Brookfield's Rally Makes a Billionaire of Bean-Counter Cockwell

(Bloomberg) -- Jack Cockwell’s persona as a swashbuckling accountant still resonates at Brookfield Asset Management Inc., a globe-spanning asset manager that he helped set in motion a half-century ago.

“Jack was very, very tough,” said Ira Gluskin, a money manager who first met Cockwell in the 1970s. “Here was this South African accountant who suddenly started taking control of some of Canada’s biggest resource companies. The Canadian establishment didn’t take kindly to this.”

Now, at 76, Cockwell is a member of the Canadian Business Hall of Fame and very much part of the establishment he once bucked. He’s also one of Canada’s newest billionaires, as a 26 percent surge in Brookfield shares this year has left him with a $1.1 billion fortune, according to the Bloomberg Billionaires Index. Cockwell declined to comment.

Brookfield's Rally Makes a Billionaire of Bean-Counter Cockwell

Brookfield manages more than $250 billion worth of property, infrastructure, renewable power assets and private equity. Its holdings include London’s Canary Wharf office development, Brazilian toll roads and more than 200 hydroelectric facilities.

Cockwell joined the Toronto-based firm in 1969 as a financial adviser to brothers Peter and Edward Bronfman, once dubbed the “poor cousins” for having reportedly inherited just $25 million in stock from the family’s Seagram’s spirits fortune. He quickly set out to build the company, then known as Edper Investments, and began a series of bare-knuckled takeovers of Canadian real estate, resource and financial companies.

Cockwell’s DNA

He had some dust-ups along the way.

“They should keep that guy in the back, back, back room,” Don Blenkarn, a member of Parliament, said during an abrasive appearance by Cockwell before a government finance committee in 1986, the Globe and Mail reported in a subsequent profile of Cockwell.

He attracted similarly hard-charging, workaholic accountants and together they created a company that’s a bean counter’s dream. Today, it includes dozens of interlocking public partnerships and privately held investment funds. Even though Cockwell long ago turned to younger executives to run the firm -- including hand-picked successor and fellow Brookfield billionaire Bruce Flatt as chief executive officer -- it retains Cockwell’s DNA.

One affiliate, Partners Limited, effectively controls about 20 percent of Brookfield’s publicly traded Class A shares and all of its Class B shares, which allows it to appoint half of the public company’s board. The affiliate is controlled by Cockwell, Flatt and about three dozen others.

Voting Rights

Brookfield has attracted its share of skeptics. Institutional Shareholder Services Inc. ranks it among the riskiest 10 percent of public companies, primarily over how its voting rights are structured. Accountability Research Corp.’s Mark Rosen faults Brookfield for its practice of valuing assets based on internal assessments rather than turning to outside experts.

“What you normally see is a company going out and getting third-party input,” said Rosen, the director of research at the independent investment research firm in Toronto. “Brookfield values their own assets with very little external input.”

As a Canadian firm, Brookfield reports its financial performance according to International Financial Reporting Standards, or IFRS, which allow companies to use fair-value accounting for many assets. Such valuations are based primarily on management calculations, as Brookfield affiliates disclose in their financial filings and investor presentations.

Brookfield says that its management is in the best position to value these assets and uses external valuations as part of its analyses, which have been corroborated by the marketplace over the years. "Of more than 400 assets Brookfield has sold in the last five years, over 95 percent were sold at, or above, fair value,” spokeswoman Suzanne Fleming said in an email.

Low Profile

The firm hasn’t run afoul of regulators or its auditors, and proxy advisory ISS gives it the highest score for audit and risk oversight. Nor has it spooked investors. Seven analysts retain buy ratings on the shares, while two recommend holding, according to data compiled by Bloomberg. The company closed $30 billion of private funds last year, according to a February press release.

Cockwell himself has kept a lower profile since Canada’s recession in the 1990s, which almost sank the firm. He spent years unwinding positions and selling prized assets.

In 2001, he married Lynda Bronfman, the third wife of his former boss, Peter Bronfman. By then the parent company had been renamed Brascan. Flatt took over as CEO a year later, and in 2005 it became known as Brookfield. He’s since transformed the operation, bringing in about $100 billion in third-party capital and concentrating holdings into property, power and infrastructure.

Cockwell, who remains a Brookfield director, has put his fortune to work in retirement, making a series of multimillion-dollar donations to Toronto’s Ryerson University where he’s also a governor.

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