Saudi’s Sovereign Fund is Serious on Infrastructure, Signs MoU with Blackstone

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Cash-rich sovereign wealth funds are major participants in the capital-intensive ecosystem of unlisted infrastructure. On his first foreign trip since inauguration day, U.S. President Donald J. Trump is making rounds in the Middle East, starting off in Riyadh. Despite political headaches in Washington D.C. egged on by major T.V. reporters, Trump is keen on having a revitalization effort on crumbling U.S. infrastructure, especially in the areas of airports, roads and bridges. Revealed in the mix of presidential prowess and Saudi royalty, Saudi Arabia’s Public Investment Fund (PIF) plans to commit US$ 20 billion to be an anchor investor in a new US$ 40 billion infrastructure fund to be managed by The Blackstone Group LP, the world’s biggest private equity manager. The infrastructure fund will target rehabilitating and upgrading U.S. infrastructure and support systems. The fund also plans to use debt financing, thus having a potential warchest to invest in US$ 100 billion worth of infrastructure projects primarily in the United States. The Blackstone Group is having Sean Klimczak, a senior managing director at the firm, to run the elephantine infrastructure fund. He has been with Blackstone since 2005. Klimczak had initiated talks with Saudi government officials in April 2016 about a potential infrastructure fund with an unlimited fund term life.

Blackstone Chief Executive Officer Stephen A. Schwarzman and KKR & Co. co-CEO Henry Kravis are also in Riyadh attending the inaugural Saudi-U.S. CEO Forum. Blackstone and PIF, just prior to Trump landing in Riyadh, had signed a non-binding Memorandum of Understanding (MoU). The terms are being finalized. Saudi’s PIF was financially advised by M. Klein and Company, an advisory firm founded by former Citigroup investment banker executive Michael Klein.

Yasir Al Rumayyan, Managing Director of PIF commented in the release that, “The Public Investment Fund’s international investment strategy is built upon establishing strong global partnerships and identifying opportunities to maximize sustainable returns for the people of Saudi Arabia. We look forward to partnering with Blackstone, a recognized leader with a strong record of achievement across its extensive infrastructure projects. 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 Public Investment Fund to achieve long-term returns given historical investment shortfalls.”

Blackstone Group President Hamilton James in a release stated, “There is broad agreement that the US urgently needs to invest in its rapidly ageing infrastructure. This will create well-paying American jobs and will lay the foundation for stronger long-term economic growth.”

Cutting Mega Checks

PIF also completed the motions to commit US$ 45 billion to the SoftBank Vision Fund, a massive US$ 90 billion technology investment fund overseen by Japan-based Softbank Group.

Other private equity giants getting into the U.S. infrastructure game with the Trump backdrop are The Carlyle Group, KKR, Oaktree Capital Group LLC and Brookfield Asset Management.



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