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Diversified Real Assets: The Case for a Strategic/Opportunistic Approach

BROOKFIELD PUBLIC SECURITIES GROUPi | MULTI-ASSET STR ATEGIES

In our view, the popularity of alternative investing strategies speaks to the growing need for investors to diversify beyond traditional stock and bond allocations. We believe that tangible real assets can provide an effective way to source this diversification, based on our research into their distinct and often complementary profiles for risk and return. This primer makes the case for building exposure through a risk-aware, dynamic allocation to listed real assets—the equity and debt securities of companies that own and operate real assets. We will demonstrate the merits of a strategic/opportunistic framework for portfolio construction, based on a balanced approach to three important investment objectives: inflation protection, capital appreciation and current income.

1


Introduction THE FEATURES AND CHARACTERISITCS THAT BIND REAL ASSETS TOGETHER AS AN ASSET CLASS Listed real assets represent a global universe of nearly $11 trillion, as highlighted in Exhibit 1 below. Most of the companies that issue these securities are engaged in real estate, infrastructure and natural resources. While these asset classes have very different fundamental drivers and business models, our research into their investment characteristics points to several features that bind them together as real assets. For one, they are backed by tangible hard assets that tend to generate returns linked to inflation. In addition, the revenues from many real assets are visible and recurring, as they are frequently based on long-term contracts or regulation. And finally, the end-user demand for the essential goods and services provided by real assets tends to be relatively sustainable and inelastic.

These common “real” features drive three common investment characteristics found across the universe of real assets.

• First, real assets tend to have a positive sensitivity to inflation, thereby providing the potential to hedge against inflation. Of course, there are independent factors related to each asset class that may cause them to underperform or hinder their ability to keep pace with inflation.

• Second, real asset cash flows tend to be tied to contractual inflation escalators, which may lead to attractive capital appreciation.

• Third, real asset cash flows tend to be derived from contracted or regulated revenues that may provide current income potential.

BROOKFIELD'S STRATEGIC/OPPORTUNISTIC APPROACH TO REAL ASSETSWe believe that the distinct investment characteristics of real assets can provide an effective tool for portfolio diversification. In our view, positive inflation sensitivity, capital appreciation and current income are all relevant in the design of a multi-real-asset-class solution. But we also believe that this type of framework should be designed to deliver capital appreciation and income throughout the economic cycle, whether or not inflation is present. Through this paper, we demonstrate the merits of taking a balanced approach to these objectives, using a construction framework that divides real assets into strategic and opportunistic allocations.

T A B L E O F C O N T E N T S

The Merits of a Strategic/Opportunistic Approach to Portfolio Construction

3

The Distinct Investment Characteristics of Listed Real Assets

4

The Potential Value of Dynamic Asset Allocation

8

Our Closing Perspective 9

Appendix 10

THE GLOBAL UNIVERSE OF LISTED REAL ASSETS REPRESENTS $11 TRILLION OF EQUITY AND DEBT SECURITIES, SPREAD ACROSS THREE PRIMARY SECTORS: REAL ESTATE, INFRASTRUCTURE AND NATURAL RESOURCES.

E X H I B I T 1 : A D I V E R S I F I E D, $11 T R I L L I O N U N I V E R S EGlobal Equity Markets: $5.5 Trillion Global Fixed Income: $6.1 Trillion

As of December 31, 2019. Source: Bloomberg, Nareit, Standard & Poor's, Brookfield Public Securities Group LLC. See index definitions on page 4.

INFRASTRUCTURE(INCLUDING MLPS)

REAL ESTATE

19% 51%

30%

NATURALRESOURCES

INFRASTRUCTURE(INCLUDING MLPS)

TIPS

45% 23%

19%REAL ESTATE

13%

NATURALRESOURCES

DIVERSIFIED REAL ASSETS: THE CASE FOR A STRATEGIC/OPPORTUNISTIC APPROACH 2


The asset classes within the global real assets universe are fundamentally distinct, driving equally distinct investment characteristics. As we highlight in Exhibit 2, while most real assets are inherently sensitive to changes in inflation, some are more so than others. At the same time, the return characteristics of some asset classes tend to have more capital appreciation potential, while others are more income oriented. Below we rank these criteria for each of the sectors of our universe on a relative basis, based on our assessment of the historical return profiles we have observed in listed real-asset-related indexes.ii

Source: Brookfield Public Securities Group LLC. For illustrative purposes only. Investing involves risk. Risks are subject to change without notice.

E X H I B I T 2 : T H E D I S T I N C T D R I V E R S O F R E A L A S S E T R E T U R N S

REAL ASSET SECTORS HAVE VARYING DEGREES OF INFLATION SENSITIVITY, CAPITAL APPRECIATION POTENTIAL AND INCOME POTENTIAL.

INFLATION SENSITIVITY

CAPITAL APPRECIATION POTENTIAL

INCOME POTENTIAL

REAL ESTATE EQUITIESReal Estate MEDIUM MEDIUM MEDIUM

REIT Preferreds LOW LOW HIGH

INFRASTRUCTURE EQUITIESInfrastructure MEDIUM MEDIUM MEDIUM

MLPs MEDIUM MEDIUM HIGH

REAL ASSET DEBTReal Asset Debt LOW LOW HIGH

OPPORTUNISTICNatural Resource Equities HIGH HIGH MEDIUM

Commodities HIGH HIGH LOW

TIPS HIGH LOW LOW

INFLATION AGNOSTIC

INFLATIONSENSITIVE

NEED FOR CURRENT INCOME (DEFENSIVE)

NEED FOR CAPITAL APPRECIATION(OPPORTUNISTIC)

BROOKFIELD'S FRAMEWORK FOR DIVERSIFIED REAL ASSETS

Many Diversified Real Asset/Real Return

Strategies

We consider each of these factors when we construct real asset solutions, seeking to balance the potential benefits of inflation protection, capital appreciation and current income. This approach, depicted in Exhibit 3, sets Brookfield apart from managers primarily focused on inflation protection, and is a key driver behind our strategic/opportunistic approach to asset allocation.

