Good day, and thank you for standing by. Welcome to the Brookfield Asset Management Third Quarter 2025 Conference Call and Webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jason Fooks, Managing Director, Investor Relations. Please go ahead.

Thank you for joining us today for Brookfield Asset Management's earnings call for the third quarter of 2025. On the call today, we have Bruce Flatt, our Chief Executive Officer; Connor Teskey, our President; and Hadley Peer Marshall, our Chief Financial Officer. Before we begin, I'd like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and our financial and operating performance, we may make forward-looking statements, including forward-looking statements within the meaning of applicable U.S. and Canadian securities laws. These statements reflect predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risks and future events and results may differ materially from these statements. For further information on these risks and their potential impact on our company, please see our filings with the securities regulators in the U.S. and Canada and the information available on our website. Let me quickly run through the agenda for today's call. Bruce will begin with an overview of the quarter and the market environment. Connor will walk through key growth initiatives across each of our businesses. And finally, Hadley will discuss our financial results, operating results and balance sheet. After our formal remarks, we'll open the line for questions. One last item to mention is that the shareholder letter, which this quarter will be a single letter covering the biggest themes across Brookfield, will be published Thursday morning alongside Brookfield Corporation's earnings. And with that, I'll turn the call over to Bruce.

Thank you, Jason, and welcome everyone. We are pleased to report another strong quarter for our business, marked by record fundraising, earnings deployment and monetization. Quarterly fee-related earnings grew 17% over the past year to $754 million. Distributable earnings grew 7% to $661 million, and fee-bearing capital reached $581 billion, an 8% increase year-over-year, all driven by our strongest fundraising period ever. These results reflect the strength of our franchise and the benefits of our global scale diversification and long-term client partnerships. Our business continues to benefit from the major themes shaping the global economy. The acceleration of AI and data digital infrastructure, the accelerating demand for electricity and the improving strength in the real estate markets; each of these themes plays directly to our strength as an owner, operator and investor in real assets, and together, they are fueling multiyear growth across the business. In the third quarter, we raised $30 billion, bringing total inflows over the past 12 months to more than $100 billion. This was our highest pace of organic fundraising ever. Our fundraising in the quarter came from strong closes for two of our flagship funds, and increasing capital from our comp to entry funds and partner manager strategies. Our flagship global transition fund, our venture-focused Pinegrove strategy and our music royalties-focused Primary Wave business, all had closed just recently and each exceeded its target. Turning to the broader market environment. Transaction conditions have improved steadily throughout the year. The global economy remains resilient despite trade and tariff uncertainty. Corporate earnings are healthy. Capital markets are liquid, and the Federal Reserve has begun lowering rates. This is giving the market more confidence and leading to transaction activity significantly increasing. Global M&A volumes are up nearly 25% year-over-year. The third quarter alone saw $1 trillion of announced deals, the highest level since 2021. This resurgence in large cap M&A and a record backlog of sponsor-owned assets are therefore fueling activity. This is creating a good environment for both deployment and also asset sales. We remained active in this environment, deploying large-scale capital at attractive entry points where operating expertise provides us a competitive edge, while also crystallizing value from our mature investments at attractive returns. Our ability to recycle capital efficiently, returning proceeds to clients while raising new funds for the next generation of opportunities is fundamental to how we compound value over time and continue to consistently grow our business. Another important milestone was our recently announced agreement to acquire the remaining 26% in Oaktree Capital Management. As you know, one of the most respected names in global credit investing. When we partnered with Oaktree six years ago, the goal was to combine our global scale and real asset expertise with Oaktree's deep credit experience and value-oriented culture. That partnership exceeded expectations, enabling the rapid expansion of our credit platform, supporting the launch of Brookfield Wealth Solutions, and driving a 75% increase in Oaktree's asset base. Bringing Oaktree fully into Brookfield is the next natural step. It combines the scale and reach of our nearly $350 billion credit platform, enables deeper collaboration across our businesses from origination and underwriting to distribution and analytics. Most importantly, it enhances our ability to deliver the full breadth of Brookfield's credit capabilities to clients. Turning briefly to overall credit markets. Liquidity remains ample, and spreads in both public and private markets are near historically tight levels. Certain pockets of private credit such as middle market, direct lending and sponsor-backed leverage have become more commoditized as large amounts of capital are raised for a small pool of attractive deals. We've been disciplined in avoiding these segments of the market and instead focused on attractive risk-adjusted return opportunities where we have strong competitive advantage, such as infrastructure, renewable power, asset-based finance strategies and opportunistic credit. Across our business, our ability to raise large-scale capital deployed strategically across megatrends and deliver risk-adjusted returns to trusted clients continues to drive record results. Our balance sheet is extremely solid. Our margins are expanding and double-digit growth trajectory is sustainable. With record fundraising momentum, deep deployment pipelines, and healthy monetization activity across our platforms, the foundations we've built over the past years have set the stage for an even stronger 2026. With that, I'll turn the call over to Connor, and thank you for the results.

