Saudis back $40bn Blackstone 'permanent capital' infra fund

Saudi Arabia's Public Investment Fund is investing $20bn in the vehicle. The latter hopes to catalyse more than $100bn to boost President Trump’s infrastructure plans.

Blackstone is set to launch what would be the world’s largest infrastructure fund after receiving a $20 billion commitment from Public Investment Fund, the sovereign wealth fund of Saudi Arabia.

When finalised, the pledge is expected to be the cornerstone investment in a “permanent capital vehicle” anticipated to reach about $40 billion, with Blackstone stating it will match the PIF’s pledge, currently at the MoU stage, from other investors. The Saudi commitment already surpasses the landmark $15.8 billion raised by Global Infrastructure Partners in January, a figure that came from 191 LPs.

Including leverage, Blackstone said it expects to invest in more than $100 billion worth of infrastructure projects in total, largely in the US.

The fund is the first specific commitment to US infrastructure since President Donald Trump stated his $1 trillion spending plans at the start of his mandate this year. The programme’s outline has yet to be disclosed, though Transportation Secretary Elaine Chao earlier this month said a statement of principles could be released within weeks.

“This potential investment reflects our positive views around the ambitious infrastructure initiatives being undertaken in the United States as announced by President Trump, and the strategic opportunity for the PIF to achieve long-term returns given historical investment shortfalls,” said Yasir Al Rumayyan, managing director of the PIF.

The commitment was announced on the eve of President Trump’s arrival in Riyadh – the first stop of his inaugural trip overseas as president – although Blackstone and the PIF said discussions between the two institutions began in May last year, prior to his election.

Blackstone’s private equity chief Joe Baratta first outlined preliminary plans for a record fund in February, stating such a size “would be the ambition if [these plans] come to fruition”. The firm’s previous attempts to fundraise for infrastructure led to the formation of Stonepeak Infrastructure Partners by former Blackstone executives Trent Vichie and Michael Dorrell.

Steve Schwarzman, Blackstone’s chief executive, is the chairman of a group of business leaders advising President Trump that also includes Global Infrastructure Partners’ Adebayo Ogunlesi. Last month, he was quoted as saying that the prospect of government action on infrastructure was a “super big deal” amounting to a multi-trillion-dollar investment opportunity.

The PIF was advised by former Citigroup chairman Michael Klein, who has also been working with the Saudi Arabian government on its planned IPO of oil giant Aramco. In an interview with Newsweek back in 2007, Klein said sovereign wealth funds “have almost replaced US pension funds as the principal source of capital for alternative investments”.