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Blackstone’s infra fund eyes $5bn first close this quarter

The first close total will include money committed from Saudi Arabia’s Public Investment Fund.

Blackstone is expecting to hold a first close of up to $5 billion for its debut infrastructure fund during the second quarter, sources familiar with the fundraising told Infrastructure Investor.

The sources said a first close total will include money committed from Saudi Arabia’s Public Investment Fund, which has said it will match dollar-for-dollar the third-party capital Blackstone raises. A first close on $5 billion would indicate the firm has raised around $2.5 billion from third-party institutional investors.

The New York-based fund manager announced last year it would raise an open-ended fund of up to $40 billion, including $20 billion from the Saudi’s PIF, to invest mostly in North American core and core-plus infrastructure. Blackstone declined to comment for this story.

Little information about the fundraise has been made public.

On Tuesday, New Mexico State Investment Council invested $100 million in the Blackstone fund, around a third of which is for co-investments, according to documents seen by Infrastructure Investor.

The state endowment could qualify for a two-year, 25 percent fee break by committing before first close, NMSIC spokesman Charles Wollmann said. He added that The Townsend Group, which is a consultant for NMSIC and other US institutions, could get fee breaks for its clients if the advisor secures more than $300 million in combined commitments.

In January, the Pennsylvania Public School Employee’s Retirement System published documents from a board meeting that shows Blackstone is seeking to raise $7.5 billion this year. With the PIF’s matching funds, that could take total raised this year to $15 billion. The pension committed $500 million.

The fund, Blackstone Infrastructure Partners, is targeting a net internal rate of return of 10 percent for investments made in large-scale assets requiring equity commitments of around $1 billion, according to the NMSIC documents. The firm will mostly target operating North American infrastructure, but 30 percent of the fund is allocated for Western European assets and a small portion will invest in greenfield projects.

Blackstone’s infrastructure group is led by Sean Klimczak, who since 2005 has worked on the company’s energy and power investments. Former General Electric executive Steve Bolze was hired in August to head portfolio operations and asset management.

Last Thursday, on Blackstone’s first quarter earnings call with investors, chief executive Stephen Schwarzman said a first close is expected this quarter and will be followed by additional closes over the next year. He said the firm is “reviewing a pipeline of interesting investment opportunities.”

Jonathan Gray, Blackstone’s president, added the firm is raising an open-ended vehicle and has “no set time limit” for fundraising.