Thank you, and good morning, everyone. As Bruce mentioned, this past year was the most active period in our history across fundraising, deployment and monetizations. Our infrastructure and renewable power franchise is one example of this momentum, as over the past 12 months, we've raised $30 billion, deployed $30 billion and monetized over $10 billion at approximately 20% returns, demonstrating strength, scale, and consistency of our platform. Our franchise is the largest and most established globally, serving as a cornerstone of our business and a key driver of long-term growth. Deployment is centered around sizable investments across all sectors, geographies and positions in the capital structure, including by utilities, from a controlling equity investment for an industrial gas business in South Korea, and a minority equity investment in the United States for Duke Energy Florida, across transportation, via structured equity investment in a Danish port, across data with a mezzanine financing for a European stabilized data center portfolio, and across renewables, by an equity investment in a South American hydro platform, and to take private of a global renewable developer concentrated in France and Australia. And finally, across our first AI infrastructure deal with Bloom Energy, which we committed to this past quarter. AI promises unprecedented improvements in productivity but it is simultaneously driving an unprecedented demand for infrastructure, from data centers and power generation to compute capacity and cooling technologies. We estimate that AI-related infrastructure investments will exceed $7 trillion over the next decade. Brookfield's unique position, owning and operating across the full energy and digital infrastructure value chain gives us a tremendous advantage in capturing this opportunity. On the back of this generational investment opportunity, we are launching our AI infrastructure fund. A first-of-its-kind strategy that pulls together our global relationships with hyperscalers, our expertise in real estate, and our leading position in infrastructure and energy into one strategy. With the goal of being the partner of choice to leading corporates, governments and other stakeholders looking for integrated solutions that combine development capability, operating expertise and large-scale capital. We are also preparing to launch our flagship infrastructure fund, which is our largest strategy at Brookfield early next year. Looking ahead, we expect to have all of our infrastructure strategies in the market in 2026, including our flagship infrastructure fund, our AI infrastructure fund, our mezzanine debt strategy, our open-ended super core and private wealth strategies. And in the back half of the year, we expect to launch the second vintage of our Infrastructure Structured Solutions Fund. As a result, despite raising $30 billion over the last 12 months, we expect next year will be even bigger. Within renewable power, this quarter, we also held the final close of the second vintage of our global transition flagship at $20 billion, making it $5 billion larger than its predecessor and the largest private fund ever dedicated to the global energy transition. The success of this fund raise also reinforces the scale, credibility and momentum of our energy franchise. Since launching our first ever transition strategy less than five years ago, our platform now produces over $400 million of annual fee revenues. More important, we are investing into an environment that is highly attractive and increasingly constructive for us. Global demand for electricity is increasing at an unprecedented rate. This is the result of the ongoing trend of electrification as large sectors like industrials and transportation are increasingly electrifying. And this growth has now been supercharged in recent years by the surge in electricity demand from data centers to support cloud and AI growth around the world. Data centers are becoming some of the largest single consumers of electricity and the scale of new generation required to support them is immense. Each of these forces is contributing to a structural shortage of generation capacity. To put it plainly, the world needs more power, and it needs it faster than ever before. Our business is uniquely designed to meet this challenge. We are positioned to provide any and all power solutions that will be necessary to meet this need. Our leading renewable power business can provide the low-cost wind and solar solutions needed to meet this increasing demand. Renewables continued to see significant growth due to their low-cost position, but also their ability to win on speed of deployment and energy security, as they do not rely on imported fuels. And in a world where baseload power and grid stability are increasingly important, in addition to renewables, we have leading