• The strategic allocations of Brookfield's diversified real asset solutions are focused on the first three asset classes in Exhibit 2—real estate equities, infrastructure equities and real asset debt. These asset classes have demonstrated a long history of relatively consistent patterns of return, albeit with moderate sensitivity to inflation.

• In contrast, our research suggests that sectors we deem to be more opportunistic—natural resource equities, commodities and TIPS—tend to have less consistent patterns of return over time, while demonstrating a higher sensitivity to changes in inflation. We tend to invest in these sectors as warranted by market conditions.

E X H I B I T 3 : G U I D I N G P O R T F O L I O CO N S T R U C T I O N W I T H A B A L A N C E D A P P R O A C H T O T H E I N V E S T M E N T O B J E C T I V E S

Source: Brookfield Public Securities Group LLC. This chart does not depict actual holdings or results of a Brookfield fund or composite.

FOR MORE CONSISTENT RESULTS OVER TIME, WE BELIEVE THAT A DIVERSIFIED REAL ASSETS FRAMEWORK SHOULD BALANCE THE INVESTMENT OBJECTIVES OF INFLATION PROTECTION, CAPITAL APPRECIATION AND CURRENT INCOME.

The Merits of a Strategic/Opportunistic Approach to Portfolio Construction



E X H I B I T 4 : A S T R AT E G I C F R A M E W O R K F O R CO N S T R U C T I N G D I V E R S I F I E D R E A L A S S E T S O L U T I O N S

Allocation (%)Target

Ranges (%)

REAL ESTATE EQUITIES 40.0 25-55Real Estate 35.0 20-50REIT Preferreds 5.0 0-15INFRASTRUCTURE EQUITIES 45.0 30-60Infrastructure 40.0 25-55MLPs 5.0 0-15REAL ASSET DEBT 15.0 5-30Real Asset Debt 15.0 5-30CASH 0.0 0-5Cash 0.0OPPORTUNISTIC 0.0 0-20Natural Resource Equities 0.0CommoditiesTIPS

0.00.0

REAL ESTATEEQUITIES

(40%)

REAL ASSET DEBT(15%)

INFRASTRUCTURE EQUITIES(45%)

As of December 31, 2019. Source: Brookfield Public Securities Group LLC. The framework is subject to change without notice. The manager makes no warranty that the targets will be achieved. The manager makes no warranties to update the information shown herein.

We believe that the historical patterns of real asset index returns can provide valuable insights into the construction of a diversified real assets solution. The illustrations in this section will highlight the investment characteristics of various real asset classes on the basis of risk-adjusted

returns, correlations, capital appreciation and income potential, inflation sensitivity and interest-rate sensitivity. Unless otherwise indicated in the footnotes under each chart, our models are based on the dates and indexes listed below.

The Distinct Investment Characteristics of Listed Real Assets

Based on this approach, we believe the construction of a diversified real assets framework should be guided by the target allocations highlighted below.

EQT MSCI World Index

FI Bloomberg Barclays Global Aggregate Index

RFR Risk Free Rate represented by the ICE BofA Merrill Lynch 3-Month U.S. Treasury Bill Index

DRA The Brookfield Diversified Real Assets Index Blend is composed of the following index proxies outlined in this Index Key: 35% RE (Real Estate), 5% PREF (Real Estate Preferred Securities), 40% INFR (Infrastructure), 5% MLP and 15% Real Asset Debt (divided 70%/30% between RAIG/RAHY)

RE FTSE EPRA Nareit Developed Index

PREF ICE BofA Merrill Lynch Preferred Stock REIT 7% Constrained Index

INFR Dow Jones Brookfield Global Infrastructure Index*

MLP Alerian MLP Index

RAIG A blend of real asset sectors, as designated by Brookfield,** of the ICE BofA Merrill Lynch Global Corporate Index

RAHY A blend of real asset sectors, as designated by Brookfield,** of the ICE BofA Merrill Lynch Global High Yield Index

NREQ S&P Global Natural Resources Index

COMM Bloomberg Barclays Commodity Index

TIPS Bloomberg Barclays U.S. Treasury Inflation Notes Index

* Brookfield has no direct day-to-day role in the management of the Dow Jones Brookfield Global Infrastructure Index. Brookfield-branded indexes do not reflect any performance data from Brookfield Investment Management Inc. funds or portfolio composites. See index definitions at the end of this report.

** Brookfield manages real asset portfolios focused on three main categories of real assets: real estate, infrastructure and natural resources. Fixed income sectors of the ICE BofA ML Global Corporate Bond Index and ICE BofA ML High Yield Index that fall into these categories include Cable, Infrastructure Services, Oil Gas T&D, Telecommunications, Transportation, Utilities, Ag Timber & Basic Materials, Energy Exploration & Production, Metals & Mining, Real Estate, RE Ownership & Development, and REITs. The underlying constituents of these sectors comprise the RAIG and RAHY components of the Diversified Real Assets Index Blend.

