Real Assets Quarterly/media... · will see short-term cash flow disruption but no significant...

BROOKFIELD PUBLIC SECURITIES GROUP i | REAL ASSETS 1Q 2020

Real Assets QuarterlyThe first quarter of 2020 started well, but conditions quickly reversed as the COVID-19 pandemic spread worldwide. Markets unanimously declined as an unprecedented demand shock loomed over the global economy (Exhibit 1).

T H E ‘ C A T C H - U P ’ T R A D E This sell-off was unique for a few reasons. First, volatility and correlations across asset classes hit historical highs. But more importantly, extraordinary fact patterns (social distancing, shelter-in-place, etc.) changed the way people lived their lives, which affected markets in unusual ways.

At the start of the sell-off, real assets acted as expected and provided attractive downside capture relative to broad markets (Exhibit 2). As the situation intensified, and investors began selling assets in order to deliver or raise cash, we began to see selling pressure impact more-defensive asset classes, including real assets. This “catch-up” trade erased much of the outperformance of real assets. Aside from certain real asset sectors in the eye of this storm (discussed in more detail on the next page), we believe that most real asset sectors will see short-term cash flow disruption but no significant long-term value diminishment. As of March 31, 2020. Source: Bloomberg. Brookfield has no direct role in the

day-to-day management of the Dow Jones Brookfield Global Infrastructure Indices. See index definitions at the end of this report. Past performance does not guarantee future results. Index performance is not indicative of the performance of a Brookfield investment.

E X H I B I T 1 : P E R F O R M A N C E R E V I E W , A S O F M A R C H 3 1 , 2 0 2 0

GLOBAL INFRASTRUCTURE EQUITIES1Q-2020

(%) FTSE Global Core Infrastructure 50/50 Index -21.25Dow Jones Brookfield Global Infrastructure Composite Index -24.45ENERGY INFRASTRUCTURE EQUITIES Alerian Midstream Energy Index -46.92Alerian MLP Index -57.19GLOBAL REAL ESTATE EQUITIES FTSE EPRA Nareit Developed Index -28.34MSCI US REIT Index -26.99ICE BofA Preferred Stock REITs 7% Constrained Index -11.57REAL ASSET DEBT ICE BofA USD Real Asset High Yield Custom Index -16.48ICE BofA USD Real Asset High Yield & Corporate Custom Index -13.76BROAD-MARKET BENCHMARKSMSCI World Index -20.93S&P 500 Index -19.60Bloomberg Barclays Global Aggregate Index -0.33ICE BofA Global High Yield Index -14.10ICE BofA Global Corporate Index -5.55

E X H I B I T 2 : R E A L A S S E T E Q U I T I E S G E N E R A L LY O U T P E R F O R M E D I N T H E E A R LY D A Y S O F T H E D R A W D O W N

R E A L A S S E T D E B T P E R F O R M E D I N L I N E W I T H H I G H Y I E L D ; R E I T P R E F E R R E D S E X H I B I T E D V O L A T I L I T Y B U T O U T P E R F O R M E D H I G H Y I E L D

As of March 31, 2020. Source: Bloomberg, Brookfield Public Securities Group LLC. See Disclosures for full index representations.

Global Equities Global Infrastructure EquitiesGlobal Real Estate Equities Energy Infrastructure

Investment Grade REIT Preferreds High YieldReal Asset Debt

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Dec 31,2019

Jan 28,2020

Feb 25,2020

Mar 31,2020

Dec 31,2019

Jan 28,2020

Feb 25,2020

Mar 31,2020

-28.34%

-46.92%

-20.93%-21.25%

-14.10%-13.76%-11.57%

-5.55%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Global Equities Global Infrastructure EquitiesGlobal Real Estate Equities Energy Infrastructure

Investment Grade REIT Preferreds High YieldReal Asset Debt

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

Dec 31,2019

Jan 28,2020

Feb 25,2020

Mar 31,2020

Dec 31,2019

Jan 28,2020

Feb 25,2020

Mar 31,2020

-28.34%

-46.92%

-20.93%-21.25%

-14.10%-13.76%-11.57%

-5.55%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

1

R E A L A S S E T S : T H E B E N E F I C I A R I E S A N D T H E N E G A T I V E LY I M P A C T E D F R O M C O V I D -1 9

The virus and the subsequent containment measures changed the way people move and congregate. As a result, certain real asset sectors saw acute impacts to demand for their goods and services. Discussed below are our views on recent performance and the potential implications. It is important to note that we see market volatility as an opportunity for active managers. Many of our sectors are trading at significantly discounted valuations, given current events, which may provide opportunity.

