This is Part One of the Industry Primers audio program on alternative asset managers, published by Latticework from MOI Global. It is the first of two audio programs that accompany the written primer on the industry, and it is the story of the industry, told for a general audience. The account is built from documented scenes, with the people named, the dates given, and the participants quoted in their own words, many of them from their own interviews, talks and memoirs, and from the findings of a federal court. It assumes no background in finance and explains its terms, from a management fee and carried interest to a leveraged buyout, a tender offer and a distressed-debt fund, as they arrive. This episode is public.
The program runs from a Brazilian power company chartered in Ontario in 1899 to Brookfield’s completion of its purchase of Oaktree in July 2026, and from Toronto, Montreal and São Paulo to New York, Los Angeles, Stockholm, Zug and London. Its people are the builders of the industry: Jack Cockwell, an accountant from South Africa who borrowed to own a piece of the Bronfman brothers’ company and won control of Brascan for it in 1979, and Bruce Flatt, the accountant from Winnipeg who made Brascan into Brookfield; Henry Kravis and George Roberts, the cousins who founded KKR with Jerome Kohlberg; Stephen Schwarzman and Peter G. Peterson, who founded Blackstone; Howard Marks and Bruce Karsh, who founded Oaktree in Los Angeles; Conni Jonsson, who founded EQT in Stockholm; and Fredy Gantner, Marcel Erni and Urs Wietlisbach, who founded Partners Group in Zug. It follows how founders who began with little money of their own made themselves owners beside the clients whose capital they managed, and how they came to manage capital their clients commit for years.
Part One stands on its own. It tells how the industry took its present shape, from the first buyouts of family companies to the listings of the managers themselves and the handover to a second generation. The economics of the business, and the companies as investments, are the subject of Part Two and of the written primer. The records it gives are total returns with dividends reinvested, each stated with its window and its benchmark.
The program runs in twenty sections:
Three Hundred and Eighty Million in Cash. In the last days of December 1978 the Bronfman brothers’ investment company in Montreal buys 50,000 shares of Brascan, the Toronto company whose Brazilian utility, the Light, had spent eighty years building the streetcars, dams and power plants of São Paulo and Rio de Janeiro, and which has just agreed to hand the Light to Brazil for USD 380m in cash.
Stay With Me. Jack Cockwell, born in 1941 in a South African port town and trained as an accountant by correspondence, reaches Montreal in 1967, joins Peter Bronfman in the late 1960s on the promise “Stay with me and we will build a company”, and at 27 borrows from the Bank of Montreal to pay for his piece of the equity.
Breakfast at the Waldorf. When Brascan’s board answers Edper’s approach with a bid of about USD 1.13bn for F. W. Woolworth, Edper buys on the American Stock Exchange on April 30, 1979, finds only about 28,000 shares at the open, buys 2.4 million in one print at 3:08 that afternoon, and has about 3.1 million by the close.
I Am Exercising My Call. On May 25, 1979 Judge Pierre Leval refuses to stop Edper’s open-market purchases and calls Cockwell “a thoroughly credible witness”, Edper buys about 30 percent of Brascan in five weeks and has control by the end of the year, and Peter Bronfman crosses out the proposed chief executive’s name in the business plan and writes in Trevor Eyton’s, who runs Brascan for about twelve years.
The Last Fight. Henry Kravis of Tulsa and his first cousin George Roberts of Houston learn the bootstrap acquisition from Jerome Kohlberg at Bear Stearns, acquire a group of industrial businesses from Rockwell in 1975, and in April 1976, after Bear Stearns turns down their offer to build the buyout business inside the firm, resign with Kohlberg to start their own.
A Third for a Quarter. KKR opens on May 1, 1976 with USD 120,000, USD 10,000 each from Kravis and Roberts and USD 100,000 from Kohlberg, finds seven backers to pay its costs, and sets its share of the profit at 20 percent after the oil-business custom of a “third for a quarter”, in which a partner who paid a quarter of a well’s cost took a third of what it produced; its first fund turned USD 31m of commitments into USD 537m paid back, 35.5 percent a year after fees and the firm’s share.
And the Light Went On. Under Ray O’Keefe, KKR’s first purchase, A.J. Industries, sheds more than 30 losing divisions and its 83 lawsuits; at Union Texas Petroleum managers who own 10 percent cut their budget once they see their USD 60m share of it; and after Michael Milken raises USD 100m in an afternoon in 1984, the 1987 Fund reaches USD 6.13bn.
Any Fool Can Buy a Company. On November 30, 1988 RJR Nabisco’s special committee chooses KKR’s bid of USD 109 a share, about USD 25bn for the equity and about USD 31bn with debt, the largest takeover in history to that day, with USD 1.5bn of the fund’s equity beneath it; the 1987 Fund that held it earned 8.9 percent a year net, against 26 to 39 percent for the funds of 1976 to 1986.
More Than Capital. Conni Jonsson, the youngest of four boys in a Swedish farming family, founds EQT in Stockholm in 1994 under a mandate from Investor AB with a first fund of about EUR 300m and lists it on September 24, 2019 at SEK 67 a share; in Zug, Fredy Gantner, Marcel Erni and Urs Wietlisbach found Partners Group in 1996 to manage entrepreneurs’ wealth and list it on March 24, 2006, offered at CHF 63 and opening at CHF 79.95.