I N D E X K E Y

Investing in the real asset classes highlighted above involves risk. The loss of principal is possible, except for TIPS and U.S. Treasury bills for which principal is guaranteed by the full faith of the U.S. government. The tax treatment of returns of the asset classes listed above may differ given differential tax treatment of income versus capital gain and other factors, such as the capital structure of the investment.



E X H I B I T 5 : R I S K - A D J U S T E D R E T U R N A N A LY S I S

-3%

0%

3%

6%

9%

12%

15%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%

Retu

rn (A

nnua

lized

)

Standard Deviation (Annualized)

FI

RFR

DRA

RETURN(%)

ST DEV(%)

TRADITIONALRFR Risk Free Rate 1.4 0.5EQT Global Equities 8.8 14.3FI Global Fixed Income 4.0 5.5

STRATEGICDRA INDEX BLEND 10.6 12.6RE Global Real Estate 10.2 18.1PREF REIT Preferreds 6.9 11.5INFR Global Infrastructure 12.0 12.5MLP MLPs 8.9 17.3RAHY Real Asset High Yield 8.4 8.9RAIG Real Asset Investment Grade 5.6 6.2

OPPORTUNISTICNREQ Natural Resource Equities 8.0 19.8COMM Commodities -0.5 16.0TIPS U.S. TIPS 4.3 5.8

EQT

COMM

NREQ

RAHY REMLP

INFR

PREFRAIG

TIPS

HISTORY SHOWS THAT REAL ASSET CLASSES WE DEEM TO BE STRATEGIC HAVE GENERATED ATTRACTIVE RISK-ADJUSTED RETURNS, RELATIVE TO EQUITIES AND FIXED INCOME.

For the period January 1, 2003 through December 31, 2019. Source: Bloomberg and Brookfield Public Securities Group LLC. The index data presented above include back-tested performance. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the index components used in this chart and see full definitions of these indexes at the end of this report.

R E L A T I V E L Y A T T R A C T I V E R I S K - A D J U S T E D R E T U R N S F O R S T R A T E G I C R E A L A S S E T C L A S S E S

As illustrated below, the asset classes we deem to be strategic (real estate, infrastructure and real asset debt) delivered relatively attractive long-term risk-adjusted returns over the January 2003 through December 2019 study period—all near or above the capital markets line between the risk-free return (RFR) and equities (EQT). We consider these asset classes to be strategic in the construction of a diversfied real asset solution. Illustrating this blend is the Brookfield Diversified Real Assets Index Blend (DRA) in Exhibit 5 and other exhibits in this report.

M O D E R A T E C O R R E L A T I O N S A M O N G R E A L A S S E T C L A S S E S

We attribute the relatively moderate historical correlations among real asset classes to their distinct drivers of risk and return highlighted in Exhibit 2. This point is demonstrated by the correlation matrix in Exhibit 6 below.

E X H I B I T 6 : A S S E T C L A S S CO R R E L AT I O N S – J A N U A R Y 2 0 0 3 T H R O U G H D E C E M B E R 2 0 19

CORRELATIONS AMONG REAL ASSET CLASSES HAVE BEEN MODERATE.

As of December 31, 2019. Source: Bloomberg and Brookfield Public Securities Group LLC. The index data presented above include back-tested performance. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the index components used in this chart and see full definitions of these indexes at the end of this report.

EQT FI DRA RE PREF INF MLP RAHY RAIG NREQ COMM TIPS

EQT Global Equities 1.00 0.35 0.87 0.83 0.47 0.81 0.55 0.75 0.52 0.80 0.54 0.18

FI Global Bonds 0.35 1.00 0.53 0.48 0.37 0.52 0.15 0.42 0.90 0.35 0.36 0.69

DRA DRA Index Blend 0.87 0.53 1.00 0.95 0.66 0.94 0.61 0.81 0.68 0.69 0.52 0.40

RE Real Estate Equities 0.83 0.48 0.95 1.00 0.65 0.81 0.45 0.71 0.61 0.60 0.44 0.36

PREF REIT Preferreds 0.47 0.37 0.66 0.65 1.00 0.52 0.37 0.60 0.50 0.27 0.23 0.38

INF Infrastructure Equtities 0.81 0.52 0.94 0.81 0.52 1.00 0.61 0.72 0.65 0.70 0.52 0.39

MLP MLPs 0.55 0.15 0.61 0.45 0.37 0.61 1.00 0.61 0.31 0.56 0.44 0.12

RAHY Real Asset High Yield 0.75 0.42 0.81 0.71 0.60 0.72 0.61 1.00 0.68 0.64 0.52 0.37

RAIG Real Asset Investment Grade 0.52 0.90 0.68 0.61 0.50 0.65 0.31 0.68 1.00 0.47 0.44 0.73

NREQ Natural Resource Equities 0.80 0.35 0.69 0.60 0.27 0.70 0.56 0.64 0.47 1.00 0.75 0.21

COMM Commodities 0.54 0.36 0.52 0.44 0.23 0.52 0.44 0.52 0.44 0.75 1.00 0.31

TIPS U.S. TIPS 0.18 0.69 0.40 0.36 0.38 0.39 0.12 0.37 0.73 0.21 0.31 1.00

STRATEGIC ALLOCATIONS



V A R Y I N G D E G R E E S O F I N F L A T I O N S E N S I T I V I T YInflation sensitivity is driven by the fundamental nature of the underlying real assets. Examples include the pricing power of commercial real estate landlords to raise rents or of operators of infrastructure assets such as utilities and toll roads to pass along higher costs to customers. Exhibit 7 illustrates the performance of real asset classes in periods of greater-than-expected and less-than-expected inflation. Over the Study Period, the real asset classes we deem to be strategic performed

well versus their relevant global equity and fixed income benchmarks, regardless of the inflationary environment. In contrast, the three asset classes we deem to be opportunistic only performed well versus their relevant benchmarks when inflation was greater than expected. We believe these historical results support the view that such opportunistic allocations to natural resource equities, commodities and TIPS should be made when inflationary pressures are expected.

