Photographer: Victor J. Blue/Bloomberg

Blackstone Jumps on Plans for $40 Billion Infrastructure Fund

  • Firm ‘just leapfrogged’ most of infrastructure world: analyst
  • Fund could benefit ‘significantly’ from Trump’s spending plan

Shares of Blackstone Group LP rose to the highest in 18 months after the private equity firm laid out plans for a $40 billion infrastructure fund.

The stock jumped as much as 7.1 percent Monday to $31.99, the highest since November 2015. It traded at $31.64 as of 11:06 a.m. in New York.

Citigroup Inc. analysts led by Bill Katz upgraded their rating on the shares Monday to a “buy,” saying the infrastructure initiative could drive up Blackstone’s valuation. Other analysts, including Credit Suisse Group AG’s Craig Siegenthaler and William Blair & Co.’s Chris Shutler, said they anticipate Blackstone’s fee income to rise and become less volatile as the firm raises and begins investing the new mega-fund.

“While we have been pointing to Blackstone’s future opportunities in the infrastructure segment, we conservatively had very little economics associated with this brand new segment embedded in our estimates,” Credit Suisse analysts led by Siegenthaler wrote in a note to clients Monday.

Blackstone on Saturday said it will form a new infrastructure business with a $40 billion fund, which when leveraged could have more than $100 billion in purchasing power. Saudi Arabia’s Public Investment Fund agreed to commit $20 billion to the pool. Blackstone and PIF are still negotiating terms of the arrangement.

Leapfrogs Others

Investor interest in infrastructure is fueling ever-bigger pools of capital, especially as the strategy gains renewed attention from U.S. President Donald Trump, who has vowed to direct more private money toward improving roads, bridges and airports. Brookfield Asset Management Inc. scored $14 billion last year for an infrastructure fund, which was topped in January by Global Infrastructure Partners, which closed on $15.8 billion.

“Blackstone just leapfrogged most of the infrastructure world,” Evercore ISI analyst Glenn Schorr said Monday. The fund, which New York-based Blackstone plans to structure as a permanent-capital vehicle, is a “perfect fit” because the firm will have access to long-dated money and investors with long-term liabilities can benefit, Evercore analysts led by Schorr wrote to clients.

While Blackstone hasn’t disclosed plans for fees on the fund, Credit Suisse’s Siegenthaler said he anticipates them to be similar to terms of the firm’s core-plus real estate pool, which targets stable, income-producing property that can be held for a long term. Blackstone earns 1 percent on invested capital in that fund and gets a 10 percent share of investment profits.

Led by Chief Executive Officer Steve Schwarzman and President Tony James, Blackstone managed $368.2 billion across private equity, real estate, credit and hedge funds as of March 31. Schwarzman, 70, chairs Trump’s Strategic and Policy forum, a group of business leaders who advise the president on job creation and economic growth.

“This business could benefit significantly from a new infrastructure spending plan,” Siegenthaler wrote, “which has been one of President Trump’s key priorities as the president plans to address the $2 trillion infrastructure funding gap in the U.S.”

Peter Grauer, chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director at Blackstone.

— With assistance by Felice Maranz

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