A major backer of billionaire Josh Harris’ new asset management business has received a rare public rebuke from Brookfield Asset Management, which has complained that AEL, a life insurance company, should not hire funds in a start-up.
Shares of the Iowa-based annuity seller fell 21% after Brookfield, its largest shareholder, expressed dissatisfaction with the investment in a Harris vehicle spear earlier this year after leaving Apollo Global Management in a succession dispute.
Announcing his resignation from the AEL Board of Directors, Brookfield’s Chief Investment Officer Sachin Shah wrote: “It is clear, based on recent events, that there has been a fundamental shift 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 Tuesday.
Brookfield executives have objected to AEL, whose full name is US-based Equity Investment Life Holding, using its resources to back Harris’ 26North Partners, a company they view as a new non-investment company. proven, said a person familiar with the matter.
In a statement to the Financial Times, AEL dismissed such criticism, saying 26North’s investment was “similar to agreements we have with several other value-creating asset managers” and “consistent with our . . . strategy which we first announced in October 2020”.
“We are also disappointed with Brookfield’s decision not to appoint a new director immediately,” the company added.
AEL chief executive Anant Bhalla announced a “modest” investment in 26North during an earnings call on Tuesday, referring to Apollo co-founder Harris as “one of the leading equity investors- investment of his generation”.
“AEL hopes to find future assets from . . . 26 North,” he said. “[It has] many talents are flocking to her.
Brookfield first took a stake in AEL in 2020, shortly after the insurer rebuffed an unsolicited takeover bid from Apollo’s annuity subsidiary, Athene Holding. The Canadian group also created a reinsurance subsidiary to initially manage $5 billion of the Iowa company’s annuity liabilities and now owns 18% of the insurer.
In recent years, AEL has invested more aggressively in private assets at a time when alternative investment managers such as Apollo, Blackstone, KKR and Carlyle have have joined forces with insurance companies as a way to build their credit investment units.
AEL announced on Monday that 18% of its investment portfolio is now deployed in “higher yielding private assets”. Prior to Tuesday’s plunge, shares of the company had risen nearly a tenth for the year.
Brookfield said it was also invoking a contractual right to compel the insurer to file documents that would allow the Canadian group to sell nearly 60% of its AEL shares.
Harris resigned from Apollo’s board earlier this year after a 30-year career with the group. He had been a candidate to replace Leon Black as chief executive last year, but the job went to Marc Rowan, the firm’s insurance business architect.
Representatives for 26North, Harris and Brookfield declined to comment.