C A P I T A L A P P R E C I A T I O N P O T E N T I A L

We define real assets as long-lived, hard assets that have the potential to appreciate over time as replacement costs rise and operating efficiencies are achieved. Exhibit 8 highlights that, historically, such capital appreciation has been more pronounced in infrastructure equities and real estate equities. Historically, our blend

of real asset classes, which we deem to be strategic, as represented in the Brookfield Diversified Real Assets Index Blend (DRA), has delivered capital appreciation on par with global equities. In addition, DRA has delivered a higher income return, resulting in a higher total return.

E X H I B I T 7 : P E R F O R M A N C E I N P E R I O D S O F G R E AT E R -T H A N A N D L E S S -T H A N - E X P E C T E D I N F L AT I O N

E X H I B I T 8 : A N N U A L I Z E D P R I C E A P P R E C I AT I O N A N D I N CO M E R E T U R N S – J A N U A R Y 2 0 0 3 T H R O U G H D E C E M B E R 2 0 19

STRATEGIC ASSET CLASSES

12.9%

5.3%

16.7% 17.4%

7.9%

19.8%19.0%

10.8%

6.5%

24.2%

12.3%

6.3% 7.2%

2.9%

7.7% 8.5% 7.6% 7.9%5.2% 6.4%

4.6%

-0.8%

-8.3%

2.6%

STRATEGIC ASSET CLASSES OPPORTUNISTIC ASSET CLASSES

OPPORTUNISTIC ASSET CLASSES

==

EQT FI DRA REIT PREF INFR MLP RAHY RAIG NREQ COMM TIPS EQT FI DRA REIT PREF INFR MLP RAHY RAIG NREQ COMM TIPS

4.5%8.8%

4.0%

10.6% 10.2%

6.9%

12.0%

8.9% 8.4%

5.6%

8.0%

-0.5%

4.3%

TOTALRETURN

INCOMERETURN

CAPITALAPPRECIATION


=

EQT FI DRA REIT PREF INFR MLP RAHY RAIG NREQ COMM TIPS

2.1%

6.6%

4.6%

5.9% 5.8%

4.3%

3.3%

8.6% 7.0%

1.8%

2.6%

5.4%

1.3%

-1.8%

2.5%

1.7%

5.2%

3.5%

0.4% 0.5%

7.8%

7.0%

0.3%-0.1%


STRATEGIC ASSET CLASSES HAVE PERFORMED WELL IN PERIODS OF BOTH GREATER-THAN AND LESS-THAN-EXPECTED INFLATION, OPPORTUNISTIC ASSET CLASSES HAVE UNDERPERFORMED IN PERIODS OF LESS-THAN- EXPECTED INFLATION.

HISTORICALLY, CAPITAL APPRECIATION HAS BEEN A SIGNIFICANT COMPONENT OF REAL ASSET TOTAL RETURNS.

As of December 31, 2019. Source: Bloomberg and Brookfield Public Securities Group, LLC. The index data presented above include back-tested performance. Greater-than/less-than expected inflation is defined as 4-quarter periods during which Seasonally Adjusted CPI-U was greater-than/less-than the 12-month SPF Forecast one year prior. From 2003-2019, there were 29 periods of greater-than-expected inflation and 36 periods of less-than-expected inflation. CPI U represents the change in the Consumer Price Index for urban consumers. Past performance is not indicative of future results. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the index components used in this chart and see full definitions of these indexes at the end of this report.

As of December 31, 2019. Source: Bloomberg and Brookfield Public Securities Group, LLC. The index data presented above include back-tested performance. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the index components used in this chart and see full definitions of these indexes at the end of this report.

Greater-Than-Expected Inflation Environments Less-Than-Expected Inflation EnvironmentsAVERAGE ANNUAL RETURNS (1/01/2003-12/31/2019) AVERAGE ANNUAL RETURNS (1/01/2003-12/31/2019)



C U R R E N T I N C O M E P O T E N T I A L , S U P P O R T E D B Y C O N T R A C T E D O R R E G U L A T E D A S S E T S

Many companies engaged in real-asset-related businesses are subject to contractual or regulated revenue streams. We believe these recurring revenue streams have the potential to translate into attractive streams of distributed income.

Exhibit 9 illustrates with a December 31, 2019 current-income comparison of various real asset classes, relative to global equities and global fixed income. All of the strategic real asset classes we measured had higher current income than their relevant global equity or fixed-income benchmark.

E X H I B I T 9 : C U R R E N T I N C O M E O F R E A L A S S E T S


2.3%

1.5%

4.2%3.8%

5.2%

3.6%

9.2%

5.6%

2.5%

4.0%

0.0%

2.0%=

EQT FI DRA REIT PREF INFR MLP RAHY RAIG NREQ COMM TIPS


REAL ASSET CLASSES CAN PROVIDE ATTRACTIVE CURRENT INCOME, RELATIVE TO TRADITIONAL EQUITIES AND FIXED-INCOME SECURITIES.

