Minneapolis’ Castlelake investment firm getting $1.5B infusion from Canadian global asset manager

A Toronto-based firm is making a $1.5 billion investment for a majority stake in one of the Twin Cities’ largest private investment firms, Castlelake.

The deal with Brookfield Asset Management, a global investment firm with over $900 billion in assets under management, is expected to close by the end of the third quarter.

Chief Executive Evan Carruthers and Managing Partner Rory O’Neill, both former Cargill investment professionals, founded Castlelake as an alternative investment firm in 2005. Since then, Castlelake has grown to 220 employees and has $22 billion in assets that it invests on behalf of 200 institutional investors.

Brookfield is set to acquire 51% interest in Castlelake’s fee-related earnings and invest in the firm’s funds and strategies. Castlelake specializes in the private credit sector, most notably in aviation, specialty finance and real assets. The deal is expected to close in the third quarter.

“In Brookfield, we believe we have found a like-minded partner that values experience and specialized expertise, and takes a disciplined, yet creative approach to delivering value for investors,” Carruthers and O’Neill said in a press release. “We are excited about this partnership’s ability to enhance Castlelake’s value proposition, help accelerate its innovation, and scale its platform for the benefit of investors, business partners, and employees.”

The strategic partnership with Brookfield will help drive further growth and innovation at Castlelake, and a Castlelake spokesperson said there will be no changes to the Castlelake management team and other employees.

Growth in the private credit market has been driven by regulations that have affected the amount of leverage that traditional banks and lenders were able to utilize. Two trends are driving an increase in this and similar deals in the private credit market: general consolidation in the private credit and alternative investment space and huge asset managers, like Brookfield, looking to expand in the asset-based private credit sector.

Bloomberg estimated the private credit market at $1.4 trillion in early 2023 and an industry research firm anticipates the market will nearly double by 2027. That growth is also fueling the rise in large asset managers looking for more expertise in the private credit markets.

“There is strong demand for Castlelake’s leading private credit strategies, and tremendous growth potential in the asset class, said Craig Noble, CEO of Brookfield Credit in a press release. “We look forward to helping Castlelake scale their business, and the addition of their capabilities enables us to better serve our clients around the world.”