platforms in hydro, nuclear and energy storage, all of which play a critical and growing role for electricity grids, both independently and as complements alongside natural gas and renewables in the energy mix. In this regard, we are very pleased to announce, last week, a landmark partnership with the U.S. government to construct $80 billion of new nuclear power reactors using Westinghouse technology. The agreement reestablishes the United States as a global leader in nuclear energy and positions Brookfield at the center of a historic build-out of clean baseload power, creating one of the most compelling growth opportunities across our transition platform, and potentially one of the most successful investments in Brookfield's history. Within our private equity business, we recently launched the seventh vintage of our flagship private equity strategy, which focuses on essential service businesses that form the backbone of the global economy. These include industrial, business services and infrastructure-adjacent companies where we can apply our operational expertise to drive efficiency, productivity and scale. Early investor feedback for this strategy reflects a growing recognition that value creation in the current environment is driven less by multiple expansion or financial engineering, and more by hands-on operational improvement, an approach that has long defined Brookfield's success. While many traditional buyout strategies are navigating slower fundraising cycles, we continue to be differentiated. We have consistently returned capital at strong returns from preceding vintages, and are seeing strong demand for our differentiated, operationally focused model. We expect this next vintage to be our largest private equity fund ever. We are also bringing our private equity strategy to the private wealth channel with the recent launch of a new fund structured for individuals. Similar to how we structured our successful private wealth infrastructure fund, this new private equities fund will be able to invest alongside all of our private equity strategies. This means that targeting individual investors in the retirement market does not require us to invest differently, but rather simply package our current investment activity in a different way to meet the growing demand from a new set of clients. Within real estate, we continue to see strong momentum across our property business. Market conditions have improved meaningfully. Transaction volumes are rising, capital markets are robust, and valuations for high-quality assets are firming. We are actively monetizing stabilized assets, selling approximately $23 billion of properties, representing $10 billion of equity value over the past 12 months. At the same time, it is an excellent point in the cycle to be deploying capital into certain segments of the market, and we have significant dry powder to put to work following the successful close of our latest flagship real estate fund, our largest real estate strategy ever. The combination of limited new supply, recapitalization needs, and improving sentiment is creating one of the most attractive investment environments we've seen in years. We are also taking advantage of the constructive financing backdrop to strengthen our long-term holdings, including the $1.3 billion refinancing of 660 Fifth Avenue in Manhattan, part of the over $35 billion of real estate financings we've closed year-to-date. And finally, on our credit business, we will make a few additional points. We continue to see a large opportunity set to invest in the areas that fit our core competencies. The themes driving our equity businesses will require significant debt capital investment, and Brookfield is well-suited with its expertise and capital to meet that need, whether it be in real asset, opportunistic or asset-backed finance. As we look ahead to the rest of the year and into 2026, we see the market continuing to be strong for our business. Capital markets remain healthy. Liquidity is abundant, and the opportunity set across our businesses continues to expand. The flagship strategies we are launching will continue to anchor our growth while our complementary products, including our AI infrastructure fund, and our rapidly scaling fundraising channels such as wealth and insurance, are diversifying our platform and driving our consistent high-teens growth rates. The secular forces shaping the global economy—digitalization, decarbonization and deglobalization—are the same themes that have guided our strategy for many years. Today, they are accelerating. As these trends converge, Brookfield's global reach, operating depth, and access to long-term capital position us well to continue leading the industry. With that, we'll turn the call over to Hadley to discuss our financial results, record quarterly fundraising and balance sheet positioning.

