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Blackstone Unveils $100B Ambition for Infrastructure

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(Bloomberg) -- Blackstone, the world's biggest private equity manager, is eyeing more than $100 billion in infrastructure investments with a new strategy anchored by Saudi Arabia's Public Investment Fund.

PIF agreed to commit $20 billion to the pool, and Blackstone plans to raise the same amount from other investors, the New York-based asset manager said in a statement Saturday. With leverage, Blackstone expects to have more than $100 billion in purchasing power for infrastructure projects, primarily in the U.S.

The agreement between Blackstone and PIF is a non-binding memorandum of understanding, and the organizations are continuing to negotiate terms, they said.

The partnership comes as top executives, including Blackstone CEO Steve Schwarzman and KKR co-CEO Henry Kravis, descend on Riyadh for the inaugural Saudi-U.S. CEO Forum, a weekend of dealmaking. The meetings, which have already yielded billions of dollars in deals between companies including oil giant Saudi Aramco and General Electric, are taking place as U.S. President Donald Trump visits the kingdom.

Infrastructure investing has gained renewed attention as Trump's administration vows to direct more private money toward improving roads, bridges and airports. The asset class also fits the bill for liability-driven investors in the U.S. and abroad seeking current income amid near-zero interest rates and negative yields elsewhere in fixed income.


"There is broad agreement that the United States urgently needs to invest in its rapidly aging infrastructure," Blackstone President Tony James said in the statement. "This will create well-paying American jobs and will lay the foundation for stronger long-term economic growth."

Schwarzman is a top confidant to Trump from outside the White House. After he was elected, Trump asked the Blackstone billionaire to form a group of business executives that would meet frequently with the president to discuss job creation and economic growth. Schwarzman, 70, chairs the gatherings of the Strategic and Policy Forum.

Investor interest is fueling ever-larger pools of capital devoted to infrastructure. Brookfield Asset Management scored $14 billion last year for a pool dedicated to the strategy, which was topped in January by Global Infrastructure Partners, which closed on $15.8 billion.

Blackstone signaled its ambitions for a large fund in January, when its global head of private equity described what it would take to be a meaningful investor in infrastructure.

"To be relevant in that end of the market I think you need to be deploying billions of dollars at a time, not hundreds of millions, and so you're probably talking about a vehicle that's $20 billion, $30 billion, $40 billion dollars of equity," Joe Baratta said then in an interview on Bloomberg Television.


Despite the buzz surrounding infrastructure, it's not always an easy place for private investors to deploy their money. Lengthy planning and permitting processes can limit projects that are ready for investment, and not all projects generate attractive returns. Apollo Global Management co-Founder Josh Harris said earlier this month that public-private partnerships, governments' typical ploy for attracting private investment, often produce low returns that are hard to justify.

"In infrastructure we need revenues," Harris said during the Milken Institute Global Conference in Beverly Hills, California. "There's a lot of financing, but no revenues."

Private investors therefore have to pick their spots carefully, finding projects that have different levers to pull. Airports are a key area of focus for providers of private capital, according to Glenn Youngkin, the president of Carlyle Group, which is raising money for a global infrastructure fund.

"Airports, right out of the box, is the No. 1 target area right now," Youngkin said Friday on CNBC. "They are an understood commercial entity, and there are airports starting to move this way" already.


Oaktree Capital Group is marketing two infrastructure funds, one focused on U.S. transportation and another for North American energy, the firm said last month. KKR is planning to raise money for a third infrastructure fund, the private equity firm said last month, after raising $3.1 billion for its current pool in 2015.

EQT Partners in February finished raising $4.2 billion, almost 40% more than targeted, after less than six months for its third infrastructure fund. Stonepeak Infrastructure Partners, run by former Blackstone dealmakers, is targeting $5 billion for its third pool, people with knowledge of the matter said last month.

Peter Grauer, chairman of Bloomberg, the parent of Bloomberg News, is a non-executive director at Blackstone.

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