Blackstone projects first close for $40 bln infra fund in early 2018

Blackstone Group expects to hold a first close for its infrastructure platform’s debut fund, targeting $40 billion, in early 2018, President and Chief Operating Officer Tony James said during a July 20 second-quarter-earnings call.

Blackstone raised $20 billion from Saudi Arabia’s sovereign-wealth fund, Public Investment Fund, earlier this year. James said he expects the rest of the infrastructure vehicle’s capital to come from other institutional investors, similar to Blackstone’s private funds.

“I think it’ll be a reflection of our traditional mix. We’re hoping for some strategic investors,” James said, adding that many of Blackstone’s other funds have “anchors” like Saudi Arabia.

Blackstone’s infrastructure fund will invest in U.S. projects. A May news release announcing the Saudi Arabian commitment noted the rapid deterioration of U.S. infrastructure, which the American Society of Civil Engineers graded D+, signifying poor qualities and significant risks.

Sean Klimczak will lead the firm’s infrastructure investment efforts, having previously shepherded the firm’s investment in Cheniere Energy Inc.

The firm has invested in infrastructure deals over the years. In a previous earnings call, James said Blackstone’s infrastructure track record amounted to several billion dollars and returned “something in the net 40 percent range. So spectacular results.”

Blackstone’s assets under management swelled to a record $371 billion in the quarter ended June 30. The figure will likely grow in the near term, with $90 billion of uninvested capital waiting in the wings for new deals.

“Fear not that we’re running out of ammo,” James quipped during the earnings call.

Its ability to exit older investments remains robust as well. Within its $100 billion private equity platform, Blackstone collected almost $596 million in performance-related investment income in H1 2017, a 142 percent increase from the $246.2 million it collected in the year-earlier period.

While the PE platform’s AUM grew by a fraction year over year — to $100 billion from $99.6 billion — the assets on which Blackstone collects fees shrank 2 percent to $68 billion. Meanwhile, second-quarter management and advisory fees jumped 38 percent to $374.2 million from $271.1 million in Q2 2016.

The PE platform invested $4.2 billion during the quarter. Another $1.1 billion, the bulk of which is for a pending investment in Ascend Learning, has been committed to new deals.

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Tony James, president of Blackstone Group, speaks during the Reuters Investment Banking Summit in New York on Nov. 14, 2006. Photo courtesy Reuters/Keith Bedford