B E N E F I C I A R I E S

Sector Performance Potential Implications

Communications Standout performer across real assets, given increased data needs

Data consumption will grow exponentially, a key driver for the sector

Data Centers Strong absolute and relative performance due to anticipated growing demand for cloud computing

Corporations may permanently increase their network redundancy, which would be a positive for the sector

Industrial Performed well, given significantly increased demand for e-commerce

This could accelerate the ongoing shift from in-store to online buying

N E G AT I V E LY I M PA C T E D

Sector Performance Potential Implications

Hotels Experienced a significant decline as a result of COVID-19 travel restrictions

We do not expect long-term travel propensity to change and would expect a recovery as normalcy returns

Retail & Other Entertainment

Saw similar price action, given aggressive measures prescribed to contain the virus

We are more pessimistic on the longer-term prospects for retail, given the prospect of accelerated adoption of online buying

Healthcare Disproportionately impacted by the idiosyncratic nature of the current crisis

We expect near-term volatility. However, our outlook for the sector is positive, as the pressures of an aging population will continue to create a favorable demand backdrop

Airports Significant weakness, given the historic travel restrictions

We see some near-term cash flow impacts, but we believe value opportunities will emerge

Energy Infrastructure Hit by dual supply and demand shocks. The virus impacted global demand and the situation was further exacerbated by the fallout from the OPEC/Russia negotiations, which are discussed in more detail on page 8

Demand will rebound once economic activity normalizes. Until there is a sustained price recovery, we expect U.S. producers to significantly slow production

REAL ASSETS QUARTERLY 2

O U R C U R R E N T D I V E R S I F I E D R E A L A S S E T S V I E W S

Given the current environment, in the context of a diversified real assets portfolio, we advise a slightly defensive tilt while selectively isolating our risk exposures to areas of the market well-supported by attractive fundamentals and valuations. Within equities, we prefer lower-beta infrastructure to real estate and see energy infrastructure as very attractively valued. Within debt, we like the defensive characteristics of both real asset debt and REIT preferreds.

O V E R W E I G H T N E U T R A L U N D E R W E I G H T

CURRENT

G L O B A L I N F R A S T R U C T U R E

GLOBAL INFRASTRUCTURE EQUITIES – We favor the sector’s innate defensiveness but are cognizant of overall valuations, given the recent outperformance of certain sub-sectors.

ENERGY INFRASTRUCTURE EQUITIES – The sector is facing headwinds, given dual supply and demand shocks. Valuations are very attractive, but until there is greater clarity, we favor limited exposure.

R E A L E S TAT E

GLOBAL REAL ESTATE EQUITIES – We recognize the risks embedded within certain real estate sectors. However, valuations are historically attractive.

REIT PREFERREDS – REIT preferreds are an effective way to access real estate exposure with reduced equity beta.

R E A L A S S E T D E B T

REAL ASSET DEBT – We favor increased exposure, given current conditions. Credit spreads have widened across credit ratings, and we prefer concentration within investment grade, or very high-quality high yield.



CURRENTGEOGRAPHY/SECTOR SELECTED VIEWS

N O R T H A M E R I C A

Industrial ■ Begun to trade at more reasonable levels, in our opinion. Demand may increase as a result of the recent realizations around the vulnerability of our supply chains.

■ While an economic downturn will impair aggregate demand for goods, it should slow new supply, which will improve sector fundamentals.

Residential ■ Historically shown to be more defensive in times of economic stress. We believe the sector is also well-positioned to return to growth, if we don’t experience a significant economic slowdown.

Data Centers ■ We believe these are the most insulated from a potential slowdown. These companies may see rising demand from increased telecommuting, e-learning, online shopping, etc., as schools and offices close and the populace embraces social distancing. Recent activity may accelerate the ongoing shift to on-line consumption.

■ In addition, as a result of recent events, many corporations may be rethinking their IT infrastructure and may work to add redundancies and more capacity to their networks.

