with the growing RIA channel in the United States. By 2023, Brookfield Oaktree had partnered with more than 50 wealth management groups, raising $7 billion in capital from wealth sources last year alone, according to Brookfield’s fourth-quarter shareholder letter. Eventually, the company expects the wealth channel to bring in $12 billion to $15 billion in fundraising capital each year.
WealthManagement.com connected with Brookfield Oaktree Wealth Solutions CEO John Sweeney to talk about what goes into the firm’s choice of assets and investment vehicles and how it works with advisors to bring alternatives to individual investors. Sweeney started his career on the wealth side, working first at Citi Private Bank and then at Morgan Stanley, managing alternative investment products. “I’ve been lucky enough to have been on the alternative side of investing since late 1999 to early 2000 before these things were really alternative investment departments,” Sweeney said.
In 2013, he joined Oaktree to help build its wealth business, serving as head of Americas intermediary business and as president of Oaktree Funds from 2014 to 2018. Since January, Sweeney has been running Brookfield Oaktree Wealth Solutions’ business globally. Before that, he oversaw the firm’s U.S. operations, including sales, distribution, product management and product development.
This Q&A has been edited for length, style and clarity.
WealthManagement.com: Since you were there when Brookfield decided to take the majority stake in Oaktree, can you talk about what drove Brookfield’s decision to focus more on the private wealth channel?
John Sweeney: The transaction you mentioned was closed in September 2019 when Brookfield acquired the majority economic stake in Oaktree. And that really rounded out the investment verticals. Brookfield was very well-known for infrastructure, private equity, renewables and real estate. It was not as well-known for the credit side, so the Oaktree acquisition rounded out private credit, distressed credit and liquid credit. From an investment standpoint, the acquisition made perfect sense.
If you pierce the veil a bit—both firms had a wealth business. The business I ran at Oaktree was a wealth business, and Brookfield had two separate businesses, one that focused on public securities and one that focused on private funds. The two firms are still separate, except for wealth. We knew if we wanted to go from selling funds sporadically into the wealth channel, you couldn’t treat wealth as just somewhere we could distribute products periodically. It has to become a business. So rather than have three separate groups calling the RIAs, broker/dealers and private banks, we said let’s bring these groups together and build a business that’s focused on wealth management/alternative investment distribution.
That’s not just hiring salespeople. If you fast forward to today, we have 130 people globally focused on and in alternatives. That’s everything—sales, distribution, marketing, legal, compliance. It’s recognizing, yes, the importance and the opportunity in the wealth channels. But it’s a different channel. As I said, I spent most of my career in these channels. How you service, how you support, and how you report to these investors is oftentimes just as important as the investment strategy itself. So, Brookfield took the decision, “If we are going to go into wealth in a meaningful way, we are going to invest in the business not for the next 12 to 18 months, but over the next three, five, seven, 10 years.”
The why is the changing landscape of private wealth going from 0% when I was at Morgan Stanley, to 0% to 3% percent and trying to get into 5%. We think that trend is still in its infancy, the trend being high-net-worth private retail investors allocating more to alternatives in general and then also getting more specific in their allocations to private equity, different flavors of private credit, infrastructure and other investments. It was the tailwinds in the space, the asset classes we were in and the commitment that led us to where we are today, with 130 folks around the globe.
WM: The firm offers different types of investment products. There is real estate, infrastructure, private credit. I wanted to talk through how decisions are being made about what asset types to target and also about which vehicle types and which wrappers would be best suited to bring those products to the private wealth channel?
JS: I would step back and say the luxury we have is first and foremost, our team. In addition to salespeople, we have teams that cover home office and research, whether it’s RIAs, banks or wirehouses, understanding their goals and objectives.
You know the asset classes that we are in—we need to pair those asset classes up with the goals and objectives of our clients. We don’t want to just sell at them. So what we do is understand our clients, know their goals and objectives and look at our product platform. If you look at how our products have evolved, whether it’s the credit funds through a BDC or the infrastructure fund through an interval or tender offer fund, and the same thing with real estate and REIT, what we are trying to do is work with our clients, take the core capabilities of either Brookfield or Oaktree and put them into a container that our wealth clients are looking for.
What we’ve seen is our wealth partners trying to structure products for the accredited investor really below QP, that $1 million to $5 million client. So we have spent a lot of time over the past few years taking our existing investment content, working with partners around the globe, not just here in the U.S., and putting that investment content in a wrapper that is appropriate for a subset of their clients. A commonality that we heard is immediate drawdown, lower minimums, public reporting and 1099s. The goal for us is to take that existing investment content and say, “Can we take the same investment strategy, investment teams, target markets and investment process and put it in one of these containers that’s more wealth-friendly?”
I would say it’s a partnership for the firms. We have very good dialogue with all of these firms, especially in the U.S. We don’t want to develop products or ideas that there isn’t a home for. So we have ideas around these bases we are active in, but we generally introduce a new product structure in partnership with someone. Not saying a firm commitment, but in partnership with the idea that we had and that vehicle we are talking about would be applicable to the goals of some of our clients.
I view it as a two-way street, and it’s the luxury of having a large team that knows our clients really well.
WM: Have you noticed whether RIAs feel more comfortable with certain of these products over others?
JS: I find that it’s such a dispersed market. We’ve heard real estate, we’ve heard growth equity, private credit. It certainly touches all the asset classes that we are active in, from private equity to real estate to infrastructure and then across the credit spectrum. As RIAs are building their portfolios, it’s more specific to them and how they are putting the building blocks together. But it definitely runs the gamut of asset classes.
