Carried Interest
Private equity is a good business to be in when profits are rolling in. The challenge obviously is keeping that happening. A private equity fund that does not accrue profit quickly becomes old news and money never follows old news. Generating revenue then is key to new money which then finances growth. And then the growth improves profitability.
When Joe average invests in funds other than stocks or when he hires a brokerage to manage his assets, there are fees. Typically 2% is a reasonable rate for a brokerage to charge for managing your money. Growth or loss, it is irrelevant because that 2% is due regardless. 2% is not very much, $20,000 on $1 million dollars which will make nobody rich until you start to accrue many tens of millions under management.
Commissions are also a way that stock brokers make money. A percentage of the sale, just as with other commissioned sales, is what drives the stock market to make deals. A customer’s wins or losses are irrelevant, simply the deals. Sell $1 million in stock at a gain or loss and you get a commission. Pretty good deal.
But what if you are not a registered broker or brokerage, can not get registered as a federal bank but are very good at picking stocks and wheeling and dealing and want to make buckets of dough from other peoples money? Why not start a hedge fund. Or a private equity group. Maybe one that invests in the ‘green’ revolution.
And what better place to start a fund the as a triple corporate agent so to speak. An unpaid advisor to a government, leader of an organization to finance Net-Zero, (GFanz) and as the UN Special Envoy for climate change. He was also a board member of the World Economic Forum all while chairing the Brookfield fund created to invest in green initiatives.
Remarkable luck, that, to get all these positions. Interesting if they all fit together. As the advisor to Trudeau our government changed the rules as to how and what pension funds in Canada could invest in. Prior they could not invest in anything with high risk, so Trudeau and Chrystia Freeland come up with a Crown Agency to derisk investing in green. This backstopping allows pensions to flow investments into the high risk ventures substantially growing Brookfields investment portfolio.
An example of this would be the 51% ownership Brookfield has in Westinghouse, one of the largest players in the nuclear power generation business. Initially as well you had many of the largest investment corporations flowing money here as well with the prompting of GFANZ but this has now evaporated with the latest US President.
So for instance, Ukraine needs someone to rebuild its nuclear energy infrastructure. Up steps Westinghouse with a $2 billion bid which the Government of Canada announces it is backstopping through loan guarantees. So due to the derisking by our government investing in this becomes available for pensions either through the zoning of the money to Ukraine or investment in Ukrainian companies generating power. Brookfield makes bank, Carney get’s paid a 2% management fee and up to 20% bonus (the carried interest) which would normally be paid out ofver the life of the contract but due to the government derisking this and law changes in Canada all can be paid out on the front end.
So you ask why does Brookfield now have its corporate address in the US? Well there are a couple reasons. Accessing US capital is much easier when you are a US company. The US is starting out on a path of rebuilding its nuclear generation capacity and $80 billion has already been contracted with Westinghouse to due this. But the big kicker is the rules eliminating exposure to Brookfield in the event this all implodes. Too big to fail means that the investors, your pensions, are entirely on the hook if this falls apart.
Brookfield and its people can not be held accountable, and the pure genius for Carney is he will have already been paid out billions by then.
If he can stay on as Prime Minister.
These loop-holes are a known thing for the government but of course why would anyone in Government change it if they are benefitting. Look at Freeland, she is now an ‘unpaid’ advisor of investments for the Ukrainian Government. Strange how that happened virtually at the same time as Canada’s announcement of the derisking of their rebuilding nuclear generation.
The level of corruption here is staggering. The leaders of our country are robbing it blind. While all the while preventing the rebuilding of the middle class. Stripping manufacturing from our country, preventing investment in resource extraction, processing and delivery. And the latest folly announcing a trade agreement with China that gives us next to nothing in comparison to what China gains which is total discord between the US and Canada.
Our country is being destroyed by the people we elect to make it prosper. Power and greed are all that is driving the levers of power these days. The carried interest payouts for the building of nuclear generator in the US could be tens of billions. With much of that going to Carney.
He is a banker who is now in charge of making the rules regarding how he makes his money. He places his assets into a blind trust as per rules of parliament. So the theory is he does not know what investments are being made with this trust. But the truth is he knows exactly what is in the trust and how to secure his future and that of his family dynasty for generations to come. The only hope for us as Canadians is to vote him out.
Will a new government change the. rules and then investigate how he has manipulated this situation to his advantage? This I do not know. One can only hope. Our future as Canadians depends on it.