First published in early 2023, Verso Books just released a new paperback version of Our Lives in Their Portfolios: Why Asset Managers Own the World, geographer Brett Christophers’ exhaustive account of what he describes as our growing “asset-manager society.”
In it, he reveals how massive multinational investment firms like Blackrock, Macquarie, and Allianz have rapidly expanded into “alternative” assets like housing and infrastructure, expanding their scope well beyond traditional financial products like stocks and bonds. This means that many people now live in homes and rely on infrastructure like toll roads, hospitals, gas pipelines, data centres, water and sanitation services, telecom towers, and electricity generation facilities that are ultimately owned by pension funds, insurance companies, and banks through highly complex asset management schemes.
Canadian Dimension spoke with Christophers about the influence of these new financial masters and their ownership of the “basic building blocks of everyday life,” with particular focus on the enormous Toronto-based asset manager Brookfield, which boasts almost $1 trillion in managed assets and operates in more than 30 countries across five continents. CD also spoke to him about the “Canadian model” of pension funds, in which investment management organizations like the Canada Pension Plan and the Ontario Teachers’ Pension Plan directly invest in housing and infrastructure, largely circumventing global asset managers. Finally, Christophers explains who actually benefits from this system, and presents a few proposals about fighting back.
Brett Christophers is professor of human geography in the Institute for Housing and Urban Research at Uppsala University in Sweden. He is also the author of The New Enclosure, Rentier Capitalism, and The Price is Wrong, all published by Verso Books.
Canadian Dimension (CD): With the possible exception of Blackrock, it’s likely that many people have never heard of some of the largest asset managers, let alone understand the full scale of their activities. What is it about asset managers and “asset-manager society” that has allowed for such discretion and invisibility, and presents challenges in terms of analyzing what they do?
Brett Christophers (BC): Most of us live our lives now using—or even in some cases living in—assets that are owned by asset managers. But 99 percent of the time, we have absolutely no idea that that’s who actually owns the assets. And there’s an obvious reason for that.
Sometimes, we use those infrastructures without any connection to any kind of control or custodian of those assets. A good example of that would be when people who live in Chicago park at a parking metre: unless they get a fine they never have any engagement with any kind of company that is involved in the ownership and maintenance of that asset.
But even where people do have some engagement with a company in relation to the use of that asset—for example, if you’re a tenant of a home that is owned by an asset manager—it will almost never be the asset manager itself that you engage with. It’s a company to whom they contract out that menial activity. The world’s biggest asset manager in terms of ownership of infrastructure, Australia’s Macquarie, says that every day something like a hundred million people around the world use its infrastructures and in most cases are paying to use those infrastructures. But practically none of them will have any idea that Macquarie controls those assets. And it’s designed that way.
But even if you know that Macquarie or Brookfield might be the owner of these assets, it will typically be extremely difficult to find out much about that arrangement. And the reason for that is that there’s ordinarily a rather kind of labyrinthine set of corporate arrangements through which those assets are held. So typically, if you look for some company accounts, there’ll be a local company that is the holding company for those assets and there’ll be a further set of holding companies that hold that holding company. And if you trace your way back through that ownership chain, you would eventually get to an investment fund. And it’s that investment fund that is essentially the ultimate holding company for the asset. And all that investment fund is, as the name suggests, is a collective investment vehicle that is managed by the asset manager and which manages the money of typically a large number of those who are the ultimate owners.
If, for example, a Macquarie infrastructure fund is the owner of an asset, that fund will be managing the money of multiple end investors who have effectively advanced the money to Macquarie to manage on their behalf. And it’s their money that’s being invested. That will typically be the likes of pension funds, sovereign wealth funds, insurance companies, banks. It might include a few high-net-worth individuals, but typically it’s institutional investors that put their money into these investment funds. Now, the thing with these investment funds is these are private investment vehicles which, insofar as they are private, typically have very limited disclosure requirements—and which are even more limited by virtue of the fact that they are normally domiciled in jurisdictions which offer a degree of protection from financial scrutiny.
So most of these private investment funds that are managed by asset managers and invest in things like infrastructure and housing are domiciled in places like Delaware, or the Cayman Islands, or Jersey, or Luxembourg. And what all of those jurisdictions share is a very light kind of regulatory burden, very limited disclosures and, finally, very favourable tax arrangements. And so what that means is that if you’re trying to figure out what those investment funds own, and how they own them, you’re typically going to struggle to do that, simply because they don’t have to tell you very much.