As of December 31, 2019. Source: Bloomberg and Brookfield Public Securities Group, LLC. The index data presented above include back-tested performance. Current income reflects the percent of current income for each index. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the index components used in this chart and see full definitions of these indexes at the end of this report.

V A R Y I N G D E G R E E S O F I N T E R E S T - R A T E S E N S I T I V I T Y

Exhibit 10 illustrates the varying degrees of interest-rate sensitivity of real asset classes. In periods of both greater-than- and less-than-expected interest rates over the Study Period, the performance of the Diversified

Real Assets Index Blend (and many of its underlying components) demonstrates the potential for real assets to perform well, regardless of the interest- rate environment.

E X H I B I T 10 : T H E P E R F O R M A N C E O F R E A L A S S E T S I N P E R I O D S O F R I S I N G A N D F A L L I N G I N T E R E S T R AT E S


19.2%

2.7%

17.2%

21.1%

7.42%

17.9%16.5%

12.4%

4.8%

21.7%

7.6%

1.8% 2.7%4.9%

7.5%5.9%

7.9%9.6%

7.4%5.3% 5.9%

1.8%

-4.2%

6.1%


==

EQT FI DRA REIT PREF INFR MLP RAHY RAIG NREQ COMM TIPS EQT FI DRA REIT PREF INFR MLP RAHY RAIG NREQ COMM TIPS

STRATEGIC ASSET CLASSES HAVE PERFORMED WELL IN PERIODS OF BOTH GREATER-THAN AND LESS-THAN-EXPECTED INTEREST RATES.

As of December 31, 2019. Source: Bloomberg and Brookfield Public Securities Group, LLC. The index data presented above include back-tested performance. Rising/falling interest rates are defined as 4-quarter periods during which the yield on the 10-year U.S. Treasury is increasing/decreasing. For the period January 1, 2003 through to December 31, 2019, there were 28 periods of rising interest rates and 37 periods of falling interest rates. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the indexes used in this chart and see full definitions of these indexes at the end of this report.

Periods of Rising Interest Rates Periods of Falling Interest Rates AVERAGE ANNUAL RETURNS (1/01/2003-12/31/2019) AVERAGE ANNUAL RETURNS (1/01/2003-12/31/2019)



The global universe of listed real asset equity and debt securities is composed of fundamentally distinct asset classes that have responded very differently to economic and market drivers. Consistent with these distinctions, there is wide dispersion in the returns of individual asset classes from year to year, as shown in Exhibit 11 below.

Based on these shifts in market leadership and the wide gaps observed between the top and bottom performer in each year, we believe that dynamic asset allocation within a multi-real-asset-class solution can enhance investment performance.

As of December 31, 2019. Source: Bloomberg, Brookfield Public Securities Group LLC and ICE BofA Merrill Lynch. The index data presented above include back-tested performance. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the indexes used in this chart and see full definitions of these indexes at the end of this report.

E X H I B I T 1 1 : T H E B E N E F I T O F A C T I V E LY M A N A G E D E X P O S U R E

The Potential Value of Dynamic Asset Allocation

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

DRA 44.5% 38.0% 26.2% 42.4% 41.2% -2.4% 76.4% 35.9% 13.9% 28.7% 27.6% 24.8% 10.0% 31.4% 22.0% -1.3% 28.7%

REIT 40.9% 32.9% 21.4% 36.7% 16.3% -4.7% 50.8% 20.4% 13.8% 19.2% 15.9% 16.3% 0.1% 19.4% 15.8% -3.6% 23.1%

PREF 40.7% 29.2% 15.4% 32.3% 16.2% -14.7% 49.7% 16.8% 13.6% 18.1% 9.1% 15.9% -1.4% 18.3% 12.6% -3.8% 22.8%

INFR 32.7% 23.7% 11.0% 29.1% 12.7% -23.7% 40.5% 16.4% 11.9% 16.0% 6.1% 13.6% -5.6% 12.5% 12.1% -4.7% 20.3%

MLP 32.6% 16.7% 10.5% 26.1% 11.6% -35.6% 38.3% 15.0% 6.8% 9.8% 4.4% 4.8% -7.1% 11.8% 11.4% -6.2% 16.4%

RAHY 29.0% 12.5% 6.3% 10.8% 8.1% -36.4% 35.5% 13.0% 5.4% 7.0% 1.0% 4.2% -8.1% 10.0% 10.1% -6.8% 13.4%

RAIG 23.9% 10.0% 2.9% 9.3% 4.7% -36.9% 34.2% 12.5% 3.4% 6.6% -1.0% 3.6% -14.4% 6.2% 10.1% -7.9% 12.6%

NREQ 15.1% 9.1% 2.8% 6.5% 4.2% -36.9% 21.0% 10.5% -5.8% 6.2% -8.6% -1.4% -24.5% 5.0% 3.0% -11.2% 8.4%

COMM 10.7% 8.5% 2.8% 2.1% -7.0% -38.6% 18.9% 6.7% -13.3% 4.8% -9.5% -10.2% -24.7% 4.7% 1.7% -12.4% 7.7%

TIPS 8.4% 6.8% -2.6% 0.4% -11.3% -47.7% 11.4% 6.3% -15.2% -1.1% -12.2% -17.0% -32.6% 0.1% -6.5% -13.1% 6.6%

36.1% 31.2% 28.8% 41.9% 52.5% 45.4% 65.0% 29.5% 29.1% 29.7% 39.8% 41.8% 42.6% 31.4% 28.5% 11.8% 22.1%GAP BETWEEN

TOP & BOTTOM PERFORMER

TOP P

ERFO

RMER

BOTT

OM PE

RFOR

MER



Throughout this paper, we have demonstrated the merits of including multiple real asset classes (including real estate, infrastructure and natural resources) and multiple security types (including equities and fixed-income instruments) in a multi-real-asset-class solution. Notably, over our Study Period from January 2003 through December 2019, the Brookfield Diversified Real Assets Index Blend (DRA) generated higher risk-adjusted returns than Global Equities (EQT) and Global Fixed Income (FI). These results, as measured by historical Sharpe Ratios, are highlighted in Exhibit 12 below.

