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Brookfield Real Assets Income Fund Inc. (NYSE:RA) Launches New Fund


Summary

Brookfield completed the merger of three legacy funds; HHY, HTR and BOI.
The three funds were all focused in debt instruments - with two funds emphasizing mortgage backed securities and one fund emphasizing high yield corporate bonds.
The scope of the new fund is slightly broader by security - including equities and debt – but narrower by industry sector.
The new fund will pursue a dynamic asset allocation approach so the investment focus may change as market conditions dictate.
The new fund is named Brookfield Real Assets Income Fund and trades on the New York Stock Exchange under the ticker symbol (RA).
The Public Securities Group of Brookfield Asset Management recently completed the merger of three legacy funds; (HHY), (HTR) and (BOI). Brookfield believes the larger size of the combined fund will increase the fund's profile in the marketplace and the multi-asset investment strategy of the combined fund will enable Brookfield to change the fund's asset allocation during different market cycles. The new fund, the Brookfield Real Assets Income Fund (NYSE:RA), is targeting income through investments in securities and instruments of real assets companies, namely real estate, infrastructure and natural resources.
When I spoke to Sam Diedrich, member of Brookfield's asset allocation investment team, he was quite excited about the new fund and what it had to offer. In a nutshell Brookfield believes this is an opportunity to enhance shareholder value.
"We believe the newly established RA fund structure will provide benefits for shareholders through dynamic asset allocation, a broader scope to source investment opportunities, and the benefits of greater scale."
The first and most obvious benefit of the merger is scale. The preceding funds were each worth between $200 million and $400 million in terms of their portfolio, the new fund is worth over $900 million. With greater scale comes the potential to attract the attention of sell-side analysts and by extension further increase the fund's visibility with investors. Along the way Brookfield hopes to see the fund's discount to NAV, currently in the range of -13%, narrow as new investors become aware of the fund and begin to see the potential in current values and long term total returns.
The second and more important benefit of the merger is the potential for increased income and growth of capital through a multi-asset class approach with dynamic asset allocation. Because high yield bonds, mortgage securities, and real asset equities behave differently over time, dynamic asset allocation creates the potential to shift capital between these asset classes to seek superior income and capital appreciation over time.
The Brookfield Real Assets Income Fund
The Brookfield Real Assets Income Fund is a US based and US-centric closed end fund focused on securities and instruments of real assets companies (i.e., real estate, infrastructure and natural resources). The fund trades on the NYSE under the symbol . The primary goal is high current income, the distribution was initiated at a rate of $2.38 annually (about 11% at today's market share prices), with a secondary goal of capital growth.
In terms of investment focus, it targets securities such as high yield corporate bonds and asset backed securities issued by firms engaged in businesses related to real assets, specifically real estate, infrastructure and natural resources. These assets tend to generate high levels of current income and may do well under the coming Trump administration if inflation predictions play out as planned. One of the potential benefits of their approach is what Mr. Diedrich termed "an inherent inflation protection"; when inflation rises the prices of real assets typically rises with it and, by extension, the values of investment securities based on and issued by companies engaged in the business of real assets.
In Mr. Diedrich's view the potential that lay in Trump's economic policies is a net positive for the market and the fund. "How positive we won't know until next year sometime".
To manage what is in reality a complex portfolio the firm has drawn together specialist investment teams derived from the management teams of the legacy funds as well as other portfolio teams within Brookfield. These teams include Asset Allocation, Real Asset Debt, Securitized Credit, Infrastructure Equities and Real Estate Equities. As of December 2, 2016, Corporate Bonds represented about 29% of the portfolio, Asset Backed Securities were about 64% of the portfolio with a small holding of Equity investments rounding out the total. In total, there were 341 individual holdings, none more than 2.5% of total portfolio value.
The Bottom Line
The bottom line is that the Real Assets Income Fund is a streamlined fund focused on a sector of the economy that is expected to do quite well in the coming years. At the same time it offers a discount to NAV for the value investor and a distribution for the income seeker, a combination that can produce market beating total returns. I believe this Fund is worth looking into further.
Visit For More Info: https://www.brookfield.com/

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