A S I A PA C I F I C

Singapore ■ Adverse market impacts have been less severe in the region compared with other areas in Asia. We anticipate office occupancy will remain near current levels, as new supply has been limited.

■ Additionally, in-place office rents are generally below market rents, and we believe this will lead to NOI growth continuing to be stronger than for other markets in the region.

E U R O P E

U.K. ■ We have a negative view on the U.K. retail sector. We see attractive opportunities in U.K. companies which own high-quality office and industrial properties.

Continental Europe

■ Our overall view has held steady. We favor German residential, French office and a diversified Swedish landlord, but are less constructive on retail.

Global Real Estate Equities

Global real estate equities, as measured by the FTSE EPRA Nareit Index, returned -28.34% for the quarter, amid continued market volatility. On a regional basis, all markets declined during the quarter.

O U R C U R R E N T V I E W S

We expect real estate fundamentals to slow in the coming months amid the economic slowdown. However, we believe that REITs are prepared to withstand the current market crisis. Balance sheets are in better shape this cycle than during the Global Financial Crisis (2007-2008), as companies in our investment universe carry less leverage and limited near-term debt maturities.


Given the fluidity of the current environment, there are far too many variables to say accurately how much net asset values (NAVs) of REITs have declined. But based on our estimates, REITs currently trade at meaningful discounts to the underlying value of their real estate portfolios. Historically, buying REITs at significant discounts to NAV has proven to be a recipe for attractive long-term returns.

When considering how REITs will recover from the current market uncertainty, we take into consideration the differences between the current environment and the 2007-2008 Global Financial Crisis. As illustrated in the charts below, REITs carried higher levels of leverage in the previous downtown, with more instances of shorter-term debt and higher dividend payout ratios.

In this cycle, leverage is near record lows, interest coverage is very strong, and most companies have very limited near-term debt maturities. We believe these factors help position REITs to weather this current period of uncertainty and any resulting near-term economic softness.

As of December 31, 2019. Source: Brookfield Public Securities Group Research, Nareit T-Tracker, S&P Global Market Intelligence. Reflects all listed U.S. Equity REITs.

E X H I B I T 3 : R E I T S A R E W E L L - P O S I T I O N E D T O W E A T H E R T H E C U R R E N T C R I S I S

30%

40%

50%

60%

70%

20192018201720162015201420132012201120102009200820072006

31.4%

Average: 37.6%

DEBT TO MARKET VALUE

50

60

70

80

90

20192018201720162015201420132012201120102009200820072006

83

Average: 68

WEIGHTED AVERAGE TERM TO MATURITY (MONTHS)

1.0

2.0

3.0

4.0

5.0

6.0

20192018201720162015201420132012201120102009200820072006

5.1

Average: 3.5

WEIGHTED AVERAGE INTEREST COVERAGE RATIO

65%

70%

75%

80%

85%

90%

20192018201720162015201420132012201120102009200820072006

77.5%

Average: 76.5%

DIVIDEND PAYOUT RATIO

LOWER LEVERAGE

LONG-TERM DEBT

STRONGER INTEREST COVERAGE

LOWER PAYOUT RATIO


Global Infrastructure Equities


WEIGHTING SECTOR SELECTED VIEWS

Utilities ■ We favor the sector given its innate defensiveness.

■ We are seeing some pronounced valuation dispersions, as fully regulated utilities significantly outperformed those with non-regulated exposure. In our view, many of these companies are well-capitalized and several have exposure to low-cost renewables generation.

Transports ■ We prefer less-economically sensitive toll roads. There has been a deterioration in traffic levels, but there is the potential for levels to bounce back quickly once travel restrictions are lifted.

■ Airports are facing challenging conditions, and unlike toll roads, traffic recovery may take some time. However, we are starting to see deep-value opportunities emerge in certain high-quality assets.

Communications ■ We favor U.S. towers, due to their strong counterparties and business models, which provide for a stable and growing cash flow base.

■ The sector was a rare beneficiary of global containment measures, as data needs have increased, given remote working, online learning, and streaming activities.

Energy Infrastructure

■ We acknowledge the challenges the industry is facing. We prefer large-capitalization companies with integrated asset footprints and well-capitalized balance sheets.

■ We believe that, in some cases, the market may have over-penalized certain companies, and certain opportunities may present themselves.