Thank you, Connor. Today, I'll provide an overview of our third quarter financial results, including additional color around $30 billion of fundraising, our recent M&A activities, and the strategic positioning of our balance sheet. As previously mentioned, we delivered another record quarter of earnings, driven by strong fundraising, deployment, and monetization. Fee-bearing capital increased to $581 billion, up 8% year-over-year. Over the last 12 months, fee-bearing capital inflows totaled $92 billion, of which $73 billion came from fundraising and $19 billion came from deployment of previously uncalled commitments. In the third quarter, fee-bearing capital grew $18 billion, driven in large part by the final close of the second vintage of our global transition flagship fund and continued strong capital raising and deployment across our complementary strategies. Fee-related earnings were up 17% to $754 million, or $0.46 per share, and distributable earnings were up 7% to $661 million, or $0.41 per share. Distributable earnings growth reflected higher fee-related earnings, partially offset by increased interest expense from the bonds we issued over the past year and lower interest and investment income. Overall, growth was driven by a record $106 billion raise over the last 12 months and record deployments of nearly $70 billion. This activity has been a major catalyst for our business, and we will continue to be active on the deployment front given strong investment opportunities in front of us. The simplicity and consistency of our earnings anchored almost entirely in recurring fees gives us a strong foundation to continue to build from, especially as we continue to further our capital base and launch new strategies. Lastly, our margin in the quarter was 58%, in line with the prior year quarter and 57% over the last 12 months, up 1% from the prior year period. This margin increase was driven by three offsetting dynamics. First, we continue to acquire a greater portion of our partner managers. These businesses have lower margins, and therefore, while these acquisitions are highly accretive acquisitions, they do weigh a bit on our consolidated margin. Second, Oaktree margins are temporarily lower than usual. At this point in the cycle, Oaktree is returning significant capital, but has not yet called capital for some of its deployment, leading to a natural reduction in fee-related earnings and margins. That trend will reverse as it has in the past given the strong growth in the business. Finally, our margins on our core business continued to increase as expected, more than offsetting these dynamics. Turning to fundraising. In total, we raised $30 billion of capital in the quarter, bringing our 12-month total to $106 billion. Over 75% of that capital came from complementary strategies, reflecting the breadth, strength, and diversification of our offerings, which allows for sustained fundraising momentum in addition to our flagship cycle. As for our flagships, we also raised $4 billion for the final close of our second global transition flagship, bringing the strategy size to $20 billion. We continue to raise capital for the fifth vintage of our flagship real estate strategy, bringing in $1 billion from SMAs, regional sleeves, and private wealth for the quarter with $17 billion being raised to date for the entire strategy. Within our Infrastructure business, we raised $3.5 billion, including $800 million for our private wealth infrastructure vehicle, bringing our year-to-date total for the fund to $2.2 billion. In our private equity business, we raised $2.1 billion, including a total of $1.4 billion for 2 inaugural complementary funds, our Middle East private equity fund and our financial infrastructure fund. Subsequent to quarter end, we held a final close for the inaugural Pinegrove opportunistic strategy for $2.5 billion, exceeding its initial target and ranking among the largest first-time venture growth or secondary fund ever raised. And finally, on credit, we brought in $16 billion of capital across our funds, insurance, and partner manager strategies. This included over $6 billion across our long-term private credit funds, including $800 million for the fourth vintage of our infrastructure mezz credit strategy, which has raised more than $4 billion for its first close. We also raised $5 billion from Brookfield Wealth Solutions, including an SMA agreement with a leading Japanese insurance company, marking its first entry into the Japanese insurance market, which should be the first of more to come. As we head towards the end of the year, we're confident this will be our best fundraising year ever, and we see that trend continuing with strong momentum for 2026. Broadening the scope to the next five years, we recently laid out our plan to double the business by 2030 at our Annual Investor Day hosted in New York. We outlined our plan to continue expanding our product offerings by scaling existing offerings and launching new ones, diversifying our investor base, including across Europe, Asia, middle market and family offices, and on the retail side by launching new private wealth related products. These drivers should enable us to double our business over the next five years with fee-related earnings reaching $5.8 billion, distributable earnings reaching $5.9 billion, and fee-bearing capital reaching $1.2 trillion. However, our business plan does not include certain additional growth opportunities such as product development, M&A associated with our partner managers, and opening up of the 401(k) market opportunity, which gives us multiple paths to outperform and to deliver over 20% annualized earnings growth. Turning now to our balance sheet. In September, we issued $750 million of new 30-year senior secured notes at a coupon of 6.08%, extending our maturity profile and diversifying our funding sources. We also increased the capacity of our revolver by $300 million to provide additional flexibility as our business continues to grow. At quarter end, we had $2.6 billion in liquidity, a strong liquidity position. We use our balance sheet selectively to seed new products and support strategic partnerships, such as closing the acquisition of a majority stake in Angel Oak and signing the acquisition of the remaining 26% of Oaktree that we currently do not own, both of which occurred after the quarter. On Oaktree, we will invest approximately $1.6 billion to acquire their fee-related earnings, carried interest in certain funds and related partner manager interest. Upon close, this will create a fully integrated leading global credit platform with significant scale and capability. The transaction is expected to close in the first half of 2026 and is subject to customary closing conditions, including regulatory approval. Lastly, we declared a quarterly dividend of $0.4375 per share payable December 31 to shareholders of record as of November 28. In closing, we are confident in our trajectory towards achieving our long-term growth goals. The breadth of our platform, our operational expertise, and our global scale continue to give us a clear advantage. Our strategy is aligned with the strong tailwinds of digitalization, decarbonization, and deglobalization and we're expanding in areas where these trends intersect: AI infrastructure, energy transition, and essential real assets. Thank you for your continued support, and we're ready to take questions.