We believe that the strategic allocation of a multi- real-asset-class solution should be focused on the three asset classes that have featured relatively consistent patterns of return: real estate equities, infrastructure equities and real asset debt securities. In contrast, allocations to natural resource equities, commodities and TIPS should be made opportunistically when inflationary pressures are expected. Our paper has illustrated the investment merits of this approach through a hypothetical blend of real-asset indexes — the Brookfield Diversified Real Assets Index Blend (DRA), which includes Strategic Asset Classes, as designated by Brookfield.

Our approach to constructing a diversified real assets solution seeks to balance the potential benefits of inflation protection, capital appreciation and current income. Over the Study Period, the Brookfield Diversified Real Assets Index Blend (DRA) provided these benefits, as summarized below:

1. Average annual returns that exceeded those of global equities in periods when inflation was greater than expected;

2. Capital appreciation slightly less than global equities; and

3. A significantly higher income return than either global equities or global fixed income.

We close with a summary of these results, highlighted in Exhibit 13.

Our Closing Perspective

Footnotes for Exhibits 12 and 13: For the period January 1, 2003 through to December 31, 2019. Source: Bloomberg and Brookfield Public Securities Group LLC. See Exhibits 5, 7, 8 and 9 of this report for methodology and disclosures for the data shown in Exhibits 12 and 13. The index data presented above include back-tested performance. The performance results do not represent actual trading or represent the performance of any Brookfield strategy. Actual trading may produce different results. See the Index Key on page 4 for the index components used in this chart and see full definitions of these indexes at the end of this report.

E X H I B I T 1 3 : O U R R E S E A R C H S T U D Y A T A G L A N C E THE BROOKFIELD DIVERSIFIED REAL ASSETS INDEX BLEND (DRA) Vs. GLOBAL EQUITIES (EQT) AND GLOBAL FIXED INCOME (FI)

E X H I B I T 1 2 : H I S T O R I C A L S H A R P E R A T I O S THE DIVERSIFIED REAL A SSETS INDEX BLEND (DR A) Vs. GLOBAL EQUITIES (EQT ) AND GLOBAL FIXED INCOME (F I )

DRA

3. INCOME RETURN

0.00.20.40.60.81.0

2. CAPITAL APPRECIATION1. INFLATION HEDGE

16.7%

EQT FI

12.9%

HIGHER TOTAL RETURNS IN PERIODS WHEN INFLATION WAS GREATER THAN EXPECTED

5.3% 5.9% 6.6%

0.5%

4.6%

2.1%3.6%

EQT

SHARPE RATIOSFIDRA

0.52 0.49

0.73



Appendix: Exploring the Diverse Fundamentals Behind Real Asset Cash Flows

Source: Brookfield Public Securities Group LLC. Note that the designations of strategic and opportunistic asset classes are based on the judgment of Brookfield Public Securities Group LLC.

S T R A T E G I C R E A L A S S E T C L A S S E S

ASSET CLASS FUNDAMENTAL CASH FLOW DRIVERS THE DISTINCT MACRO SENSITIVITIES OF LISTED REAL ASSET CLASSES

Real Estate: Office Retail Multifamily Industrial Self-Storage Hospitality

Cash flows are derived from rents and are determined by property leases. The structures of these leases vary by factors such as property type and duration.

The diverse property types and lease structures of real estate are supportive of attractive performance potential throughout the economic cycle. For example, in periods of economic expansion, healthy demand can provide the pricing power for landlords to raise rents as leases expire. Rents can also increase as landlords make property improvements. Property types with longer lease terms offer downside protection from in-place leases and tend to be more stable. Meanwhile, properties with shorter lease terms tend to have a greater sensitivity to economic activity and inflation.

REIT Preferreds REIT preferred securities generate income from the revenue streams associated with REITs, which we have found to be consistent over time given that most tenants (outside of lodging and apartments) have long-term leases that reduce the volatility of the top line of these companies.

A fixed-rate perpetual preferred, whether a REIT preferred or another type of preferred, can have substantial interest-rate risk.

Infrastructure: Transportation Energy (C-Corps and MLPs) Utilities Communications

Cash flows are generated by long-lived assets that deliver essential products or services. Such cash flows tend to be a function of i) price, often tied to a regulatory or concession framework, and ii) volume, which can be steady in some asset types and more tied to levels of economic activity in others.

The diverse cash flow characteristics of infrastructure assets have the potential to deliver attractive performance profiles during the early, mid and late stages of the economic cycle. To illustrate, the contracted or regulated revenues of infrastructure assets are often linked to inflation, which can drive pricing power in periods of economic expansion. In periods of economic contraction, the cash flows of many infrastructure assets tend to be supported by steady demand, which can provide defensive characteristics.

Real Asset Debt: Investment Grade High Yield

Cash flows are derived from the underlying assets of companies engaged in real estate, infrastructure and natural resource equities.