The FTSE Global Core Infrastructure 50/50 Index and the Dow Jones Brookfield Global Infrastructure Composite Index returned -21.25% and -24.45% for the quarter, respectively. Global infrastructure equities demonstrated defensive characteristics across the spectrum, with the exception of two sub-sectors: Energy Midstream and Transport Infrastructure, which returned -40.4% and -32.3%, respectively.ii


We favor a defensive position to enable capital preservation in this environment of extreme risk and volatility. We remain focused on stock-specific, high-conviction ideas, and favor exposure to companies with strong balance sheets and access to liquidity. That said, we are firmly keeping an eye on emerging opportunities, particularly across the airports space, as well as select companies within energy infrastructure.


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

We do expect some short-term cash flow disruption within certain parts of our universe, but it is important to remember that infrastructure assets are long-lived and should be valued with a long-term time horizon. We do not believe the long-term cash flow generation capacity of these assets has changed sufficiently enough to warrant current valuations. Each asset needs its own detailed analysis, but current valuations may provide attractive entry points for certain opportunities.

As of March 27, 2020. Source: Brookfield Public Securities Group. Sectors based on constituent companies of FTSE Global Core Infrastructure 50/50 Index.

E X H I B I T 4 : T H E M A J O R I T Y O F C U R R E N T I N F R A S T R U C T U R E M U LT I P L E S A R E H E A V I LY D I S C O U N T E D

EV/EBITDA P/E

25.0

20.0

15.0

10.0

5.0

0.0

Aver

age

Valu

e

Airports Oil & GasStorage/

Transportation

Ports Satellites Toll Roads Towers ElectricityTransmission& Distribution

Local GasDistribution

Rail Renewables/Electric

Generation

Water

CurrentValue10.3

CurrentValue9.0

CurrentValue8.3

CurrentValue5.5

CurrentValue7.2

CurrentValue23.4

CurrentValue14.1

CurrentValue16.0

CurrentValue13.5

CurrentValue10.3

CurrentValue18.6


The energy infrastructure sector has been challenged, as twin demand and supply shocks from COVID-19 and OPEC+ have created significant turbulence in the oil and gas markets. Energy infrastructure equities have also experienced significant technical selling pressure and generally sold off with broader energy. This has occurred despite energy infrastructure possessing relatively more defensive cash flow characteristics than other energy verticals, in our view. The Alerian Midstream Energy Index and the Alerian MLP Index returned -46.92% and -57.19%, respectively, for the quarter.

S U P P L Y S H O C K I N T H E F A C E O F D E M A N D U N C E R T A I N T Y

On Friday, March 6, OPEC and Russia met to discuss potential crude oil production cuts as demand continued to fall due to COVID-19 and related travel restrictions. The two sides were eventually unable to reach an agreement, as Russia refused to cut its production further and cede any additional market share to U.S. producers. The following day (Saturday, March 7), Saudi Arabia effectively started a price war by slashing crude prices for its customers and messaged that it would potentially add more than two million barrels per day of crude oil to an increasingly oversupplied market. As a result, crude oil prices collapsed and closed the quarter at $20.48 per barrel; having dropped over 50% since Saudi Arabia’s announcement.

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

It is important to remember that midstream companies typically generate fees for transporting, storing or processing hydrocarbon volumes. In some cases, companies are paid by demand or supply counterparties whether capacity is utilized or not. As a result, midstream cash flows tend to be more defensive when compared with other energy verticals when prices decline in a short period of time. Still, some midstream cash flow is at risk when assets lack firm commitments and volumes start to decline.

Unhedged producers, however, experience an immediate decline in revenues when commodity prices see a sharp pullback. These producers could find themselves at risk of bankruptcy if leverage increases and they lack access to capital. Importantly, we do not expect any material, long-term hydrocarbon demand destruction from COVID-19, and we believe there are opportunities for energy companies coming out of this down cycle.