One comment I will add. Given the movement we have seen in rates, it’s not just an income story any longer. We are starting to hear more about total return and seeing interest in products that are not just income-focused.
WM: And then I wanted to talk about the mechanics of how the firm connects with the financial advisor community and how it gets its products in front of advisors.
JS: I would separate that into different teams internally that are focused on what I could call corporate, research and product personnel. We have a dedicated team that interfaces with research/CIOs, whether that’s in RIA or even at one of the big banks. They are out there constantly talking about, “Here’s the Brookfield Oaktree offering set. What are your goals and objectives?” That’s the first line of defense.
And then we have a separate team of sales folks that are working across RIAs, banks and broker/dealers. Once the home office onboards one of our products, we have a separate team that has relationships, that understands the individual advisors’ needs, goals and clients. And then, they are more engaged in the selling process.
It’s at least a two-stage process. One is the home office/CIO process. And the second is the individual advisor process. And you need to get both of them right.
WM: We’ve seen a number of fintech platforms rise up in the space that serves financial advisors in that intersection of alternative investment and private wealth money. Does Brookfield Oaktree Wealth Solutions work with any of those?
JS: We do. We have worked with more of what I would call your traditional fintech players. iCapital has probably been our biggest relationship globally. CAIS, to a lesser extent. I’ve read some of your recent pieces on Yieldstreet and Opto. It’s a super-interesting space to me that I want to spend more time on. But yes, more directly, iCapital and some of the others that are providing some of the technology that interfaces between an RIA and Brookfield/Oaktree, we’ve been using for a number of years.
WM: Can you tell me what the process is behind which fintech platforms you decide to work with?
JS: If you look at some of the big U.S. wirehouse firms, even RIAs, a lot of them have relationships with some of these fintech platforms. Obviously, you have to do your own due diligence and make sure they can handle what you are doing. But a lot of it is, “How does your client want to access these investments?”
They are probably not going to come in directly, they are looking for smaller minimums. We’ve found iCapital and the big U.S. broker/dealers—Morgan, Merrill, UBS—had an entrenched relationship. CAIS seems to have one with some of the RIAs. It again, comes back to more deciding on products. You really need to understand who the client you are trying to get to is, who their firm works with and then you have to figure out how to integrate them into your process.
WM: What additional channels do you try to access the RIA community through?
JS: The other channels we are working through are the big custodians, whether that’s Schwab, Pershing, Fidelity. We work with all the major custodial platforms.
WM: I saw on the website you have some thought pieces about alternative investment offerings and why they might be attractive. Are there other ways the firm tries to educate financial advisors about the alternative investment universe and get them up to speed on what their options might be?
JS: You hit on what I think is still the most important topic in alternative growth in wealth management and it’s education. We spend a lot of time on both training and education in partnership with some of these firms that we’ve been talking about today. On our own, we are publishing content under what we call “The Alts Institute.” What you have probably seen from us is that 101-level asset class content. You are going to start seeing more and more from us.
Our ultimate goal with “The Alts Institute” is to bring folks into a location and do more in-person training, more in-depth training. And it’s not only on the asset class. The asset class training is very important, but so is the training on the product itself. We want you to know the asset class, why you are incorporating that asset class into your portfolio and then spend enough time on the product itself and how it operates within that asset class. Over the next 12 to 18 months, you are going to hear a lot more from us on that and how we build it out and transition from just publishing content on the website to doing more in person.
I think that is a long-term investment by us and others, to be frank, and I think it’s critically important. If clients are truly going to move from its 5% today up to 15%, 20%, 25% in alternatives, there is an education gap that we are hoping that with our partners, we can help them fill so they can achieve their goals.
WM: It seems most advisors realize alternatives are important. Where do you see the biggest gaps in their education right now?
JS: Asset class-wise in wealth, asset classes like infrastructure are still relatively new in the U.S. So we are spending a lot of time with partner firms educating on that asset class and how that would be incorporated into a portfolio.
I would also say with a lot of these structures we’ve been talking about that are set to touch a client beyond your $5 million qualified purchaser clients, sometimes there are new advisors to the overall alternatives landscape that we spend time educating.
WM: We’ve seen more alternative asset managers targeting the private wealth channel. I am curious about how Brookfield Oaktree views the competition and what is the strategy for dealing with that competition, given the goals of raising the money that’s coming in from private wealth?
JS: There is certainly more competition coming in, both from traditional asset managers, as well as other large alternative investment shops. I would say our view on that—it’s good. We want to grow the overall alternative asset class. The way we compete there, in these channels, is going back to how I started. Investing in the business, creating a business globally designed to work with the wealth channel beyond sales and distribution folks, really have an all-encompassing offering so we can sell to, service and support those clients as they are accustomed.
And then stick to our strengths. As you have seen us introduce new products, they are coming out of an investment vertical where either Brookfield or Oaktree has a long operating history. When we talk about private credit, we trace our roots back all the way to 2000-2001, when Oaktree did its first private credit fund. We are trying to stay true to what we do. As I mentioned earlier—same team, same target markets, same investment philosophy and investment process—take what we are known for and what we are very good at over a long period of time and introduce that into the wealth space in a container that’s more friendly there.
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Originally posted on: https://www.wealthmanagement.com/alternative-investments/one-asset-managers-approach-courting-individual-investors-and-advisors