Four Hundred Thousand Dollars. Stephen Schwarzman, a shopkeeper’s son from outside Philadelphia, and Peter G. Peterson, the son of Greek immigrants, open Blackstone on October 1, 1985 with USD 400,000, USD 200,000 each; the more than 400 letters announcing the launch bring no business, and the capital falls to USD 182,000 in the first year.
Put Me Down for 100. After an offering memorandum sent to nearly 500 possible investors yields two meetings, Prudential’s Garnett Keith commits USD 100m over a tuna sandwich, Nikko Securities commits USD 100m and Japanese investors supply nearly 40 percent, and the fund closes on October 15, 1987 at USD 810m from 33 investors, four days before Black Monday.
A Black Tombstone. After a steel distributor Blackstone bought misses its first interest payment, Schwarzman makes the investment committee the firm’s institution, with written memoranda two days ahead and every partner speaking; the firm begins buying real estate in 1991 with apartments in Little Rock at a 15 percent yield, and in February 2007 completes Equity Office, about USD 39bn, with contracts for the sale of about half of it on the day it closes.
The Number One Guy in the Country. Through the 1980s the Edper group controls John Labatt, MacMillan Bloedel, trust and insurance companies and property companies through a web of cross-ownership; after Olympia & York’s filing in May 1992 it sells its large stakes, keeps office buildings and hydroelectric power, becomes a partnership of its managers in 1995, and in 1996 buys One Liberty Plaza and the World Financial Center from Olympia & York.
The Young Accountant from Winnipeg. Bruce Flatt joins in 1990, tells of a Park Avenue tower bought for USD 432m in 1996 and sold for USD 2.2bn 21 years later, becomes chief executive in 2002, a year after the group raised its first fund from outside investors, and on November 7, 2008 writes that the company’s own capital “does not come due”.
Banished to the Bond Department. Howard Marks, moved from Citibank’s equity research to its bond department in 1978 and asked to figure out high-yield bonds, and Bruce Karsh, a lawyer handed the Johns Manville bankruptcy file, start a distressed-debt fund at TCW whose first close comes on October 28, 1988 at USD 65m, and in April 1995 leave with three colleagues to found Oaktree as equal partners, managing about USD 7bn.
If the World Ended. Oaktree’s five founders set out “to own less and less ... of a company that was worth more and more”, and in October 2008, with USD 11bn raised for a distressed fund and 90 percent of it uninvested, they decide to invest; by Marks’s count the distressed debt funds earned 22 percent a year gross, unlevered, over 35 years.
Now It’s on Joe and Scott. Joseph Bae and Scott Nuttall, the two analysts KKR hired in 1996, become co-chief executives on October 11, 2021; USD 1,000 put into KKR at its New York listing in July 2010 became about USD 10,700 by that day, 23.5 percent a year against 15.4 percent for the S&P 500, and the founders’ special share is to be canceled on December 31, 2026 at the latest.
Amazing Hands. Blackstone sells units to the public at USD 31 on June 22, 2007, opens a property trust for individual savers in January 2017, makes Jonathan Gray president on February 13, 2018, and on July 20, 2023 becomes the first alternative manager to pass USD 1tn of client money; USD 1,000 at the offer price became about USD 10,300 by October 22, 2026, 12.8 percent a year against 10.9 percent for the S&P 500.
This Company Looks Very Undervalued. In 2018 Connor Teskey tells Bruce Flatt that Oaktree looks very undervalued and comes back with a structure; Brookfield agrees on March 13, 2019 to acquire about 62 percent of it for about USD 4.8bn while Howard Marks and Bruce Karsh keep the rest and run it, and buys the remaining quarter for about USD 3bn, completed on July 31, 2026.
We Toll the Road. Brookfield hands a quarter of its asset manager to its shareholders on December 9, 2022, ten years and ten months after Flatt’s letter of 2012 foresaw the separation, and builds an annuity insurer from its own capital to almost USD 200bn of assets by its president’s account; USD 1,000 put into Brookfield in early 2002 became about USD 50,000 by October 22, 2026, 17.2 percent a year against 10.1 percent for the S&P 500, and Brookfield’s own estimate, from 1993, is 19 percent a year against 11.
The program runs 1 hour 29 minutes (1:28:44). The written primer, Industry Primer: Alternative Asset Managers, and its companion deck are on the Latticework Substack at the Industry Primer on alternative asset managers. Part Two, the deep dive for professional investors, is a separate episode, available to members of Latticework: Industry Primers Podcast: Alternative Asset Managers, Part Two: The Deep Dive.
This audio program is published by MOI Global for educational purposes only. It is not investment advice, an offer, or a solicitation, and no security mentioned herein is recommended for purchase or sale. The publisher and contributors may hold positions in securities discussed. Figures are believed accurate as of the dates stated but are not warranted; listeners should verify all data against primary sources before relying on it. Nothing herein constitutes legal, tax, or accounting advice.
Transcript
The transcript is available for download to members only.