Energy Infrastructure Equities


U P S T R E A M M I D S T R E A M D O W N S T R E A M

S U P P LYG AT H E R I N G &

P R O C E S S I N G , “ G & P ”

S T O R A G E L O N G - H A U L P I P E L I N E S D E M A N D

L E A D E R S

Gas producers in the Northeast or other gas basins could benefit from declines in associated gas production

Gas G&P in the Northeast or other gas basins, as producers could increase activity or benefit from better netbacks

Crude storage is expected to be a prime beneficiary, based on the steep contangoiii in the current futures curve

Natural gas and natural gas liquids (NGL) pipelines connected to producers in gas basins

L A G G A R D S

Producers that are highly levered, particularly those exposed to lower-tier crude oil basins

Gathering systems in crude oil basins could see volumes start to fall, impacting midstream cash flow to varying degrees

Crude oil pipelines with no contractual protections (i.e., minimum volume commitments) that are connected to supply centers

Refineries should see lower product sales due to travel restrictions

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

Producers have better balance sheets this down cycle, and production is generally more consolidated with larger producers

G&P systems see continued throughput, albeit with potential declines, and even fare well in bankruptcy

Demand-pull pipelines that are generally supported by reservation fees or minimum volume commitments

Refineries and export facilities likely see short-term impacts but may rebound once demand normalizes

E X H I B I T 5 : S H O R T - A N D L O N G E R - T E R M I M P A C T S V A R Y A C R O S S T H E E N E R G Y V A L U E C H A I N

Source: Brookfield Public Securities Group.


The speed at which credit spreads widened across the board (both investment grade and high yield) in February and March was swift and severe. We witnessed some compression toward the end of March in response to the fiscal- and monetary-policy measures announced to stave off the economic slowdown. However, we are not at the widest levels on record (which occurred during the Global Financial Crisis). There is a risk that spreads move wider from current levels, and we remain focused on downside mitigation in our real asset debt portfolios.

Real asset debt’s moderate underperformance to broader credit was largely attributed to the energy sector, which, as previously noted, was hit with both demand (COVID-19) and supply (OPEC+) shocks during the quarter. Transportation and gaming/leisure bonds also weighed on real asset corporate debt. Conversely, utilities, cable and telecom bonds posted relative outperformance.

The U.S. Federal Reserve announced during the quarter that it would begin purchasing investment-grade corporate bonds in an effort to boost liquidity. The move worked, as an all-time monthly record was set in March for investment-grade issuance.iv During the Global Financial Crisis, companies did not have ample access to capital, and therefore we view the Fed's move as being very positive in terms of navigating the current crisis.

Looking ahead, we do not envision a straight-line recovery by any means, and we anticipate a wave of high-yield bankruptcies and restructurings. While we underwrite every investment with a focus on downside risk, we currently have a heightened focus on stress testing and recovery values, as well as near-term liquidity and maturity schedules. Our goal is to ensure our investments have the ability to make it through a potentially deep recession without having to access capital markets.

We are currently spending a lot of our time reviewing dislocated opportunities within the investment-grade universe. We are also finding some attractive valuations in higher-quality (BB-rated) non-investment-grade issuers. Below we outline our views across the real asset debt universe.


Real Asset Debt


CURRENTGEOGRAPHY/SECTOR SELECTED VIEWS

I N F R A S T R U C T U R E

Utilities ■ We maintain our view that the regulated business models of the electric utilities offer what we believe are the most dependable earnings and cash flows, along with strong balance sheets.

Telecom ■ We prefer higher-quality cable operators, data centers and companies with long-haul fiber capacity, as these companies have short- to medium-term fundamental tailwinds.

R E A L E S TAT E

Homebuilders ■ Fundamentals are positive over the medium to long term. In general, these companies have the ability to adjust their cost structures in the near term.

Healthcare ■ We maintain exposure to high-quality companies where we are invested in the top of the capital structure.

N AT U R A L R E S O U R C E S

Energy ■ The supply and demand shocks the sector faced in the first quarter exacerbate existing headwinds facing the industry. We anticipate further stress on volumes and cash flow generation.

Metals & Mining

■ We maintain select exposure to gold mining companies, given the commodity’s favorable supply and demand profile.


Exhibit 1 equity indexes represented by the MSCI World Index for Global Equities, the FTSE Global Infrastructure 50/50 Index for Global Infrastructure Equities, the FTSE EPRA Nareit Developed Index for global Real Estate Equities and the Alerian Midstream Energy Index for Energy Infrastructure securities. Exhibit 1 fixed income indexes represented by the ICE BofA Global Corporate Index for Investment Grade Debt, the ICE BofA Preferred Stock REITs 7% Constrained Index for REIT preferred securities, the ICE BofA Global High Yield Index for High Yield securities, and the ICE BofA USD Real Asset Corporate & High Yield Custom Index for real asset debt.

