Blackstone Group executives on Thursday shed some light on the structure and strategy of its previously announced infrastructure fund, anticipating a first close early next year.
The investment vehicle, targeting $40 billion and anchored with a $20 billion commitment from Saudi Arabia’s sovereign wealth fund, will be an open-ended, permanent-capital fund that collects fees based on net asset value, the firm’s executives said on a conference call with investors.
A shift toward permanent-capital vehicles is a long-duration strategy Blackstone said it is considering for a number of its businesses.
“We like to hold our winners,” Tony James, the firm’s president, said on a conference call. “Generally speaking, we see moving the firm toward more and more permanent capital vehicles.”
Aside from the Saudi commitment, fundraising will begin this autumn — with a first close expected in early 2018. The fund will primarily invest in core and core-plus assets, while a “minority” of the fund will target greenfield opportunities, James explained.
James said fundraising will be “largely a reflection of our traditional mix” of investors, but he is hoping to attract strategic investors as well.
The $371 billion asset manager announced its plan and commitment from Saudi Arabia in May as US President Donald Trump travelled to the Middle Eastern state. Trump has set a goal to mobilise $1 trillion of investments in US infrastructure and has signalled the private sector will be important in meeting that mark.
“We’ve been making infrastructure investments quite successfully for over a decade in our private equity funds,” Blackstone co-founder Stephen Shwarzman said. “We see a historic investment opportunity emerging in America. We believe the time is right to launch a dedicated business.”
He added that internal staff and some key hires will run the infrastructure division, led by senior managing director Sean Klimczak, who has worked on the firm’s energy investments since 2005.
‘We don’t need changes in Washington’
Michael Chae, chief financial officer, seemed to downplay the $40 billion target Blackstone has set when he stated: “We’re going to start with a target that’s smaller than that, and then as we raise additional money, we’ll match the balance of the $20 billion over time.”
Saudi Arabia’s commitment alone surpasses Global Infrastructure Partners’ $15.8 billion fund closed in January as the largest infrastructure vehicle ever raised.
There was sustained talk from politicians at the beginning of the year about increasing investments in US infrastructure, but legislation to do just that continues to be delayed. Despite the inaction, James said Blackstone will have no problem investing such a large fund.
“We don’t need changes in Washington to invest this fund, simply put,” he said. “We’re going to be in the deployment business right away.”
Including leverage, Blackstone said in May it expects to invest in more than $100 billion worth of infrastructure projects in total.