Our first question comes from Alex Blostein with Goldman Sachs.

I was hoping we could start maybe with the commentary around fundraising momentum in the business you're seeing into 2026. A number of pretty robust verticals. But at the same time, it sounds like monetization outlook is also picking up. So maybe help us frame what that could mean for management fee growth as you look out into 2026? So maybe we could start there.

Thanks, Alex. We're very excited about 2026. Maybe if we can start with fundraising. For 2025, I think we guided that fundraising would exceed 2024's levels ex AEL of $85 billion to $90 billion. Through three quarters, we're at $77 billion and expect to meaningfully exceed that target. As we look forward to 2026 with our infrastructure and private equity flagships in the market with a bumper year expected in infrastructure fundraising with the closing of Just Group, and the continued growth in our partner managers and complementary strategies, we very much expect 2026 to exceed the levels we'll achieve in 2025. And then when you turn that towards FRE growth, we expect to maintain our momentum and either reach or exceed what has been laid out in our 5-year plan. And this is really driven by two things. One, with the addition of Oaktree, Just Group, Angel Oak, those transactions will add almost $200 million to our FRE on a run rate basis going forward. And then when you add the run rate of the growth in 2025 rolling through our numbers in 2026, and the expected growth just laid out from new fundraising in 2026, we expect next year to be a very strong year.

Our next question comes from the line of Sohrab Movahedi with BMO Capital Markets.

I just wanted to focus just a little bit on the credit business, if we can. Obviously, an important source of fee-bearing capital growth as part of the 5-year plan. This quarter, the fee rate, the blended fee rate, if I look at the fee revenues relative to the private credit, or the total credit I should say, funds was a bit higher than what we're used to seeing. Can you just talk a little bit about what was the driver of that, if that is a new rate we're looking at, if the fee rate is a little bit higher? Is that consistent? Or is that a one-off? And then there's just private credit has been a little bit more in the headlines. Just curious to kind of get a sense of how you think about it relative to your business and the growth aspirations that you have especially coming from credit?

Perhaps I'll start, and then I'll hand to Hadley. In terms of the slightly elevated fee rate this quarter in terms of private credit, it's really driven by two things. Our private credit business continues to evolve as the mix shift within our business adjusts through the transactions and the increasing ownership of our partner managers. And what we would say is on a blended basis, our fee rate is going up marginally. We will acknowledge that particularly within our Castlelake business that is performing very well, there was an outsized quarter with some one-off transaction fee revenue that is creating a little bit of upside in this quarter's numbers, but that shouldn't detract from the broader positive trend that we're seeing across our credit business.