CD: You describe asset-manager society as “a society in which asset managers increasingly own and control our most essential physical systems and frameworks, providing the most basic means of social functioning and reproduction.” Key to this process, you argue, is investments in “alternative” spheres like housing and infrastructure, rather than strictly financial assets. And of all asset managers that exist, you argue that Brookfield epitomizes this relatively new asset-manager society. What is it about it that has allowed it to become what you term the “real-asset asset manager par excellence”?
BC: The book is about the growing control by asset managers, like Brookfield, of what I point to as two main types of assets. I distinguish between, on the one hand, various forms of housing, which includes single-family housing, multi-family housing, care homes, student housing, even mobile home communities, and on the other, different types of infrastructure assets linked to energy and transportation like bridges, roads, toll roads, parking metre systems, and telecommunications infrastructure. This also includes various social infrastructures like hospitals and schools.
Since the 1990s, asset managers have become, very rapidly, significant owners and controllers of these types of assets in a way that prior to the 1990s they typically were not. And the reason why I describe Brookfield in those terms is that of all the different asset managers that are big players in this area, Brookfield is probably the one that has a high profile both on the housing side and the infrastructure side. So there are lots of asset managers out there that are major owners of housing but not of those various types of infrastructure.
Blackstone is probably the best example of that. It’s tried to develop an increasing presence in infrastructure, and it’s getting bigger all the time, but it’s still not particularly well-known in that area. And as I mentioned, Macquarie is the biggest on the infrastructure side, at least for now, but has a relatively limited presence on the housing side. Whereas Brookfield is in the top bracket for both sides. So that’s why I spend a lot of a lot of time talking about Brookfield: not necessarily because I think it does things particularly differently in the asset management space. It’s just if you want to find a company that is a big guy on both of these sides, then Brookfield will be it.
CD: What is the difference between open-ended and closed-end funds, and how do they influence investment decisions?
BC: To simplify a very complicated picture, investment funds can either be open-ended funds—which means different things to different people but in the way I’m using it it means that there is no fixed lifespan to that fund, and in theory that fund can exist and operate in perpetuity. But on the other hand, there are other funds, which I refer to as closed-end funds, which do have a fixed lifespan. That means a couple of important things. Firstly, it means that when investors put money into those funds, they know that the fund has a fixed life. It can sometimes be extended by a year or two. But typically in the case of a real estate or infrastructure fund it will be something like 10 to 12 years. And when investors commit money to those funds, they do so on the understanding that they will get that money back at the end of that 10 or 12 years, hopefully with a nice healthy profit. The investor knows that they’re getting their money back, and the asset manager—more importantly still—knows that they have to return the money within that time frame.
And so what that typically means is that if an asset manager spends the first two to three years of that fund’s lifespan focused predominantly on spending the money—buying assets, investing in assets—they spend the rest of the time trying to sell them because they know that they have to have sold those assets by the time that the fund is wound up. And that’s why on average the period of ownership of both housing and infrastructure by these funds will be anywhere between three and eight years. Knowing that you have to sell that asset at a big profit—that you are going to be able to deliver the types of returns you’ve promised to the investors—has all sorts of really important implications for how you treat that asset and the people who live in it or use it while it’s in your hands.
It’s a private equity model, imported into the real estate and infrastructure space. Something like 90 percent of these investments go through those closed-end funds. So that’s the majority model. It means that the asset has to be sold: that the selling is just as important as the buying. So they’re not in it for the long term.
CD: You have a more recent book as well, The Price is Wrong, so I wanted to ask about the sizable role of asset managers in the climate infrastructure and low-carbon transition space. What is it about this sector that has made it so appealing to firms like Brookfield?
BC: Beginning in the 2000s and then accelerating very rapidly in the 2010s, Brookfield did become and remains a major owner of renewable energy assets, in particular solar and wind farms. Within that space of asset manager ownership of renewable energy generating assets, Brookfield is the world’s largest.
There were a number of reasons why that became such an attractive area for investment. Partly, it’s about optics: it’s good to be seen to be investing in green. I don’t think we should underestimate the importance of that. But clearly, at the end of the day, these are calculating investors and they certainly wouldn’t be investing in them only for the optics. Particularly in the 2010s, you had a confluence of factors that made these very attractive assets. On the one hand, you had a very low interest rate environment in the wake of the financial crisis where the types of assets that big asset managers had historically been relying upon in order to deliver regular and reliable annual income to their investor clients—which would have been bonds, fixed income securities—were no longer paying yields of five, six, seven percent. They were paying much lower yields than that because of the low interest rate environment. And so what that meant was that for those clients who were seeking that regular annual income, that annual yield, of which pension funds are a very important example, the big asset managers had to look elsewhere.
