Blackstone Lands Major Commitment
The wide-moat firm has inked a memo of understanding with Saudia Arabia's Sovereign Wealth Fund.
Blackstone (BX) has signed a nonbinding memorandum of understanding with Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, for a $40 billion infrastructure-oriented fund that is primarily focused on the United States, but with a global mandate. The PIF plans to contribute $20 billion, while Blackstone will raise the remaining capital from other limited partners. We plan to maintain our wide moat rating and $37 per unit fair value estimate for Blackstone. The $40 billion in incremental assets under management would be an 11% increase in AUM, given Blackstone's $368 billion in AUM in the first quarter. We see the fund as supporting our existing forecasts for AUM to reach $550 billion in 2020 and economic net income forecasts of more than $4 billion, and note that the fund matches up well with Blackstone's ability to be innovative with new strategies, attracting incremental AUM.
With debt, Blackstone expects to be able to invest in more than $100 billion in infrastructure projects, and this fund marks the first large dedicated fund to infrastructure, though Blackstone has certainly pursued these types of efforts (more than $40 billion invested over the past 15 years) in the past as part of general funds. Infrastructure investment has been an area of strong interest by limited partners, with peers such as KKR ($3.1 billion for a 2015 fund), Oaktree, Brookfield Asset Management (which raised a $14 billion fund in 2016), and Global Infrastructure Partners (a recent $15.8 billion fund) all operating in the space. The niche is attractive because it offers the opportunity to invest in investments that can generate fairly reliable cash flows for decades, often protected by regulation or geographic barriers to entry, in a fund that matches up with the investment horizon for sovereign wealth funds.
Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.
Stephen Ellis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.