Yes. And I'll just talk a little bit about how we're seeing credit more holistically. I mean, there have been a few high-profile credit events in the market. And what we're seeing across our portfolio, and the broader credit trend, is that these events are very isolated and not a sign of a broader credit cycle. And if you actually look at our portfolio, we don't have any relevant exposure to these issues. But when we think about our portfolio, our area of focus has really been heavily around real assets, asset-backed finance, opportunistic. And these are where we have expertise around the structuring, the underwriting of the sectors, the sourcing capabilities, and then, of course, our scale. And we've been less focused on the more commoditized part of the private credit market, especially around direct lending. The one point I would probably also add though, is that if there was a broader credit cycle, that plays to our strength with our opportunistic credit strategies. So overall, we feel really good about our positioning. We have a large, diversified, and differentiated platform around our credit business, and that's built for growth and resiliency across the market cycles. And we'll only benefit from the integration of Oaktree.

Hadley, if I can just ask one quick follow-up on that. Given the pleasant surprise, for example, this quarter, as minor as it was, came out of one of the partner managers that you own. Is there a potential for negative surprises, I suppose, to come from the partner managers as well? And can you dimension what sort of risk management, I suppose, is in place to color that?

No, we don't see that. And it goes back to the area of focus. If you think about our expertise around real assets and the areas within asset-backed finance that we focus on, that's critical because we're doing the due diligence. We've got collateral. We've got strong structures in place, and look, low default rates and high recovery rates. And so that puts us in a really good position. That's why we like that part of credit.

Our next question comes from the line of Cherilyn Radbourne with TD Cowen.

With regard to the pending buy-in of the Oaktree minority stake, can you talk about some of the things that you'll be able to do together as a combined company that you can't do today as a majority owner?

Thanks, Cherilyn. We're thrilled about the transaction that we've announced with Oaktree. And really what it allows us to do is accelerate the combination of the businesses and unlock the benefits of integrating two leading institutions. And maybe to simplify it, we would say the low-hanging fruit near-term upsides are really in three places. One will be almost instantaneously on closing. Oaktree had its own subsidiary balance sheet. We can immediately collapse that. That's much more efficient for us from a financing perspective. Even further within that balance sheet, there are a number of securities and investment positions, that under Brookfield Asset Management's asset-light model, we will actually monetize those positions and use them to fund a very large portion of our purchase price, making that transaction highly, highly accretive. The second opportunity is really just around operating leverage. When it comes to fund operations, administration and back office, there's tremendous synergies in operating leverage as both our businesses continue to grow from combining our combined capabilities, and that really is a scale business and putting the two institutions together will unlock a lot of value. And the last one is absolutely the most important, and it's the ability to see upsides in our marketing, our client service, and our product development. Our ability to combine the power of the two organizations in terms of the products and solutions and partnerships that we can offer to our clients, we think, is going to be unmatched. And this is particularly valuable for serving the growing portions of the market, whether it be insurance companies and individual investors going forward. Maybe just on a closing note, the team at Oaktree has been our partners for the last six years, and this just takes that partnership to a whole another level. Howard Marks is on the Board of BN. Bruce Karsh is going to go on the Board of Brookfield Asset Management. And it's early days, but our interactions with Armen, Bob, Todd, and the fantastic team at Oaktree, we already expect this integration to be far better than we initially hoped.

Our next question comes from the line of Bart Dziarski with RBC Capital Markets.

I wanted to touch on the retail theme. So you talked about the infrastructure wealth product and the momentum there and then the PE evergreen strategy, I think that's in the market now. So one theme, but two parter. Just can you give us a sense of the early indication that you're seeing these products and the momentum into next year? And then just a reminder of the distribution strategy as you build these products out into next year?

Thank you. I think it goes without saying that the momentum we're seeing in the individual market is very robust. And again, that we will highlight, we view this as a market, the broader individual market, that's your high-net-worth and your retail investor, that's your annuity and insurance policyholder, that's your 401(k) and your retiree market. We view this as a very significant market opportunity that will continue to grow incrementally for the years and candidly decades to come. In terms of where we're seeing growth opportunities in the near term, we are launching new products into this market. We just recently launched our private equity product for the retail channel. That launched just recently and started with an incredibly successful launch in Canada and is now launching in the U.S. And our expectation is that's really the equivalent to our infrastructure product for the retail market. We expect the private equity product to scale even faster than our infrastructure product has. And therefore, we continue to expect this to be an increasing portion of our growth in earnings going forward.