Renewable energy assets were often very attractive assets in that regard, because the vast majority of them tend to be supported by government mechanisms like feed-in tariffs that provide for long-term price and revenue stability. A feed-in tariff that a government will offer to a new wind or solar farm will often say that the developer of that asset will be eligible to receive a fixed price for their electricity for, say, 12 or 15 years. That kind of predictability and reliability was very attractive for asset managers in order to be able to offer their clients that regular annual yield of five six, or even seven percent, when other opportunities to deliver that yield were not necessarily available. Now, those assets wouldn’t necessarily deliver attractive capital gains; the value of those assets might not inflate rapidly. But they could look for that type of kind of huge capital gains elsewhere. For a certain subset of clients, these were very attractive things to invest in, particularly during that period.
I think it’s cooled off. The situation has changed, particularly since 2021-22 as you had inflation coming up and interest rates rose. Then these types of assets became, in relative terms, substantially less attractive to asset managers. And what you found is that in 2023, for example, asset manager investment in infrastructure in general and renewable infrastructure in particular fell off a cliff. But it was due to the new operating environment.
Organizers gather in front of the BlackRock headquarters in New York City to demand the asset holder cancel $220 million of Zambia’s debt. (Photo: Wyatt Souers)
CD: Another important facet of alternative investments is pension funds, of which Canada plays an interesting and sizable role. You note that these pension funds represent a somewhat unique approach of direct investment in infrastructure that has become known as the “Canadian model.” You write that this means that they exist “independently of asset-manager society.” What’s the relationship of this “Canadian model” of pension fund activities to asset managers? Has this model picked up in other places?
BC: It’s a super interesting area. There are a handful of very very large public pension funds in Canada, like the Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan, and Ontario Municipal Employees Retirement System. Beginning in the 1990s, when other pension funds around the world began to increase their allocations of capital to the infrastructure asset class—and did so specifically by routing that investment via asset managers and their dedicated infrastructure funds—the Canadian pension funds pursued a notably different model: instead of giving their money to asset managers to invest on their behalf and paying them fees for doing that, they cut out the intermediary and carried out that investment in infrastructure themselves. And they continue to do that predominantly today. They remain quite distinctive in that regard.
There are a few interesting things I would say about that model. The first is the question of why they did that and I think there are a number of different reasons for it. One of them was that they thought, and I think they continue to think, that there was this kind of incongruity in asset managers’ models. Pension funds, when they invest in infrastructure, they typically think of it as a long-term investment. And yet, as we said earlier, the investment funds that asset managers are putting on the table to invest in infrastructure were typically closed-end funds that by their very nature are short or at most medium-term. So the Canadian pension fund managers said, “Well, that doesn’t really make sense.” I think there were other reasons as well, but that was clearly part of it.
The second thing to say would be that the model, as far as I can tell, has not been replicated to any significant level elsewhere in the world. However, there are definitely places where there has been—particularly in recent years—growing talk of trying to replicate the “Canadian model,” precisely because of a certain level of recognition of the kind of flaws in the asset manager approach. The best example of that is the new Labour government in the United Kingdom. It has recently come out and said that this is something that UK-based pension funds should be looking at doing. However, they’ve also recognized that there are certain structural reasons why that hasn’t happened historically, the main one being that public pension funds in the UK are on average much, much smaller. They don’t exist on that kind of large consolidated basis. For example, if you are a local municipality in the UK, you will have your own pension fund. So they’re not consolidated regionally or nationally. Moreover, they simply don’t have the critical mass, organizationally or financially, necessary to follow the Canadian model, where you have to be a big player to be able to do this yourself. You need the scale to do it. So the Labour government recognizes that certain structural arrangements would have to be pretty fundamentally overhauled in order to enable that model to be possible in the UK. And I think there are other parts of the world where similar structural impediments exist.
CD: When it comes to pensions, one can conceivably imagine that it’s teachers, nurses and public sector employees who are benefiting from the system, since it’s about their ability to retire and live comfortably. In the book, you push back on this notion that the benefits are really that equitable or that it really is in the interests of workers. Who really benefits from this system on the whole?
BC: The simplest thing I can say there is that the asset management industry, including as it pertains to investment in real assets—in housing and infrastructure, but not only in that respect—is fundamentally a creature of a deeply iniquitous capitalist financial system. And it’s anything but a vehicle for leveling out those inequalities. On the contrary, it’s a vehicle for entrenching and deepening them.
