Daily Management Review

Blackstone collects $ 40 billion for Trump’s infrastructure projects


05/26/2017


The Saudi Arabian Sovereign Public Investment Fund (PIF) has agreed to invest $ 20 billion in a new Blackstone infrastructure fund, reported WSJ and Bloomberg. Blackstone intends to attract another $ 20 billion from other investors. Taking into account the debt financing, the new fund will be able to invest $ 100 billion in infrastructure projects. In total, President Trump promised to allocate $ 1 trillion for infrastructure projects during his election campaign.



pixabay
pixabay
The agreement with PIF was signed on Saturday during Trump’s Middle East tour. The deal has no binding force, and the negotiations have not been completed yet. "Negotiations with the Saudis never end," said Blackstone’s CEO Stephen Schwartzman.

The $ 20 billion investment promised by PIF is more than the total volume of the world's largest investment fund, Global Infrastructure Partners ($ 15.8 billion, Preqin data). In 2016, investors poured $ 56 billion in infrastructure funds, and added $ 29 billion in the first quarter of 2017.

"There is a common understanding that the US urgently needs investments in the rapidly decaying infrastructure", Blackstone’s president Tony James commented on the agreement with PIF. "[Such investments] are opportunities to create well-paid jobs in the US and are the basis for even greater long-term growth". 

Saudi Arabia, which ranks 1st in the world for oil exports, is trying to establish relations with the administration of the new US president, since Trump's predecessor, Barack Obama, in 2015 signed a nuclear agreement with Iran. In addition, Saudi Arabia is trying to diversify the economy, as oil prices have fallen sharply over the past three years. Another step in this direction is Saudi Aramco’s IPO, which is scheduled for 2018. During Trump's visit, PIF also signed an agreement to invest $ 45 billion in the technology fund of Japanese Softbank, which will amount to $ 93 billion.

Assets under the management of Blackstone on March 31 amounted to $ 368.2 billion, which is almost twice as much as that of its closest competitor, Apollo Global Management. Four Blackstone’s major platforms - real estate, private equity funds, hedge funds and lending - also occupy a leading position in the global market. The average annual return on infrastructural funds, which started operating in 2004-2013, varies between 5.7 and 14.4% (Preqin data).

Earlier, Trump promised to invest $ 1 trillion in upgrading the transport infrastructure and creating millions of new jobs in the next 10 years. As an example of successful spending, he cited airports and the quality of roads in China. "Our roads are falling apart", - said the American leader, referring to experience of his friend from a transport company. 

In early May, President compared the United States with the country of the third world, when he discussed the level of infrastructure in China at a press conference. This was told by the Washington Examiner newspaper.

"China is doing incredible things", Trump said, referring to the transport infrastructure. "We, just like a third world country, build a bridge, and this is perceived as a miracle in this country." 

At the same time, the president criticized the decision to spend $ 6 trillion on the restoration of Middle East countries. "We spent $ 6 trillion on the Middle East", the head of state said, "it's 20 times worse now than it was when we started, is it not sad that we can send $ 6 trillion to the Middle East, and for our country we cannot find $ 1 trillion", he concluded.

source: ft.com






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