As highlighted in the exhibits of this report, the debt of real-asset-related companies have historically shown less sensitivity to rising inflation and interest rates and broader categories of global fixed income.

O P P O R T U N I S T I C R E A L A S S E T C L A S S E S

ASSET CLASS FUNDAMENTAL CASH FLOW DRIVERS THE DISTINCT MACRO SENSITIVITIES OF LISTED REAL ASSET CLASSES

Natural Resource Equities

Natural resource equity cash flows are generally derived from the production, processing and distribution of commodities.

Our research shows that the cash flows derived from energy and metals & mining tend to be driven by factors that impact demand, such as population growth and economic activity. In contrast, we have observed that the cash flows from agricultural assets are driven more by factors that impact short-term supply, such as weather and water.

Commodities Commodity futures generally reflect the supply and demand dynamics of the underlying commodities.

The historical returns of commodity futures have generally shown a high sensitivity to changes in inflation. generally have a high sensitivity to changes in inflation.

TIPS TIPS are backed by the full faith and credit of the U.S. government. Because of this they are much less sensitive to changes in economic conditions compared with stocks, commodities and credit-sensitive bonds.

While the par value of other types of bonds tends to be devalued with CPI inflation,iii the par value of TIPS rises with CPI inflation. Unlike most U.S. asset classes, TIPS are not subject to state and local taxes, although they are subject to federal income taxes.



D I S C L O S U R E S©2020 Brookfield Public Securities Group LLC (“PSG” or “the Firm”), is an SEC-registered investment adviser and represents the Public Securities Group of Brookfield Asset Management Inc., providing global listed real assets strategies including real estate equities, infrastructure equities, multi-strategy real asset solutions and real asset debt. PSG manages separate accounts, registered funds and opportunistic strategies for institutional and individual clients, including financial institutions, public and private pension plans, insurance companies, endowments and foundations, sovereign wealth funds and high net worth investors. PSG is an indirect, wholly owned subsidiary of Brookfield Asset Management, Inc., a leading global alternative asset manager. The information in this publication is not and is not intended as investment advice or prediction of investment performance. This information is deemed to be from reliable sources; however, Brookfield does not warrant its completeness or accuracy. This commentary does not constitute, and is not intended to constitute, an offer or solicitation to sell or a solicitation of an offer to buy any security, product or service; nor shall any security, product or service be offered or sold in any jurisdiction in which Brookfield is not licensed to conduct business, and/or where an offer, solicitation, purchase or sale would be unavailable or unlawful. Performance shown in USD unless otherwise noted. Past performance is not indicative of future results.

F O R W A R D - L O O K I N G S T A T E M E N T SInformation herein contains, includes or is based upon forward-looking statements within the meaning of the federal securities laws, specifically Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements, other than statements of historical fact, that address future activities, events, or developments, including without limitation, business or investment strategy or measures to implement strategy, competitive strengths, goals, expansion and growth of our business, plans, prospects and references to our future success. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other similar words are intended to identify these forward-looking statements. Forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining our actual future results or outcomes. Consequently, no forward-looking statement can be guaranteed. Our actual results or outcomes may vary materially. Given these uncertainties, you should not place undue reliance on these forward-looking statements. The quoted indexes within this publication do not reflect deductions for fees, expenses, sales charges or taxes. These indexes are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. There may be material factors relevant to any such comparison such as differences in volatility and regulatory and legal restrictions between the indexes shown and any investment in a Brookfield strategy, composite or fund. Brookfield obtained all index data from third-party index sponsors and believes the data to be accurate; however, Brookfield makes no representation regarding its accuracy. Indexes are unmanaged and cannot be purchased directly by investors. There may be material factors relevant to any such comparison such as differences in volatility and regulatory and legal restrictions between the indexes shown and a Brookfield strategy, composite or mutual fund. Brookfield Public Securities Group LLC, (“PSG”), does not own or participate in the construction, or day-to-day management of the indices referenced in this document. The index information provided is for your information only and does not imply or predict that a PSG product will achieve similar results. This information is subject to change without notice.

The index sponsors permit use of their indices and related data on an "As Is" basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/ or completeness of their index or any data included in, related to, or derived therefrom, and assumes no liability in connection with the use of the foregoing. The index sponsors have no liability for any direct, indirect, special, incidental, punitive, consequential, or other damages (including loss profits). The index sponsors do not sponsor, endorse, or recommend Brookfield Public Securities Group LLC or any of its products or services. Unless otherwise noted, all indices are Total Return indices.

H Y P O T H E T I C A L P E R F O R M A N C EThe information and data included in this publication constitute hypothetical and/or back-tested information, and do not represent the investment performance of any actual investor account, investment product or strategy. The hypothetical and/or back-tested simulated results are net of estimated advisory fees and transaction costs for private index returns and gross of fees and transaction costs for public index returns; all dividends are assumed to be reinvested. Although the information and data in this publication provide background information and data relevant to considering prior events and risks, past hypothetical or back-tested performance is not a guarantee of future returns. It is possible that the markets will perform better or worse than shown in the hypothetical and back-tested simulation results; that the actual results of an investor who invests in the manner these simulations suggest will be better or worse than the simulations; and that an investor may lose money by investing in the manner the simulations suggest. Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. While the simulation results reflect rigorous application of the methodology selected, the hypothetical and backtested simulation results have certain limitations and should not be considered indicative of future results. In particular, they do not reflect actual trading in an account or fund, so there is no guarantee that an actual account or fund would have achieved the hypothetical or back-tested results shown. There may be material factors relevant to any such comparison, such as differences in volatility and the regulatory and legal restrictions between the indexes shown and a Brookfield investment strategy. Past performance is not indicative of future returns.Performance back-tested by an index provider, prior to the launch date of indexes used in this report, are highlighted below: FTSE EPRA Nareit Developed Index (Launch Date: 3/2/2015)ICE BofA Merrill Lynch Preferred Stock REIT Constrained Index (Launch Date: 5/3/2007)Dow Jones Brookfield Global Infrastructure Index: (Launch Date: 7/14/2008)Alerian MLP Index: (Launch Date: 6/1/2006)S&P Global Natural Resources Index: (Launch Date: 5/27/2008)