When they’re trying to improve the reputation of their businesses, the big asset managers absolutely draw on that idea that they are benefiting ordinary pensioners by investing their money and making profits. There’s two key things that argue against that. The first of those is simply that in the case where the money is being invested via asset managers, the asset managers themselves always take their pound of flesh. So if investments are successful, they extract a substantial share of those profits through their performance fees. In the case where investments are unsuccessful—which is to say they lose money—the asset manager still does fine, because they have their annual guaranteed management fees, which kind of mitigate any significant risk for them. So they do fine, even if their investments bomb. And they do a heck of a lot more than fine when their investments do well. But the model is structured so that they take more than a fair share.
The second thing to say is that if we focus on the external investors’ money that is being invested: yes, typically some of that is the retirement savings of ordinary workers like the nurses, the firefighters, the teachers, and so on. But the reality is that that’s only a tiny, tiny sliver. For one thing, most of the retirement savings money that is being invested through these funds is the retirement savings of wealthy people, for the simple reason that retirement savings wealth is unequally distributed in society, like all forms of financial wealth. The second thing is that it’s not only retirement savings and pension fund capital that is being invested by these funds. It’s also sovereign wealth funds and insurance companies. It’s the money of investment banks and so on. Pension fund wealth only represents part of it, and then only a tiny share of that represents the retirement savings of ordinary workers. To pick on the retirement savings of ordinary workers and say, “well that’s who we’re making money for,” is fundamentally disingenuous.
CD: In terms of speaking to people who are concerned about this in their own neighbourhoods, communities, cities: are there pieces of advice or opportunities for leverage or pushback you think are worth flagging? How can we fight back against this asset-manager society?
BC: To start on a kind of negative note: this is something that is now a very entrenched phenomenon within contemporary capitalism. It’s entrenched not only because these entities already own so much housing and infrastructure. More important than that, it’s entrenched because governments have essentially outsourced investment in housing and infrastructure to the private sector. Under contemporary fiscal orthodoxy, they’ve come to the view that major investment in public housing and public infrastructure is not something that governments are any longer able to do in the way that they did in, say, the 1930s through to the 1970s. So they basically say,
Look, we don’t have the money. The private sector has to do this.
And insofar as the private sector has to do it, by default it’s asset managers that have to do it or that we are expecting to do it simply because the bulk of surplus private capital today is held and managed by asset managers. If you’re saying the private sector has to do it, then you’re almost by implication saying asset managers have to do it. So while that kind of fiscal orthodoxy remains, it seems to me that it’s very difficult to expect different outcomes. So it was notable that when the new Labour government in the UK came to power a couple of months ago, that Chancellor Rachel Reeves was already talking about the role of the Blackrocks and the Blackstones and so on in terms of funding infrastructure in the UK. That’s the reality today in both the Global North and the Global South.
But the positive way to think about it is if people think, as I do, that this is not really a very good thing, then the thing to think about is where are the potential points of vulnerability for asset managers? And in general terms there are two points of vulnerability. Asset managers need two things to be able to do their business. They need money to invest. So if the pension funds and the sovereign wealth funds and the insurance companies no longer give them money to invest, then their business does not exist. And as well as needing money to invest, they need things to invest in. They can’t invest in housing and energy infrastructure and transportation infrastructure unless they are allowed to do that. And so in terms of general points of vulnerability, those are the two points of vulnerability.
So what can people do? Well, if they have retirement savings, they can say to their pension fund trustee: “Yes, we want you to make a profit for us. We want our retirement savings to grow. But we don’t want them to grow if that means you are investing that money via asset managers, for example in real estate funds that are making money by ratcheting up rents on low-income tenants.” So that’s one thing to think about—if it’s ultimately your money that’s being invested, then talk to those who are investing it about how they’re investing it. Are they using asset managers? What types of asset managers’ funds are they using? What types of vehicles is that money being invested in?
The second thing to say on the other point of vulnerability is that, ultimately, asset managers can only buy housing and infrastructure if governments allow them to do that. There’s nothing to stop people lobbying politicians and saying, “Look, we don’t think Blackstone or Blackrock should be allowed to buy apartment blocks, wind farms, or toll roads.” The politicians might not listen. But in certain parts of the world—like in Copenhagen—politicians have listened and have taken steps, albeit relatively modest ones, to try to stem the flow of investment from asset managers into the types of critical assets that are so important to people’s everyday lives.
This interview has been edited for clarity and length.
James Wilt is a Winnipeg-based PhD candidate and freelance writer. His latest book is Dogged and Destructive: Essays on the Winnipeg Police.