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, make no warranties regarding same, do not guarantee the suitability, quality, accuracy, timeliness and/ or completeness of their index or any data included in, related to, or derived therefrom, and assume 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 of 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.

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 the leading gauge of energy infrastructure Master Limited Partnerships (MLPs). 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 (AMZ) and on a total-return basis (AMZX).

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 Composite Index comprises infrastructure companies with at least 70% of its annual cash flows derived from owning and operating infrastructure assets, including Master Limited Partnerships (MLPs). Brookfield has no direct role in the day-to-day management of any Brookfield co-branded indexes.

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 Real Estate Index is an unmanaged market-capitalization-weighted total-return index, which consists of publicly traded equity REITs and listed property companies from developed markets.

The ICE BofA Global Corporate Index is an unmanaged, commonly accepted measure of the performance of global investment grade corporate securities. Index returns are calculated monthly, assume reinvestment of dividends. The index does not reflect any fees, expenses or sales charges. It is not possible to invest directly in an index.

The ICE BofA Global High Yield Index is an unmanaged, commonly accepted measure of the performance of global high yield corporate securities. Index returns are calculated monthly, assume reinvestment of dividends. The index does not reflect any fees, expenses or sales charges. It is not possible to invest directly in an index.


The ICE BofA Preferred Stock REITs 7% Constrained Index is a subset of the BofA Fixed-Rate Preferred Securities Index including all real estate investment trust-issued preferred securities. The ICE BofA Fixed-Rate Preferred Securities Index tracks the performance of fixed-rate U.S. dollar-denominated preferred securities issued in the U.S. domestic market.

ICE BofA Real Asset High Yield Custom Index is a custom index that tracks the performance of sectors of ICE BofA Global High Yield Index that correspond to equity sectors in Brookfield's real asset universe. Such real-asset-related sectors include Cable, Infrastructure Services, Oil Gas T&D, Telecommunications, Transportation, Utilities, Agriculture, Timber, Basic Materials, Energy Exploration & Production, Metals & Mining, Real Estate, RE Ownership & Development and REITs. ICE BofA Global High Yield Index tracks the performance of below-investment-grade corporate debt publicly issued in major domestic or eurobond markets.

ICE BofA Real Asset High Yield and Corporate Custom Index is a custom index blend of sectors of ICE BofA Global High Yield Index (70%) and ICE BofA Global Corporate Index (30%) that correspond to equity sectors in Brookfield's real asset universe. Such real-asset-related sectors include Cable, Infrastructure Services, Oil Gas T&D, Telecommunications, Transportation, Utilities, Agriculture, Timber, Basic Materials, Energy Exploration & Production, Metals & Mining, Real Estate, RE Ownership & Development and REITs. ICE BofA Global High Yield Index tracks the performance of below-investment-grade corporate debt publicly issued in major domestic or eurobond markets. ICE BofA Global Corporate Index tracks the performance of investment-grade corporate debt publicly issued in major domestic and eurobond markets.

ICE BofA USD Real Asset High Yield and Corporate Custom Index is a custom index blend of sectors of ICE BofA U.S. High Yield Index (70%) and ICE BofA U.S. Corporate Index (30%) that correspond to equity sectors in Brookfield's real asset universe. Such real-asset-related sectors include Cable, Infrastructure Services, Oil Gas T&D, Telecommunications, Transportation, Utilities, Agriculture, Timber, Basic Materials, Energy Exploration & Production, Metals & Mining, Real Estate, RE Ownership & Development and REITs.

ICE BofA U.S. Corporate Index tracks the performance of U.S.-dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market.

ICE BofA U.S. High Yield Index tracks the performance of U.S. dollar-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market.

The MSCI U.S. REIT Index is a free-float market-capitalization-weighted index that is composed of equity REIT 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 Based on constituent companies of the FTSE Global Core Infrastructure

50/50 Index.iii Contango is a situation where the futures price of a commodity is higher

than the spot price.iv https://www.marketwatch.com/story/investment-grade-us-companies-

storm-gates-to-borrow-with-fed-at-their-back-2020-04-01

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


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