The CEO of the world’s second-largest alternatives firm is optimistic

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For the last two decades, Bruce Flatt has been the CEO of Brookfield Asset Management, growing it to become the second-largest alternatives firm in the world. He oversees more than $725 billion in assets spanning a diverse portfolio comprised of real estate, private equity, infrastructure, energy transition, credit, and insurance. 

Flatt brings his vast perspective to an exclusive interview with CNBC’s Delivering Alpha newsletter, where he explains why he’s not too concerned about the many headwinds facing the economy today. 

 (The below has been edited for length and clarity. See above for full video.)

Leslie Picker: I want to kick things off with kind of a bird’s eye view, because you do have such a unique vantage point in the economy right now. And given all of the forces that have caused the public market sell-off – inflation, higher interest rates, concerns about geopolitics, China, Russia supply chain challenges, and the like – what’s been the impact from your vantage point?

Bruce Flatt: Long-term wealth creation is about investing in great businesses with great people and compounding over the long term. So, despite wars, pandemics, explosions, recessions, and all the other things you just mentioned, over the past 30 years, we’ve just continued to buy great businesses, keep compounding and the returns have been excellent. And so, I guess I’d just say everyone just has to stay invested, not get too excited about the market gyrations that happen every day, and just keep with it. And that’s the secret to success in investing.

Picker: Given what you’re seeing in terms of the deal market. In real estate and the like — there are concerns about a recession, there are questions about whether we’ve reached the bottom — do you see any indications that either of those are on the horizon?

Flatt: The good news is corporate balance sheets are very strong. Personal balance sheets are very strong. If we have a recession, it’s going to be a light recession and that’s a good thing. But there’s no doubt – look, we need to get inflation down around the world and it’s either going to come down naturally, over time, or the central banks are going to cause it to come down. And those two scenarios paint differently, but they will be successful. We will get through all of this as we always do. And we will come out the other side. What’s important for us is that inflation is very impactful in a positive way for real assets. And these are real return things that we invest into and they produce – they’re highly cash generative, and that’s a very positive thing for the type of things that we own.

Picker: How does that work? Why is inflation so positive, given that the cost of debt is going up?

Flatt: When we buy real assets, you put a lot of money in upfront. Your expenses are relatively small compared to that and your margins are high. So, when inflation impacts it impacts the whole asset, but it…