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Bruce Flatt was the CEO for the company’s last 20 years. Brookfield Asset ManagementThe company grew rapidly to become the 2nd-largest alternative business in the world. His portfolio includes real estate, private equity and infrastructure. Credit, insurance, and energy transition. He has more than $725 million in assets. 

Flatt offers his wide-ranging perspective during an exclusive interview for CNBC’s Delivering Alpha newsletter. Flatt discusses why he isn’t too worried about the economic headwinds today. 

 This video was edited to be more concise and clear. For the full video, please refer to above.

Leslie Picker: I want to kick things off with kind of a bird’s eye view, because you do have such a unique vantage point in the economy right now. Given all the factors that led to the sell-off of public markets – inflation and higher interest rates as well as concerns over geopolitics in China and Russia, what has been your view on the effects?

Bruce Flatt Long-term wealth creation is about investing in great businesses with great people and compounding over the long term. In spite of all the turmoil, wars and recessions that have occurred over the years, our investment in excellent businesses has continued, with great returns. Therefore, I would just like to say that everyone should just stay invested and not be too concerned about market fluctuations every day. Just keep doing what they are good at. This is the key to investing success.

Picker: Given what you’re seeing in terms of the deal market. In real estate and the like — there are concerns about a recession, there are questions about whether we’ve reached the bottom — do you see any indications that either of those are on the horizon?

Flatt: Good news: Corporate balance sheets are strong. Individual balance sheets are strong. A recession is a mild one. We must get inflation around the world down. There’s no question about that. Either it will come down over time or central banks will cause it to fall. These two scenarios may look different but will both be successful. As we have always done, we will make it through this. We will get through it all. We believe inflation has a very positive impact on real assets. These are the real return items that we invest in, they produce cash, which is a positive for our type of assets.

Picker: What is the secret to this? Is inflation so beneficial when debt prices are going up?

Flatt: Real assets require that you invest a large amount of capital upfront. You have relatively low expenses compared to this and you make a lot of money. Inflation impacts all assets, but only the expenses. The inflation impacting the revenues will cause the revenues to increase over time. Fixed rate leverage is a good option. However, the debt can rise slightly if it’s not fixed. Many people today own fixed rate leverage. If they had been doing the right thing, their leverage would have stabilized at historic lows for many years. We should take a moment to remember that all these assets are able to work at very low rates of interest. This is the best prediction for future rates. We’re not going to have as low as they were, but we’re going to have low-ish rates, whether it’s 3% on the Treasury, 4% on the Treasury,  5% on the Treasury, these assets that we own do really, really well.

Leslie Picker: Is five-ish scary to you?

Flatt:  No, no. It’s unlikely that we will get there. However, it is possible.

Picker: You recently announced a pretty well-telegraphed plan to spin off the 25% stake in your asset management business. What do you hope to accomplish with this transaction?

Flatt: Although they work in tandem, the two components of our business are quite distinct. Our business has $75 billion capital that we’ve kept in it for over 30 years. We’re unique because most people haven’t managed to do that. Then we also have an asset management company, which is quite different. Both of them work together well, but they are just two different things. Therefore, 25% of the business will be transferred to shareholders. We are simply dividing the shares of each shareholder into their main security, and they will now own 25%. Security owners can choose to leave the company or stay at the top. However, if someone only wants access to the asset manger they can purchase that one. It will be beneficial for shareholders. However, industrially, this security can only be used in one industry. So, we could do M&A or other things with that security. 

Picker: Reading between the tea leaves there it sounds like you may use that as a currency for potential further asset management M&A. Oaktree was an asset management company that you bought recently.

Flatt: Bruce Karsh, Howard Marks, and Bruce Karsh have the greatest credit investing skills. Oaktree was not bought by us, we partnered with them. The public was then bought out by us. Their 35% ownership remained and we are thrilled to continue being partners with them. We paid cash part and shares of the parent business to make that happen. We have never issued shares to our parent company in the past and don’t intend to. If ever we want to buy something again like this, we could have a security exactly the same as the one we currently own.

Picker: Recently, you have raised $15 billion to support your energy transition funds. Is this your ultimate goal? How does this strategy fit in with the current climate? 

Flatt: We’ve been in the renewables business, starting with owning hydro plants from 30-40 years ago. Today, we are the biggest in solar, wind and hydro. We continue to grow that business. This is the foundation of our fund for energy transition. In addition, we provide capital or purchase businesses with carbon content. For example, we might buy a company that produces electricity from coal, but it will be our task to reduce the carbon footprint over the next 10 year. It’s not enough to say that we will eliminate carbon-intensive companies. Someone has to put in the work. Our job is to help businesses transition to the future by utilizing the capital and operating personnel we have. It’s impossible for us all to be there, and not all of it must be from renewables. We need to assist people in transferring their balances. 

Picker: Recently, there has been a prominent, proposed transaction out your growth funds. The largest check I understand from your venture fund is to work alongside Elon Musk in his takeover Twitter. This deal will see you contribute about $250m of equity. Why was this transaction so attractive? Why participate in the Twitter takeover

Flatt: Our goal is to grow our business. The importance of technology has been a constant. Technology is becoming increasingly important in the world of investment. It was not something we could see in many cases. Valuations are becoming more affordable. Because valuations are now real, it will be even more critical in all our businesses in the future. This is the specific case you’re referring to. I’m not going to comment on it, but it’s been a long and fruitful relationship. We’ve made many investments in Tesla and Elon, so it’s just natural that it happened.

Picker: What do you think are his motivations surrounding the deal and what are you hoping to achieve from it? It’s all noise and hairiness. 

Flatt: It’s not something I will comment on from here. He is our friend and we support him. But, look at it, our growth team considers it a profitable business.

Picker: Brookfield has been your CEO for over 20 years. You are a significant return for shareholders. I did some calculations earlier, looks like about 10 times that of the S&P on a compounding basis going back to 2002, when you took over as CEO. Is there anything you can attribute this success to? Do you believe that the past returns can be used to predict future ones?

Flatt: Returns are dependent on what you invest in and how you stay with it. This is where I would take my luck. It was a lucky break, and we ended up in the alternative business. This is an amazing business. The interest rates dropped a lot. We were able to create a business with the help of these relationships and build money in international funds and wealth funds all over the globe. That’s it. The next step is execution. There have been many little errors, but few big ones. Execution has also been very good. We stuck with it. A lot of our success comes from just keeping going. We’ve enjoyed a very successful run. For the future I see there’s still lots of runway. We’re optimistic about it.