And sorry, just on the distribution strategy?

Certainly. So I think there's two key components there. In terms of distribution into the individual market more broadly, the winners in this market are largely going to be driven by who has the track record, the scale, and the credibility. And as a result of that, we are seeing the significant opportunity to get our products placed onto the leading bank distribution platforms around the world for that near-term market opportunity in retail. As we think ahead more broadly to other components of the individual market, in particular, the 401(k) and the retiree market. At this point, we are preparing our business for that very significant opportunity, making sure we have the right relationships and the right partners with all the stakeholders in that space. That's the advisers, that's the plan administrators, that's the consultants, that's the record keepers. And there's a significant effort within Brookfield. And we feel, given our focus on real assets, that lends itself well to that growing market, we feel we're very well positioned.

Our next question comes from the line of Craig Siegenthaler with Bank of America.

So our question is on corporate direct lending, both IG and non-IG. From your prepared commentary, it sounds like you're less constructive on the investment opportunity today versus some of what your peers are saying due to intensifying competition. However, when you take a step back, it looks like aggregate LTVs are still pretty low and the spread to publics are still pretty rich. And with the cash yields declining now with Fed rate cuts, the relative attractiveness to retail insurers and institutions should still be there. So my question is, what am I missing here besides the gaining share of private credit versus BSL and high yield?

So Craig, that's a great question. To provide some context, we'll approach this from a few angles. On a broad level, we believe private credit has become and will continue to be a crucial part of global finance, with ongoing growth alongside bank credit and other liquid sources. This growth is substantial and expected to be long-lasting. Currently, in the market, we are identifying the most appealing returns on a risk-adjusted basis. Although every investment has its particulars, we are observing very strong premiums, particularly in credit associated with real assets, infrastructure, real estate credit, and certain segments of the asset-backed finance market. You mentioned the significant influx of capital into the direct and corporate lending market, leading to compressed spreads in some areas and a bit of covenant degradation due to the competition for lending opportunities. This varies from case to case. Generally, our strategy is to steer clear of the most commoditized aspects of the market and concentrate on areas where we can achieve attractive spread premiums and maintain our covenant positions as we have in the past. I appreciate your question because it's important to clarify that we do not believe private credit is slowing down. It remains a substantial, expanding, and enduring part of the financial system moving forward.

Thanks, Connor. I have a follow-up on the credit business, and I think you covered a little bit earlier, but I was bouncing around between two calls. But management fees in the credit business went up a lot faster than average fee-bearing AUM. And I know Castlelake went in there. So maybe that had some lumpiness in there. But we still have the fee rate up 10% on the average fee-bearing AUM base. So were there any lumpy items in the revenue side that we should back out? And also, I don't think you hit this part, but were there any lumpy items in the expense side of the credit business? Because sometimes a lumpy revenue item might correlate with an expense item. So we just want to make sure we get the P&L run rate correct as we walk into 4Q here.

Sure. And it's pretty simple. Thank you again for the question. The outsized growth that we had in credit this quarter, I think the way to think about it is I think that business was up almost 15%. About half of that is just run rate organic growth, the continued momentum we're seeing in that business. And half of that was the full quarter of an acquisition that was made within our Castlelake business. So some of it was M&A related, and some of it was organic growth. Maybe you can think about that as roughly half and half. And then on the fee rate component, within Castlelake, which is a business—a partner manager of ours that's performing very well—they did have some outsized transaction fees in this quarter. The blended broader fee rate is trending up, but it was somewhat enhanced this quarter by one-time transaction fees.

Our next question comes from the line of Kenneth Worthington with JPMorgan.

Great. Maybe for Hadley. You're operating at 58% operating margins right now. You highlighted on the call that Oaktree margins are depressed, but getting better. Core margins are rising, but that acquisitions are operating at lower margins. How do we put these pieces together, particularly since we've got some of the transactions just closed or closing? And you mentioned sort of the transaction fees sort of helps in the current quarter. So how do we think about the right level and then the trajectory once everything gets closed?