D E F I N I T I O N S Correlation measures how closely two data series move in relation to one another, with a correlation of 1 representing perfect unison and a correlation of -1 representing perfect opposition.Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.Standard Deviation is a statistical measure used to quantify the amount of variation or dispersion of a set of data values.

I N D E X D E F I N I T I O N SThe Alerian Midstream Energy Index is a broad-based composite of North American energy infrastructure companies. The capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities, is disseminated real-time on a price-return basis (AMNA) and on a total-return basis (AMNAX).



The Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships (“MLPs”) calculated by Standard & Poor's using a float-adjusted market-capitalization methodology. The Bloomberg Barclays Global Aggregate Index tracks the performance of investment-grade public debt issued in the major domestic and eurobond markets, including global bonds. The Dow Jones Brookfield Global Infrastructure Index is calculated and maintained by S&P Dow Jones Indexes and comprises infrastructure companies with at least 70% of their annual cash flows derived from owning and operating infrastructure assets. Brookfield has no direct role in the day-to-day management of the Dow Jones Brookfield Global Infrastructure Index. The Dow Jones Brookfield Global Infrastructure Composite Index is calculated and maintained by S&P Dow Jones Indexes and comprises infrastructure companies with at least 70% of their annual cash flows derived from owning and operating infrastructure assets, including MLPs. Brookfield has no direct role in the day-to-day management of the Dow Jones Brookfield Global Infrastructure Composite Index. The FTSE Global Core Infrastructure 50/50 Index gives participants an industry-defined interpretation of infrastructure and adjusts the exposure to certain infrastructure sub-sectors. The constituent weights are adjusted as part of the semi-annual review according to three broad industry sectors - 50% Utilities; 30% Transportation, including capping of 7.5% for railroads/railways; and a 20% mix of other sectors including pipelines, satellites and telecommunication towers. Company weights within each group are adjusted in proportion to their investable market capitalization. The FTSE EPRA/Nareit Developed Index is an unmanaged market-capitalization-weighted total-return index that consists of publicly traded equity REITs and listed property companies from developed markets. The ICE BofA Merrill Lynch Global Corporate Index is an unmanaged, commonly accepted measure of the performance of global investment-grade corporate securities. The ICE BofA Merrill Lynch Global High Yield Index is an unmanaged, commonly accepted measure of the performance of global high-yield corporate securities. The ICE BofA Merrill Lynch Preferred Stock REITs 7% Constrained Index is a subset of the BofA Merrill Lynch Fixed-Rate Preferred Securities Index including all real estate investment trust- issued preferred securities. The BofA ML Fixed-Rate Preferred Securities Index tracks the performance of fixed-rate U.S. dollar-denominated preferred securities issued in the U.S. domestic market. The ICE BofA Merrill Lynch Real Asset High Yield Custom Index tracks below-investment-grade corporate debt publicly issued in the major domestic or eurobond markets for sectors deemed by Brookfield to be real-asset-related. The ICE BofA Merrill Lynch Real Asset Corporate & High Yield Custom Index is divided 70%/30% between real-asset-related sectors of the BofA Merrill Lynch Real Asset High Yield Index and the BofA Merrill Lynch Global Corporate Index. The MSCI U.S. REIT Index is a free-float market-capitalization-weighted index that is composed of Equity REITs securities that belong to the MSCI U.S. Investible Market 2500 Index.

The MSCI World Index is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets. The S&P 500 Index is an equity index of 500 widely held, large-capitalization U.S. companies. The S&P Global Infrastructure Index provides liquid and tradable exposure to 75 companies from around the world that represent the listed infrastructure universe with weights across three infrastructure clusters: utilities, transportation and energy.

E N D N O T E Si Brookfield Public Securities Group LLC (“PSG” or “the Firm”)

is an indirect, wholly owned subsidiary of Brookfield Asset Management.

ii The historical returns of various real-asset-related indexes were evaluated from 1/01/2003 or inception, whichever was later, through 12/31/18. Indexes considered included the following: the FTSE EPRA/Nareit Developed Index, the ICE BofA BofA Merrill Lynch Preferred Stock REITs 7% Constrained Index, Dow Jones Brookfield Global Infrastructure Index, Alerian MLP Index, real asset sectors of the ICE BofA Merrill Lynch Global High Yield Bond Index and ICE BofA Merrill Lynch Global Corporate Bond Index, S&P Global Natural Resources Index, Bloomberg Commodity Index, Bloomberg Barclays U.S. Treasury Inflation Notes Index.

iii CPI inflation is based on changes in the Consumer Price Index, which is a broad measure of average price changes for a diverse basket of goods and services typically purchased by urban consumers, across diverse households and geographies.

C O N T A C T U Sbrookfield.com | [email protected]© 2020 Brookfield Public Securities Group LLC


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