Massive $40-billion US-Saudi infrastructure fund struggles to get going

In the short term, Blackstone's goal now is to raise a total of $15 billion - much less than it trumpeted during Trump's visit to Riyadh

Last May, the private equity firm Blackstone announced that it was creating a $40 billion fund that would invest in infrastructure projects in the United States. The fund’s largest backer was the government of Saudi Arabia, which agreed to kick in half the cash.

Ten months later, the highly anticipated fund has yet to complete an initial round of fund-raising, much less start investing in infrastructure.
 

Although the Saudis promised to contribute up to $20 billion, Blackstone is required to raise a dollar from other investors for every dollar the kingdom’s Public Investment Fund puts in. So far, only two other investors have publicly committed to the fund, with their contributions totaling $575 million, according to data provider Preqin, which tracks such investments.

In the short term, Blackstone’s goal now is to raise a total of $15 billion — much less than it trumpeted during President Trump’s visit to Riyadh last spring — according to a document posted on the website of a Pennsylvania pension plan that has agreed to invest in the fund.
 

Facing hesitant investors, Blackstone has twice missed its own deadlines for completing the first round of fund-raising, according to people briefed on the plans and a timetable included in the Pennsylvania pension plan’s documents.

Among the factors that have complicated the fund’s launch: Saudi officials told Blackstone last year that they wanted to create an investment committee — including one or more Saudi representatives — that would oversee the fund, according to four people briefed on the talks who weren’t authorized to discuss them publicly.

The idea was a non-starter for Blackstone officials, who have consistently avoided outside influence over their investment decisions, said three of the people briefed on the talks. “We’ve had a long and broad-based relationship with the Kingdom that’s, frankly, never been stronger,” said Christine Anderson, a spokeswoman for Blackstone. “They’ve been exceptional partners.” She declined to discuss the details of the firm’s fund-raising efforts, citing legal restrictions that apply during marketing periods.

A spokesman for the kingdom’s Public Investment Fund declined to comment.

Blackstone — whose co-founder and chief executive, Stephen A. Schwarzman, is a prominent supporter of President Trump — rushed to unveil the infrastructure fund during the pomp-filled presidential visit to Saudi Arabia last May. Wall Street titans including Schwarzman attended opulent ceremonies to celebrate the two countries’ financial and political ties.
 

The deal fit neatly into the White House’s efforts to coax foreign countries to invest in the United States. Blackstone’s president at the time, Hamilton E James, predicted that the fund would spur infrastructure projects that would “create well-paying American jobs and will lay the foundation for stronger long-term economic growth.”

In the joint Blackstone-Saudi news release, H E Yasir Al Rumayyan, the head of the Public Investment Fund, said that the $20 billion Saudi pledge “reflects our positive views around the ambitious infrastructure initiatives being undertaken in the United States as announced by President Trump.”

©2018 The New York Times News Service