Thanks for the question. First, I'd say that we are very disciplined when it comes to our cost. And we expect our margins to continue to improve over time as we presented at Investor Day. And that's on the backs of our growth initiatives that will play out and the operating levers that are built into our business, as well as we execute on ways to drive additional efficiencies, including the integration of Oaktree. And in this regard, we are on track and actually ahead of our margin improvement plan that we've laid out. It's also worth pointing out that the consolidated margin increase that we're seeing today is a blend of a few offsetting dynamics. The first being, we acquired a greater share of our partner managers and these businesses, while highly accretive to our earnings, do have lower margins, and do mildly dilute our overall margin level. Second is Oaktree's margins are temporarily lower as we point out. As they've been returning more capital and haven't yet called capital for some of its deployment. That's a typical cycle for that business, and it will naturally reverse given the countercyclicality to the overall business. And the last point I'd make is that the margins across our core businesses continue to expand, which is more than offsetting the first two items I just mentioned. So while we focus on continuously improving our margins and are delivering in that regard, we run our business with a focus to grow FRE over the long term, and we don't manage the business to a specific absolute margin level, which obviously can be impacted by the mix.

Our next question comes from the line of Dan Fannon with Jefferies.

So lots of momentum in fundraising, but I wanted to talk about private equity, in particular, it sounds like your outlook is quite optimistic around raising a larger fund. That seems different than what we've heard for that asset class from others. So just curious about what informs that optimism given the market backdrop?

Thanks, Dan. Our private equity business is a little bit unique, and it has been for 25 years. In that, it focuses on essential assets and services, and it—and as a result, it produces very consistent results across the market cycle. And why that really plays out well today is, as mentioned, we've just launched BCP, the next vintage of BCP in the quarter, and we do expect it to be our largest private equity fund ever. We do feel that we are differentiated in the market because our focus on, one, high-quality assets that generate cash across the cycle has allowed us to return significant amounts of capital out of this strategy in recent years. So we're not facing the DPI issue that has driven a lot of headline noise in the sector. And then secondly, we, I think, all recognize that the next generation of growth and value creation in private equity, given the more normalized interest rate environment, is not going to come from financial leverage and financial engineering. It's going to come from operational improvement. And given that over the 20-year history of our flagship private equity fund, we've delivered over 25% IRRs for two decades, with over half that value creation coming from operational improvement, we are seeing tremendous market demand for our approach to private equity that we think works across the cycle, but it's perfectly suited for where we're at in the current economic environment. So it's early days. We've just launched the fund, but we do expect it to be our largest fund to date.

Our next question comes from Jaeme Gloyn with National Bank.

Good job on the fundraising this quarter this year. One thing that was mentioned at the Investor Day was broadening or deepening the client base, the institutional client base. So I'm just curious on what the source of fundraising looked like from a breadth of client standpoint?

In terms of broadening the fundraising base, I think we can answer this question quite specifically. The growth in our business over the last several years has really been driven by the scaling and increased penetration of large-scale institutions. And while we focus on other additional pockets of fundraising, it's important to remember that component, and that core foundation of our business continues to grow. But what we have done internally within Brookfield and what we've been investing in for the last 12 to 24 months is dedicated fundraising teams that can target a much broader base of investors. This is small or medium-sized institutions. This is a dedicated team focused on insurance institutions. This is a dedicated team focused on family offices. All of those initiatives, we would say, are still in the relatively early innings, and we're seeing tremendous growth across three verticals. One, a greater number of clients within each of those groups. Two, a greater number of products amongst those clients that we're bringing on board. And three, simply larger checks from those clients that we have. So we would expect this momentum to continue, but it's really driven by having dedicated teams focusing on all the different subcomponents of the institutional market going forward.

And I'm currently showing no further questions at this time. I'd now like to turn the call back over to Jason Fooks for closing remarks.

Okay. Great. If you should have any additional questions on today's release, please feel free to contact me directly, and thank you, everyone, for joining us.

This concludes today's conference. Thank you for your participation. You may now disconnect.