An important financial backer of billionaire Josh Harris’s new asset management venture has received a rare public rebuke from Brookfield Asset Management, which complained that AEL, a life insurance company, should not be committing funds to a start-up.
Shares of the Iowa-based annuities seller plunged 21 per cent after Brookfield, its largest shareholder, expressed dissatisfaction with the investment in a vehicle Harris launched earlier this year after leaving Apollo Global Management in a succession dispute.
Announcing his resignation from AEL’s board, Brookfield’s chief investment officer Sachin Shah wrote: “It is clear based on recent events that there has been a fundamental change in the strategic direction of [AEL].”
“As previously communicated, neither I nor Brookfield Reinsurance can support this change in strategy as being in the best interests of the company, its policyholders or its shareholders,” Shah added, in a letter filed on Tuesday.
Executives at Brookfield objected to AEL, whose full name is the American Equity Investment Life Holding company, using its resources to back Harris’s 26North Partners, a venture they regard as a new and unproven investment firm, a person familiar with the matter said.
In a statement to the Financial Times, AEL rejected those criticisms, saying the 26North investment was “similar to arrangements we have with multiple other asset managers that are generating value” and “consistent with our . . . strategy which we first announced in October 2020”.
“We are also disappointed with Brookfield’s decision not to immediately appoint a new director,” the company added.
AEL chief executive Anant Bhalla announced a “modest” investment in 26North during an earnings call on Tuesday, speaking of Harris, an Apollo co-founder, as “one of the foremost private equity investors in his generation”.
“AEL hopes to source future assets from . . . 26North,” he said. “[It has] a lot of talent flocking to it.”
Brookfield first took a stake in AEL in 2020, shortly after the insurer fended off an unsolicited takeover bid from Apollo’s annuities affiliate Athene Holding. The Canadian group also created a reinsurance affiliate to initially manage $5bn of the Iowa company’s annuity liabilities and today owns 18 per cent of the insurer.
AEL has in recent years been investing more aggressively in private assets at a time when alternative investment managers such as Apollo, Blackstone, KKR and Carlyle have joined forces with insurance companies as a way to build their credit investing units.
AEL on Monday announced 18 per cent of its investment portfolio is now deployed in “higher-yielding privately sourced assets”. Prior to Tuesday’s plunge, the company’s shares were up nearly a tenth for the year.
Brookfield said it was also invoking a contractual right to force the insurer to file paperwork that would allow the Canadian group to sell nearly 60 per cent of its AEL stock.
Harris resigned from the Apollo board earlier this year after a 30-year career at the group. He had been a contender to replace Leon Black as chief executive last year but the job went to Marc Rowan, the architect of the company’s insurance ventures.
Representatives for 26North, Harris and Brookfield declined to comment.