Brookfield Is Quietly Building a Private Credit Powerhouse. Should Investors Take Notice?

Private credit investments have been a major growth driver for alternative asset managers over the past several years. With industry credit needs growing and banks pulling back on lending due to increased regulations and capital requirements, alternative capital providers have stepped in to bridge the lending gap. That includes Brookfield Corporation (NYSE: BN), which has quietly built a leading private credit platform.

Here's why investors won't want to miss what this alternative investments company is building in private credit.

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Private credit isn't the problem

There have been many headlines over the past year claiming that the once-booming private credit market is about to go bust due to a string of high-profile bankruptcies and concerns that more defaults are coming from loans made to software companies at high risk of AI disruption. However, Brookfield's CEO Bruce Flatt made some important points about private credit in his first-quarter letter to shareholders.

First, he noted that, "at its core, private credit is simply credit -- providing senior capital to asset owners and businesses, in return for a prioritized fixed return." He stated that while the structures might differ slightly, "the underlying principles of underwriting, collateral, and discipline remain unchanged." Brookfield built its approach to private credit around "disciplined underwriting, a focus on downside protection, and a consistent emphasis on risk-adjusted returns across cycles." It invests where it has competitive advantages, including real asset credit across infrastructure, energy, and real estate, as well as asset-backed lending. As a result, it has no material exposure to software.

Building a private credit platform by partnering with the best managers

Brookfield has largely built its private credit platform through its partnership with Oaktree. The global investment firm began that partnership in 2019 when it purchased a 62% stake in Oaktree. In commenting on the initial partnership, Flatt stated at the time that it would help broaden Brookfield's "product offering to include one of the finest credit platforms in the world." The partnership has been a tremendous success, enabling Brookfield to broaden its credit franchise over the years. The company purchased the remaining stake in Oakfield last year as it continues to grow its credit business.

The company has since invested in several asset-based private credit platforms, including a 51% stake in aviation and specialty finance platform Castlelake and a majority interest in residential mortgage credit provider Angel Oak. Brookfield's partnership strategy has enabled it to build a diversified private credit platform with $250 billion in assets under management and $1.5 billion in annual fee-based income. The company aims to grow its credit assets to $640 billion by 2030 to drive strong fee-based income growth.

This high-quality platform is on sale

Brookfield has taken a disciplined approach to building its private credit platform. It has partnered with industry leaders that practice disciplined underwriting focused on downside protection. As a result, its platform should continue to deliver growing earnings as its loans perform and credit assets under managment grows. Despite that, its shares have fallen more than 10% from their 52-week high as investors have lumped Brookfield in with other private credit companies. That sell-off looks like a great buying opportunity for this high-quality financial stock.

Matt DiLallo has positions in Brookfield Corporation and has the following options: short July 2026 $40 puts on Brookfield Corporation. The Motley Fool has positions in and recommends Brookfield Corporation. The Motley Fool has a disclosure policy.