Blackstone’s infra fund to hit $40bn over the next decade

Blackstone expects its debut open-ended infrastructure fund to have a “normal, mortal size” first close in the next several months and for it to reach its $40 billion target over the next decade.

On the firm’s earnings call, president Tony James said he’s confident Blackstone’s infrastructure group, which was announced last June, will hit the $40 billion figure but said that is a “very long-term target”. In the meantime, James said the infrastructure fund will reach first close in the next few months.

Last week, documents published by Pennsylvania Public School Employee’s Retirement System, which approved a commitment of up to $500 million to the fund, said Blackstone is seeking to raise $7.5 billion by the end of this year. That total will be matched dollar-for-dollar by Saudi Arabia’s Public Investment Fund, which committed up to $20 billion to Blackstone’s infrastructure programme, which could bring the fund’s year-end tally to $15 billion.

“We’re going to have a normal, mortal-size first close and get started in the business,” James said. “When that money’s invested, we’ll start bringing in new money. We will build our way up to that $40 billion over the next decade or so.”

Blackstone’s infrastructure fund will invest 70 percent of its equity in US infrastructure, including in core, core-plus and public-private partnerships. The amount of equity being raised means target investments will mostly top $1 billion and deal-level leverage will be in the 50 percent to 60 percent range, according to the pension documents.

James said Blackstone is confident it can deploy in the US the amount of capital it is targeting, with or without legislation from US politicians. “We don’t need any improved legislation or regulatory system to invest this fund really well,” he said.

President Donald Trump took office last year promising to rebuild infrastructure and has hinted the private sector may have a role to play in that initiative. His plan has stalled since releasing an outline last May calling for $200 billion of federal spending to catalyse private investment.

In a speech on Tuesday, Trump said he wants the federal government to work with state and local governments, and the private sector “where appropriate”, to invest $1.5 trillion in US infrastructure.

“We think there’s tons of targets out there where we can bring our value-creation capabilities […] even in the existing regulatory scheme,” James said.

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. The firm has invested in infrastructure for more than 15 years and has deployed more than $7 billion in infrastructure and related investments.