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Sun 15 Oct 2017 09:36 AM

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Blackstone to seek $10bn for Saudi-backed fund

Saudi Arabia's Public Investment Fund committed to invest $20 billion to infrastructure fund

Blackstone to seek $10bn for Saudi-backed fund
Blackstone Chief Executive Officer Steve Schwarzman.

Blackstone Group, the private equity giant with ambitions for the largest-ever infrastructure fund, is seeking as much as $10 billion to supplement a $20 billion anchor commitment for the pool before it starts investing, people with knowledge of the plans said.

The firm is planning to start with $5 billion of outside capital and as much as $5 billion from clients with separately managed accounts, said the people, who asked not to be identified because the process is private. That would supplement the commitment of as much as $20 billion that Saudi Arabia’s Public Investment Fund made to the pool in May. The money from PIF will be provided to the fund in stages, matching commitments from outside investors.

Blackstone’s own commitment is 2.5 percent of the fund up to $500 million, the people added.

At least 70 percent of the pool will be invested in North America, the people said. It will be flexible to invest in different types of projects and will focus on energy, transportation, communications and water and waste facilities.

Blackstone is structuring the vehicle to be open-ended, meaning it can continually gather commitments and distribute profits while investing. The firm will take 12.5 percent of the profits when the fund exceeds a 5 percent annualized return hurdle, the people said. It will collect management fees of 0.5 percent on uninvested capital and 1 percent on the pool’s net asset value, with a 25 percent discount during the first two years after the fund starts investing, the people added.

The firm in May named partner Sean Klimczak as head of the infrastructure strategy. The fund’s investment committee also includes Blackstone Chief Executive Officer Steve Schwarzman, President Tony James, real estate head Jon Gray, private equity leader Joe Baratta, energy private equity head David Foley, private equity portfolio operations leader Dave Calhoun and Dwight Scott, the president of the firm’s credit unit, the people said.

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